This this vlog, Danny talks about the similarities between PPC marketing and direct mail marketing tactics, and why sticking with PPC is so important for constant deal flow. Don’t forget, all of the vlog episodes (and more) are available on the FlippingJunkie YouTube channel at http://youtube.com/FlippingJunkie.
Doing direct mail marketing is great for growing your reach to motivated sellers, but can often be discouraging (as we found out) when getting a 0.1% response is a good response…
Investing only about $500 to direct mail just wasn’t working for a few reasons: there wasn’t a targeted enough audience, and there wasn’t enough funding behind it.
The same rule applies to PPC marketing. If you’re only allotting $500 a month for pay per click, how can you expect to get the best ROI? You can’t. True, PPC is much more targeted, so your ads are getting in front of your exact audience, but as Danny points out this is a pay-to-play strategy. And it WORKS.
The other thing to consider when budgeting for PPC is how much a single deal is costing you. The more you pay, the better the return. You can’t just rely on getting lucky for every deal. So, let’s say you spent $3000 on getting one deal. That one deal will last you, what, about 3 months? That’s great! But you need to be generating other deals in the meantime. That’s why PPC isn’t a one-and-done thing, it’s on-going.
You can learn all about it in this vlog episode, and on the podcast.
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Danny Johnson: This is the Flipping Junkie podcast episode 69. [music] Welcome to the Flipping Junkie podcast. My name is Danny Johnson; former software developer turned house flipper, flipping hundreds of houses. Each week, we bring you interviews, strategies, stories, and motivation to help you get started flipping houses and on your way to becoming your own boss and achieving financial freedom. Thanks for spending time with me today. Now, let’s get to it.
Hey, everybody. Welcome back to the Flipping Junkie podcast and the vlog that we’ve got on YouTube now. So if you go to YouTube.com/flippingjunkie, you could check out some of these videos that I’m shooting now from in my car. And I’ll probably be doing some other ones in houses and stuff like that.
So I’m driving and I’ve just been thinking about, you know, a lot of people that we talk to that are getting into flipping houses and trying to find traction and trying to find the ability to scale and to get consistent with doing deals. Some of that comes from like AdWords and people concerned sometimes with spending the money on AdWords and it reminded me of a situation that we faced in the past and what other people had faced with regards to direct mail. And, you know, it’s basically and for the longest time we did this, so we would do a direct mail campaign. We commit to it and we think that maybe 500 letters or 500 postcards is a lot for a list, right? And so we mail it out and then we get kind of an abysmal response when you consider the fact half a percent is a good response sometimes on direct mail and half a percent of 500 would be like, what, 25… it’s math. It’s not good, whatever it is. So yeah, I don’t know. I’m kind of driving and I’m recording a video and do the math. So 100 would be, half percent would be… 25 to 200? Yeah, so it would just be 2.5 responses, right? So in the likelihood of them being somebody that wants to sell and then sell at a discount, it’s pretty slim. And I see people doing this all the time and they will do a 500 or 1000 pieces, mail it a couple of times and look and say, “Man, I’ve spent 1500 bucks or $2000, and I don’t have anything to show for it. I got maybe one lead or I got maybe two leads and then it didn’t work out.
Well, if you look at the math from the other point of view of what are people typically paying per deal to get a deal and then how much you’ve spent on these different marketing channels. It will show you that you shouldn’t expect to get a deal. Like people that do that somewhat get a little bit lucky and it’s not consistent to just do like 500 letters and get deal. And so lately from what we experienced and when I’ve talked to a lot of other investors that scale up and get a lot of leads and a lot of deals is that we’re spending anywhere between on the very low end about $1500 per deal up towards about $5000 a deal, and the average in there somewhere around $3500 to $4000 per deal. And so if you spend $1500 or $2000 on mailings and then get disappointed that you don’t get a deal, it doesn’t make sense. It doesn’t fit what typically people are spending. Especially in the bigger markets and some of the smaller markets maybe where there’s not so much competition, that might be a good average number for a deal. But when you look at it from that point of view, then you realize like hey, this isn’t likely to generate that kind of volume or generate the deal.
And the other part of that equation that I think sometimes that’s not talking about is it’s just not getting leads that determines how many deals you’re going to get. There’s so many variables and really the big one is how well do you close when you get those leads, how well do you manage them, how well do you turn them into conversions and to deals, how well do you get the seller to agree to sell to you. And obviously, that varies a lot between people and different experience levels. Where a newer person might take, you know, 10 to 20 leads to turn into a deal and a more experienced person might be able to do that within 5 or 6 leads, every 5 or 6 leads becomes a deal. So where I’m going with that is if you’re looking at spending on average 250 to 300 even per lead, how many of those is it likely to take to get a deal? So if it’s 10 and you’re spending $350 per lead which is not a crazy number per lead, a lot of people are paying more than that to get a lead, and it takes you 10 leads to get a deal on average, you’re looking at spending $3500. So where this is going is, every time that we ever in the past got timid on sending out letters, we didn’t want to spend a whole lot, we wanted to test the waters a little bit, it didn’t generate a lot of leads and obviously didn’t generate much in the way of deals.
Now the same thing goes for AdWords and if you want to go in there and say “Well, I want my budget to be 1000 a month,” what you do expect then to get a deal that’s going to produce returns? A thousand dollars a month if you’re looking at maybe spending about 3000 or a little bit over per deal, that’s going to take you at least three months, right? So after two months, it’s easy to get disappointed, I understand it. And it’s very common and I still get this way too and it’s hard to see past that. It’s kind of hard to double down and see it that way from that point of view. To spend the money in a month, you know, have a budget of $4000 maybe in a month to have a higher likelihood of getting a deal. And here’s where that helps out a lot is because you’re not three months with no deal and you’re looking at, “okay, all this money went into a black hole and I’m scared. I don’t want to cut it all because I don’t want to, you know, make all that go to waste because I never get a deal from it with direct mail or any marketing channel, website or anything.” And to double down or to say like, “I need to commit to spending a good amount of money on these AdWords.” And to try to get that deal in that first month to me is a little bit smarter and it’s harder to commit to that but when you do that, you’re more likely to get a deal and if you get a deal, you’re looking at making $20,000 to $25,000, some people $30,000 or $40,000 on a flip, and then it’s like a no-brainer like I spent $3000 but I got this deal that’s going to make me $25,000. It’s a no-brainer. I’m going to keep doing it. But when you’re in and saying “I don’t want to spend more than $1,000 and two months, three months goes by and you don’t have a deal yet, you’re going to be more likely to just say “you know what, this isn’t working, I’m going to try something else.”
And so there’s the big thing. There’s the big secret and I think a lot of people don’t find success in this business marketing to motivated sellers because they do it just piecemeal and they’re not understanding what the real costs that the majority of people are really spending to get leads and deals. And so that’s a huge takeaway and I hope you maybe watch this or listen to this again because understanding that, committing to that is scary but I think that will help get over that hump that most people give up. I would bet, I would wager than 90% or more of people that try motivated seller marketing jump around to different things because that’s what they’re doing. They’re trying to get away with spending only 500 bucks and getting a deal and it’s just not likely. You could get lucky but it’s not going to be consistent. And like I said, busier markets and slower markets where there’s not as much competition and you got to be a little bit different. So it’s more of talking with the other investors in your area and kind of getting their idea of what they’re spending. And a lot of people won’t share that but if you’ve got friends, you guys can maybe talk about that a little bit and find out. Like I said, it’s not unheard of for people to pay over $5000 per deal in markets when they’re scaling up and wanting to do a hundred deals in a year. So it’s good to see things from that perspective.
So what are expecting to spend per deal per lead? What are you expecting? What does that look like to you? And this will be awesome for people to share. If you go to the show notes page on Flippingjunkie.com for the podcast or just go to the Youtube.com/flipping in the comments for this video, it would be awesome to hear what you guys are spending or finding that you’re spending per lead and per deal and to just see just so everybody can kind of share notes. You don’t have to say where you are or your market or any of that kind of stuff but you can see what those numbers look like. So that’ll be awesome. And be sure to subscribe on Youtube and on iTunes for the podcast and I really appreciate you guys listening and watching the video logs and listening to the podcast. It’s really hopeful for me to keep doing it and sharing and I hope you’re getting a lot out of that. I get a lot of emails from everybody talking about a lot of ratings and reviews for the podcast in iTunes, so I know you guys out there are listening and getting stuff from it. It’s kind of weird because I’m always, like doing these things I’m kind of talking to you but there’s no response back, I can’t see you, you’re not responding back to me while I’m talking and so sometimes it seems like, “Is it anybody listening to this?” But we’ve gotten a ton of downloads for the podcast and there’s a big audience and so I do appreciate it when you guys communicate and leave comments and rating/reviews on iTunes and stuff like that. But, thanks a lot.
And I’ve got a great… maybe in the next one, maybe in the next video I’ll share. We’ve got a situation where a guy has kind of stole our software and I’m not talking about just like copying but I’m talking about like the exact sales page with a different name. It’s hilarious. And again, it’s not what happens to you with business and everything in life. It’s how you react to it, right? So if you can react with a smile and laugh about it, like, what is it, Thomas Edison when his factory was burning, his whole factory, everything, all of his stuff was burning and he told his son to go get his wife or whatever, Thomas Edison’s wife so she could come see it because he’ll never see anything like that again, like it was something to look at just being in awe of but not sweating, like if you can’t change it, don’t sweat it. It’s just how you react to it and decide on what to do afterwards in reaction to it is what determines how it’s going to go. So anyway, see you guys next time on the podcast and the video log.