SPEAKER_00 0:00

Well, Craig, we got one in the bag.

SPEAKER_02 0:02

Baby. Oh, baby.

SPEAKER_01 0:03

No bad, no lag. Sometimes a cat fame storms do fill back.

SPEAKER_02 0:08

You know, do you remember back in the olden days when Hors and Buggies used to ring the bell every time that we started the show?

SPEAKER_00 0:16

Yes. We gotta bring that back. I got like I got like eight, eight to ten bells back there still from when we used to have agents in the office. Remember those days? Yeah. We still do. Well. I haven't had an agent in the office in years. Can't stop doing the Larry David thing. It's the best move, but it is a move. All right. Pros and cons of that, whatever. Let's dive into a number, numbers game. How about a numbers game, Craig? Numbers game. So if you're going to scale like Twister. Oh, that's a color game. So if you're going to scale, buy leads, all that stuff, there are three things to know. Three things you got to know to make good decisions.

SPEAKER_02 0:59

Yeah. And I remember back when I was flying with no radar that I did not look at any of these things. And wasn't talked about in at the university and uh wasn't talked about really by anybody. So there's a little powerful add-on for you, Mr. Jason.

SPEAKER_00 1:14

All right. So if you're gonna buy leads, and most people, honestly, most people that don't understand this are the ones that like it's almost like buying leads are a waste of money. You you just it's it's like flying a plane without any any instruments, right? You don't know where you're going, you know. Right. You you might have some sometimes you might look down at land and say, that that looks like where we're going. Yeah. And then and then you look down sometimes and go, oh, I didn't even realize we're over the ocean.

SPEAKER_02 1:41

Yeah. Well, I think that uh a lot of agents get stuck in the cycle of operator. And so they're not, and I mean, it was the case with me for sure. I think you were there where you're doing you're doing all the stuff, like all the day-to-day stuff, and you're not busy on the instrument. So I guess you're you're kind of like in the back of the plate handing out drinks instead of trying to fly the thing, right?

SPEAKER_00 2:04

Yeah, and I would say that a good operator uses this as their instruments, right? Like, so you're just it's not like it's not an operator job. It it's like if you're a terrible operator, then you're probably not looking at this.

SPEAKER_02 2:17

And I and ironically, if you were in any other business, any other business, it's the first thing you'd be talking about, right? Right. If you're selling hamburgers, you're gonna know these numbers. If you're selling, you know, it doesn't matter, widgets. Right. I mean, a freaking a drug dealer would be using the same metrics. So let's dive into the first one. I'm not supporting that profession or anything. I'd just say it, yeah.

SPEAKER_00 2:40

So so we'll dive into each one. There's three of them, and then we're gonna show you the relation to each other. And the relation to each other is like the magic. It's the secret sauce. It's that like it's the way any great investor would look at a business. You mean like Warren Bumfit? Yes, like the Bumfit. He likes to be called that. I'm sure he does.

SPEAKER_02 3:02

Hello, Mr. Bumfit. That would be the last meeting. Yeah. Mr. Bumfit doesn't want to meet with you anymore. All right. The first one is Rumrol. I almost busted out the uh the little machine that does all the all the sounds.

SPEAKER_00 3:17

All right, the first one is cost per sale. Yeah. Also known as CPS. Uh-huh. And in a lot of other, like like the the the big boy term would be CAC, right? What'd you say?

SPEAKER_02 3:32

Customer acquisition cost. Yeah. Customer acquisition cost. Correct. Right. So what is this exactly, Craig? Well, it's it's how much it costs you to acquire that business. What do you mean by that? Okay. So if you're buying leads, right, a lot of times the thing that folks are looking at is how much are those leads? How much do the leads cost? How much who cares? Who cares how much the leads cost? It's it's how much did it cost you to make that one sale, right? So if it took 10 leads to make the sale and the leads were 20 bucks each, that's $200 cost per sale, right? Want you to walk walk through that complicated math again?

SPEAKER_00 4:11

No, I get that. But what else is uh what what what are what are the what other costs might be involved in that?

SPEAKER_02 4:17

Well, you're looking at at that, you're looking pretty much straight at at just your that marketing cost, right? The cost per sale for the lead. So I guess you could you could you could you like that? You could uh slice you could slice it different ways if you want to include other variable costs in there, you could, you know, allocate cost of the producers, you can allocate cost of telemarketers, or whatever, right? To get your real true acquisition cost. But a lot of times, and what I typically am looking at is okay, I I'm gonna make decisions on lead vendors based on the cost per sale, right? Right. And I want to get it to a to a certain number that is kind of yeah, that that that makes at least a little bit of profit there and uh and work for there, right? You set a baseline. And that thing isn't gonna be concrete, because I remember back, you know, five years ago when we had a 80, 60, 60 cost per sale.

SPEAKER_00 5:13

Woo. Hmm. That was juicy. And and the the like if we I would say that's the first level, right? But you do want to include all those costs. Let's like other costs might be the telemarketers, it's the cost of your agents. So if your agents are writing 20 policies, you could divide the 20 policies, you could divide their monthly pay rate by the 20 policies to figure out what that piece of the cost is. But we want to know exactly so. If you want to like fine-tune this, you want to know of every single cost it takes to make that sale. So that if you're like, I want to make a hundred thousand sales, okay. Well, each sale costs this, and these are the components that you need to get there. Sure.

SPEAKER_02 5:56

And there's it there, it could be dimensional too, in that you may have, you know, somebody with a smaller book is gonna have to get more granular, right? You're gonna have to incorporate all of these things because you can't like push some of the costs over towards those renewals, right?

unknown 6:13

Right.

SPEAKER_02 6:14

And I'm not talking about the renewals of those sales, but I mean just your renewal revenue in general, right? Right. There's some if you have a $10 million book, it's a lot different, right? So that $10 million book is gonna support your your fixed costs. And like, you know, your base, like I I put the base when I'm looking at my numbers and my PL, I'm looking at their base salaries, are that's fixed cost, right? And I know that for a certain amount of every million in premium, I can have X number of salespeople, right? And it's gonna be, it's gonna kind of carry itself.

SPEAKER_00 6:47

Yeah. I I would say if they're only doing sales though, they have to be under acquisition. Sure. Because that's the function. Tomato tomato. Tomato tomato. So that's the first one is cost per sale or customer acquisition cost, right? So what's number two that we need to look at? Well, this is a this is the the other side of the coin.

SPEAKER_02 7:07

It's the lifetime value. So what does that mean? I know. It's crazy, right? And a lot of folks, at including us, say LTV, which is weird because lifetime is one word. So it really should be LV if you want to get granular. But your lifetime value is okay, we have a we have a business that has recurring revenue, right? So if I sell, if I sell uh, you know, this policy today or this household today for 2000, some amount, we don't need to get in the numbers. Okay. If we sell it for some amount, then we're gonna get paid this month, we're gonna get paid at six months, we're gonna get paid at you know, however many times over the course, and and you can figure it out that also from your retention, right? So all the numbers for every agent exist. And most agents have really, really good analytics from the carrier. They may not be compiled perfectly, but you could extract the right ones, right? And you distill out the numbers that actually matter because I think we can kind of get inundated with a zillion different numbers and metrics and all these things, and and it can you know turn into analysis paralysis. So you just want to focus on on the ones that are actually gonna help you have the right instruments to fly the plane. And and that's what I love. I love the lifetime value because it it changes it changes how you approach the business. It gives you the certainty to to really put you know, pour the gas, put your pedal on the on the on the freaking gas and go.

SPEAKER_00 8:39

Yeah, a hundred percent. And and this completely changes the economics. So, like the ways to increase LTV, and that's our that's our job, right? Because if you're just dealing with the front end sale, you're I mean, in the property and casualty world, you're gonna go broke. And most people look at that number, right? Just that front-end number. Like if you're not getting some of the other bonuses that might be that you might get with like selling a larger number of policies, but if you're just looking at that front end number, you're like, I'm gonna lose money on this. Right. Well, if you're looking at it without the LTV part of this. So LTV, you're looking at your retention, right? So there is a number of the average, the average length that your client stays with you. There is a number, and and you can figure it out based on your book on the average length of it. Whatever that retention rate is, you can reverse engineer of how many uh periods that that they're gonna be with you. So that's the renewals side of it. But you can also increase LTV by selling them more stuff once you get them. So you want to increase that, right? Right. Right. Like it's it's basic, but so many times people focus maybe on the front end sale and they don't increase the LTV, which is in our world, uh, retention and other policies, right?

SPEAKER_02 10:03

Well, and the quickest mover is not gonna be the retention, right? Like that's a long-term thing to to move that retention. Right. So, so it's it's and you know, for the amount that it can cost to move that thing, you know, unless you just have the gates up front and set it up so that things proceed well, you know, the focus should be on, okay, how am I gonna increase my my premium per sale? Right. So it's it's adding those extra lines. It's you know, throw on the the if you have some kind of uh boat or club or towing or whatever it's called, you know, you could get that like every little bit starts adding, especially if you're selling thousands of policies a year, right?

SPEAKER_00 10:41

Right. So like your your initial sale might be, let's just say a thousand bucks, right? Now, if you're you start adding these things on, it might go up to 1500, right? And then, and then you might be, they might be with you for, you know, let's say three years at renew, let's say four years. No, let's say three years, and it renews three times. We'll just we're gonna do basic. And so that that thousand dollar sale is now fifteen hundred dollars, and then it's gonna renew three times, so you're at $4,500, right? So, like if we start looking at it this way, you can drastically increase that lifetime value.

SPEAKER_02 11:20

Right. And with scale, it just it it compounds. So it you brought up something earlier that's also an important component of this, is is where when you if you're if let me try to try to frame this the right way. If if we're looking at just now, not let's let's say, okay, whatever. I don't believe you. Lifetime value is stupid. Okay, fine. You can anybody can have whatever opinion they want. Well, it's not, but but let's just let's take the other side of the coin. No, I look at what I bought this month in Leeds, and then I look at how much I sold from that. Now, here's the problem with that is number one, you're not you're not giving yourself the opportunity to make a good decision because you're not comparing apples to apples, right? I mean, we hear that all day, every day. If you're talking to clients, I wanted apples to apples, right? Well, let's do apples to apples with our own stuff. Because if we're not, if we're not looking at the at that cost per sale and addressing it it against a the full value of what we're actually making off of that, then how are we gonna make a good decision, right? 100%. And it's too noisy, too. It's kind of like if you look at if you look at the stock market at one of those charts over a month, it's right, it's all squiggly. If you look at it over a hundred years, it's just a nice smooth line. 100%. And so you can make much better decisions when it's not noisy.

SPEAKER_00 12:39

Well, you can actually make informed decisions instead of instead of emotional decisions.

SPEAKER_02 12:44

Right. If you're going off that noise, you're emotional. Right. We didn't sell anything today. You know, well, if if you didn't sell anything all month, now we got a problem. You know, but there could be a bad day. It's just a day. It's not good or bad. That's bad.

SPEAKER_00 12:59

So we have the CAC or CPS. We have the LTV, lifetime rate, lifetime value. And so there's a ratio between the two. It's what? You got to kick up that CAC. There's a ratio between the two, and it's called your CAC to LTV ratio. And the ideal number is a three to one or more CAC to LTV ratio. That means you're doing pretty good. So what do you mean? I don't understand. Give me an example. Okay, so let's say you have a three to one CAC to LTV ratio. It means for every dollar that you put in, and we'll call it the money machine because that's what your business should be, is a money machine. You put a dollar in and popping out on the other side should be three dollars, right? And then anything less than that, it get it can be dicey. You're you're getting your margin so close that like you could run into the danger zones. And so three to one or higher is the way to go.

SPEAKER_02 13:51

And you're probably not gonna see that if we go back to what I was just saying, which is if you're looking at what you sold this month and what you spent this month, you're not gonna see that, right?

SPEAKER_00 14:01

Oh, that almost brings us to our third number. I thought we were doing our third number. No, the first one is CAC. Uh-huh. Right? LTV. The second one is LTV. Uh-huh. And then the ratio. There's a ratio between the two, but the third one is the payback period. Ho ho. Tell me about that. Well, if we have the lifetime value, the lifetime value could be, like we said, $4,500, but that's spread over three years. So that means you're not going to see that for three years, right? So the payback period is your where you whatever you spent on whatever your CAC is, you receive back. You get your back. Yeah, you get your CAC back. Okay. We got it. That's called the payback period. So the idea is how long does it take for you to break even? And what we want to do is we want to shorten that as possible, as soon as possible. That means if you get that money back, you can get the money back and put it back into the machine, right? And so that cycle of taking the money out, putting it back in the machine, the faster you can do that, the faster you can scale, build, and eventually make a lot more money. And that's what we've referred to in the past as the snowball effect. Or the hockey stick. Or the hacky stick. So the payback period might in in in PNC, it is longer than other industries. But it might be sooner if you start including things like variable comp, maybe some bonuses. Like this is the one thing that drives me bananas about some agents, is like some there's always a number that you have have to grow to get whatever bonus, right? Some years you can really predict this because the some of the uncontrollable factors aren't in there. Like it might be like that this year, where there's more controllable factors where it's like you know if you grow X amount, right? So you can assume the bonus into the value of your client. You should. But regardless of that, your your the payback period in P and C is going to be a little bit long. Yeah.

SPEAKER_02 16:05

I think I I'm pulling it off the top of my head, but I but if you have a retention around 80, I mean, these are gonna be fuzzy, fuzzy math here, but if you're around 80 and you have a pretty good ratio, you're looking at about two and a half years, a little bit under two and a half. Well, not years, two and a half renewals to get paid back, break even. And when you're sitting here doing all the stuff, that seems like a long time, right? Sometimes you could be, ah, two and a half years. That's crazy. Well, I mean, think about what we're doing here, though. At the end of the day, we're investing, right? We're investing in our business. We're assuming that our strategy and our business is gonna create this money machine, right? What $1 in, $3 out. And so what else, what else can you put a dollar in and get three dollars back? Well, you get your $1 back where you broke even within a couple years. Well, I mean, you can't you can't do that in the market. Well, you could if you timed it and you were lucky, right? But most often that's not gonna happen because if you're B, you put money in the market, it goes down instantly, right? It's just the way it seems to work. But yeah, I mean, you're looking at at a lot much longer horizon to to get paid back.

SPEAKER_00 17:17

It's gonna be sooner than that because if you're factoring in your yearly bonus, the variable comp and all that stuff, it's gonna be much sooner than that. But you're probably looking at like a year to start seeing the upside.

SPEAKER_02 17:31

The end of the first renewal. So right at the second renewal.

SPEAKER_00 17:35

Yeah. And and if there are, let's say, promotions and stuff like that, yeah, you can start kicking it up because you know that that payback period might be a lot faster.

SPEAKER_02 17:43

Right.

SPEAKER_00 17:43

And so that's the idea is how fast can we get that payback period so that we can just take that money and reinvest it and snowball it.

SPEAKER_02 17:51

And then that brings you back to, I guess, a good and easy argument against the lead naysayer. Like I'd rather say, I know, I want to build a relationship. Okay, that's nice. Go do that. The thing is, you can't quantify that, right? You can't quantify rotary meetings and what you're gonna get back out of it unless you did it for a very long time and had a lot of data, right? Right. But with if you're buying 100 leads a day or 20 leads or 50, whatever, some amount of leads, fairly quickly, you have actual data that you know. Even if you're the worst, if you're the worst at at leads, you still have data as long as you make the dials on it.

SPEAKER_00 18:28

Yep. And so, like if you want to push that number down even more, because you're like, dude, I don't want to buy that many leads, that implement a very good referral process because there is a referral to new client ratio as well. So it's like, how many new clients does it take if they're if everybody's asking for referrals off that new business, how many of those, how many new business clients does it take to get a new client from that?

SPEAKER_02 18:53

So you gotta be, you gotta set the expectation and you gotta hold it and do the accountability, otherwise it's not gonna happen. Right.

SPEAKER_00 18:59

Which you will drastically change the cost per acquisition overall because now you're getting multiple clients from these new leads.

SPEAKER_02 19:10

Yep. Yeah. And serve them well, make them happy, and then they send other ones.

SPEAKER_00 19:15

That's right, Mr. Craig. Oh, that was like an MBA on how to grow. I mean, I happen to have an MBA. You happen to have one? I do. Nice. I don't. It's a big thing, dude. I got a waste of freaking money. I got a bachelor's in business, went back to school for that, and I only learned how to I I in which I did. I I got good at just like figuring out how to pass tests.

SPEAKER_02 19:38

Yeah.

SPEAKER_00 19:38

I not how to retain them. Or understand them.

SPEAKER_02 19:43

I mean, I think it's it really the biggest benefit is is the relationships that you could create, right? Because you have access to people. It's a place and they're not, it's not a bar, right? Like you're there's people that are trying to learn, and but you don't retain all of that, right? And it's all academic crap. I don't know. I think the university would be in trouble here pretty soon.

SPEAKER_00 20:05

Okay, let's review. Let's review. Number one your CPS or CAC. Yep. This is the total monies that go out to get a c a new customer.

SPEAKER_01 20:16

Mm-hmm.

SPEAKER_00 20:16

Right? Yep. Then you have your lifetime value. So it's not what your client pays you once, it's what it they pay you on average over the lifetime of them being with you. Very important to know because that's the entire process, right? Mm-hmm. And then it's your CAC to LTV ratio. We want to, we want to make sure that we have a healthy CAC to LTV ratio. We want to make sure that that we're, you know, profitable on on the new business. And then you need to know what your payback period is, just just so that you can make the good decisions of how much money goes out and how much money comes back in. And so, like if you look at, if you look at this on like I look at it like a like a linear, like a like a horizontal line. It's like goes from your client not even knowing anything about your agency to them knowing about you, to them turning into a client, to them coming in, onboarding, staying for years, and then eventually leaving. Like that whole period. That's what we're talking about. I don't know who Craig Kretzinger is to I left his agency because his rates are ridiculous. He doesn't answer the phone, some other guy does. And that's a mailbag. Bada ding bum bum.