Dan Martell - Using Setup Fees To Scale Your SaaS

00:00:00.000 Hey there, I'm Dan Martell, serial entrepreneur, investor,

00:00:02.580 and creator of SaaS Academy.

00:00:03.760 In this episode, I'm going to share with you

00:00:05.420 the exact process to create a setup fee

00:00:08.980 or sometimes called an implementation fee

00:00:11.200 for your SaaS product.

00:00:12.720 So you can get paid by your customer

00:00:14.820 to help them activate and deploy your solution.

00:00:18.020 Be sure to stay to the end

00:00:18.740 because I'm going to tell you how to download

00:00:20.020 and get access to an exclusive resource

00:00:22.300 that's called the Setup Fee Designer,

00:00:24.600 which goes through all the characteristics,

00:00:26.980 how to name it,

00:00:27.780 the different strategies for doing that, super easy.

00:00:31.640 And I'll tell you more about that in a bit.

00:00:33.540 Let's get into it.

00:00:46.960 So if you have a software product

00:00:48.840 and you're selling for anything north of $97 a month

00:00:53.540 kind of reoccurring revenue,

00:00:54.980 then you have an opportunity,

00:00:56.240 and maybe even on the low end, okay?

00:00:57.840 I've just never done it.

00:00:59.240 To charge your customer an upfront implementation fee.

00:01:03.560 That's what it's usually called,

00:01:04.440 or maybe a setup fee.

00:01:05.960 Essentially, it's some dollar amount

00:01:08.500 that you can convince your customers to pay

00:01:11.460 to help them deploy your solution,

00:01:14.200 which I know in this world,

00:01:15.540 a lot of you guys have these beliefs that like,

00:01:17.540 but why would they pay for that?

00:01:19.140 Shouldn't the product be simple?

00:01:20.760 Doesn't that tell them that maybe it's complicated

00:01:23.280 and they're not gonna get the results they're expecting

00:01:25.720 or maybe they should keep looking for somebody else.

00:01:28.460 But here's what I've discovered.

00:01:30.060 And, you know, I've been doing this now for over 20 years.

00:01:32.840 Back in the day when I was helping my brother

00:01:34.980 buy an email marketing platform,

00:01:37.580 I call it Confusionsoft, but it's Infusionsoft.

00:01:40.580 They were charging $2,000

00:01:42.640 to just essentially get access to it.

00:01:45.940 You know, he did a sales call and then he called me

00:01:48.300 and he's like, they wanna charge me $2,000

00:01:50.440 to buy the software.

00:01:52.880 like they want to charge me to pay for the software and the reason why is because they knew

00:01:58.800 that the onboarding experience was going to take some configuration and it was really neat the way

00:02:04.400 they set it up because they essentially had a partner network of consultants that were like

00:02:09.600 certified infusionsoft experts that would do the setup for free with the possibility of selling

00:02:15.200 their services after the fact and that's why they got customers to make that investment and i love

00:02:21.840 that strategy it's something that i've implemented in most of my sas companies i've helped hundreds

00:02:27.360 of my coaching clients implement it into their business and the reason why it's so powerful is

00:02:32.640 it literally can fund your growth if you set it up right i know that i have one of the companies

00:02:39.200 in my portfolio we charge i think it's a thousand dollar setup fee and the sales rep gets 70 of

00:02:46.720 that so that means that i don't have to pay sales commission they get it from the setup fee

00:02:51.760 i still have 300 out of that setup fee to go acquire the lead in the opportunity which we're

00:02:57.760 able to do it for less than that so that way i have a positive sales cycle and flywheel going

00:03:04.480 because the setup fee pays for the sales reps activity it pays for the marketing team's

00:03:10.320 acquisition and then everything else from a reoccurring revenue hits the bottom line

00:03:14.240 and it is so powerful okay and it could be a game changer for your business but if you do it wrong

00:03:20.000 then you're going to stop. You're not going to get the sale. If you set the wrong setup fee,

00:03:24.820 you're not going to get the sale. So I want to walk you through five different strategies to

00:03:29.240 do it right so that you get customers buying every time. And the best part is they'll be excited to

00:03:33.920 buy it from you because you're going to help them be more successful and solve their biggest

00:03:37.780 problems. Let's get into it. Number one is to name it. You got to give it a cool name. Don't

00:03:43.800 just think, I'm going to call it a setup fee. Clients don't want to pay for a setup fee.

00:03:47.260 They want to know that this thing is solving the problem, right?

00:03:51.400 So with HubSpot, for example, if you've ever bought HubSpot, they call it a coaching fee, right?

00:03:56.660 They want to sell you coaching to ensure you deploy their technology, their product.

00:04:02.720 And the reason why is because most people buying complicated configuration-based solutions like a CRM,

00:04:09.600 financial applications, ERP solutions, you name it,

00:04:13.500 their biggest fear is not does your product do what you say it's going to do.

00:04:17.020 it's them not getting it deployed

00:04:19.440 and then their boss getting mad at them

00:04:21.440 because they didn't get success.

00:04:23.220 So you need to give it a name

00:04:25.480 that solves the biggest concern they have.

00:04:28.460 So you can call it an implementation fee,

00:04:32.280 you can call it a coaching fee,

00:04:33.700 you could call it an activation fee,

00:04:35.360 you could call it a data migration fee, whatever it is.

00:04:40.160 Give the name to make it seem part of the process

00:04:44.040 for the customers to get the value.

00:04:45.240 Number two, price to value.

00:04:47.160 So oftentimes my clients specifically,

00:04:50.600 they don't understand the value they're creating,

00:04:52.720 not the cost.

00:04:53.560 Some of them are like, well,

00:04:54.740 I know I can pay a team of people,

00:04:56.920 you know, $100 to migrate our client's data, right?

00:05:00.600 But that's not the value.

00:05:01.780 It's not what you can pay

00:05:03.000 because you've gone through the work to build a team

00:05:05.340 and maybe a more advantageous part of the world.

00:05:09.440 It's what's the value to the customer

00:05:11.620 and how do you present that value to a customer?

00:05:14.040 because they can do it themselves.

00:05:15.580 Or you can charge for a migration fee

00:05:18.540 to get everything moved over.

00:05:19.820 And the beauty of it is,

00:05:20.840 is you're gonna get it done way faster.

00:05:22.920 So you gotta price the value you're creating,

00:05:25.540 not your cost.

00:05:26.860 It's not a cost plus scenario.

00:05:28.600 It's what kind of value.

00:05:29.960 And the more people pay,

00:05:31.280 the more that they're gonna pay attention.

00:05:33.180 So sometimes you wanna test out 2,000, not just 1,000.

00:05:36.800 You might test out 1,500.

00:05:38.240 You might even try 5,000.

00:05:40.300 But getting, especially if your customers are bigger,

00:05:42.360 because they won't even blink at that, right?

00:05:44.440 And then you get them committed to the solution.

00:05:47.100 Then you could even charge,

00:05:48.180 and my favorite thing is annual contracts.

00:05:49.960 Side tangent, gonna leave that one there.

00:05:52.260 But it gives you the opportunity

00:05:54.920 to really get commitment from the customer

00:05:57.940 because you're pricing the value, not your cost.

00:06:00.600 So be sure, like if you have,

00:06:02.060 sometimes it requires custom development

00:06:04.040 and some people just like charge the engineering time

00:06:07.040 that you're paying your consultants or your developers,

00:06:09.140 that's not the way to do it.

00:06:10.240 Most people, if they hire a developer,

00:06:12.560 they don't even know if they're good.

00:06:13.460 You've got people that know your stack,

00:06:15.080 know your APIs, know your frameworks,

00:06:17.060 understand the customer segments you serve,

00:06:19.360 and can deploy this with a guarantee,

00:06:21.720 then $2.50 an hour for custom stuff

00:06:23.560 is probably a better bet, at least $1.50 an hour.

00:06:25.800 But you don't wanna charge $35

00:06:27.260 because that's what you pay your engineers.

00:06:28.820 So the price to value is a key point.

00:06:31.240 Number three is the offer map.

00:06:33.200 So the way I think about it is you wanna go from like,

00:06:36.180 where are they at your customers today?

00:06:38.120 Where do you want them to get, okay?

00:06:40.220 ideally first value, you wanna get them

00:06:42.160 to some kind of core value.

00:06:43.340 And then what you do is you map out all the steps

00:06:45.960 that would require them to do that.

00:06:47.360 You know, I have a friend, Nathan Berry,

00:06:48.720 who's got ConvertKit, which is an email marketing platform.

00:06:51.540 And one of the things they did in the early days

00:06:53.840 is they would migrate their customers

00:06:55.480 over to their platform.

00:06:56.560 Why?

00:06:57.400 Well, if I've connected all these forms on my website,

00:07:01.180 my marketing funnels to an existing product,

00:07:04.220 and you're asking me, like,

00:07:05.680 I believe that you have a better solution,

00:07:07.560 but I know the effort involved to migrating

00:07:10.320 is all this extra stuff.

00:07:11.840 I mean, that's a big ask.

00:07:12.940 So you wanna start thinking about like,

00:07:14.740 okay, can I charge, let's do a package,

00:07:17.840 which is the data migration

00:07:19.180 and then the configuration customization.

00:07:21.100 Maybe you offer, you have designers on staff

00:07:23.200 that understand your templating language

00:07:25.880 and you could provide an offer that gets them

00:07:28.180 to copy their brands and customize all their templates.

00:07:32.980 Maybe there's some training or best practices you can offer

00:07:35.820 to make sure that their team gets trained.

00:07:37.800 See, that's another thing is,

00:07:39.060 if it's a product that's gonna be deployed to a department

00:07:41.840 and you have the opportunity to sell them on some training,

00:07:45.940 then why wouldn't you?

00:07:47.280 Because at the end of the day,

00:07:48.460 SaaS shouldn't stand for software as a service,

00:07:51.440 it should stand for success as a service,

00:07:53.600 and you want to design an offer

00:07:55.700 that gets them to guaranteed success.

00:07:58.820 Number four is trade urgency.

00:08:01.640 The biggest thing that I've discovered

00:08:03.680 that gets people excited about investing in,

00:08:06.820 see the word I use, investing in,

00:08:08.960 your implementation fee, your setup fee,

00:08:11.540 whatever you wanna call it,

00:08:12.940 is the idea that they're gonna be able

00:08:14.720 to get an outcome faster.

00:08:16.260 So you wanna trade urgency, okay?

00:08:18.980 And maybe you actually have like limited supply

00:08:21.220 of how many clients you can help.

00:08:22.960 And that's a thing that your enrollment specialists

00:08:26.520 or your salespeople or whatever you call them,

00:08:28.120 product specialists can communicate and say,

00:08:29.860 hey, you know, over the next quarter,

00:08:31.980 We only have two more slots to get people

00:08:34.940 into our data migration process.

00:08:38.100 So if you wanna do that,

00:08:39.880 this is what it's gonna look like.

00:08:40.920 So you trade urgency to get your solution deployed faster

00:08:45.560 because if they're bought into the outcome,

00:08:47.620 they're bought into the solution,

00:08:49.240 then you wanna make sure you can push that along.

00:08:52.020 Trade urgency.

00:08:53.320 Number five is test it, okay?

00:08:55.000 Some of you guys are listening to this going like,

00:08:56.460 there's no way my clients would pay that.

00:08:58.200 There's no way.

00:08:59.040 What if our conversions go from 30% down to 2%?

00:09:02.540 I can't afford to do that.

00:09:04.700 Test it, literally.

00:09:06.400 Create an offer.

00:09:07.980 Have one of your sales rep watch this

00:09:10.060 and listen to this and design an offer and price it.

00:09:14.400 Start on the bottom if you want

00:09:15.640 and test it with the next five calls.

00:09:18.240 Not all your calls, maybe a small percent,

00:09:20.420 maybe 5%, 10% of your calls

00:09:22.380 to see if they can get people to enroll.

00:09:24.800 And the reality of it is,

00:09:26.160 is maybe, you know, where you used to get 10 enrollments,

00:09:29.380 you only get nine or eight,

00:09:30.900 but the ROI of that implementation fee,

00:09:33.920 that setup fee is going to fund the commissions,

00:09:37.840 it's gonna fund your growth,

00:09:38.900 and it's gonna allow you, if you're bootstrapped,

00:09:40.780 to keep being bootstrapped a lot longer,

00:09:42.340 if you're funded to show better unit economics

00:09:44.440 for your investors and to build a better business.

00:09:47.520 So test it, try it out, and just say,

00:09:50.480 when you're on the call, it's like, hey,

00:09:51.980 the investment is $2,000 for a coaching fee,

00:09:55.220 and then 350 a month for the first 12 months.

00:09:59.240 And just say it natural.

00:10:01.000 Why do you guys charge a coaching fee?

00:10:02.900 Here's my favorite answer.

00:10:04.160 I don't know, it's always been that way.

00:10:05.980 That's the best answer to give to somebody

00:10:08.640 that asks you if you're dealing with that objection,

00:10:10.260 but just go out and test it.

00:10:12.300 So quick recap, the five characteristics

00:10:14.340 of an implementation fee.

00:10:16.080 We gotta do one is we gotta name it.

00:10:17.520 Number two, we gotta price to value.

00:10:19.680 Number three, we gotta create an offer map.

00:10:22.000 Number four, we wanna trade urgency,

00:10:24.500 essentially speed and number five,

00:10:26.760 we wanna test it, get it out there today.

00:10:29.820 You can literally get this deployed today.

00:10:32.420 As I mentioned at the beginning of this episode,

00:10:34.080 I wanna share with you an exclusive resource.

00:10:36.100 It's my setup fee designer.

00:10:38.240 It's the specific framework that I use

00:10:40.300 with my coaching clients to outline

00:10:42.400 not only the creative names that I've given,

00:10:44.440 there's a bunch of examples,

00:10:45.960 all the different types of services

00:10:47.780 that you can offer as part of the fee

00:10:50.060 and then also how to go out there and test it,

00:10:52.500 identify a sales rep and make it real.

00:10:55.540 Don't sit on it, click the link below,

00:10:57.060 download my setup fee designer template

00:10:59.140 so you can get things going today.

00:11:01.140 Click the link below, it's your copy as a gift to you.

00:11:04.220 And as per usual, I wanna encourage you,

00:11:06.600 if you like this video, please click the subscribe button,

00:11:09.440 click the like button and leave a comment.

00:11:11.120 Let me know what was the number one takeaway

00:11:12.980 that you got from this video.

00:11:14.700 And I wanna challenge you always to build a bigger life

00:11:18.860 and build a bigger business, both of those in tandem.

00:11:21.900 I'll see you next Monday.

Dan Martell - March 14, 2022

Using Setup Fees To Scale Your SaaS

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