I was spending my time in all the wrong ways.
A couple of years ago when I was setting about to change my whole life because I got myself into a position where I had started the wrong business, I was completely miserable and knew that I was missing out on probably the best part of my career by doing the wrong thing.
I had spent a ton of money. I felt like a total failure and I was working on starting over during that time. I developed a lot of what I talk about now in all the different courses and videos like this where we dive into things like exploring your why and finding work that is truly fulfilling to help you find the freedom that you’re looking for as an entrepreneur.
One of the really important things that became a part of my awareness during that time was a business model that was much more effective than the one I had.
So I had spent a lot of my career as a service-based business and not just any service, but one that is really hard to quantify. And that is photography and design. So one of the tricky things as a designer is you never really know how long a project is going to take. So when you’re trying to figure out how profitable you are or how much time you actually have in a week to serve a customer, it’s really, really difficult to actually map that out and to be strategic. And I was done with that.
I was really done with having it be so complicated to project my revenue and to manage my time.
I figured there had to be a better way. So as a part of the transformation that I went through, even knowing that design was something I really enjoyed, I started to expand and think about what were the different business models.
I could add different revenue streams I could add into my business in order to have an easier to manage cashflow, which at the end of the day is really what a business is all about, isn’t it? It’s about making money and making sure you have enough money to pay your bills and to take a salary home, et cetera. So one of the models that I stumbled across and really put to the test was the idea of a membership site. And that’s what I want to talk to you about today. I want to take you through the logic and some of the strategy as to what makes membership sites in particular such incredible business models. Even if right now you are a one-to-one provider or a service business and it’s hard to even imagine how you could have passive income in your business. So we’ll look at the details. We’ll talk about the strategy.
Let’s make some magic, shall we?
Okay, so let’s assume that you are an entrepreneur and at the moment you’re not thrilled with your business model. And what I mean by that is the ways that you make money, either you’re not making enough money or it’s not a manageable process, meaning it’s not super organized in terms of how you’re able to project, how much money you’re going to earn or how much time you’re gonna spend. And those are critical elements to be able to manage.
If you want to think of a business that is very scalable, that ultimately will be one that will provide you with freedom and fulfilment. So as you look at trying to make your business a little bit more wieldy and predictable, looking at revenue streams that are a little bit more sustainable or a little bit more plannable can be really important.
There are several options for this and most people call most of those options passive income, which is a bit of a misnomer because there are very few types of income where you just sort of set it and forget it, but we’re not going to go into that today. But one of the business models that comes up during conversations about passive income is the idea of a membership site.
Membership sites get me so excited because they tick all the boxes.
The boxes I’m talking about are what I call freedom factors and these are criteria I look at when I’m thinking of bringing a new product to life to see whether or not that product is going to fit into the lifestyle that I want to have as an entrepreneur and not just the lifestyle, but into revenue model and into the time I want to spend to bring that product to life to deliver that product.
So I’m not having to sacrifice either my time or my revenue in order to get this thing done. So let’s talk a little bit about what those freedom factors are.
There are five freedom factors
That I look at when I’m trying to just determine the viability of a passive or leveraged income revenue stream.
- Is it easy to outsource?
- Is it scalable?
- Can I get a high profit margin out of it?
- Does it have premium potential?
- Is it recurring revenue?
So in the show notes from today, you’re going to be able to download a PDF where I go through all of these factors and help side by side compare different types of passive income and how they stack up when it comes to the freedom factors.
But what you’ll see in that PDF is that membership sites tick all the boxes they have all of the freedom factors. Now, some might be more important to you than others, but they’re all important if you want to be able to spend your time the way you want and make money while you sleep, which are really important indicators of passive income products that are exciting to most of us. So let’s talk a little bit about how this actually plays out with a membership site and why you might want to actually build one.
One of the most important things to keep in mind is that if you’re building any kind of membership site, it’s really about building a community. So you need to be interested in that. First because if what you want to do is just build this cash cow that you’re not going to pour any love into, it’s probably not going to work very well.
First and foremost, you need to be interested in bringing like minded people together on a particular topic or product membership sites at the end of the day, our communities. So that needs to interest you. You need to be someone who wants to build a tribe or be a leader or not be visible at all necessarily, but allow people to come together and to connect. So that’s first.
The second thing is that actually membership sites, although you might be intimidated by actually physically building one because of the technology, they’re not that complicated. But what you are going to want to do is pick the type of membership site that works for you. So you might do what is thought of as a traditional membership site where you’re actually bringing a community together and maybe delivering content or delivering information, maybe delivering access to experts, but you’re having some sort of content that you’re bringing to life and delivering to your members on a regular basis.
But you could also have a membership site that is based on a physical product. So something like a subscription box is basically a membership site. It’s just that along with that you’re also shipping something. There are others like delivery. Like Netflix for example, is technically a membership site.
But what we’re looking at in terms of the word membership is where someone signs up for a recurring charge, right?
So that’s what gives us that recurring revenue. Someone signs up today and we keep charging their credit card every month. That is the key. How you actually put the product together is a totally different conversation. The other thing that I love about membership sites is you could have any price point. You could have a site or a or a recurring revenue product where the cost is $5 a month or you could have one that’s a thousand a month, there’s really no limit. It totally depends on the value that you’re delivering.
It’s a really flexible model based on what you want to do.
The other thing I love about it is it can allow you to bring value to people you can’t serve right now. So maybe you want to be able to help people who don’t live in your physical area and by bringing something to life online, you’re able to help people all over the world or maybe as a coach or a consultant or a service provider you’re priced out of a lot of your customers are priced out of your services because you charge a premium and you want to be able to help the little guys who need you the most. But it’s just not viable for you to charge a lot less per hour for your time because you can charge more and your time is really, really valuable.
A membership site is a place where you can give people a lot for a little because it’s scalable, because whether you’ve got one person or a hundred people, it’s the same amount of work. You really, really, really are able to give tremendous value to the people who join without having to do triple, quadruple a thousand times the work per person. So it becomes a really great model for your customers as well.
Now, there’s a couple of questions I know you’re going to be thinking about as you’re considering this model for yourself. The first one is, oh my gosh, this is huge and overwhelming. How do I bring it? Until we just recently talked about the concept of an MVP or a minimum viable product, and that is definitely the strategy that I recommend. Go have a listen to that episode over there and learn the MVP model, but essentially it’s about not getting dissuaded by perfect and just bringing something usually called a Beta or an initial version to life quickly.
Then you can make it perfect and pretty and all of the things that you’re going to be worried about when you’re wanting to launch this thing for the first time. Don’t let that stuff get in your way.
The other thing I know you’re going to be thinking is how on earth do I sell it? And that is a really, really important question because that is the most important part of any passive income product is not building it but selling it and what you’re going to want to look out for that ultimately is to build a brand. The more people know you and trust you, the more people like your flavor of what you do, the easier it is to get people to buy from you. So in our entire next season of the Magic Maker podcast, we are going to be diving deep into how to do that.
So we can definitely help with that.
But the beautiful thing about the MVP model is that you don’t need to do that to start with. It’s something you can do over time because it’s easy to get people in the door at a discounted price by saying, hey, come be a founding member. This is our first time. Come along if you’re interested so you can buy yourself time to build that brand. But that’s what’s going to help you stand out online because the reality is this is a product you’re going to sell online. You’re entering into a journey where you are now an online brand and that is has its own sort of learning curve with it.
Again, go back and visit the MVP episode because we talk about some ways to get past that perfection monster and to just bring something to life quickly so that you can test it and see if it’s right for you and more importantly, see if it’s right for your audience. So that’s it for today. If you want to have more conversations about products like this one or building a brand, definitely check out our Facebook group. And also come hang out with us on Instagram. It’s a place we love to be. If you have time, you can run over to jnicholesmith.com and we always have some amazing free resources to help you take action on the stuff in these videos. So we hope to see you over there.