“Front-end to back-end”: The simplest business model

Hey UpFlipers,

Think business is complicated?

Well, it’s true there are many moving parts when you’re growing fast.

But, at its core, business is about two things:

1. Turning leads into customers (without going broke)

2. Keeping those customers and selling more to them

#1 is your business’s “front-end”. #2 is your business’s “back-end.”

Today, we’re diving deep into how you can structure each - including marketing strategies, pricing tips, and offer ideas.

Plus, some numbers to watch on each side, and a few quick case studies of companies that nail this formula.

Why front-end marketing does not have to make huge profits

Everyone always says “an existing customer is cheaper to acquire than a new customer.”

That’s because new leads don’t know, like, or trust you as much as people who have bought from you.

Your front-end offer solves for this. 

Your goal here isn’t to get the biggest profits, but rather, to sell as many people as possible.

To overcome the trust gap, you make it easier/more compelling to buy. That means the product/service itself has to be great… but so too does your sales copy and your customer targeting.

Front-end pricing strategies/tactics

• First-purchase discount: Give them X% off their first purchase or a similar deal (like free shipping or BOGO). Common in eCommerce. Can work for service businesses if they sell the same service on the back end.

  

  Zoosnoods offers 10% off your first order if you get on their list

• Free trial/freemium: For software or memberships, you can either limit the customer’s time (free trial) or features (free forever). 

• Introductory service: Service businesses can offer a lower-cost service that scores a small but quick win. Low-risk to the customer and low time investment for the business.

• Risk-removal: Moneyback guarantees/solid refund policies demonstrate your faith in your product/service and reassure the customer they “won’t pay” if not satisfied.

• Loss leader: You intentionally take a loss to make the front-end offer price unbeatable. 

The point is that you offer insane value for the price with the hope that you’ll make more money on the back end.

Now, a loss-leader strategy requires you to have a back end built out to recoup that loss. If you don’t have that yet, you’ll need a source of income (like your job or substantial savings) to sustain yourself while you build the back end.

Otherwise, your front end will need to be profitable so you actually have money to sustain yourself.

The importance of testing front-end offers

You won’t necessarily strike gold at first. Your offer might flop. 

That’s not always bad — you might just need to test a new offer, new copy, or something else for the same front-end product/service.

Now, you can do pretty darn well for a LONG TIME just honing your front-end marketing. 

Dial in your acquisition method to control costs while increasing traffic (and raising prices, if applicable) to grow steadily…

Why back-end products = REAL growth

If the front end builds your list of customers, the back end turns that list into a cash-flowing, profitable asset.

They now know, like, and trust you. It’s much easier to persuade them to buy again from you, whether the same product/service or something else.

Some businesses wait a long time before adding a back-end offer once they nail their front-end. However, it’s possible to add them right away — particularly if its a consumable/recurring product/service.

Back-end offers

Identify what needs your existing customers have now and present offers that meet those needs. These will be your back-end offers.

Examples:

• Upsells: Sell more of or a higher version of your product/service. For example, a mobile car detailer might sell its detailing services to a client who only performed a car wash. Or a software company may sell a higher-level plan. Or an apparel company may sell a customer more of the same shirt.

• Cross-sells: Sell a complementary product/service. For example, if you sell one flavor of coffee… sell another flavor that customer might like based on their taste. Or perhaps you sell them a branded mug. 

• Subscription: Sell them on a subscription (if you didn’t on the front end). For example, ongoing home cleaning services, an ongoing freelance retainer, or a paid membership community. You may offer a discount to persuade the customer—you take a small revenue hit in exchange for steady cash flow.

  

  iHeartDogs sells a subscription for recurring revenue

• Reverse front and back-ends: You might later create a lower-level, lower-cost offer and make that your front-end. Some service businesses can do this by “productizing” their knowledge (making a course/eBook, for example). 

• Affiliate products: Cross-sell other peoples’ products. Skip the hard work of making a new offer yourself.

Back-end sales strategies/tactics

• Email marketing: Get customer permission/opt-in for email marketing when they buy. Build flows that “onboard” them, upsell, cross-sell, ask for reviews, ask for referrals, reward your “VIP” customers, remind them of renewals, etc. If applicable, write emails to your list to build a relationship and loyalty among your customer base.

• SMS marketing: Complement email with SMS. SMS is a great place to create an extra sense of “VIP” status and let customers know about special promos.

• Loyalty program: Reward repeat business with points toward free/discounted products. 

• Retargeting ads: Target past customers to keep your brand and offers at the top of mind. This covers another channel outside your email/SMS list.

• Involve the customer: Customers love to feel a part of something. So get customer feedback on existing products and input on future potential products. Some business models lend themselves to this better than others. For example, eCom and digital product businesses may ask customers what they want to see and have them “beta-test” new products.

What numbers to watch for the front and back ends

Business have zillions of numbers to track. 

Many are “vanity metrics” — numbers that look great but don’t necessarily equate to progress toward your business goals.

Let’s cut the confusion by looking at a few KPIs to track on your business’s front and back ends:

Front-end metrics

1. Customer Acquisition Cost (CAC): The amount you spend to gain one customer. The lower your customer acquisition cost, the higher your front-end margin.

2. Conversion rate: The percentage of leads who purchase. This works for front and back ends, but it’s much more vital on the front end. You can measure it overall, by channel, and in other ways.

3. Average Order Value: This measures the value of each order a new lead places. A higher AOV on the front end can offer more to spend on acquisition.

Back-end metrics

1. Repeat purchase rate: The percentage of customers who buy more than once in a time period. The higher this is, the better you’re retaining newer customers.

2. Customer Lifetime Value (CLTV): How much you make from one customer over their time with the brand. Multiply average order value by average number of purchases to get this.

3. Churn rate: The percentage of subscription customers who cancel within a specified timeframe. This one matters big-time if you sell a subscription product/service — whether you’re a subscription-only business or offer the option for certain products/services.

4. AOV: AOV matters here, too. It tells you how effective your upsells and cross-sells are doing. It also helps you find opportunities for these.

5. CLTV/CAC: Divide CLTV by CAC. The higher this is, the more money you make overall per dollar spent on a customer.

That last one is the holy grail of business growth. As long as it’s positive, you have no real ceiling. And, of course, if it’s higher… your profit margins grow.

You can spend more on acquisition because each customers earns you back several dollars per dollar spent.

If it costs you $50 to get a customer, and they can reliably earn you, say, $500 over their time with you… your CLTV : CAC = 10. Your earn $10 for every $1 spent on a customer.

3 businesses doing “front-end→back-end” right

Here are a couple of businesses doing the front-end→back-end well:

1. RXLA Candles

Jen and Jocelyn started RXLA Candles as a side hustle selling candles at a local farmer’s market and some other pop-up shops around town.

In a way, that’s how they stood out on the front end — just making candles within their local community. Limits the competition and hits the “buy local” angle people enjoy.

Customers loved their products but wanted the option to buy online. So the pair listened launched a website. 

Jen and Jocelyn kept listening to the customers, learning that they wanted perfumes with scents similar to the candles. They also now sell diffusers, incense, and other back-end products.

Therefore, candles — the flagship product line — is their official front-end.

Now, Jen admitted they waited too long to leverage email marketing. They were worried customers didn’t want to hear from them (they later learned the opposite was true).

Now, Jen writes the email newsletter. She builds strong relationships with customers and makes extra sales with every newsletter send.

There’s a lot more that they’re doing on the back end, though:

So check out our full interview with Jen about RXLA Candles.

2. Wizard Wash

Wizard Wash is a Florida-based pressure-washing company serving residential and commercial clients.

Wizard Wash starts with, well, pressure washing. In fact, that was the only service it offered for a long time.

However, people who need pressure washing probably need other things cleaned… like, say, their driveways.

Thus, Wizard Wash began offering paver sealing on the back end to collect more revenue per client.

Now, it can offer recurring versions of both — that means more recurring business without as much ad spend AND a higher AOV.

The result: Big margins.

Watch our full interview with Wizard Wash’s founder, Chase Lille, here.

3. Moto Pizza

Moto Pizza is a Seattle-based pizza chain that’s so popular, it sells out three months in advance.

The front-end offer here is obvious… pizza. But it’s positioned well. Lee, the founder, tapped into this Filipino heritage to make some truly unique pies.

The back end of his business is locked in via social media. He’s mastered the art of interacting with customers and building a strong sense of community that keeps them coming back.

Yet this also fuels his front-end marketing, as people spread the word about his business on social media. He’s dipping into ads now but has never had to do so.

But he also added ice cream to expand his offerings. Pizza customers can grab some ice cream for dessert — a perfect pairing.

Oh, and it helps him secure more sales when pizza sells out. Lee has something for people who want, but can’t get pizza.

We interviewed Lee to learn more about his business success. Check it out here.

To wrap it all up…

When it comes down to it, a successful business merely needs to get solid prospects in the door and keep them around for the long haul.

That involves:

1. A great front-end offer: Something to turn leads into customers.

2. A way to get that offer in front of people: How you get the leads you’ll turn into customers (ads, social media, etc.).

3. Back-end offers: The things that keep customers coming back, leading to growing profits.

4. A way to sell those back-end offers: How you present your back-end offers to customers (email, loyalty programs, etc.)

The goal is really to maximize that CLTV to CAC ratio. The more a customer pays you per $ you spend to acquire them, the better.

Now go out there and kill it!

Woah, check these out…

💡 Clueless about what business to start? This article might help…

🔥 Click here if you’ve ever wondered what a typical day looks like for a 7-figure entrepreneur

💵 Learn the basics of business insurance — A crucial topic for entrepreneurs that few talk about

🎙️ Catch our latest podcast episode for more business inspiration and ideas

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