The "A-R-S" ladder: A mental model for starting and growing a business

Hey UpFlipers,

Many entrepreneurs flop and fail because they complicate things.

They squander thousands of $ and countless hours on unimportant matters to “look” like a legit business…

Or they get confused and lack direction, chasing the latest shiny object.

Truthfully, business is simpler than people make it.

The keyword is simple. Not easy. I’m not denying the hard work and long hours it takes to build a business.

But when you cut out the bloat, you only have to do three things:

• Acquire

• Retain

• Scale

I call this the “A-R-S” ladder, and we’ll go deep into each stage in today’s newsletter.

The Acquire-Retain-Scale ladder

At its core, business boils down to:

1. Turning leads into buyers, getting them “in the door”.

2. Turning those new, one-off buyers into lifelong customers to grow your margins.

From there, you can rest on your laurels and just look for ways to scale back your time involvement…

Or, you can go to the next level:

Once you’ve maxed out customer lifetime value (the total amount one customer is worth to your business) via retention ...

You go back to the acquisition world with your newfound cash and scale.

The result of this “flywheel” approach:

More customers entering your business, with each being quite lucrative.

You gain even more money to reinvest in what’s working in your business. 

Think about how big you can grow following this “Acquire-Retain-Scale” mental model.

Simple, but not easy. There’s no “get rich quick.”

Each stage involves a lot of obstacles, setbacks, and hard lessons. It can take a lot of time to climb this “ladder.”

But we’ll go over each phase so you at least have a broad roadmap to follow when starting and growing your business.

Acquisition — Kickstart your customer base

You can’t get anywhere without some customers first. So you must put your heart and soul into grabbing those few customers…

And often, with little to no money.

Let’s cover how to make the best of a low-budget situation when acquiring customers.

1. Know your target audience

Many entrepreneurs pick a product/service, then try to find a market.

That’s backwards. Find a hungry market, then sell a solution to their problem.

You can have an idea of what product/service you want to sell, but confirm a market exists for it.

If you find one, learn what you can about that market’s problems, pain points, goals, things like that.

Selling’s easier when you know a hungry market’s problems like the back of your hand.

2. Focus on ONE front-end service

The fewer decisions customers have to make, the less thinking they have to do… and the more likely they buy.

So, it's often best to sell only one thing on the front-end.

This saves you money and can increase your ROI, too. No need to invest in the materials, products, equipment, etc. for multiple products. 

You get quite proficient at that one front-end offer.

3. Low-cost marketing

You can spend time or money to grow. If you have little money… you’ll have to spend time on low-cost marketing methods.

A few ideas:

• SEO and content marketing

• Social media engagement

• Networking with others

• Brochures/flyers

• Word-of-mouth

• Front-end email marketing

For example, we have a Facebook page:

Here, we can have people “like” the page to engage with us for free and, eventually, sign up for a course.

Paid traffic can work if you gain traction with free methods. In fact, retargeting ads can grab leads who visited your site but never bought.

But be careful. You must learn the platform you pick and avoid burning your cash right away.

Don’t spread yourself too thin. It’s fine to have a presence on many marketing channels, but focus your efforts on 1-2 max. Perhaps you pick one free and one paid channel.

Most of your Acquisition efforts will go toward this marketing. But the next two sections give you a boost in the early days.

4. Gather reviews

Some stats from Search Engine Journal showcasing the power of customer reviews:

• Almost everyone checks reviews when shopping online

• Almost half of customers trust reviews as much as personal recommendations from friends/family (and 18-34-year-olds do so at an even higher rate)

• 96% of customers hunt for negative reviews

• Recency, overall average rating, and number of reviews are the top three things most customers look for when looking at local business reviews

Get a review or testimonial from as many customers/clients as possible. Each is an asset you can use on your website, third-party sites, in your marketing, and more.

Set up accounts on places like Trustpilot and Google My Business (if applicable). Tons of customers check these sites. They can also help SEO indirectly.

Check out our interview with Neil Parekh, founder of wildly successful cleaning company MaidThis, for tips on collecting tons of reviews (and much more).

5. Earn referrals

Referrals bring you low-cost “warm” traffic, meaning the customers already trust you to some degree (thanks to being recommended by family/friends).

The best time to ask for a referral is right after the customer leaves a good review since they’re thinking of your product in a positive light.

Referral request + a little incentive for them and their referral = easy leads.

Martin Skarra, owner of Seattle Window Cleaners, gave us some tips on what he did to build his company’s referral program. Watch the full interview here.

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Retention — Where your profits are made

The Acquire stage might be the hardest. You have little to no money and must “figure things out”. 

But now, you have to keep those hard-won customers. Time to learn how to Retain.

1. Excellent customer service

Earning lifelong customers/clients starts with the first sale… 

And that first sale doesn’t end when the customer hands you money.

Consider this: Around 70% of customers have quit buying from a brand due to poor customer service…

While 91% of customers say they will likely buy again after an excellent experience.

Go above and beyond with that first sale, ensuring the customer has an excellent purchase and post-purchase experience.

Address any issues promptly and respond to negative reviews, offering to fix whatever went wrong. 

Think of that extra effort as part of the “cost” of earning a lifelong customer.

2. Know your customer journey

Your front-end product solves one problem. What’s the next problem you can solve for your customer?

The solution is the next thing you can sell.

For example, Chase Lille started Wizard Wash as a pressure washing business. 

But soon, he realized his customers needed their driveways prettied up. So he started upselling paver sealing services to add revenue strengthen customer loyalty.

(Check out our full interview with Chase here.)

Sit down and think about your customer journey. Determine their problems at each stage and pick products/services you can sell to solve them.

3. Build your email & SMS marketing

In general, customers must give you their email when buying… building you an email list of customers.

Email’s one of the highest-ROI marketing methods. Numbers vary by business model and industry, but experts say email can earn up to $36 per $1 spent.

Probably higher for existing customers, too, since they already trust you.

SMS marketing can offer even higher ROI. It’s more direct, there’s fewer worries about spam and trash filters, and people open texts much faster.

A strong email and SMS strategy keeps your customers engaged and gets them buying repeatedly. That consists of:

1. Automations: Upsells, cross-sells, abandonment flows, post-purchase sequence, etc… these run on autopilot, helping you build loyalty and sell more with little time investment

2. Campaigns: Special promotions, new offers, etc.

In either case, get consent from your customers to receive marketing emails/SMS and follow applicable laws and regulations.

4. Implement a loyalty program

Reward customers for repeat business by creating a loyalty program. They’ll spend more if they can earn rewards toward future purchases.

Oh, and they’ll appreciate getting rewarded for sticking with you.

These days, apps like Smile.io and Glue handle a lot of the work for you (but they’ll cost you, of course).

5. Retargeting ads

You can use retargeting ads for past customers, too. Good chance your Return On Ad Spend (ROAS) will be higher since these customers are easy to sell.

If you’re building an email list, retargeting ads may not be as vital to getting repeat business. Always weigh potential returns.

6. Personalize everything

Personalize your customer service, email/SMS marketing, retargeting ads, and even your loyalty program where possible.

Tailoring your messaging, product/service recs, and so on builds a stronger connection. The customer feels valued and you speak more to their needs.

Scaling — Dominate your market

Congrats! You’ve multiplied your revenue/customer without a proportional increase in acquisition.

Your profit margins have fattened. You have more capital to put toward acquisition and other operational pieces of growing a business.

Some things to do at this stage:

1. Identify your whales

Your Retention efforts reveal your “whales”... the top customers by revenue. 

Dig into the data to learn about them. See what they have in common. 

Use that data in your front-end marketing — ad targeting, copy, creative, website copy, the whole thing.

Think about it: Would you rather spend $1 to get a $2 customer/client or a $20 customer/client?

Tools like Retention X can be a great help in finding your whales AND improving other areas of customer retention.

2. Make your highest-volume product your front-end

Acquisition is about gaining customers, not profits. 

Your “Retention infrastructure” is solid at this point, so you may be able to afford lower profits (or even losses, depending on your business) on the front end.

So it’s often wise to swap in your highest-volume offer as your front-end. 

You might not have to change anything if your current front-end does the most volume. For instance, service businesses usually can stick with their main service.

However, a product business may have to shift to another product that’s doing big numbers.

3. Dump more into your winning acquisition method

Want to keep things simple? Pick an ad campaign that’s working (aka, has a positive ROAS) and increase your ad spend.

If you can put $1 in and get several out, you may as well put more of those $1s in. And you’re more likely to get a ton of dollars out if you did #1 in this section correctly.

You can always test new ads to see if you can incrementally improve ROAS.

4. Hire and outsource

Business owners have a limited amount of time and energy every day. They can’t waste it on the small stuff…

That means finding all the tasks that aren’t “big-picture” and hiring those out to others.

For example, I have a virtual assistant who handles my blog posts, website stuff, and some client communications. Saves me a lot of time and headache.

I also have an accountant to do my taxes every year. More time saved!

So as you grow, pick out the tasks that aren’t in your “zone of genius” and consider hiring them.

For hiring tips, check out our 7-step guide to hiring employees.

To wrap it all up…

Business is hard work. No doubt about it.

But it doesn’t have to be complicated.

All you need is to:

1. Acquire: Bring in leads and get them to buy

2. Retain: Turn those one-time buyers into long-term customers

3. Scale: Reinvest your profit margins into gaining new customers

Rinse and repeat.

Focus on what moves you up in each stage and shut out distractions. For example, you don’t need to worry too much about retention when you’re still working hard to build your lead flow.

Of course, a lot goes into mastering each stage, as we covered. You don’t have to do it all at once. 

Businesses aren’t built overnight. Stick to a plan. Take one step at a time, every day, over a long period.

That’s how you build a thriving and (relatively) predictable business you can scale and maybe even sell later.

Go get ‘em!

Woah, check these out…

😱 Ditch the flashy tech startup ideas: Here are 10 ways to “bore” your way to riches

🖥️ All businesses need an online presence — and one of these site builders can help

📚 Make sure you grab our CEO’s 2024 reading recommendations

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

🏆 And make sure to sign up for our contest — one lucky winner gets FREE lifetime access to our brand-new membership website launching in April!

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