The Hourglass Model to build your online empire
Why is the hourglass model better for your service-based business than the value ladder, building funnels and focusing on social media?
Having an online business is awesome. Sitting in your favorite chair, you get to sell your products and services around the world. Making millions from your computer has attracted thousands of people who want to build their online empire.
There are multiple ways to build your online business, multiple business models, strategies and tactics. It can feel overwhelming and confusing.
Unfortunately, the "make money online" space is broken because every "guru" teaching you tactics on how to make money online will claim their method is the one-and-only missing piece. "You need to do Facebook Ads", "you need to be on Instagram", "you need to have a Facebook Group", "you need to do TikTok", they say.
And if you were to listen to all of their recommendations and follow their advice (and buy all their courses) you'd end up doing all Facebook marketing, Instagram marketing, TikTok marketing and other tactics, with no time to work on your business.
On top of that, a very commonly "pushed" framework is the "value ladder" and "building funnels." The basic principle of the value ladder is that you attract customers with a free or a low-ticket (inexpensive) offer. Then, by pushing them through a pre-designed process (a funnel), you sell them more stuff by implementing "order bumps", "one-time offers", "downsells" and "upsells".
The value ladder," just build a funnel", and "you need to do XYZ social media" culture makes it look easy to build your online business. They picture it as if it was just a matter of you "finally realizing" that you are missing this one step/social media platform/funnel/hack that they happen to teach in their $2k course.
"If only I knew how to use TikTok for my coaching business", you start to think.
The sheer volume of this kind of advice, the "gurus" sharing screenshots of their stripe accounts, showing off how much money they spent on ads and pushing their agendas makes you think that this IS the way to go. That if you only follow the steps and do what they do, you'll be fine.
I hate to bring this to you. You won't be fine. Most of what is taught online is not going to work for your business.
"WTF!? What kind of blasphemy is this, Mike!?"
I've worked with 600+ online entrepreneurs, and I saw first hand that if it were that easy if it all came down to following a random tactic to get the results, we would all be millionaires. Aren't we all just one funnel away? Just one 1 million views on Pinterest away from making a million bucks!
The funnel creation and social media tactics are not, in and of itself, evil. But that is all they are - tactics, sales tactics that have their time and place. And that time and place are NOT where you think it is.
This is NOT how you should think about building your business
There is an interesting phenomenon that happens in "Internet Land." For some reason, entrepreneurs think that this one piece of the puzzle - the sales marketing and getting traffic from social media - is all they need to make their business work.
And it blows my mind this happens mostly in the online business world. I have not seen a brick-and-mortar business fall into the same trap of illogical thinking.
Think about this for a second.
If you wanted to have a business in a world that had no internet, and the only way to start your business would be to have a physical location, what would you do?
Would you start from thinking how to sell people more stuff with order bumps and one time offers (the funnel) BEFORE you know what to sell them and if that thing will even sell?
Would you start thinking about where you are going to get the most traffic BEFORE you understand who your audience is and who would actually buy your product?
Would you even ask yourself those questions BEFORE you fully understood what it is that you are selling if people even want your products, is it good, is there a product-market fit?
Wouldn't you do market research first and build your product/offer to test if it works and if people are happy using it?
Or would you follow the online world route and start from building a store with alleys designed to sell more (more of something you don't know will sell). And then would you take a megaphone and show up in those random places (social media platforms) to shout "buuuuy myyyyy shiiiiit" ("even though I don't know if you want it").
It's crazy. Random funnels and social media tactics don't work.
The problems with the current approach to building an online business
The two problems with what's happening in the online space are:
- Gurus are pushing random tactics claiming this is all you need to be successful.
- Focusing on the sales/trade marketing before you have your offer and audience tuned in.
I want to be clear about something. I'm not saying the whole "getting traffic" and "building a funnel" is total bs. What is a complete bs is looking at your business only from the perspective of traffic and funnels.
And I know a lot of you are very tired of this conflicting "guru talk" and getting all the advice that keeps changing all the time, as new tactics show up on the horizon and "guru" comes up with a new online course.
I know it doesn't even feel right to be doing TikTok lip-sync for your coaching business.
Three crucial departments in your business
You see, business and marketing is usually divided into a few departments - brand/authority marketing, research and development (r&d), and sales/trade marketing (and a bunch more, but for the sake of simplicity, let's focus on these).
Brand/authority marketing makes sure you understand the audience, their pain points and that you - as a brand - are a match for this audience. It's about building authority, relationship and connection with the audience.
R&D works with authority marketing to tweak existing and build new offers for the audience.
Trade/sales marketing works with authority marketing and finds channels to sell the offers, ways to sell more, implement pricing strategies etc.
So when you focus on social media traffic and the funnels, the only thing you focus on is sales marketing. And if your sales team/sales vehicle does not have an excellent offer to sell, IT JUST WON'T SELL.
Unless you are sitting on tens of thousands of dollars to drive traffic and test offers with random tactics, you need to change your approach. Unless, while spending all this money for testing, you have unlimited time to learn all the "guru tactics" and TikTok lip-sync, you need to change your approach to building and growing your online business.
Why the "value ladder", building funnels and social media won't work
You need to focus on strategy vs tactics and build the foundations. I see too many online entrepreneurs not conducting fundamental business analysis, research and numbers crunching.
Any business operates on margin. Margin gives money for profits and development. And there are two main margin models out there:
- Low-margin product that HAS to be sold on high volume
- High-margin product
Let's explore these two options.
- To sell low-margin products, you need to sell a lot of them.
- Your sales mechanism (the funnel) has to be tuned in and convert like crazy to achieve volume
- For your funnel to convert like crazy, you need to have a product that sells. The best funnel out there will not sell bad offers. Period.
- How do you create a good offer (in the traditional business, this is done by R&D working with brand marketing)? You analyze your audience: their needs and pain points.
- You also need traffic to send a lot of people to your funnel to convert visitors into buyers.
And, contrary to popular belief, it is not easy to sell low-ticket.
- cheap = feels low quality
- cheap = doesn't feel good; nobody wants to feel cheap
So a few problems in this model is that for it to work you need
- a big audience who wants to buy your stuff,
- the funnel that works for that audience with that offer,
- ways to send traffic to your offer (often paid traffic - advertising).
As you can see, quite a few things need to be tuned-in before this model works. You need to sit on a pile of cash or already have an audience to make it all a reality. Pretty hard to make it happen, especially if you're trying to start or grow your new business.
How do you make money on the low-margin product? You need to scale - get more traffic. How do you get more traffic? You need cashflow for advertising. How do you get cashflow? From sales. How do you get sales? From high volume sales. See the problem here? You're chasing your tail.
The above is why the "value ladder" approach won't work if you're just starting. Value ladder approach tells you to sell low-ticket and upsell (aka, shovel down the throat) people with more stuff, so it makes your funnel break even so you can sell them more stuff to make some money finally. And for all of this to work, you need to employ scarcity and urgency tactics - put countdown timers and "limit spots" to buy your offer.
It is quite entertaining to watch the "guru" mention in the funnel that they only have 7 spots left in their online course. I mean, who in their right mind, would limit access to a digital product that has unlimited supply? Welcome fake scarcity.
Ok, end of rant. Let's move to the next model: selling high-margin products.
You cannot just come up with a high-ticket product and sell to random people. Nobody will buy your stuff if they don't know you, don't trust you, don't trust your product.
For a more expensive product to sell, you need to have:
- Proof of concept (proof that someone needs your product)
- Results - proof that it works
- Social proof - proof it works on other people
So as you can see, you cannot come up with a high ticket product and start selling online. You need to put work into building those assets first. Not to mention choosing the right strategy on how to use those assets, which social media to choose, which funnel to develop etc.
When you think about both of these models, you can see where you're going wrong by chasing those tactics, tools and social media "hacks" everyone is selling courses on. Both models - the low-ticket/high volume and high ticket products - need similar elements to be in place before you can even think of the sales funnels and social media.
Low-ticket/low-margin high volume is a difficult option because to make decent money you need the volume. And if you don't have an audience or capital/cashflow, you simply cannot afford low-ticket.
High-ticket/high-margin is tough too because nobody will buy your stuff if you're not an authority, don't have a brand, don't have an audience and don't have the proof of results that justify the price-tag of your offer.
Build your business the right way
This is where the Hourglass Model comes in. It is built on the premise that you are developing the right foundation for growing and scaling your business.
In the Hourglass Model, you are focusing on the elements that you can leverage when you are ready to launch all the sales tactics and funnels so that they actually work.
It teaches you how to build the authority and r&d departments in your business so that the trade/sales marketing piece (funnels and traffic) has fantastic offers that sell.
You're building those elements while already making money, learning about your audience and creating the best offers they will want to buy.
The idea behind the Hourglass Model (HM) is that you start with building your authority first. You are getting the results on a lower ticket offers first and then leverage them to create higher-margin products (The Ripples Effect). The goal and your mindset are not about making money just yet (although that happens naturally but is not your immediate goal). The goal is to build assets and foundations to sell more soon when you choose the right platforms, and when you design the sales funnel that will work for that audience and that offer.
You might ask a question now - ok, but you told me earlier I should not do low-ticket, and now you're telling me that I should? Look at you! So proud of you going into details and asking questions!
Well, the difference is in HOW you position and present those offers, WHY you build them and WHAT you do with them to sell more in the future. The difference lies in your business model and strategy behind leveraging the low-ticket offers.
Because the main principle of the HM Model is to get to the point of selling a high-margin product (HMP) asap. And it doesn't need to be a "signature" offer for thousands of dollars. The type of HMP depends on what kind of final offer you want to build and what business model you want to choose.
Do you want to have a high-margin marketplace full of smaller products? Great! A high-ticket online course? Not a problem. Or maybe a mid-tier group coaching offer. Absolutely!
HMP is an accelerator of growth because when you have the margin, then you have the cashflow, and when you have the cashflow you can accelerate your growth by selling more of your low- or high-margin products. And because you are getting results with your offers, it is easier to sell the higher-margin ones. And because you are getting results, your audience loves what you do, so you are growing your audience, even more, creating more "ripples" and building more authority. It is an upward spiral that will result in actual growth.
Mike "HMP" Koziol