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How to Optimize Your Membership Site with Smart Systems

general business management tips for membership sites

General Management

This category will serve as a catch-all for everything else not covered in the systems described above. KPI (key performance indicators) tracking, your tech stack, finances, and management of staff are all part of running a successful membership site.

key metrics and kpis for membership and subscription businesses

Membership Site Metrics & KPIs

There are a handful of KPIs you need to monitor on a regular basis in order to optimize your site’s performance and profitability. The majority of these metrics can easily be tracked and monitored with MemberMouse’s Advanced Reporting Suite.

  • Churn rate: The percentage of your members who cancel in a given month. The simplest way to calculate member churn is to take the total number of members on your site at the beginning of each month divided by the number of cancelled members at the end of every month, e.g. if you have 1000 members on March 1st and 50 cancel by March 31st, your churn rate is 5% (50/1000).
  • MRR and ARR: Monthly recurring revenue and annual recurring revenue.
  • CAC: Cost to acquire a customer. This can be a little hairy to calculate accurately, but essentially, add up all costs associated with bringing on new members (advertising costs, an agency or marketing manager if necessary, any associated technology, affiliate commissions, etc.), then divide that sum by the number of new members for a given time period. For example, if you are running your site solo and spending 15% of your time on marketing related activities plus hard costs of $6500/year then you need to add 15% of what you pay yourself to $6,500, and then divide by however many new customers you acquired last year. Here’s an example: let’s assume your salary is $100,000/year, so 15% of that is $15,000. ($15,000 + $6,500) / 250 new customers = $86 CAC per new member. It’s truly essential to know your CAC to the best of your ability so you can make smart and profitable marketing decisions.
  • CRC: Cost to retain a customer. Most of your efforts as a membership site owner should be attributable to CRC because it costs exponentially more to bring on a new member than it does to retain an existing one. This includes all of the tech expenses it takes to run your site, all content production and associated equipment, expert guest fees, customer service reps, VAs, and more. Run an expense audit and add up what it takes to keep your members happy and paying every month, then divide that by the number of members you have. That’s your CRC.
  • Conversion rates. There are so many conversion rates you can keep track of, but the most important for membership sites are ones associated with marketing efforts. For all the marketing and advertising you do, you should know the resulting number of site visitors to email list subscribers, then email list to free trial (if you offer one), then free trial to paid member. This is important to keep track of so you know which of your marketing efforts are viable (profitable + reliable) vs. those that don’t produce adequate results. Double down on viable marketing channels and quit ones that waste your time and money.
  • Upsell percentage: The percentage of your customers that have made a purchase from you in addition to your base membership offering, like upgraded to a higher priced subscription or purchased one-on-one coaching.
  • LCV: The lifetime value of a customer, or simply put, the average amount of money each of your customers pay you from sign up to cancellation. If your LCV is lower than your CAC, you’re in trouble – that means you’re paying more to acquire a new member than the new member pays you over the course of their tenure on your site. However, to create a successful, profitable membership site, each of your customers should spend significantly more with you than it costs you to acquire them. Tracking both CAC and LCV are non-negotiable for membership site owners.
  • ARPU: Average revenue per user, per month. This metric is closely tied to LCV. If your ARPU is $10/month and a customer sticks around for 12 month, your LCV is $120.

    learn a powerful tech stack for memberships

Assemble Your Tech Stack

Putting together a proper tech stack is an enormous hurdle for many membership site owners we work with. There are seemingly dozens of options in each plugin category and endless customizations from there. If tech is not your strong suit, the best ways to save yourself countless hours of research and headaches (not to mention enormous switching costs of technology mistakes down the road) is to consult with an expert who can guide you to the right tech stack based on your specific needs.

That being said, most memberships sites need: a membership plug-in, possibly an LMS plugin, a discussion forum (whether that’s a plugin or standalone), payment processor, customer service tool, engagement tracking capabilities, an email provider, a hosting provider, accounting software, and more. From there, the sky’s the limit based on your specific needs, and budget. Going into detail of all your tech stack options is beyond the scope of this article, but if you need a tech stack audit or some direction on managing your tech stack get in touch.

Ensure that the tech tools you purchase make business sense and don’t increase the complexity of your tech stack such that it becomes a nightmare to manage. Tools have their place and some are extraordinarily useful and necessary to run your membership site. Create a PD that includes your decision making parameters for evaluating any new technology. You should dial in on any process related to running your business before you considering handing that task over to an app or similar tool. The takeaway: get professional help with your tech stack if that’s not your area of expertise and only add new tools as it makes business sense to do so.

master the finances of your membership site

Master the Finances of Your Membership Site 

Just as technology might not be your core competency, if finances aren’t your thing, get a bookkeeper to keep tabs on your money each month, coupled with a smart CPA to help you maximize your earnings and grow your business. This is a relatively low cost approach to financial management. A remote bookkeeper + a CPA shouldn’t cost more than $5000 or so per year for a business grossing less than 5 million annually.

If you have a background in finance or accounting and can take care of this area of your business with relative ease and a low time commitment, power to you. But as your site grows and you are needed to perform more RGAs vs. day-to-day tasks, be realistic about when it’s time to outsource.

Every business needs accounting software regardless of your personal level of involvement in keeping the books. We use Xero and also recommend Quickbooks. That’s a key part of your tech stack and shouldn’t be overlooked.

In addition to higher level financial management I strongly recommend running an expense audit every quarter to ensure you’re not spending unnecessarily. I’m a strong proponent of running a tight ship, and as entrepreneurs, if we’re spending superfluously, that’s less dollars in our pockets.

manage staff members

Staff Management: Hiring, Outsourcing, & More!

Many membership sites are run by 1 to 6 people, and oftentimes just 1 or 2. If that’s you, it’s imperative that you outsource where it makes sense and create all of the systems in this article to run an efficient membership site. The most common jobs that membership sites outsource to other people (as opposed to a SaaS app or other technology) include: financial management, office management or secretarial duties, community management, tech management, customer service, copywriting, copy editing, content production, marketing (social media management, podcast editing, video editing, master planning, etc.), web development, graphic design, sales, and coaching & consulting.

Upwork is a great place to start when looking for help, as is asking for referrals from your network, on Twitter, LinkedIn, and job boards. The most important thing is that you make the right hire at the right time for the right tasks.

Transitioning from a solo operator to a manager of others and CEO is a huge leap. Don’t walk into it haphazardly or without a plan. This is another area where getting outside help, even from books, blogs, forums, and podcasts is essential to success. Making the right hire can accelerate your business and change your life for the better. Making the wrong hire can be a major productivity suck, cost you a small fortune, and cause copious amounts of stress. Think I’m being dramatic? Think again.

Bear in mind that if you’re going to have frequent interaction with your hire, that they need to be a strong fit with your company culture. They should share your values in the way you run your site and how you treat your customers. It’s better to hire someone with a mediocre skill set and a strong culture fit vs. someone with stellar skills whom you can’t stand. Skills can be taught, whereas character and values are harder to change when you’re dealing with adults who have decades of deeply ingrained views on the world.

Create a company POV (point of view). This is the one page document that breaks down in layman’s terms why your business exists. A prospective employee should be able to read that POV document and understand the character, values, and direction of the organization. Just as process documents help you create a decision making framework in other areas of your business, your POV should provide a framework for the type of people you hire.

Wrapping Up

Whew! That concludes the 8 systems for successful memberships and this 3 part series on revenue generating activities. I’m glad you stuck with me and hope you feel prepared to make some seriously beneficial changes to your membership site!

Everything we’ve covered here points back to increasing your profitability & efficiency while decreasing unnecessary expenses. It’s your job as the CEO to set the vision for your business and carry it out with intention. These 3 articles should serve as a toolkit for running your membership like a well-oiled profit machine.

Start relentlessly focusing on revenue generating activities. Choose one area of focus at a time and start to put in the resources necessary to reach your big, hairy, audacious goals! You can do it, and we’re here to help with any step of that process.

My consultancy, Subscription Coach, is a great resource for membership sites looking to level up their sites. We offer loads of free resources, like my email course on how to maximize revenue with the members you already have. And if you’re just starting out or your marketing machine has run dry, pick up my free ebook on membership site marketing now.

Interested in working together directly? Shoot me an email, [email protected], to schedule a free 25 minute call to see if we can help you out.

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About Amanda Northcutt

Amanda is a revenue strategy consultant for online businesses with recurring revenue models. She lives in Fort Collins, CO and spends her free time with her family, cycling, hiking, and pretty much any mountain sport under the sun.