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Pru Chapman
OC Founder + Head Hustler

Pru Chapman is the Founder + Head Hustler at Owners Collective, a dedicated digital community and global online resource hub for early-stage entrepreneurs. Pru gets giddy supporting business owners to create meaningful, sustainable + profitable business. She loves nothing more than bulletproof coffee, her pooch Maverick, andd an empty mountain hiking trail.

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I get asked ALL the time about Membership Sites, and having run one myself for about two years, I’ve definitely experienced the good and the bad with membership sites firsthand.

In full transparency, we don’t run our membership site anymore, and in this episode, I’m going to talk you through why.

Straight off the bat, the big allure of membership sites is that people really want that recurring revenue. I totally get that and that definitely does exist with membership sites. But what people don’t often talk about is what it actually takes to get and to keep that revenue coming in. And most importantly, just how much profit you do or don’t get to keep at the end of the day because that’s what we’re interested in as well as all the impact and the incredible change in the supporting your members.

The biggest myth that I want to bust right before we get going is that memberships are passive income streams. There’s nothing passive about a membership site.

Let’s dive in…

 

Here’s what we cover:

  • How Memberships Sites are anything BUT passive income
  • The hidden costs with Membership Sites
  • How content-hungry membership Sites can be
  • The opportunity to build community through Membership Sites
  • Why we eventually shut our Membership Site down, even with 200-300 members

 

Links and resources:

Ready to launch & leverage your own did? Download my free guide to starting and scaling your business over at theownerscollective.com/startandscale

 

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Full Transcript

I get asked ALL the time about Membership Sites, and having run one myself for about two years, I’ve definitely experienced the good and the bad with membership sites first hand.

In full transparency, we don’t run our membership site anymore, and in this episode I’m going to talk you through why that is.

Straight off the bat, the big allure of membership sites is that people really want that recurring revenue. I totally get that and that definitely does exist with membership sites. But what people don’t often talk about is what it actually takes to get and to keep that revenue coming in. And most importantly, just how much profit you do or don’t get to keep at the end of the day because that’s what we’re interested in as well as all the impact and the incredible change in the supporting your members.

The biggest myth that I want to bust right before we get going is that memberships are passive income streams. There’s nothing passive about a membership site.

But let’s start with…

The Pro’s of Membership Sites

 

1. Recurring Revenue

So never do you have to start the month on zero again or hustle up clients. They’re going to be in your membership, they’re going to be paying you every month and you’re going to have that base of whether it’s a $1,000 a month, $5,000, $50,000, however much it is, and that’s the real allure of membership sites is that recurring revenue stream. So that’s a wonderful pro. The second excellent pro about membership sites is that it’s an easy entry price point. All right? So if you’re already working with clients and there’s a price for your one-on-one or perhaps for your signature online course, then with a membership site, because it’s a really leveraged model, meaning that you can do one too many within a membership site, you can offer it at a much lower price point, meaning that you can have bigger numbers in there and it shouldn’t take any extra work (in theory)

 

2. Easy price entry point for clients

These potential clients may have been wanting to work with you for quite a while, but they can’t afford that one on one coaching or that signature online course, so at a reduced price they can jump right in.

 

3. Great for community vibes and community building

You’ve got all of your people, they’re in your membership site. They’re there month on month, week on week, day on day, and you can really build some wonderful relationships, nurture those relationships, not only between you and your members, but also between members as well.

 

4. A content vault for your Business

And then fourth, and the final big pro to membership sites is that it can become a vault of information for your business. So you’ve been working on a bunch of checklists or downloadables or videos and you can put all of those into your membership sites. So it becomes this incredible vault or library of information. And also you’re going to keep adding to this month on month. So it just grows and expands and becomes this wonderful place where you have so much value to offer your members and also to call upon for anything future that comes up as well.

 

Cons to Membership Sites

 

1. Member drop-off

If you don’t have a locking contract for your membership site, which most people don’t, members will leave. Your will have members that will leave each month, which starts to muck up that recurring revenue.

So no contract, people can opt out whenever they want. And what this does in your members psychology, which is really where I want you to jump in and have a think about things, is that every single month when they see that direct debit coming out of their account or that charge to their credit card, it is a decision making point about are they getting enough value out of your membership to stay there. Now, this shouldn’t be confused with how much value you’re putting into your membership because I know if you’re listening to this, you just want to love up on your members. You want to give them everything that you can. You’ve got, like I said, the checklist, the downloadables, the expert sessions.

You might even go and meet your members live out in the community. I don’t know. I know that you’re going to be providing an incredible amount of value, however your member, I mean, they’ve got their own life going on, they’re running their own business. So maybe they’re not utilizing all of that value that you’re putting down. And so every single month when they see that charge, it is a decision making point for them about will they keep their membership or will they cancel it? Okay. So the con here is like I said, your recurring revenue disappears with that member. But also, and I think this is really important, is that it’s really deflating for your team.

For us, there was three of us working on this every single day. We loved it, we were just jam packing it with as much value as we could. Every single week we were asking ourselves, how can we provide more value? How can we provide more value? And the more that we added, it didn’t necessarily retain our members because like I said, it’s their option, their choice about whether they tap in and utilize all that value.

 

2. If you do have a contract in place or minimum signup, then your conversion is going to suffer

if you do put in a locking contract for your membership, that might be 6 months or even 12 months, you’re going to see a drop in your conversion. People are membership wary these days and if you ask them to sign up to a long term commitment, they’re really going to have second, third and fourth thoughts about that.

 

3. The administration of a membership site is incredibly high.

So one easy point to think about here is, think about all those wonderful members that you’ve got on board. Okay? You’re giving them tons of value but just think about maybe there’s 50 or 100. Think about how many payment plans that is, and then how much opportunity there is for people’s credit cards to expire, to fail or for them to be lost or stolen.

And so every single month, there’s going to be a process of getting new details from that member. Now, you can absolutely automate this. What I can tell you though, and this is shooting from the heart, I should say because it’s the truth is that there’s probably 80 to 90% of those members are not going to follow up really promptly on giving you their new credit card details. It’s actually going to require someone from your team to physically contact them and to update their details. Now, when you have to do this every single month, this really does come at a cost to your business and it’s also incredibly boring work with whoever it is on your admin team doing it.

 

4. You’re going to be continuously promoting your membership

To make sure that you’re refilling all of those members that drop off every single month. So it is like a constant marketing machine for your membership site because it’s not as though members come in and they all stay. They will naturally drop off and we call that a churn rate.

So think about that is that you need to be constantly marketing your membership site and that can get pretty boring both for you and for your potential members and clients as well.

 

5. Tech Issues

For a lot of my current clients who are thinking about membership sites, they might be a massage therapist or they might be an interior stylist or an interior designer or… These are typically professions that don’t spend a lot of time in front of the computer.

And when you run a membership site, it is a tech business. And so tech issues are going to arise, which means you’re going to be spending a significantly increased time in front of your computer. Also, when things go wrong with a tech business, it’s usually pretty expensive to fix them. Quite often you can’t fix them by yourself, you’ll need to get your web developer to come in and to change and alter something. So, tech issues are always apparent with an online business. So it’s something you need to factor into with your budgeting, with your membership site as well because things are naturally going to go wrong. Or you want to improve things and that’s going to come at a cost as well.

 

6. Does it really give your members the best results?

Now, here’s what I mean is when you run an online program, for example, different to a membership site. But when you run an online program, you identify the problem that your client or your potential client has, and then you have a very unique framework that you take them through that gets them the desired result when they finish or by the time they finish your online program. So it’s very problem to solution with your unique special sauce in the middle.

However, when you’ve got a membership site, you typically a drip feeding content every month, it might be on a slightly different topic every month. There’s not necessarily a framework for walking people from start to finish. So you need your question about when these members came in with a problem, are they actually getting the result that they needed? Now, if they’re coming in because they needed community, they probably are getting that result.

 

7. You’ll get a different ‘type’ of member

To be really honest with you guys, this was the straw that broke the camel’s back for me with our membership site. Okay. Now, that is that, you are going to get a different type of member in your membership site. And here’s the reason, is that you’re charging that lower price point. So it allows for some tire kickers to come in, some people would just come in because they want to download your stuff or check out what you’re doing. These people can often be rude, demanding, and nasty. SO take a good think about whether you want that energy around your team, your business, or your reputation

 

8. They’re content hungry (which is expensive)

We were really committed to offering an incredible amount of value because we thought that that’s what our members wanted and that’s what would retain them. And what I have to say is that when I zoomed out and had a look at my whole business of Owners Collective, our membership site was taking up 80% of our time for 20% of our results.

So, in terms of what I just said about like our monthly commitment to getting experts in, it would take us about four full days to approach the expert, explain the concept of everything to get the information out of them, to lay it down, to brand it, to upload it, to doing the downloadables, the checklist, the workbooks.

That would be a four day process every single month. And that’s before my time stepped in and my community managers time stepped in as well. And you would be surprised how quickly that month comes around.

So, we wanted to maintain that commitment to an incredible amount of value, but it was so much value for the return on investment that we were getting. So, like I said, it was at a break-even point and that’s being incredibly honest with you guys. And while we love the community element of it, it wasn’t a profitable arm of our business.

 

9. They’re expensive to run

You have to consider the admin cost. For us, we used to always pay our guest contributors as well because I really wanted to value their time. We had staff on, marketing budgets, and the content production. So you add all of that up. That comes at a significant cost every single month. You have to weigh that up against how many members you’ve got and how much they’re paying every month.

 

Wrap

I hope that if membership sites are in your sight, then you really take the time to consider both the pro’s and con’s because people will tout the benefits of membership sites, but very rarely do they talk you through the cons of membership sites. And I want to be transparent about all the things that we’ve tried and what’s worked and what hasn’t and why it hasn’t.

So like I said, we eventually did shut our membership site down, but I have to say, the first year of it was fantastic. We absolutely loved it, we did have that recurring revenue coming in. It was incredible for community building. It really upped our content game. But when we got into that second year, some of those little niggles of those cons became louder and louder and as a savvy business owner, I just couldn’t ignore them any longer. I really had to do some analysis on not only the profit around the business, but also for my people, for my staff. And also for my members, were they really getting the results that we wanted them to get? And so after two years we did close down.

Now, if you already have a very large community and you’re only offering a high ticket item at the moment then a membership site might be an option to scoop all of those people up and be able to deliver an incredible amount of value to them in a really leveraged fashion.

However, if you’re a smaller business or you’ve got a smaller audience, you might only get a handful of people into your membership site and when you have a look at how much are they paying, how many of them do you have, and what are those costs going to be, not only of money, but also of your time, then that gives you a better picture of what’s involved in a membership site.

 

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