Some of you may remember how I took a passive income idea and launched it in one month.

Since then I’ve been revising and testing out different business models as it slowly builds momentum. There are now about 300 tutors signed up and over 600 “matches” have been made (between a tutor and student).

I thought you mind find it useful to see some of the ideas I’ve tested along the way, including what worked and what didn’t.

Version 1 – Charge the Client

When I first started out I figured it would be hard to find good tutors and easy to find people who would want to hire them. So I decided to charge clients for the service of finding a good tutor.

This is the model used by sites like monster.com or “recruiting” sites. The employer pays to find the employee, not the other way around.

I bought a bunch of traffic and drove some people to the site with Google Adwords, but after testing this for a while it became clear the the conversion rate was not very high. What was the problem?

After thinking about it for a while I came to the conclusion that I was asking people to pay too soon. I think people wouldn’t mind paying for a tutor once they were convinced they had found someone who was good. But to ask them to pay for the opportunity to contact some tutors…who may or may not work out, didn’t connect with people.

I would have preferred to only charge them AFTER they found a good tutor and had met with them, but I couldn’t think of any way to enforce this in my passive model. I mean, what incentive would someone have to come back and pay after they had already met with the tutor and had all their info. It just seemed like a hassle and annoyance.

Even though I had a money back guarantee, etc, I had to admit that clients weren’t going for it. I had to face facts: the people on the site weren’t convinced of the value at the time I was asking them for their money.

So what to do…give up? No! Try another approach to accomplish your goal. That’s the mark of a successful entrepreneur.

Version 2 – Charge the Tutor

After thinking some more about different business models, I decided it might work better to charge the tutors to keep a profile on the site.

After all, they were the ones who stood to benefit by earning lots of money. In general, very few people have a problem with someone saying “hey if I were to bring you a huge pile of cash, would you mind if I took a little off the top for myself”. In other words, I only get paid if you get paid. It’s a great sales proposition.

Furthermore, charging the tutors made much more sense as a recurring “subscription” product because tutors would need to get new jobs on an ongoing basis (there is a high turnover). Selling to clients would be a one time sale but selling to tutors would be recurring revenue.

Yet, I still had the issue of asking tutors to pay up front before they really knew if it would work. This was just some average looking site they stumbled across, and as with everything online it’s hard to know what you can trust. Clearly, I needed some sort of free trial. I decided to test out a standard “30 day free trial”, after which I would ask tutors to subscribe if they wanted to keep their profile up.

So what happened? A pitifully low conversion rate. :(

Of the 78 tutors who registered in one month, only 1 converted into becoming a subscriber. At that rate, it wouldn’t cover the cost of bring in leads (a topic for my next post).

So what to do…give up? No! Try another approach to accomplish your goal. That’s the mark of a successful entrepreneur.

Version 3 – Trick Them Into Paying

At this point I contemplated various other schemes that might help improve the conversion rate.

One tactic often employed by companies (Netflix for example) is to require the credit card details up front on a 30 day free trial. That way if the person doesn’t cancel within 30 days they get charged instead of having to actually enter their payment info at the end of the 30 days (a big difference psychologically).

This always seemed shady to me since if your site is really worth it people should be willing to pay. You shouldn’t need to trick them, rely on their laziness, or hope they forget to cancel.

But I tested it anyway just to see what happened, and it didn’t work very well. Even with all the right “marketing tactics” in place, hardly anyone who went to the sign-up page actually signed up once they saw a credit card was required. Plus I didn’t really feel good about requiring it in the first place.

I was thinking about it all wrong. Instead of focusing on how to convince people to sign-up, I should have been thinking about how to make the site better!

At this point, I was getting somewhat discouraged. What kept me going was one important fact: PEOPLE WERE ACTUALLY FINDING THE SITE USEFUL. I knew this because every day tutors were finding jobs on the site and people were finding tutors. I would occasionally get emails from people telling me how much they liked the site. This thing had potential, I could feel it. I was probably even a little bit irrationally committed.

So what to do…give up? No! Try another approach to accomplish your goal. That’s the mark of a successful entrepreneur.

Version 4 – A Better Free Trial

I could have always just made the site free and put up some advertisements, but I knew there was a solution to this problem.

After discussing this dilemma with other entrepreneurs, I finally went back and looked at the data from the free trial (version 2). A startling fact emerged: only 25% of the people who had gone through the 30 day trial had been contacted by ANYONE.

That meant that 75% of the people who I was emailing saying “hey your free trial is up, pay me money!” had never even been contacted for 1 tutoring job. No wonder they weren’t signing up!

Still, I figured that if 25% of people had gotten a job, and doing only 1 hour of tutoring covered the cost of subscription, at least more of those 25% would have subscribed, right?

I decided to survey that 25% and sent them a very brief, personalized email from me. Not some mass mail that would get deleted. It looked like this…

Hi Test,

I’m surveying a few of the tutors, and was hoping you could send me some feedback on your experience so far with UniversityTutor.com? Basically, has it been useful and if so how? If there is any way we can improve the site or make it better please don’t hesitate to let me know.

Thanks for your feedback I appreciate it!
Brian Armstrong
UniversityTutor.com

The responses I got back painted a clear picture: most of that 25% who had gotten contacted had only been contacted by 1 person. Often, that one contact hadn’t even turned into a job for them. Essentially, I was over-estimating the value of being on the site. I wasn’t giving them any real value (they hadn’t gotten a tutoring job) so they had no reason to subscribe.

It finally made sense. You need to get in touch with several potential clients (not just one) before you get a real tutoring job out of it (I knew this from experience but didn’t connect it). Plus, many people who came to the site would contact 4 or 5 tutors all at once and wait to see who got back to them promptly. Basically, they were interviewing several tutors for one job, so getting 1 contact through the site did not guarantee a job.

This was further confirmed when I went back and looked at the one person who had subscribed. They had been contacted more than anyone else that month: 5 times.

I thought for a few days about how to make the site better so people could clearly see the benefit before I asked them to pay. I thought about extending the free trial to 60 days or just focusing on SEO to bring in more traffic.

Then something hit me: why not make the free trial based on the number of contacts instead of the length of time. Sure, a 30 day free trial was common, but maybe it didn’t make the most sense in this case.

SOLUTION: I changed the free trial so that the first 5 students who contacted you were free, no matter how long that took. No credit card was required up front. I also cut the subscription price in half from $19.95 to $9.95.

The number of subscribers improved almost overnight. It was a great feeling. I felt like I had cracked the code. I literally did a dance around the computer.

Now, when someone received an automated email from me asking them to subscribe, I KNEW they had at least been contacted by 5 people and could see the value in the site. Maybe that would take 2 months to happen. Maybe it would take 2 weeks as the site got more popular. This felt right, and the tutors seemed to agree.

Conclusion

I think there are several important take aways from this:

• 9 out of 10 of my ideas don’t work, and that’s ok
• Survey your customers, they will tell you what’s wrong
• Don’t ask your prospects to pay until AFTER they’ve seen the value
• REMEMBER: So you want to give up? No! Try another approach to accomplish your goal. That’s the mark of a successful entrepreneur.

Until next time, keep breaking free!
Brian Armstrong