Can a Welcome Email Pay for Your Facebook Ads?

In this solo episode, TJ shares an idea that has been on his mind a ton: the negative CAC model. CAC is the cost of acquiring a customer, and the goal is to make your first-week revenue per subscriber bigger than what you paid to get them. TJ says it is relatively unexplored in local media, that he has not tried any of it, and that finding the right offer will be like finding a needle in a haystack. He wants your ideas.

Where the idea came from

TJ heard a talk at a newsletter conference in Austin, a month or two before this recording, from someone at The Assist. It is a B2B newsletter for female executives, so its readers are nothing like a local audience. TJ thinks the principle can still carry over.

Here is what the speaker went over. Within the first 7 days after someone subscribes, The Assist earns more than it cost to get that subscriber. That is the "negative" in negative CAC.

What this looks like for a local newsletter

TJ's example uses an average cost of 50 cents per subscriber. If you could make an offer in the first 7 days that earns you more than 50 cents per subscriber on average, you are now making money to get subscribers.

The full version would be amazing, because you would go double, triple, quadruple down on Facebook ads and scale fast. But even a partial version helps. If it only cut your acquisition cost by 30%, 50% or 80%, you could reinvest that money.

TJ is clear that the Assist numbers are from memory ("something like this"), so treat them as a ballpark.

How The Assist does it

TJ believes The Assist sends an email every day for the first 7 days. They do not just fire off offers. They give value first, with interesting content, and the deals sit inside it.

Day one might be about how female executives lose track of their great ideas, with a tip to try Notion. If someone signs up, Notion pays The Assist a kickback. Day two might be about hating Google Sheets and trying Airtable, and The Assist gets a cut there too. Mostly it is software, plus some courses or paid communities.

That money goes straight back into growth, which TJ says is why they are growing so fast.

Why SparkLoop does not solve it for local

SparkLoop is a version of this idea: push your subscribers to other newsletters, and those newsletters pay you. TJ says it may work for the right newsletter, usually B2B, but it seems to be helping less and less.

He tried it and did not find it viable for local. The newsletters that pay well are tech, AI and B2B, and that is not who local readers are. So the offer has to come from somewhere else.

Why TJ thinks nobody has done this in local yet

TJ says the local media space is full of unsophisticated operators, and he includes himself. Each of us is siloed in a small market, with a low TAM (total addressable market). Even the best operator ever might make $500,000 a year in one area.

When eight or nine figures are on the line, as in B2B, you hire the best people and get in the weeds. Local operators are more like small businesses with a lot of other things going on. The upside for local is that acquisition is much cheaper, so the payout to you can be lower and still be worth it.

The med spa example

TJ says a conversation on his show about how valuable med spas are got him thinking, and he believes it was Billy who brought it up. His example is Botox, which is expensive and recurring. He is guessing at the numbers: say a client is worth $2,500 over time, because they go seven times at about $300 each.

If a client is worth that much, what would a med spa pay to get in front of one? And the fit with a local audience is good. In the four newsletters he runs, TJ says readers are around 70% female and skew upper middle class, which is the ideal med spa customer.

The deal he would offer

The welcome email is where it goes. TJ would say you partnered with a med spa that wants to offer something really good. A 10% discount is not enough, since you can find that anywhere.

So he would tell the med spa, with the numbers in hand: give 80% off the first treatment, and pay me $50 for everybody I send you. They will take a loss or break even on that first visit, but over the long haul they make thousands of dollars. TJ says these are made-up numbers meant to prove the point.

The one in a hundred test

Most people will not take it. Some are men, some are young women, some do not have the money. The real question is whether one out of a hundred people would take you up on that offer.

If one in a hundred does and you make $50 each time, you are earning exactly what a subscriber costs you. Your cost per subscriber is effectively zero. More than one in a hundred and you are ahead.

It will not be easy

TJ calls the hardest part pitching it to the businesses. You have to sell them and convince them, set up tracking, and work out how to talk about it in the welcome email or build a welcome sequence that fits.

He also warns about tone. You do not want people to feel that they signed up for a newsletter that just pitches them everything. Still, he thinks it is worth it if you can pull it off, and he stresses this is not a brand new concept, since The Assist already does it. Nobody has implemented it in local newsletters, as far as he knows.

More businesses to try

The takeaway is to think about recurring revenue businesses with high lifetime value when you talk to advertisers. TJ lists what he is considering:

• Landscaping: He is talking to a landscaper partner about it right now.
• Pest control: He has a call this week with a pest control contact.
• Dentists and orthodontists: Orthodontics is high cost, so they might pay a lot even with a very low take rate.
• Smaller ideas: A heavily discounted restaurant gift card, or a first month free at a $20 a month automated car wash.

TJ's advice is to be creative, but to stick with high lifetime value.

Segment your list with surveys

Segmentation is where he says this gets really exciting. The first step is a survey. TJ says Beehiiv has one built in, and if you use another platform you could use a Google Form and automations.

Ask whether someone is male or female, what the household makes, and how old they are. Then you can send the med spa offer only to women over 40 who make over $100,000 a year. Step back, and you could build ten welcome sequences with ten offers for ten types of people, depending on how they answer. TJ says this already exists in B2B and, as far as he knows, nobody is doing it in local.