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Real Talk: Should You Create a Membership Site?

May 1, 2024

Should you create a membership site?

So often, it’s sold as the ultimate dream:

“Create a membership site and you too can enjoy recurring revenue – forever”, they say.

Which is kind of true.

Only, it also comes with a very, very big asterisk:

Memberships are one of the most advanced, psychologically trying, long-game, difficult leveraged business models out there.

And, no-one is sharing THAT when they are selling the dream.

In October 2023, I launched my very own online membership site.

Believe me when I say that I have aged 26 Internet years in the months since (just kidding – kind of).

Here’s the truth though:

They are no joke, and this is coming from someone with six years in the online business space, experience in every leveraged business model under the sun, an advanced understanding of data and advanced marketing concepts and serious grit and resilience.

Cliff notes, though: I am a sucker for punishment and I actually enjoy the game of it.

But, honestly?

I think I’d be in the minority here. It’s kind of like an Ultra Marathon runner:

It takes a special breed to want to put yourself through it, but it’s worthwhile if you have what it takes, you’re willing to play the long game and you’re up for the task 😅.

If you’re finding yourself wondering “should I create a membership site?”, I want to share with you the cold, hard truth about running a membership site based on my own personal experience.

Take from it what you will. My hope is that it will help you go into this model with eyes wide open, because misaligned expectations is the ultimate dream killer.

Psssst… there are a lot of people who are affiliates for a certain membership course out there, who will sing the praises of the membership model from the rooftops. For that reason, it can be difficult to get an honest, accurate and unbiased account of the realities of this business model from someone who doesn’t have a financial interest in which model you choose. That’s why I’m writing this.

What is a Membership Site?

A membership site is a recurring revenue model where access is via a recurring fee.

It is different from a subscription model, which has the same element of access via a recurring fee but where the fee is usually for a deliverable (for example, a template).

A membership usually includes a community of some sort, and ongoing content creation or coaching of some type.

It is typically suited to industries where the subject matter is ever-changing (for example, AI), there is an ongoing need (for example, creating monthly Instagram content), community is a priority (for example, mothers in business), or there the subject matter doesn’t necessarily have a set “start” and “end” point.

Should You Create a Membership Site? Let’s Start With the Cons.

It’s easy to see the appeal of the membership model.

Recurring revenue is the dream, right?

And usually, that’s what new membership site owners are focused on when they decide on this model.

The truth is – when done well, they can give you this, and it’s a beautiful thing.

However, no model is perfect and with the good comes the not-so-good.

So, let’s kick off with the cons of starting a membership site, so that you can go into this with realistic expectations.

I’ll intentionally colour each of these with my own personal experience, and the things I wish I’d known when I decided to go into this model.

  • The Churn Beast: The reality when entering into a membership model is that you will experience churn. Churn is people cancelling from your membership each month or year, depending on your billing period.

    With churn being a natural and expected part of running a membership site, there are “benchmark” churn rates that will help you to assess whether your membership churn levels are “healthy”.

    Even if they are, the reality is that you will need to be heavily focused on new member acquisition to ensure that your membership is growing at a rate that is higher than it is churning.

    Average churn rates for a membership site are as follows:

    Under 5%: Excellent, best in class.
    Under 10%: Very good, benchmark.
    Under 15%: Okay, but definitely optimise.
    15%+: You will need to optimise.

    Managing churn with a retention strategy will become a significant part of your “job” as a membership site owner. This optimisation process needs to be something that excites you.

    It’s also a great way to optimise and improve your membership, because receiving “in real time” feedback from the cancellations you receive gives you clear insight into what to work on.

    For example, in our own model we have our members fill out a quick form to cancel, in which they rate their experience and give us something to improve upon.

    Having cancelled members fill this out allows you to assess things like:

    a) Whether you are attracting the right members: For example, if a member gives feedback that the membership was a “4” for them where others rated it highly, it’s likely that there is something in your messaging that attracted the wrong member and the content was a wrong fit.

    b) Whether you are doing a good job: If people are giving you a high rating but still leaving, there are likely optimisations to be made around messaging, content volume or roadmap, etc.

    This helps you to create a best in class product – or to adjust your messaging to attract a different member, if needed.
membership site - churn feedback
  • The Psychological Impact of Churn: Of course it’s expected that people will leave your membership when you have the option to do so.

    However, I feel very certain that 99% of people are not psychologically prepared for when it actually starts to happen (right from month one).

    In my view, you need to be the type of person that naturally runs their business by the numbers to be mentally equipped to deal with this.

    The secret is knowing what “normal churn” is, and what IS actually something to be concerned by.

    In my view, that’s where an advanced understanding of the numbers is a superpower.

    Even so, there is STILL something about churn that can feel uncomfortable, and I am certain that every membership site owner knows what I mean.

    It has required some self-reflection and assessment as to whether I feel psychologically comfortable to live with churn as a daily reality.

    The truth is this:

    It takes mental fortitude to deal with it, even when you know it’s something you will deal with.

    Here’s an example to paint a picture for you:

    Let’s say that you have 200 members, with a fairly average 10% churn rate.

    That means that every month, 20 members will leave.

    On a practical level, that means:

    a) You will receive a cancellation form most days;
    b) You will receive feedback on what to improve upon most days (and sometimes, bad feedback);
    c) You will have a lot of admin to deal with to process it all.

    The reality of THAT isn’t something that is on most peoples radar.

    With other business models, churn isn’t something you will need to deal with at all and so it’s important weigh the psychological impact and whether you feel you would be comfortable dealing with it daily.
  • Memberships is an Advanced Business Model: Memberships are hands down the most advanced business model I have run.

    That’s saying something, given that I have run 1:1, group programs, high ticket programs, online courses and everything in between.

    My personal view is that starting a membership isn’t for the beginner, even though it’s often the model that most appeals to the beginner.

    In particular, it requires a deep understanding of advanced marketing concepts like Customer Lifetime Value (LTV) and Cost of Customer Acquisition (CAC) in order to grow.

    I would imagine that most newer business owners aren’t familiar with this, and that the story goes a little something like this:

    a) They start a membership with a cohort of new peoples;
    b) Members start to leave;
    c) They don’t have the marketing know how to replace them at the rate they are leaving;
    d) Their membership slowly dies out.

    The way to avoid that is by understand LTV/CAC.

    Lifetime value refers to the total value of a member over the lifetime they are with you.

    To calculate LTV, you can use a fancy calculator (like the one I have, and which I can give you access to in Lifestyle Business School) or you can run the following sum:

    First, you need to know your average member lifetime value. Here’s the calculation:

    1 / (Churn %]) = LTV.

    For example [1 / 10% Churn] = 10 Months.

    Second, you need to know your LTV in dollars. Here’s the calculation:

    [(Membership price)*LTV].

    For example [$200 a month * 10 Months] = $2,000.

    So, in this example, the monthly membership price is $200.

    The average time someone stays in the membership (based on a 10% churn) is 10 months.

    And using the calculation above, the average customer lifetime value is $2000.

    That means that every member, on average, is worth $2000.

    You can increase that number by either:

    a) Increasing how long a member stays by decreasing churn; or

    b) Increasing their spend; for example by increasing your price, adding upsells etc.

    The game with a membership is acquire new members at a percentage of their LTV that is viable.

    This is the Cost of Acquisition piece. You need to find an acquisition channel that allows you a CAC (cost to acquire a customer) that will allow you to grow. The ratio of your LTV/CAC becomes the game.

    It’s an advanced marketing model, and I would imagine most aren’t prepared for it.
  • Growth is Slow

    If you’re wondering whether to create a membership site, you might also be thinking about whether an online course or other model might be a better structure.

    The truth is that online courses offer greater potential for cash injections.

    Because you are selling them for a higher one-time fee, you will get bigger cash injections and higher immediate revenue potential.

    With a membership, as long as you can engineer an LTV that is higher than selling the membership as a course you will eventually make more money but it’s a long game.

    We’re talking years, and you need to be in it for the long haul.
  • High Risk for Burnout

    A membership model when set up the right way from the outset has incredible potential for scale and leverage.

    The biggest risk factor is NOT setting it up that way, and capping your growth because it’s not truly scalable.

    This can occur when you create too many deliverables, features or benefits.

    This can have the effect of overwhelming both you (with the high probability of burning out in delivery and not having the capacity to focus on growth), and your member (resulting in increased churn.

    The other big risk factor is scope creep.

    There is huge power in creating a membership with the insights from your members, but you do also need to be careful that in trying to “do a great job” and make your members happy you don’t end up with a beast that burns you out.

    For example, every three months we run an anonymous feedback survey in our membership.

    In it, we ask for feedback from our members on what they love, and what they would love to see.

    If we adopted everything our members wanted, our offer would very quickly become unsustainable, unprofitable and unviable. You need to temper your members desires with the price point of your offer, what is reasonable, what makes sense for the offer and what aligns with you as the founder.

    If we took on every request, we would end up with a $20,000 offer with a low ticket price point.

    It doesn’t make good business sense, and you need to be savvy enough to balance this.
  • Your Members Aren’t As Invested

    When someone pays, they usually pay attention.

    If your membership requires your members to apply themselves to achieve a transformation, the cancel anytime nature of a membership can provide your members with an “easy out” when things inevitably get hard.

    It can feel much easier to simply cancel than to dig heels in and do the work.

    This is something that psychologically I think is a disadvantage both for members and for the results that the membership site owner is able to generate.

    I’ll come back to this one, because it’s one of the reasons that (even though I am okay with allll of the other cons) I am considering changing up the model.
  • Recurring Value (Over Up Front Value) is Required

    This one is dependent on the type of membership you run, however if you have a suite of high value material that is instantly accessible, you will need to feel comfortable with the value exchange.

    Does it feel energetically good to you that there is a likelihood that some (usually, a minority) of members might download or consume all of your content and “run”?

    Or that some members will stay for two months, but go through everything?

    Or that you could have charged $1,499 for that same member, and they may have happily paid it because the value of your offer is in the intel, not the amount of time they stay? [Read this again, and five times over].

    For this reason, there are certain types of offers that may not be a perfect fit for the traditional membership model.

    Or, that would better suit a back end membership model (mine included, but more on that later).

    If you have a membership where content is available on a rolling basis and then disappears (for example, let’s say you have a template provided each month that isn’t then saved in a library), or there are ongoing deliverables (for example, coaching) the value proposition to pay on an ongoing basis is clear.

    However, if not you will need to consider whether a membership model is the right fit – or whether perhaps a membership could be incorporated in a different structure (more on that soon!)
  • Failed Payments and Delinquent Churn is Common

    This is an unexpected con of running a membership site. Especially with monthly payments, you will need to be prepared for up to 20% of your payments to fail each month, meaning they don’t go through on the first try.

    Members will often also forget to update their cards or insufficient funds in time even with a robust automated follow up system. This then requires manually re-onboarding them. It is administratively something that is time-intensive.

    If you have a good system in place, you can recoup most of those payments within the month but you will still experience delinquent churn and may have cashflow issues due to the longer billing cycle on account of late payments.

The Pros of Creating a Membership Site

Now, let’s switch sides and talk about the pros of building a membership site.

And, when you go into it with realistic expectations – there are many!

I do think it’s important to start with the cons however, because they aren’t usually considered and it’s the reason people become disillusioned and give up.

Memberships can be magical – with some big ifs and buts.

They can be magical 🪄… IF:

You are willing to do the work (because, it’s WORK – and a lot of it);

You have the mental fortitude to deal pragmatically with cancellations;

You have a spirit of optimisation and genuinely want to improve and be of service;

You have an understanding of numbers and a willingness to learn more advanced concepts, memberships:

And, your offer suits it.

If you’ve ticked yes to all of the above, memberships can over time become a fairly lucrative money making machine.

Lets sum up the pros:

  • Selling Can Feel Calmer: One of the big pros of a membership site is that they can give you a sense of calm and certainty over your revenue.

    As someone that has traditionally only launched and received big cash injections and then trickles of payment plans, there is something that feel calmer about set recurring revenue coming in each month.

    It doesn’t mean that you don’t need to market – because you do, more than with most other models.

    But because your revenue is month to month or year to year, there is a greater degree of calm involved. Even if you don’t grow, churn (if you are doing a good job with delivery) will mean that your revenue plateaus out with a soft landing, rather than a sudden thud.

    (But, it still plateaus to nothing without consistent marketing – it’s not “recurring revenue” with no work. It’s just as much if not more work than courses).

    Depending on the season of your life and business, this can be a model that can provide a greater sense of calm around sales than a course model (as long as you are comfortable with the psychological impact of churn).

    You can also more easily run a sales model that is more evergreen; and do regular promotions to bump up sales rather than big, splashy launches.

    However! It also means that you need to be always both marketing and selling to do this successfully, and that (once again) is why this is one of the most advanced business models.
  • Running a Membership Site Can Help You to Improve Your Offer: The ability for your members to cancel is a powerful way to get real time feedback on your offer and messaging, and to tweak and optimise it to improve.

    It’s something that I think will make ANY offer better, and the founder is financially incentivised to continually optimise and improve based on the feedback received.
  • Running a Membership Site Makes You a Better Marketer: There is no doubt about it – running a membership will increase your marketing skills. You will become au fait with advanced marketing concepts like Lifetime Value and Cost of Customer acquisition much more quicker than if you were focused on a launch and one-time payment model.
  • Starting a Membership Site Can Reap Long-Term Financial Rewards: The financial benefits of running a membership site often don’t become apparent until years two, three and beyond – and for that reason, it can be easy for new membership site owners to throw in the towel.

    This is best illustrated with an example.

    Let’s take a membership with:

    1) A $200 monthly fee;
    2) 10% Churn;
    3) 20 New Members a Month.

    As you can see in the table below, growth is VERY slow and steady because even with 20 new members a month, the membership site owner must replace those members with the 10% churn each month to grow.

    It’s only in years two, three (and beyond) that you can see that it starts to compound.

    It’s slow, because the game is the make sure your growth exceeds your churn – and usually that is only just possible. So, your monthly recurring revenue stacks over time bit by bit.
  • Running a membership is perfectly suited to certain offers:

    Specifically, it is best for offers where the value isn’t available immediately. Industries where things are constantly changing (eg AI), where there is an ongoing deliverable (eg Instagram content creation). Where there is a lot of instant value, I do think this should be separated from any continuity in the form of other deliverables like coaching calls etc.

    It should also suit the goal you have for it.

    For example, a membership could sit on the front end of your business and serve the goal of priming customers for your offers.

    Or, it could sit on the back end of your business and give people who purchase other offers an opportunity to continue to receive recurring deliverables.

So, What’s the Verdict: Should You Create a Membership Site?

The answer, of course, is that it depends.

If you have ongoing deliverables, your subject matter warrants it and you understand the cons as well as the pros and the model excites you – I think go for it!

Here’s where I have landed, though.

I’ve now been running a membership site for 6 months, and I have realised both that I very much love the “game” of the model, but also that I will need to make adjustments given the nature of the offer I provide.

To summarise, my flagship Lifestyle Business School offer includes the following:

1) Seven incredibly high value courses which are strategically designed to flow into one another, and provide current and aspiring digital product creators to build a leveraged lifestyle business. They cover business model, offer design, delivery, traffic and marketing, live campaigns, automated campaigns and systems.

2) A community focused on experimentation. Members are encouraged to experiment, and to “fail forward” to take action as they move through the process and learn from each other.

3) Ongoing Q+A in the form of a private podcast.

Here are the challenges associated a membership model with this particular offer:

  1. Member Commitment: This isn’t a quick process; it’s a system for building a business. It isn’t always easy, and it requires commitment. With a monthly cancel any time model, it’s easy to have one foot out the door and bail when you need to do the work.
  2. Instant Access: I like being able to give members access to all material instantly, however it doesn’t feel like an energetically fair exchange for those that come in, download everything and leave in month one. The value is available IMMEDIATELY in terms of access to the intellectual property, rather than it being tied to the amount of time someone is in the membership.
    This is huge. Imagine getting ONE piece of advice or ONE template that could change your business forever. What would that be worth to you? It’s important to realise that a membership model supports offers where the value is in the TIME, not in the transformation especially where that can happen with something available almost instantly.
  3. Community Connection: We have a unique and special concept for our community. All members are required to introduce themselves, and we only provide access to our “experiments” space where members can safely share the results of their launches and experiments (and where I share candid BTS reviews of my own business) to people who share their own. Having people coming in and out monthly can feel chaotic, and doesn’t foster a feeling of camaraderie.
  4. Admin: Managing cancellations and failed payments is a full time job. We have a contractor that attends to it for several hours a day.
  5. Results: There is an interesting psychological factor with my membership where people seem to be rushing through *consuming* the content, without actually implementing. They are trying to “get their moneys worth”, but aren’t implementing which naturally (of course) takes longer. This isn’t how you build a successful business.
    Results come from implementation, not clock watching and bingeing. I could see that happening, and it didn’t feel good.

Introducing a 12 Month Commitment

Lifestyle Business School will shift to a model that requires a commitment of 12 months.

Here’s why:

1) Enforce realistic expectations: I have always been clear that building this type of business takes time, but I want to reinforce these expectations with a set time container;

2) Stop clock watching: I don’t want to reward the behaviour associated with coming in, downloading everything and trying to leave without implementing as quickly as possible;

3) Cultivate a fair energy exchange: The energy exchange feels uneven at present. I want to invest in the people that are committed to investing in themselves, not the looky-loos with one foot out the door;

4) Get results: I want an offer that gets results, and that won’t happen with the low level of commitment that comes with the current set up;

5) Attract people serious about implementation: By shifting the model, I want to repel people who come in with one foot already out the door.

I expect it to have a positive impact on results more than anything.

It will also lessen the risk and energetic misalignment associated with unlocking instant access to every course and offer in our business instantly.

Even with this change, I am happy I have started with the cancel anytime monthly structure.

It has given me flexibility to build out the offer WHILST also delivering the membership.

It has given me invaluable feedback which I have used to improve the offering, and also to improve the messaging to ensure that we are attracting the right fit. The feedback given in cancellation forms has been gold. I can see where some messaging was attracting the wrong person, and I can see where we needed to improve almost in real time.

So, we’ve waitlisted the offer and we’ll be reopening soon.

If you want the best deal and the special waitlist only bonuses, you are going to want to get on the list.

I’m excited to test this experiment and share my experience with you.

Do you want to create a membership site?

Or perhaps you already have one and want insight into how to engineer and optimise your strategy?

Come and join me inside of Lifestyle Business School.

I’d love to help you – I have a treasure trove of resources, experiments and knowledge that will help you.

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