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The Magic Business Formula Newbie Advertisers Don’t Know: R+R=Profit

I’m going to teach you what I think is the single most important formula in business, R+R=Profit. This helped me create my first successful ad campaign back when I was a newbie copywriter.

Ani Mittra

Mar 11, 2024

I’m going to teach you what I think is the single most important formula in business. This helped me create my first successful ad campaign back when I was a newbie copywriter.

I learned this formula from a Google Ads course I took, but it applies to all businesses, even if they’re not running search ads. I believe it originally came from renowned Irish business consultant Blaise Brosnan, who has 30 years as a business executive and has authored 3 books.

Every successful business I’ve been involved in utilized this formula, even if they were unaware of it.

Let’s take a look at a simple sales search funnel, and then I’ll reveal the magic formula.

Into The Funnel

If you’re running a paid search campaign, then you have searches at the top of your sales funnel. This is the number of searches performed by people on a search engine.

Your ad receives impressions when they’re shown in the search results.

If your impression share was 25%, then your ads were only showing a quarter of the time they could have shown.

When someone clicks on your ad, they end up visiting your website.

You’re Not Buying Clicks

If the offer is right, visitors become leads and buyers.

With all this talk of clicks and funnels, it’s easy to forget that clicks are actually people.

To be successful with paid search ads, you have to remember that you’re not buying clicks, you’re buying visitors to your website.

If your offer is interesting enough, your visitors might convert into leads.

They could call you up, complete your contact form, request a quote, or sign up for your email list.

Or they might skip this step entirely and go straight to the next step and become a buyer.

Congrats, you got a sale!

This is the hardest part for most businesses, actually convincing someone to part with their money and buy something for the first time.

But that isn’t the end of the funnel.

The First Sale Is A Test

It’s always good to think of that first sale as a test. If you pass the test, you stand the chance of converting that one-off buyer into a customer, which is just a repeat buyer.

A customer is someone who has a custom of buying from you.

I never thought about the word customer, but when I heard that definition it made a lot of sense. They have already bought from you before, so if they had a good experience, it’s a lot easier to get repeat business.

If this customer is really satisfied, they might become a referrer for you, where they recommend your product or service to other people.

This is the best marketing you can get. It has zero cost, and it’s extremely persuasive.

When you read an ad from a company, you subconsciously have your guard up. You know they want to sell you something so they can make money. They have to earn your trust.

But when a third party, like a friend, coworker, or an independent reviewer tells you something, your defenses are down. They have no incentive to lie to you since they won’t make any money from the sale. These people have your trust by default.

Referrals, reviews, and recommendations can make getting future sales trivial.

Loyal Fans

I didn’t include this in the graphic, but some customers may even end up becoming loyal fans of your business, where they love your product or brand so much they start to develop an emotional attachment to it.

Fans will go out of their way to promote and support your business. Brands can be so powerful that fans will associate their identities with them.

You probably know someone who is fanatical about Apple products, swears by their Tesla or is always repping their favorite sports team. These brands have done a great job of building loyal fans who champion their business.

The Magic Formula

So what’s the most important formula in business? Well, it’s R plus R equals profit, where R plus R is repeat business and referrals.

R + R = Profit

Translates to…

Repeat Business plus Referrals equals Profit.

The front end of your sales funnel is where most of your customer acquisition costs are, yet most of your revenue can come from having a good back end. If you provide enough value to your buyers, they will make it a custom to buy from you and refer you to others.

If the front end of your sales funnel breaks even, any revenue afterward will be mostly profit. That’s called a self-liquidating funnel.

But many businesses take a loss on the initial sale and make a profit down the road from that buyer becoming a repeat customer.

Referrals are essentially free marketing that drives your acquisition costs way down.

That’s partly what R plus R equals profit means, but the formula stands for more than that.

Make Happy Customers

Although it is a formula, it’s not one you’d use by plugging into a spreadsheet. It’s more about how to think about your business and marketing.

It keeps you focused on what ultimately matters in business, which is people.

You can only build a profitable business when you make people so happy that they come back to buy more from you and then recommend you to their friends.

You’ll never get repeat business or referrals if you’re not making your customers happy.

Some of those happy customers may even become loyal fans.

Next time you get frustrated by an ad campaign not performing right away, try and remember R + R = Profit

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Ani Mittra

Marketer