The magic of a money-back guarantee

One question I consistently get from other entrepreneurs I talk to is, "How do you offer a money-back guarantee? Won't people abuse that, or isn't that too risky?"

Alas, so many misconceptions are implied in that simple question.

At Lead Cookie, we have offered a 30-day money-back guarantee since the start of the company, and it has been incredibly helpful in our journey.

In this article, I'm going to break down some of the misconceptions around money-back guarantees and explain how to use them effectively.

How our money-back guarantee works

First, before I get into the details, let me share with you how our money-back guarantee works.

At Lead Cookie, if a client is unhappy FOR ANY REASON in the first 30 days of running their account, we will refund 100% of their money, no questions asked.

There are no tricks in this. That is 30 days of actual outreach. Onboarding and setup time do not count in those first 30 days.

At Content Allies, if a client is unhappy FOR ANY REASON in the first 30 days and delivery of their first month's worth of articles, we will refund 100% of their money, no questions asked.

This means that, depending on their plan, they will see 1-2 articles, podcasts, or LinkedIn posts before their 30 days is even up. This allows them to see the quality of our work firsthand.

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As you can see, in both cases, we keep the money-back guarantee super broad. "FOR ANY REASON" means that the client can take that guarantee with no stipulations at all.

And so now the question that enters your head is... "but won't people abuse that?"

The reality about "abusing money-back guarantees"

The fear most people have around customers "abusing money-back guarantees" is simply unfounded. It does happen, but it is much less likely to happen than you would think.

No one signs up for a service and thinks- Great! I am going to play these guys, get some free work, and then leave.

Those people may exist, but as you will see in the next section, we weed them out before they can ever buy.

In reality, most people sign up for a service because they want to fix a problem in their business. They WANT to hire you on a regular basis to fix that problem and generate a positive ROI.

They don't want a quick hit of free work because they know that won't solve their problems.
Instead, they want to pay money and have their problems solved.

As a result, 99% of people out there will not abuse your money-back guarantee if you offer it. And if you are smart about qualifying your customers, then you will weed out that 1%.

How the money-back guarantee changes your sales process

One of the most magical things about a money-back guarantee is that it changes the power dynamic of your sales process.

Without the money-back guarantee, all of the risk is on the customer.
When you add in a money-back guarantee, you, as a company, take on some of that risk.

The guarantee forces you to only sign customers who are a good fit for your service.

This shift changes everything.

We open up our Lead Cookie calls by saying:

"With our service, we have a 30-day money-back guarantee, so we are very stringent about only taking on the customers who we believe will be a good fit. So on these initial calls, we like to understand more about your business and evaluate if we think we can run a successful campaign for you."

That is a very different frame for a call as opposed to just trying to sell the person on why they should hire us. Now we are, instead, interviewing them to see if they are a good fit.

And this isn't some fake manipulation tactic.
We take on risk as a company with every customer we sign.

If we sign a bad customer, then we could waste countless hours and dollars for a client who ends up taking the refund. That is no fun!

By offering this guarantee, it forces us to sell with integrity. It forces us to only pair our services with people who we believe we can actually help.

Guarantees force you to qualify customers better 

As I just shared, this guarantee will change the frame and dynamic of your entire sales process.

As a result, your sales calls will move from a place of "selling" to a place of "qualifying" customers to see if they are a good fit.

Inherently, in this process, you will begin to weed out a lot of those "bad customers" who may abuse the money-back guarantee.

You can spot most people like this from a million miles away. It's not hard, and in reality, most people who would take this are immature small business owners anyway.

Most established or successful businesses would have made it to where they are with strong ethical standards.

Yes, a few "abusers" will make it through

Now, I will be honest that despite all of your best efforts, a few abusers will sneak their way through.

At Lead Cookie, I can think of one person who was a blatant "abuser" over the lifespan of our company. To be fair, though, this individual was not originally from North America and when I confronted him about his blatant abuse of the guarantee, he seemed to genuinely not realize he was doing anything unethical. So this may have just been a culture breakdown.

Outside of that instance, we have had a handful of clients take the guarantee because "the results weren't good enough," despite the fact that our team looked at their account and thought Are you serious? You have qualified leads asking you for pricing information and trying to schedule calls...

So sometimes, despite our best efforts and running a successful campaign, the client's definition of success may be different.

The guarantee improves close rates which offsets refund costs

While I don't have data on this point since we have always offered a money-back guarantee at Lead Cookie, I can say that many people have said on the call some form of the following:

"I like that money-back guarantee."

or

"I guess you guys make it easy with that guarantee since there is little to no risk on my side to at least try this out." 

The number of times I heard this on a sales call far outweighs the number of guarantees we have given as a company.

Guarantees are the right thing to do

In a given quarter, we will probably give 1-3 refunds to customers. In 90% of those cases, I would say the refund was justified. The campaign simply didn't work as well as we thought it would.

Maybe we tested something out with a new market, or perhaps some combination of factors made this specific campaign not work.

In these cases, we are happy to give refunds as the customer should not pay if we were wrong in our assumptions that our service would produce results for them.

There are that 10% who get results and still take the refund. Yes, they are annoying. But it's worth it for all the reasons I mentioned above.

Implement your money-back guarantee

I don't care what kind of company you run; you can add a guarantee to your sales process to reduce risks.

I know of dev shops who pay insanely high developer rates to their team who have said: "If you aren't happy in the first 14 days of working with our team, we won't charge you a dollar."

I know of consultants who say, "If we don't produce at least X results on this project, then we will deduct 25% from our final invoice."

There are lots of ways you can incorporate a money-back guarantee into your business, so figure out what is right for you.

But the key is to shift the risk from being 100% on the customer, to you taking on risk as well. This will change your entire sales process and the dynamic of your calls.

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