Risk Arbitrage is one of the Most Valuable Concepts I have ever discovered about Marketing & Business — and when you understand it, you’ll set yourself up for Massive Success & Outsized Returns.

It starts with a Simple Question: “Should I Increase my Ad Spend”

I was recently at an event where someone shared that they had a 3X Return on their Ad Spend for their business – spending $50k/mo to make $150k

Now, there are strategies to increase that return—which I offered to share separately—but outside of that, he was unsure whether he should scale his existing campaigns.

Now the first question is “What do you want?” — is the goal to maximize revenue, profit, increase initial customers (to make money on backend) etc?

In this case, he wanted to maximize his revenue & profits, but was unsure where the breaking point would be on his ads & was starting to see diminishing returns at that level of spend, which is why he was stuck there.

That’s when I shared a concept that has been a game-changer for me — the concept of “Risk Arbitrage”

What is Risk Arbitrage? It’s when you have Much More to Gain than you have to Lose on a Specific Bet or Decision.

In this case I asked “What would happen if you spent another $25k on Ads?”

He said he didn’t know.

I said, ok, let’s look at all the different scenarios.

Best Case — you spend $25k & still hit 3x, you make $75k (50k net)

Average Scenario — you spend $25k & 2x, you make $50k (25k net)

Breakeven — you spend $25k & 1x, you make $25k (0 net)

Worst Case — you spend $25k & it bombs (0x), you make $0 (-25k net)

Now let me ask you, based on what you’ve seen so far with your ads do you think the worst case scenario is likely to happen? Where you return nothing?

“Probably not” he said.

So, where you’ll end up is probably somewhere in between those scenarios — but you know what…

You have a unique situation – you have Risk Arbitrage here!

Because you risk 25k but you stand to gain up to 75k (50k net)

You have Risk Arbitrage – an Outsized Bet – where the Odds of Winning are Stacked in YOUR Favor!

(Now, this doesn’t fully factor in cost to fulfill / COGS — so disclaimer here you need to look at your true net numbers – we’re looking at the Gross Net Margin – this is a simplification to explain the concept of Risk Arbitrage)

If you were to walk into a Las Vegas casino & there was a game where you wagered $1 & stood to earn back $0 → $3 with a 75% chance of success…

You’d take that bet every time!!

Well, you’d never get those odds in a Casino…

But you do get those odds with Marketing — that’s the beauty of a consistent marketing funnel that gives you a Return on Ad Spend (ROAS)

Especially when you know the right Ad Strategy for Success! (Which is what we teach with our Alpha-AI YouTube Ads Strategy)

But what do you also gain — you LEARN!

Taking that extra amount of spend, you’ll learn how it works & then you get to decide if you want to keep spending more – it’s up to you & the results.

In Marketing, we make a series of tests where we WIN or LEARN — compounding the learning to create more wins!

Now, I did also share that you don’t want to ONLY scale the ads — you always want to Optimize & Test to see how you can Increase the Returns — and use a Strategy like YouTube Ads to beat out results on other platforms.

That said, when it comes to scaling existing campaigns, look for that exciting opportunity when It presents itself:

Risk Arbitrage 🚀

Here’s a quick video I made on YouTube walking through this exact concept.

How to Use Risk Arbitrage In Your Business:

Watch the Full Video on YouTube:

Happy 4th of July! 🇺🇸

If you’re in America, I hope you all had a Happy 4th of July! 🎇

I’m definitely grateful to live in America & despite our differences sometimes, I am a big believer that we can all come together to help make our country & world a better place for everyone!

Happy Independence Day!

(Fun Fact — Almost a Decade ago, I was invited to the Hollywood Movie Premier of the Film “Independence Day Resurgence” — that was a really cool experience – and maybe a story for another time – stay tuned, haha!)

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Here’s a Sneak Peak at What’s Coming Next:

More Free Trainings & Resources — In your Inbox!

Real Case Studies & Examples of the Marketing Funnels that Scaled Coaching Businesses past 7 & 8 Figures

The REAL on-the-ground insights into what’s going on in the Online Marketing & Coaching/Consulting/High-Ticket Industry (Based on our Insights working with Thousands of Clients)

The Latest YouTube Ad & Marketing Strategies as we Discover Them – So that you’re Always on the Cutting Edge

Guest Articles, Videos & Podcasts from the Top Marketing Minds of Today — Stay tuned for some exciting announcements around this 😉

And a LOT More…

I’m serious when I say I want this to be The Most Valuable Newsletter You’re Subscribed to — Look out for us in your Inbox Every Friday!

I’ll see you in the next one!

To Your Success,

– Aleric Heck | Founder & CEO of AdOutreach