|
|
| Wealth Building Information |
|
|
|
|
The Mathematical Formula For Making Money
No matter what markets you serve; what products you sell; or what marketing tools you use, in business there's one truth you cannot escape. Embrace this truth and profits will flood your business. Disregard this truth and financial-cancer will eat you. What is this truth? Quite simply, the size and speed of your entrepreneurial success is directly proportional to your understanding of The Mathematical Formula For Making Money. Despite serving as the corner stone of every single commercial success since the dawn of commerce most businesses neglect its power. Being so familiar with the diluted version of the formula these businesses overlook the enormous profit-potential held within. The Formula Mindful of this blind-spot, let's now take a close look at the Mathematical Formula For Making Money: Leads x Conversion Rate = Customers Customers x Average Dollar Sale x Sales Per Customer = Gross Profits Gross Profits x Profit Margin = Net Profits Please pay close attention to what I am about to tell you: your number of customers; your gross profits; and your net profits are the least important figures in this formula. Why? Because they merely represent outcomes. They tell you how good or bad you're doing without telling you why. And without knowing why you're doing so well (or so bad) you are in no position to fix the cause with speed and accuracy. All you can do is guess and implement random strategies in the hope that one day your results will improve. The real power of this formula is stored within the five highlighted variables (a.k.a. levers). A Demonstration Of Power Quite literally, when you apply these levers to your business your profits will increase exponentially. Allow me to demonstrate. Assume for the moment that your business currently operates under these circumstances: Leads Per Annum = 10,000
Plugging these into the formula gives you a net profit of $20,000 per annum. Let's now demonstrate the impact of improving progressively more levers without increasing your overall effort: Case #1: Improve leads by 100% Net profit = $40,000
I.e. for every % increase in effort you get the same % increase in profit. Case #2: Improve leads and conversion rate by 50% each. Net profit = $45,000
I.e. for every % increase in effort you get a 1.25% increase in profit. Case #3: Improve your leads, conversion rate and average dollar sale by 33% each. Net profit = $47,052
I.e. for every % increase in effort you get a 1.35% increase in profit. Case#4: Improve all levers except profit margin by 25% each. Net profit = $48,828
I.e. for every % increase in effort you a 1.44% increase in profit. Case #5: Improve all five levers by 20% each. Net profit = $49,766
I.e. for every % increase in effort you get a 1.49% increase in profit. Observation: By simply increasing the number of levers you improve you magnify your leverage. In other words, for the same amount of effort, the more levers you improve the more your profits improve. In this example we see that by spreading your effort over all five levers you increased your net profits by $29,766. Compared to the $20,000 increase gained from improving only one variable we see that your profit growth is almost 50% greater for doing nothing more than spreading your resources over all five levers. Imagine all the extra money you could be generating right now without any extra effort. All it takes is a simple change in focus. Conclusion: To leverage your efforts for maximum returns you must focus on improving all five levers in your business. An Even More Powerful Demonstration Next, let's demonstrate the impact of improving all five variables by progressively larger amounts: Case #1: Improve all 5 levers by 10% each. Net profit = $32,210
N.B. Here's how to work out the Profit to Effort ratio. First of all work out the % increase in profit. This is derived by taking the original profit of $20,000 away from the new Net Profit and dividing the result by $20,000. In this instance our $12,210 increase in profit represents a 61% growth. Next, determine the relative effort by simply adding the % increases in each lever. In this example our relative effort is 50% (i.e. 5 x 10%). Finally, divide the % increase in profit by the % relative effort and you'll have the Profit to Effort ratio. Case #2: Improve all 5 levers by 25% each. Net profit = $61,035
Case #3: Improve all five levers by 50% each. Net profit = $151,875
Case #4: Improve all 5 levers by 100% each. Net profit = $640,000
Observation: As you continue to improve all five levers the magnification factor on your net profit increases at an exponential rate. In this example we see that when we doubled our effort from case #2 to case #3 our leverage increased by 61% (i.e. ((2.64 - 1.64) � 1.64) x 100). But when we doubled our efforts once more from Case #3 to case #4 our leverage increased by 135% This has to be one of the most magnificent realisations you could ever make in business. Conclusion: Never stop improving all five levers of your business. A Tragic Habit - And How To Fix It Clearly these two examples demonstrate the power of leveraging all five variables in your business. Tragically, most businesses seem to care about only one of these levers - the number of leads. To make matters worse, of all the levers this one will cost you the most to improve! So if you're stuck in the 'drive-more-traffic-to-my-business' trap - STOP! Instead, harness the multiplying power of all five levers and you'll find that your profit to effort ratio will skyrocket. Or to put it another way, by applying all five levers to your business (instead of only one) you will make more money with less effort. Right about now you may be thinking to yourself, "That's all well and good in theory but how could I possibly increase all five levers by such large amounts?" Although there are over 200 ways to amplify these levers space restrictions preclude me from discussing the how-to's here. What's important for now is that you understand the magnifying potential stored within this formula. With this understanding achieving a 100%, a 200% or even a 1000% increase in profit is well within your grasp. About The Author Learn how to systematically amplify all five levers of the Mathematical Formula For Making Money quickly and easily. Enrol in the FREE Web Baron E-Class now: http://www.outrageousprofit.com/minicourse/af.asp?id=108
|
|
|
|
RELATED ARTICLES
Q and A: Financial Independence Tips For Women From Coni Cecil As a woman Netpreneur, I sat down via e-mail with article-announce regular contributor, Internet marketer and women's financial consultant Coni Cecil of www.cecilfreedom.com. She shared her Internet marketing and financial wisdom for women on the Net. The quote on her site from Eleanor Roosevelt is inspiring: "The future belongs to those who believe in the beauty of their dreams." Residual Income - The Myth "Join our program and retire in 3 months..." yeah, right. 10 Ways To Find The Money Hiding In Your Paycheck No matter how tight things are financially for you; no matter how bleak you think that 2005 might be, if you are earning a paycheck then there's extra money hiding in it. You just need to know where to look. Here are 10 ways to bring that money out into the open. Top 7 Ways To Get Rich Want to be one of the lucky ones on the road to riches, want to be on the freeway to financial freedom, on your way to wealth? How to Have MORE Fun With YOUR Tax Refund in 2005 I counsel a LOT of people about money. I see the same mistakes being made over and over again. Personal Finance Rules to Building Wealth Key 1 Pay your self first Creating Money, Prosperity, and Abundance Now (Part 1) I have given many prosperity lectures over the years and, in light of the current massive restructuring of all world and financial systems, I feel that now is the time for all of us to review our beliefs and refocus on manifesting prosperity and abundance in our lives. I do "walk my talk" and so I would love to share my experiences and knowledge with you. On the following pages, I will present you with some valuable tools that you can begin to use right away, to create money, prosperity and abundance in your life - with almost instantaneous results. Wealth - 10 Basic Steps to Achieving It Everyone wants to be wealthy. Only a few actually achieve it though so following these steps could help put you into that minority group of the rich. My Entrepreneurial Fire-I Grabbed My First Million Before I Got Too Old My First Million took me exactly 27 months to achieve. I remember the day I made the resolution with self respect. It was a brave choice and required some faith. But looking back, faith had little to do with it. You see, I knew some things that I didnt know before after reading a book. The book made so much sense to me and was clear...so clear infact that it passed on Vision to me. The Wealth Connection ? 2 Steps to Brighten Your Golden Years Estimated Reading Time: 4 minutes -- Envision your life 10 or even 20 years from now. Where do you plan to be? What are you doing and with whom? Still Using Federal Reserve Notes?(How to Beat Inflation) "My people are destroyed for lack of knowledge." Saving Money - 35 Pieces of Advice to Save There are only 2 ways to grow your wealth - Increase your income (by earning more and saving more) or decrease your costs. Rich or Poor - Get the Knowledge Most people work hard all their lives only to "retire" poor then try to live off meagre savings or a small (rapidly disappearing) Government pension. They are forced to live out their twilight years struggling with constant money problems. Many of them have to buy only the cheapest food and are unable to enjoy the little pleasures of life like going to an occasional movie, eating out or taking short trips. They have to watch every cent they spend. Retirement ? Can You Afford It? Every day you work is one day closer to your retirement. But can you afford to stop work? If you were unable to go to work for 6 months due to illness or injury, would you still have enough income to support yourself and your family? Even if you kept working, would you have enough money put aside to comfortably retire after a hard lifetime of work? If you kept working or doing as you're doing today, for the next 10 years, would you be in a better position to retire? Have you ever calculated whether your superannuation or the pension is going to be enough for you to retire on? Wealth Building Tips: Manage Your Money As someone who loves to shop, enjoys holidays and owns way too many pairs of shoes, managing my finances is definitely something that does not come naturally to me, I have had to learn. Managing your money is so important in becoming more organised, less stressed and more productive in your life ? you'll be amazed at what you can achieve with your money when it starts working for you, rather than you always working for it! WARNING: The Biggest Lie About Social Security Like I said, If you are poor and on social security do not, and I repeat do not read this article. Budget Tips To budget, to have a budget and to be on a budget is not a bad thing; in fact, it's just about the best financial situation you can find yourself in. A budget is a valuable financial management tool which will enable you to pay your monthly expenses, save a certain percentage of your income and control your expenditures. Easy Ways to Save $1,000 Vacation season is upon us and it can be tempting to pull out the plastic. To enjoy a vacation that you are not paying for when the next vacation season rolls around, consider a plan that costs $1,000 or less and pay cash. You will no doubt enjoy your vacation more knowing that you will return home with only your memories and without credit card bills. Is Your Money Keeping Up With Inflation? In today's unpredictable global economy, you obviously never know what is going to happen next. Uncertainties and concerns regarding the Iraqi threat, North Korean crisis, and hidden terrorist cells and networks continue to loom in the back of the minds of consumers. Moreover, the stock markets and industries around the world. Cost Averaging - It Makes Sense (Dollars & Cents) It's no secret that the market goes UP...the market, goes DOWN. That's the basics of Investing 101.
|
| home | site map |
| © 2005 |