Marketing Insight — How Boil ANY Business Down To A Few Dirt Simple Numbers

 

 

Any idiot can create complexity.

You know, take a topic and make it sound really complex.  First you create big words. Then complicated charts that make it look all sophisticated and such.

In contrast, it takes a genius to take something complex and find the simple elements in it.  That, by the way is what Einstein did in the theory of relativity.  E=MC squared.  Not so complex

The point is, businesses seem complex.  How do they make all that money?

But recently, I read a brilliant book that boils it down to the basics.  You have 3 factors:

1.  Number of customers

2.  Margin

3.  Retention

If you have those 3 numbers, you know how much a company is worth.  

For example, the book gives the example of Ameritrade.  The lifetime value profit margin on a customer was $1,126 at the time the book was written.  The cost to acquire a customer was $203.

The book is Managing Customers As Investments by Gupta and Lehmann.

The way this applies to you is you could theoretically use the following plan:

1.  Buy clicks from Google for .50 each

2.  Send to a landing page where 15% opt in

3.  Every 100 visitors costs you $50 and you snag 15 opt ins at a cost of $3.33 each.  All you need to break even then is to sell 1 out of those 15 opt ins a $50 product.  Or sell most all $5.00 product.

4.  Send out emails that sell affiliate products using online camtasia or video where you presell the product.  You can also do this in writing and broadcasts.

5.  To keep people on your list, once or twice a week send out private label rights articles, ebooks and content.  Post the same on a blog to get Google love.

Well, I don't know anyone who does this.  

Anyway, the take away here is that virtually any business can boiled down to a few dirt simple numbers.  And that book will prove it to ya.  It's a good read.

Marlon