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. Â 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. Â That, by the way is what Einstein did in the theory of relativity. Â E=MC squared. Â Not so complex
The point is, businesses seem complex. Â How do they make all that money?
But recently, I read a brilliant book that boils it down to the basics. Â You have 3 factors:
1. Â Number of customers
2. Â Margin
3. Â Retention
If you have those 3 numbers, you know how much a company is worth. Â
For example, the book gives the example of Ameritrade. Â The lifetime value profit margin on a customer was $1,126 at the time the book was written. Â 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. Â Buy clicks from Google for .50 each
2. Â Send to a landing page where 15% opt in
3. Â Every 100 visitors costs you $50 and you snag 15 opt ins at a cost of $3.33 each. Â All you need to break even then is to sell 1 out of those 15 opt ins a $50 product. Â Or sell most all $5.00 product.
4. Â Send out emails that sell affiliate products using online camtasia or video where you presell the product. Â You can also do this in writing and broadcasts.
5. Â To keep people on your list, once or twice a week send out private label rights articles, ebooks and content. Â Post the same on a blog to get Google love.
Well, I don’t know anyone who does this. Â
Anyway, the take away here is that virtually any business can boiled down to a few dirt simple numbers. Â And that book will prove it to ya. Â It’s a good read.