Sunday, September 23, 2007

Making a million dollar profit is actually incredibly simple

Making a million dollar profit is actually incredibly simple. There are infinite variations on the exact method, but the underlying principle is always the same. Just make a one dollar profit, and then repeat the process one million times.


That is not really a glib answer. It is the basic truth of all business. You are probably saying to yourself that if it were really that easy to make a million then everyone would have done it.


It really is that simple, but never confuse simple with easy. Walking is simple, but walking 5,000 miles is not easy.


Walking is a simple process of taking a step and then repeating the process as much as is required. So is making your million dollar profit a case of repeating the step of making a smaller profit as many times as it takes.


The fact is that anyone can make a million, and indeed many do. If you earn $50,000 per year for 20 years then you have made a million dollars. The trick that you and I want to discuss is how to make that million dollars in a far shorter time-span.


To do it, go back to the basics. To walk (or run) is to repeat the process of a single step. How quickly you repeat that step will determine your speed, and how many steps you take will determine the distance you cover.


So the basic step to making that million dollars is to make a profit. Any level of profit will do, whether it is 10 cents per step, or $10,000 per step. So long as each step carries you a positive distance towards your goal, the rest is simply repetition.


And that, my friend, is where so many big-name dotcoms have failed. All too often, they don't actually make a profit from a single sale. They may often spend over $20 to attract each customer to make a $10 purchase. They hope that somewhere down the line, losing more than $10 per sale will magically reverse itself into being profitable.


The number one reason that so many companies struggle to acheive a profit is that they are spending more to enable each transaction to happen, than the transaction is actually worth in profits.


A while back, the books and music giant, Amazon.com was spending a little over $30 to aquire each customer. Now, that's all well and good if each customer aquired immediately brought in around $50 of profit.


However, Amazon.com had, and still has, far too many competitors to afford to place a high mark-up on each product, and it also has to pay a percentage to its affiliates very often. What that actually means is that a customer generally has to make several purchases before that aquisition cost is made back, and only after that can Amazon.com actually make a profit on further transactions.


As you see, they are banking on engendering customer loyalty. The problem is that internet customers are not very loyal - many go wherever the best deal is at any time. If they were loyal types, they'd still be using the off-line music store they used before.


Heck, we live in a society where almost 2 out of every three marriages end in divource - and the number one reason for that divorce rate? You guessed: disloyalty.


However, Amazon may misjudge loyalty, but they have two other things that make up for it. They have amazing presence (everyone knows who they are and what they do) and they make it very easy to buy your books from them.


Amazon have spent a lot of time, thought and energy into devising means to engender customer loyalty. In general, they have done a superb job in this regard. Amazon gets to know its customers well, predicts their needs, and so offers a value that few can match in that regard. The value of any offer is never just a matter of the price.


For several years Amazon.com were referred to as "the best known company that has never made a profit". However to make that profit they simply needed to scale down their customer aquisitions. That way they allowed the existing customers to make enough purchases to pay back cost of aquiring them.


The people who for years mocked Amazon.com tended to forget their undoubted position as market leader, but the people at Amazon should likewise not forget that the purpose of being in business is to make money, not just be known.


And that brings us back to looking at how you too can make your millions ..


The most important thing about business, online or off, is to do business. Global domination at losing money is not business.


The best place to start is to know that out of every 100 visitors you will get at least one sale, and that that one sale will generate an overall profit.


The worst place to start is to try to attract millions of customers before you actualy work out what you are going to sell to them, or how you are going to sell it.


Remember the lesson, that your business journey begins with a single step, and that the single step is measured in terms of profit.


To make your million dollars, just focus on making your immediate smaller sales on the smaller level and then scale up. Never start on the macro scale of millions of customers because you'll never see the detail on that scale.


Always focus on ways to maximise your profit on the smaller scale. On how much you make from every ten visitors or every hundred visitors. Always be as keen to explore how to make more from that group as you are to attract larger groups.


The majority of this site will help you to attract more customers, but the best way to attract more profit is to leverage the customer base you have to greater effect and with greater efficiency. And then increase the customer base as well.


Sometimes it is far easier to make each customer generate 50% more revenue for your business, than to increase your number of customers by 50%. Increasing both factors is the best of all.


Ammon Johns


 

2 comments:

profitknc said...

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