ENOUGH! There are only (3) Ways to Make Money - Everything Else Is Noise...

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Is anyone else getting tired of the deluge of IM products out there, none of which teach people basic business fundamentals?

The first thing that is getting to me is that you ask the average IMer what it means to "make money" and chances are they can't break it down to the core fundamentals......

First, it seems to me that a lot of people are
a) Just assuming that revenues=profits

b) not accounting for hidden costs (example labor costs which need to be factored in if you are going to scale because you can't do it all yourself...)

Where is the good old Business School 101 IM MBA Course that really needs to come out?

By that I mean:

Profits= (Revenues) - (Costs)
Revenues = (Price)*(Quantity)
Costs = (Fixed Costs) + (Variable Costs) (or average total costs)....[an important distinction that can make or break a business]
Quantity= # of units sold = (visitors)*(conversion%)
Visitors = Unique Visitors + Returning Visitors




If you are paying attention to that formula you can see that there are OBVIOUSLY ONLY (3) Ways of making money:

a) You can increase your prices
(assuming costs stay constant)

b) you can increase the number of units sold by either making repeat sales to returning visitors or new sales to unique visitors (
again, assuming costs stay constant)

c) you can decrease your costs
(here, assuming revenues stay constant)

All these gadgets and gizmos promising the stars....widgets this, super automation tool that, "outsourcing secrets" this, autoblog this, miracle content ebook that...it's just a distraction!

My advice if you are a newbie (or vet, as we all can learn something new..) reading this is to sit down and really get to understand THE BUSINESS FUNDAMENTALS of your website or niche.

One reason why I say this is that I was on a call with someone who was doing $1M a year without knowing some of this stuff - when he finally got it, he DOUBLED IS REVENUES in 3 MONTHS.....

Start understanding how you can
a) Increase your prices (if you sell your own product look at adding value, if you sell traffic i.e. you are an affiliate, look at asking for higher payouts...)
b) look at how you can increase your # of units sold (by doing follow up sales to returning customers or converting more unique visitors...this right here is HUGE)
c) understand the major COSTS of your business and look at how you can decrease them (alot of times the biggest cost is all that "free" time you spend doing work yourself....if you are doing work yourself that could be outsourced at a tenth of the cost you won't be able to scale your business...similarly, if you have not mapped out the proper business process for your organization, you won't be able to determine what you need to automate...)

Just to reiterate,

Making Money= Maximizing Profit.

To maximize your profit there are only 3 variables you can push or pull....
a) prices
b) quantity or # of units sold
c) costs (now the difference between fixed costs, variable costs and average costs!)

So the next time you go to buy something or have something presented to you or find yourself spending time doing something,ask your self the (3) fundamental questions...
1) Is this going to DIRECTLY help me increase my prices?
2) Is this going to help me increase the number of units sold?
3) Is going to DIRECTLY help me decrease my costs? If it is, is it going to help me decrease my fixed costs, my variable costs or my overalll average total costs (this is a subject in and of it sell but all those people chasing "free" traffic need to get the fact that it really ain't that free.....casual language done on purpose, btw....lol)


I really hope this helps someone. Sometimes, it just takes someone taking the time spell things out in simple form to really getting - and not a WSO either....LOL
#costs #make #make money #mba #money #noise #profits #revenue #ways
  • Profile picture of the author Daryl Lim
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    • Profile picture of the author CDarklock
      Originally Posted by darylimjz View Post

      Sorry, it sounds kinda complicated...
      Here's the simple version.

      ( Sale price - Production Cost ) * Quantity sold = Profit

      There are only three ways to raise your profit: increase sale price, reduce production cost, or increase quantity sold.

      There are complexities, because all of these things are interrelated. If you change one, you're probably going to change one or both of the others.

      A good course in microeconomics is recommended. M. Gregory Mankiw's text is canonical.
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      "The Golden Town is the Golden Town no longer. They have sold their pillars for brass and their temples for money, they have made coins out of their golden doors. It is become a dark town full of trouble, there is no ease in its streets, beauty has left it and the old songs are gone." - Lord Dunsany, The Messengers
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      • Profile picture of the author John Durham
        Terminology...semantic... people get hung up on making something old school sound new and "fangled". It's like someone who never heard of QUEEN before waynes world!




        Originally Posted by CDarklock View Post

        Here's the simple version.

        ( Sale price - Production Cost ) * Quantity sold = Profit

        There are only three ways to raise your profit: increase sale price, reduce production cost, or increase quantity sold.

        There are complexities, because all of these things are interrelated. If you change one, you're probably going to change one or both of the others.

        A good course in microeconomics is recommended. M. Gregory Mankiw's text is canonical.
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      • Profile picture of the author ewenmack
        Originally Posted by CDarklock View Post


        There are only three ways to raise your profit: increase sale price, reduce production cost, or increase quantity sold.

        .
        In my book there are 6 ways to increase profit...


        #1 Get more leads/prospects taking action

        #2 Lower the cost of getting leads/prospects per person

        #3 Convert more of the leads/prospects into customers

        #4 Increase the $value of each sale

        #5 Sell more often to each customer/client

        #6 Lower your fixed costs

        Under those 6 listings there are many ways you can go about it

        If you worked on all 6 at the same time, you are moving to exponential profit growth.

        This is more powerfull than multiplying.

        Some plain talk for easier understanding.

        All the best,
        Ewen
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        • Profile picture of the author CDarklock
          Originally Posted by ewenmack View Post

          #1 Get more leads/prospects taking action
          #3 Convert more of the leads/prospects into customers
          #5 Sell more often to each customer/client
          Those are all "more customers."

          #2 Lower the cost of getting leads/prospects per person
          #6 Lower your fixed costs
          Those are both "production cost."

          #4 Increase the of each sale
          That's "sale price."

          I've already said that there are complexities and to go study microeconomics if you want to understand them, but it still all boils down to ( price - cost ) * customers = profit. Always. No matter how complicated you get, you're just dealing in subtleties and specifics that this three-part equation already covered.
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          "The Golden Town is the Golden Town no longer. They have sold their pillars for brass and their temples for money, they have made coins out of their golden doors. It is become a dark town full of trouble, there is no ease in its streets, beauty has left it and the old songs are gone." - Lord Dunsany, The Messengers
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  • Profile picture of the author MeghanK
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    • Profile picture of the author x3xsolxdierx3x
      Originally Posted by MeghanK View Post

      What OP is talking about is "scaling" and most courses talk about it. But if you're not converting well sometimes it is more important to optimize and test than to try and just "sell more"

      Some people run 100's of autoblogs and make tons of money. They don't care how much they are "selling".

      Your post is really confusing (not because you are using a lot of jargon), but because there are a ton of misleading conclusions.

      Anyway.. nice try
      What are the misleading conclusions?

      One conclusion, and clearly the reason for the thread, is that people don't seem to grasp the core fundamentals as well as they should. I do tend to agree with this.

      I do also think that some models online make the thought process 'easy' behind it...where many people naturally aren't thinking in these terms anyway. (i.e. Oh, I just throw Adsense and Clickbank affiliate links up on as many websites as I possibly can and watch the dough come rolling in)
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      • Profile picture of the author MeghanK
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        • Profile picture of the author x3xsolxdierx3x
          Originally Posted by MeghanK View Post

          I don't know if it's just because I've been up all night and it's after 6:30 in the morning but your original post looks scary.

          There are a lot of words and formulas and really no place to grasp what you are really saying.

          you have 5 sets of a) b) c)'s and a set of 1,2,3,4's and .... ugh

          Not to mention your title is screaming ENOUGH!!! calling everything else "noise" and saying there are only 3 ways........

          There are never only 3 ways to do anything.....

          And you are using a business model that does not apply to most Internet Marketing ventures.

          Anyway... I'm glad you got your chance to yell at whoever you're trying to yell at. And uncovering your conspiracy theories, and business school mumbo jumbo

          Now I'm just rambling.. Good night.. or Good morning.
          In his defence, it DID get your attention though, right? (it got mine, as well)

          A good IM'er knows how to command attention with words.... (I admit, sometimes it can get flat-out annoying from your audience, but, as far as a thread on WF, the thread title might actually be fairly effective)
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        • Profile picture of the author cutequotes
          so still ther eis no magic formula to make money on the internet
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          • Profile picture of the author x3xsolxdierx3x
            Originally Posted by cutequotes View Post

            so still ther eis no magic formula to make money on the internet
            I don't know what you mean by "magic forumla", but there are completely legitimate, highly profitable, business models that can be applied online. They just take work to nurture and develop.
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            • Profile picture of the author CoachTomK
              Good post. I totally believe that those that are not successful marketing online either are lazy or did not take the time to learn. Any profitable venture whether selling girl scout cookies, selling pizza for a fundraising effort for an elementary schoo takes effort. Without effort, there can be no success.
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              • Profile picture of the author creative
                In my experience, success come from continuously taking action towards your online business and researching about ways on how to improve it. Everything else is noise.
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          • Profile picture of the author Shaun OReilly
            Originally Posted by cutequotes View Post

            so still ther eis no magic formula to make money on the internet
            Yes...

            The "magic formula" is to work your ass off, try project
            after project, go from failure to failure until you bust
            out and find something that works for you.

            Dedicated to your success,

            Shaun
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            .

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            • Profile picture of the author BingeSite
              Originally Posted by Shaun OReilly View Post

              Yes...

              The "magic formula" is to work your ass off, try project
              after project, go from failure to failure until you bust
              out and find something that works for you.

              Dedicated to your success,

              Shaun
              Cheers! Thats how I dun it. I had not enough cash to fall for any of those biz in a box. The only thing I had was "time" The idea was to convert time to money.

              trial and error is how I learned.
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            • Profile picture of the author swiminsoda
              Originally Posted by Shaun OReilly View Post

              Yes...

              The "magic formula" is to work your ass off, try project
              after project, go from failure to failure until you bust
              out and find something that works for you.

              Dedicated to your success,

              Shaun

              I'll 2nd that. Hope I'm at least half way through.
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        • Profile picture of the author iSoftware
          Originally Posted by MeghanK View Post


          There are never only 3 ways to do anything.....
          Do you have a paypal address....

          Here's a challenge you can call me on. If you can state for me a way to increase your profits that doesn't include at least one or all of these:
          a) increasing your prices
          b) increasing the number of units sold
          c) decreasing your costs

          I will paypal you $100. Listen, I can appreciate that this may look intimidating to you but it's not the sort of thing a person just glances over - the core facts rarely are.

          The point is that in business - and economics - there are only a few basic principles....

          Just like in math, no matter how complicated it is, there are only 4 things you can do to a number:
          -add it
          -subtract it
          -multiply it
          -divide it

          Rather than glancing over the stuff, perhaps you can ask questions? There's no kind of IM product, no amount of questions you are going to be able to ask that will have you making a PROFIT if it doesn't involve

          a) increasing your prices
          b) increasing the # of units cold
          c) decreasing your costs

          (holding things constant as I said)....

          If nothing else getting a)-c) can help.
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          • Profile picture of the author MeghanK
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            • Profile picture of the author iSoftware
              Originally Posted by MeghanK View Post

              Yeah... ROI.... bargaining lower Advertising costs .... more profit and NONE of the a b or c has to change
              um? aren't advertising costs...COSTS...i.e. c)?
              ROI IS NOT A PROFIT FORMULA (which is defined as Revenues MINUS Costs)
              - ROI is the return on your investment which is a performance percentage metric for your capital investments, i.e.
              (Profit - Investment)
              Investment


              Anyway, I'm sorry if this seems to complicated for some people - I honestly thought it was pretty simple....
              At the end of the day it's all about understanding those view important factors that effect your revenues and your costs and breaking it down to one simple equation....

              Like I said, you can only do (4) things to a number and you can only manipulate (3) factors to affect your profitability.....of course some of these factors have sub factors....as an Example you might have 10 different kinds of costs (advertising, labor, customer acquisition, etc, etc) but at the end of the day it all boils down to putting things in their right buckets and sorting them out to really figure out what matters and what doesn't matter....

              The reason why I say this is that there are only approx. 8700 hours in a year and you can't do it all - in other words you have to set priorities...just like I optimized some landing pages before I wrote this post to be consistent....

              lol
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              • Profile picture of the author BishopMartin
                Originally Posted by moneykws View Post

                Anyway, I'm sorry if this seems to complicated for some people - I honestly thought it was pretty simple....
                At the end of the day it's all about understanding those view important factors that effect your revenues and your costs and breaking it down to one simple equation....
                It is simple.. I just get the feeling that a lot of 'IM'ers' are the same people who think they can make money by signing up their friends to AmWay! They waste their money on products/systems/conferences/training materials/motivational crap and think they are going to learn the secret to making fast money.. At some point some of them realize that they are just suckers feeding the business of IM Gurus, their Upline, speakers, etc.

                The internet is amazing because it has democratized information and made it (almost) uniformly and freely available. If you are paying for 'information' on the internet then there is a good chance you are wasting your moeny..
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          • Profile picture of the author Lance K
            Originally Posted by moneykws View Post

            Do you have a paypal address....

            Here's a challenge you can call me on. If you can state for me a way to increase your profits that doesn't include at least one or all of these:
            a) increasing your prices
            b) increasing the number of units sold
            c) decreasing your costs

            I will paypal you $100. Listen, I can appreciate that this may look intimidating to you but it's not the sort of thing a person just glances over - the core facts rarely are.
            Can I play???

            Answer: Reduce refund rate.

            Anyway, I'm pickin up what you're puttin down. No "WTF" or "fancy pants" moments here. I thought it was pretty straight forward.
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            • Profile picture of the author JohnMcCabe
              Originally Posted by Lance K View Post

              Can I play???

              Answer: Reduce refund rate.
              Reduce refund rate = Increase number of units sold.

              Good try, though.
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              • Profile picture of the author Lance K
                Originally Posted by JohnMcCabe View Post

                Reduce refund rate = Increase number of units sold.

                Good try, though.
                I figured some would make a case for putting that into the "increase sales" category. Heck, that was my first thought. And I can't really argue it.

                But...

                My thinking was that those units were already sold. So it's not really increasing sales. Unless, of course, you don't consider sales final until the refund period passes.

                Anyway, I was just trying to have a little fun. I agree with the premise of the OP. Frankly, I don't see how anyone can disagree.
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                • Profile picture of the author JohnMcCabe
                  Originally Posted by Lance K View Post

                  I figured some would make a case for putting that into the "increase sales" category. Heck, that was my first thought. And I can't really argue it.

                  But...

                  My thinking was that those units were already sold. So it's not really increasing sales. Unless, of course, you don't consider sales final until the refund period passes.

                  Anyway, I was just trying to have a little fun. I agree with the premise of the OP. Frankly, I don't see how anyone can disagree.
                  Lance, you have a point about the refunded unit already being sold. Look at it as a net figure though - if a unit is refunded, the number of units 'sold' is reduced by one. When you process the refund, you no longer have the revenue for that unit. And that's disregarding the cost of processing the refund, which goes into the average cost per unit calculation.
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                  • Profile picture of the author Lance K
                    Originally Posted by JohnMcCabe View Post

                    Lance, you have a point about the refunded unit already being sold. Look at it as a net figure though - if a unit is refunded, the number of units 'sold' is reduced by one. When you process the refund, you no longer have the revenue for that unit. And that's disregarding the cost of processing the refund, which goes into the average cost per unit calculation.
                    Very true.
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                  • Profile picture of the author DogScout
                    Originally Posted by JohnMcCabe View Post

                    Lance, you have a point about the refunded unit already being sold. Look at it as a net figure though - if a unit is refunded, the number of units 'sold' is reduced by one. When you process the refund, you no longer have the revenue for that unit. And that's disregarding the cost of processing the refund, which goes into the average cost per unit calculation.
                    If it isn't in the increase # of sales category, it is in the reduce costs category.:rolleyes:
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                • Profile picture of the author J Bold
                  Originally Posted by Lance K View Post

                  I figured some would make a case for putting that into the "increase sales" category. Heck, that was my first thought. And I can't really argue it.

                  But...

                  My thinking was that those units were already sold. So it's not really increasing sales. Unless, of course, you don't consider sales final until the refund period passes.

                  Anyway, I was just trying to have a little fun. I agree with the premise of the OP. Frankly, I don't see how anyone can disagree.

                  The way I see it, lowering your refund rate would be reducing/lowering costs. When you refund, that's a "cost" to you. The unit's already sold so that doesn't come in to it. So, lowering refunds = lowering costs.

                  It would be number 3, I think, no question.
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          • Profile picture of the author tecHead
            Originally Posted by moneykws View Post

            Do you have a paypal address....

            Here's a challenge you can call me on. If you can state for me a way to increase your profits that doesn't include at least one or all of these:
            a) increasing your prices
            b) increasing the number of units sold
            c) decreasing your costs

            I will paypal you $100....
            direct cash theft... where's my $100?

            JK
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            • Profile picture of the author John Durham
              Originally Posted by tecHead View Post

              direct cash theft... where's my $100?

              JK

              That would just change the terminology from number of units 'sold" to "Stolen"... I think?

              Originally Posted by John Henderson View Post

              IMHO, the OPer is showing the framework that's underneath every business -- even IM businesses (once all of the HTML, PDF, article marketing, Twitter, Aweber razzmatazz has been stripped away).

              He's giving some rock-solid criteria upon which the value-for-money of a business strategy or new WSO can be evaluated: Does this allow me to increase my prices? Will it shift more units? Can it lower my costs?

              And if the answer's "yes", then by how much?

              But if the answer's "no", then...
              Quantifying various actions, protocols within the business, and measuring them against actual results, in an effort to optimize and increase efficiency, and...yes I understand.

              Every aspect of a business should be quantifiable and a business owner should be aware of all the checks and balances to insure the greatest ROI and productivity.

              Even down to quantifying the ergonomic efficiency of the physical movements of the workers... it can all produce more or be more efficient.

              I went to the college of hard knocks, and read e-myth to learn that.
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              • Profile picture of the author tecHead
                Originally Posted by John Durham View Post

                That would just change the terminology from number of units 'sold" to "Stolen"... I think?


                Originally Posted by John Durham View Post

                Quantifying various actions, protocols within the business, and measuring them against actual results, in an effort to optimize and increase efficiency, and...yes I understand.

                Every aspect of a business should be quantifiable and a business owner should be aware of all the checks and balances to insure the greatest ROI and productivity.

                Even down to quantifying the ergonomic efficiency of the physical movements of the workers... it can all produce more or be more efficient.

                I went to the college of hard knocks, and read e-myth to learn that.
                a'Yo.. ain't that like a drummer opting to do a double roll instead of a single roll? Or a guitarist fingerin' the neck for a hyped riff instead of actually pickin' out a full scale?

                ...oops.. I didn't use proper english :p
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                • Profile picture of the author John Durham
                  Yeah yer feelin me... das wassup.

                  Originally Posted by tecHead View Post





                  a'Yo.. ain't that like a drummer opting to do a double roll instead of a single roll? Or a guitarist fingerin' the neck for a hyped riff instead of actually pickin' out a full scale?

                  ...oops.. I didn't use proper english :p
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            • Profile picture of the author NicheMayhem
              How about d)Brand awareness...or Establish authority?

              Typically adds cost and doesn't impact pricing directly or at at least immediately but is nonetheless essential and necessary. The nameless and faceless can surface for a little but always seem to fall away into oblivion once the trend or novelty of their offer dies down, therefore they must establish authority and a brand or begin at the bottom each time they have a campaign or product to start.

              Did I win?

              Where I do agree with the OP on the essentials of conducting business I also feel nothing is as cut and dry as the displayed formula.

              You cannot increase prices without added value.

              You cannot decrease costs without subtle or major sacrifice.

              You cannot increase sales without increasing exposure.

              All of those things cost either time or money so although there are good intentions behind the OP hopefully nobody will read it and think they can just start increasing their prices all willy nilly to substantially remedy their profit margin.
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          • Profile picture of the author barbarajean
            Hi -

            New here!

            Of course those 3 things are definitely factors to profit, but another thing I have found to be the case is applying your focus on tasks that bring in money first instead of spending your time on things that don't. Simple, but effective.
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            • Profile picture of the author Mbullard
              "If you can state for me a way to increase your profits..."

              Investing those profits.

              I'm sure depending on the method you use to invest, it could be looked at as purchasing goods that have a value and you don't see a profit until you can sell those 'goods' at a higher price; 'goods' being stocks or what have you. If you look at investing that way, then no, my answer would not be correct. But if you kept your money in a bank account, wouldn't the interest be considered 'increasing your profits' without
              -increasing price
              -increasing units sold
              -decreasing cost?
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              • Profile picture of the author ewenmack
                #5 Sell more often to each customer/client

                Those are all "more customers." end quote.

                Since when is selling more often and each transaction being at a higher price to the same customer equate to "more customers"?

                Ewen
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                • Profile picture of the author CDarklock
                  Originally Posted by ewenmack View Post

                  Since when is selling more often and each transaction being at a higher price to the same customer equate to "more customers"?
                  Since I understand economics and you don't.

                  Good luck with that, by the way.
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                  "The Golden Town is the Golden Town no longer. They have sold their pillars for brass and their temples for money, they have made coins out of their golden doors. It is become a dark town full of trouble, there is no ease in its streets, beauty has left it and the old songs are gone." - Lord Dunsany, The Messengers
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                  • Profile picture of the author John Durham
                    Originally Posted by CDarklock View Post

                    Since I understand economics and you don't.

                    Good luck with that, by the way.
                    LMFAOROTF!
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            • Profile picture of the author Mac Wheeler
              Originally Posted by barbarajean View Post

              Hi -

              New here!

              Of course those 3 things are definitely factors to profit, but another thing I have found to be the case is applying your focus on tasks that bring in money first instead of spending your time on things that don't. Simple, but effective.
              This would be a facet of increasing the number of units sold.

              The OP is entirely correct, there are only three fundamental ways in which to increase profit, everything else is simply a step towards actioning one of these three.
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            • Profile picture of the author shmeeko69
              I don't pay a lot of attention to charts, but what you say is quite true. If you are not making a profit then, either you have to increase your sales, reduce your costs or go bust & in today's economic environment, most companies seem to be cutting cost to survive, as there's a shortage of revenue opportunities.

              I watch Dragons Den religiously & listen to people who now what thy're talking about & how to make serious money & are all multi millionaires. The commen denominator seems to be drive & determination & a can do attitude. They all stick to their proven formulas that work in all of their business & apply the same rules each time, this allows them to make each of their businesses scaleable, as they're in large target markets & allows them to multiply their profit margins.

              I always think of retail giants like Tesco or Argos & why they're so successful, it's because they apply the same winning formula to each of their stores throughout the UK & this allows them to continually make a profit & grow bigger.

              Mark
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              • Profile picture of the author John Henderson
                Originally Posted by shmeeko69 View Post

                I watch Dragons Den religiously & listen to people who now what thy're talking about & how to make serious money & are all multi millionaires. The commen denominator seems to be drive & determination & a can do attitude. They all stick to their proven formulas that work in all of their business & apply the same rules each time, this allows them to make each of their businesses scaleable, as they're in large target markets & allows them to multiply their profit margins.
                Duncan Bannatyne's book "Wake up and change your life" explains how he made his money, how he continues to make money and what the dragons are writing and calculating when they're making notes in their pads on the show. Just thought you might be interested.
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            • Profile picture of the author rts2271
              I flat out have to say this is business 101, same as whats taught in college and economic courses. Which is why so many people here are confused because there is a real lack of education.
              If this does not make sense to you you really should look at a job in the fast food industry.
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          • Profile picture of the author Dennis Gaskill
            Originally Posted by moneykws View Post

            Originally Posted by MeghanK View Post

            There are never only 3 ways to do anything.....
            Do you have a paypal address....

            Here's a challenge you can call me on. If you can state for me a way to increase your profits that doesn't include at least one or all of these:
            a) increasing your prices
            b) increasing the number of units sold
            c) decreasing your costs

            I will paypal you $100.
            I put a "donations" link in one of my products. I didn't increase my product price, I didn't have to sell more units, and I didn't have to decrease my costs to do it.

            ...and, I got donations so it increased my profits.

            Do I get the hundred bucks?
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            • Profile picture of the author JohnMcCabe
              Originally Posted by Dennis Gaskill View Post

              I put a "donations" link in one of my products. I didn't have to increase my product price to do it. I didn't have to sell more units to do it. I didn't have to decreases my costs to do it.

              ...and, I got donations so it increased my profits.

              Do I get the hundred bucks?
              moneykws, it sounds like you have a winner here...
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            • Profile picture of the author iSoftware
              Originally Posted by Dennis Gaskill View Post

              I put a "donations" link in one of my products. I didn't increase my product price, I didn't have to sell more units, and I didn't have to decrease my costs to do it.

              ...and, I got donations so it increased my profits.

              Do I get the hundred bucks?
              You used labor which COSTS money to set up the donation box. How much do you value your time? IF you pay yourself say $100/hr and it took you say 15 mins to set that up then your labor costs were $25.

              NO LABOR is "free". Just because you do the work yourself doesn't make if free...not from an accounting standpoint or from an economic standpoint.

              If you think the work you do is "free" try outsourcing it to someone else and see how much it costs...

              I've read a few of your posts and I suspect if I had to pay someone to write at your level it darn sure wouldn't be free


              Work that we do ourselves is one of the "hidden" costs I was referring too...

              Also, from a bottom line real profit after taxes perspective, are you allowed to claim a donation as business revenues?
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              • Profile picture of the author Dennis Gaskill
                Originally Posted by moneykws View Post

                You used labor which COSTS money to set up the donation box. How much do you value your time? IF you pay yourself say $100/hr and it took you say 15 mins to set that up then your labor costs were $25.

                NO LABOR is "free". Just because you do the work yourself doesn't make if free...not from an accounting standpoint or from an economic standpoint.

                If you think the work you do is "free" try outsourcing it to someone else and see how much it costs...

                I've read a few of your posts and I suspect if I had to pay someone to write at your level it darn sure wouldn't be free


                Work that we do ourselves is one of the "hidden" costs I was referring too...
                The only extra labor was to write one sentence at the end that included my Paypal email address for people to send a Paypal email payment to me. Technically, since that took a few seconds, I guess it was a hidden cost after all. But that whole argument is a straw man anyway, because...

                ...you said the only way to increase profits was:

                a) increasing your prices
                b) increasing the number of units sold
                c) decreasing your costs

                I did none of those things. I actually increased my costs according you, but my profits still increased instead of decreased as they should have. Didn't you just help make the case for me?

                Don't worry, I'll let you off the hook. After all, you didn't make the challenge to me, you made it to MeghanK. I just like to try to poke holes in absolutes.
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                • Profile picture of the author tecHead
                  Originally Posted by Dennis Gaskill View Post

                  .... But...

                  ...you said the only way to increase profits was:

                  a) increasing your prices
                  b) increasing the number of units sold
                  c) decreasing your costs

                  I did none of those, I actually increased my costs according you, but my profits still increased instead of decrease as they should have. Didn't you just help me prove my point?
                  Actually, you're proving his point; as by adding a donation button, you're technically increasing your prices, (since you're declaring the revenue derived from therein as profit), because that donation button wasn't there, before.

                  Even though the labor COST was minimal, you still technically increased your costs, as well.

                  See, dude is having fun with y'all because nobody is recognizing that by his definition of PROFIT, (Profit = Revenue - Cost), it is virtually impossible to figure an equation outside of those constraints that increases profits.

                  You can't have one without the other. Just like you can't have a credit without a debit without throwing your books outta whack.

                  fun dialog, though ::thumbs up::

                  PLP,
                  tecHead
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                  • Profile picture of the author Dennis Gaskill
                    Originally Posted by tecHead View Post

                    Actually, you're proving his point; as by adding a donation button, you're technically increasing your prices, (since you're declaring the revenue derived from therein as profit), because that donation button wasn't there, before.

                    Even though the labor COST was minimal, you still technically increased your costs, as well.

                    See, dude is having fun with y'all because nobody is recognizing that by his definition of PROFIT, (Profit = Revenue - Cost), it is virtually impossible to figure an equation outside of those constraints that increases profits.

                    You can't have one without the other. Just like you can't have a credit without a debit without throwing your books outta whack.

                    fun dialog, though ::thumbs up::

                    PLP,
                    tecHead
                    The flaw in your argument is that I didn't increase my price as you state. My price never changed, each customer paid the same to get the product. Some customers volunteered to pay more after receiving the product. A voluntary extra payment after the product is delivered is not a price increase. Surely you can see the difference.

                    You're right, it's been fun.
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                    • Profile picture of the author tecHead
                      Originally Posted by Dennis Gaskill View Post

                      The flaw in your argument is that I didn't increase my price as you state. My price never changed, some customers volunteered to pay more after receiving the product. Surely you can see the difference.

                      You're right, it's been fun.
                      if you say so; but how do you calculate that revenue in your books, then?

                      Originally Posted by Dennis Gaskill

                      ...some customers volunteered to pay more...
                      more by definition is an increase, no?

                      You've labeled this more revenue as "profit", no?

                      The extra revenue is derived from the initial sale of product, no?

                      You may not have increased your prices, but your Customer's did by opting to pay more, (your words).

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                      • Profile picture of the author Dennis Gaskill
                        Originally Posted by tecHead View Post

                        if you say so; but how do you calculate that revenue in your books, then?

                        more by definition is an increase, no?

                        You've labeled this more revenue as "profit", no?

                        The extra revenue is derived from the initial sale of product, no?
                        You were good up to the last sentence. The extra revenue is not from the initial sale of the product, it's from a second payment, volunteered after the product is delivered. In one case, the extra payment came in months after the product was pulled from the market.

                        You may not have increased your prices, but your Customer's did by opting to pay more, (your words).
                        Yes, you are correct, my customers increased the price, but I did not. Therefore, my example still falls within the bounds of the OP's challenge, which was:

                        a) increasing your prices - I didn't
                        b) increasing the number of units sold - I didn't need to
                        c) decreasing your costs - I didn't

                        And yet I increased my profit. There's nothing there that addresses my tactic, therefore that tactic proves the challenge has been met.
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                        • Profile picture of the author tecHead
                          Originally Posted by Dennis Gaskill View Post

                          You were good up to the last sentence. The extra revenue is not from the initial sale of the product, it's from a second payment, volunteered after the product is delivered. In one case, the extra payment came in months after the product was pulled from the market.



                          Yes, you are correct, my customers increased the price, but I did not. Therefore, my example still falls within the bounds of the OP's challenge, which was:

                          a) increasing your prices - I didn't
                          b) increasing the number of units sold - I didn't need to
                          c) decreasing your costs - I didn't

                          And yet I increased my profit. There's nothing there that addresses my tactic, therefore that tactic proves the challenge has been met.
                          I'm not trying to pick an argument with you; (and if I pushed some buttons, I apologize); I'm just looking at it from an accounting standpoint... and you're right, I used the wrong word...

                          derived from = wrong word
                          instantiated = word I should have used

                          I see where you're coming from; I'll agree to disagree

                          Its really not my call, anyway.. I hope you DO get the $100.. don't think I don't, please.

                          PLP
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                          • Profile picture of the author Dennis Gaskill
                            Originally Posted by tecHead View Post

                            I'm not trying to pick an argument with you; (and if I pushed some buttons, I apologize); I'm just looking at it from an accounting standpoint... and you're right, I used the wrong word...

                            derived from = wrong word
                            instantiated = word I should have used

                            I see where you're coming from; I'll agree to disagree

                            Its really not my call, anyway.. I hope you DO get the $100.. don't think I don't, please.

                            PLP
                            Sometimes agreeing to disagree is the best course. No worries, I wasn't offended.

                            I'm not looking for the money though. Back in post #63 I said as much. It was a comment I added at the same time you were quoting the post in response, so you probably missed my edit. I wrote:
                            Don't worry, I'll let you off the hook. After all, you didn't make the challenge to me, you made it to MeghanK. I just like to try to poke holes in absolutes.
                            And with that, it's time to get back to work.
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                            • Profile picture of the author mcmahanusa
                              Ahem,

                              Once again, I must quote my old friend Sam Clemens: "All generalizations are false, including this one."


                              Love a revisit of Accounting 101, and while it is true that knowing what constitutes proper control of profits, and what activities detract from the bottom line, without a thorough grasp of the intangibles that are vital to online success, good accounting practices will not guarantee financial success.


                              Regarding donations, as they are not part of the price of the product, and if they are, in fact, donations, they are likely not taxable, except as gifts are taxable under the tax code, and I doubt that the donations that flowed toward Dennis would have reached that level. If they did, I want to study Dennis a whole lot closer.


                              As the mama skunk said of her offspring, "Just my two scents."
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                              • Profile picture of the author Dennis Gaskill
                                Originally Posted by CDarklock View Post

                                Dennis, YOU cannot raise profits unless YOU alter one of those factors.

                                Since you didn't alter them, you didn't raise profits.

                                But your customers did, so your customers raised profits.

                                It doesn't matter where the profits go. It only matters whence they came.
                                Caliban, I'm not going to keep going around in circles with this. It's not worth the time. However, saying altering one of those factors is the only way to raise profits is, I believe, a logical, but false, argument. I raised the profits through a fourth factor, the content itself. That caused the customers to contribute more money, which increased the profits without raising the price, without selling more units, and without decreasing costs.

                                Originally Posted by mcmahanusa View Post

                                Regarding donations, as they are not part of the price of the product, and if they are, in fact, donations, they are likely not taxable, except as gifts are taxable under the tax code, and I doubt that the donations that flowed toward Dennis would have reached that level. If they did, I want to study Dennis a whole lot closer.
                                Donations may not be the right word here. Contributions? Volunteered extra payments? I don't know. I counted it as income and paid taxes on it. It wasn't much. It was a marketing experiment that I scrapped.
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                        • Profile picture of the author CDarklock
                          Originally Posted by Dennis Gaskill View Post

                          There's nothing there that addresses my tactic, therefore that tactic proves the challenge has been met.
                          Dennis, YOU cannot raise profits unless YOU alter one of those factors.

                          Since you didn't alter them, you didn't raise profits.

                          But your customers did, so your customers raised profits.

                          It doesn't matter where the profits go. It only matters whence they came.
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                          "The Golden Town is the Golden Town no longer. They have sold their pillars for brass and their temples for money, they have made coins out of their golden doors. It is become a dark town full of trouble, there is no ease in its streets, beauty has left it and the old songs are gone." - Lord Dunsany, The Messengers
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                • Profile picture of the author Mike Anthony
                  Originally Posted by Dennis Gaskill View Post

                  Don't worry, I'll let you off the hook. After all, you didn't make the challenge to me, you made it to MeghanK. I just like to try to poke holes in absolutes.
                  Actually Dennis I don't think you poked any holes with that. His point was within the context of a business. A donation falls within charity and doesn't really apply.
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            • Profile picture of the author AllAboutAction
              Originally Posted by Dennis Gaskill View Post

              I put a "donations" link in one of my products. I didn't increase my product price, I didn't have to sell more units, and I didn't have to decrease my costs to do it.

              ...and, I got donations so it increased my profits.

              Do I get the hundred bucks?
              I would argue that you added a "service" which your customers paid for. Let's call this the "Dennis is here for you" service. If we consider a unit of service as a product then you've actually increased your units sold.

              On a different note: judging from all of the people saying "WTF", I think we've exposed that some people here (if their successes are to be believed) are better marketers than they are business people (not directed at you Dennis). Not that there's anything wrong with that, mind you.
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              • Profile picture of the author tecHead
                Originally Posted by John Durham View Post

                Yeah you probably never meet bad company dude talkin like that.


                Originally Posted by AllAboutAction View Post

                ...

                On a different note: judging from all of the people saying "WTF", I think we've exposed that some people here (if their successes are to be believed) are better marketers than they are business people (not directed at you Dennis). Not that there's anything wrong with that, mind you.
                ::cough::

                Originally Posted by rushindo View Post

                ...
                Marketing is so much more fun. ;-)
                I actually barely made it through Marketing with a C-; screwed up my GPA, too

                (wish I had saved that break-even scenario spreadsheet my Finance professor made us do...)

                Guess this is why big businesses have departments with heads; well, small businesses can do the same thing. Its just a lot harder to find like-minded individuals that exude the same passion as your for your business with the skills necessary.

                PROFIT = REVENUE - COST... get back on topic!
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          • Profile picture of the author Pollon
            Originally Posted by moneykws View Post

            Do you have a paypal address....

            Here's a challenge you can call me on. If you can state for me a way to increase your profits that doesn't include at least one or all of these:
            a) increasing your prices
            b) increasing the number of units sold
            c) decreasing your costs

            I will paypal you $100.
            Can I join this contest too? I wouldn't mind 100$ : )

            You can increase your profit if you can deliver better quality for the same price. I did not mention any of your 3 points : P

            Better quality, lower the price and you will get more money because of the increased sales, but you will get more money because of the extra value you deliver not because you just increased the sales. Do you get my point?
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          • Profile picture of the author Ian Jackson
            Originally Posted by moneykws View Post

            Do you have a paypal address....

            Here's a challenge you can call me on. If you can state for me a way to increase your profits that doesn't include at least one or all of these:
            a) increasing your prices
            b) increasing the number of units sold
            c) decreasing your costs

            I will paypal you $100. Listen, I can appreciate that this may look intimidating to you but it's not the sort of thing a person just glances over - the core facts rarely are.

            The point is that in business - and economics - there are only a few basic principles....

            Just like in math, no matter how complicated it is, there are only 4 things you can do to a number:
            -add it
            -subtract it
            -multiply it
            -divide it

            Rather than glancing over the stuff, perhaps you can ask questions? There's no kind of IM product, no amount of questions you are going to be able to ask that will have you making a PROFIT if it doesn't involve

            a) increasing your prices
            b) increasing the # of units cold
            c) decreasing your costs

            (holding things constant as I said)....

            If nothing else getting a)-c) can help.
            Just like in math, no matter how complicated it is, there are only 4 things you can do to a number:
            -add it
            -subtract it
            -multiply it
            -divide it


            And as previousy said, there are only 3 things, as there's no such thing as division - division is simply a way of expressing a factor of MULTIPLICATION
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            • Profile picture of the author Lance K
              Originally Posted by Ian Jackson View Post

              Just like in math, no matter how complicated it is, there are only 4 things you can do to a number:
              -add it
              -subtract it
              -multiply it
              -divide it


              And as previousy said, there are only 3 things, as there's no such thing as division - division is simply a way of expressing a factor of MULTIPLICATION
              Well in that case, aren't multiplication and division simply ways to communicate addition and subtraction more efficiently?
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              • Profile picture of the author tecHead
                Originally Posted by moneykws View Post

                ...

                Hey this way of looking at things may appeal to more left-brained among us I know.

                But in my opinion, it's the reason why super investors like Warren Buffet can jump into industries which they personally have never been in and pick winners...why?
                Because they block out the noise and get focused on figuring out which factors most effect the pricing structure, units sold (to repeat or new customers) and cost structure - fixed, variable, marginal and average....

                It doesn't matter if it's a company selling ebooks or exotic interest rate options (think Goldman Sachs...) it all boils down to those same factors.

                It's pretty empowering when you think about it!
                dayum!!, I had to read that ish twice! Empowering, yes... very...

                Originally Posted by John Durham View Post

                It was me.
                ...dork.. no yo Mama's a dork... ha!

                Originally Posted by Ian Jackson View Post

                Just like in math, no matter how complicated it is, there are only 4 things you can do to a number:
                -add it
                -subtract it
                -multiply it
                -divide it


                And as previousy said, there are only 3 things, as there's no such thing as division - division is simply a way of expressing a factor of MULTIPLICATION
                ... and

                Originally Posted by Lance K View Post

                Well in that case, aren't multiplication and division simply ways to communicate addition and subtraction more efficiently?
                NIT PICKER!!
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          • Profile picture of the author BishopMartin
            Originally Posted by moneykws View Post

            Do you have a paypal address....

            Here's a challenge you can call me on. If you can state for me a way to increase your profits that doesn't include at least one or all of these:
            a) increasing your prices
            b) increasing the number of units sold
            c) decreasing your costs

            I will paypal you $100.

            I think I could come up with a scenario that involved short-selling stocks that might meet these criteria but I would have to think to hard...
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        • Profile picture of the author theemperor
          This is a good back-to basics OP. Thanks
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  • Profile picture of the author Tanksalot
    If I can put in my two cents - The best sales trainer I ever had always said "Reward always comes after effort, check the dictionary if you don't believe me"

    I have tried three of the latest IK products and they are all rubbish and refunds have been requested, there are only two people who I have decided to pay attention to: Ed Dale and he gives the nuts and bolts free and Geoff Shaw who looks at it from the business point of view.

    Any way as I was saying stick to the basics in a single market and get the money will follow you.....

    Hopefully
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  • You overlooked finding new products to sell to existing customers. And certainly those new products can be outsourced. Impressive graph though.
    BTW I know most professors of business and marketing have never sat across from a real live prospect and gotten them to buy now even though they insisted they were just looking. And isn't that really the name of the game?
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    • Profile picture of the author iSoftware
      Originally Posted by thewealthywiseman View Post

      You overlooked finding new products to sell to existing customers. And certainly those new products can be outsourced. Impressive graph though.
      BTW I know most professors of business and marketing have never sat across from a real live prospect and gotten them to buy now even though they insisted they were just looking. And isn't that really the name of the game?

      That's a good point but keep in mind my math anology:

      There are only 4 things you can do to a number:
      -add it
      -subtract it
      -multiply it
      -divide it

      When you sell *new* products to existing customer it all boils down to understanding 1 basic equation:
      Profits = Revenues - Costs.

      When you sell *new* products to existing customer what are you doing? You are simply increasing the "# of units sold" - total number of units.

      The point I am trying to get across here is that people need to understand there are only (3) levers you can play with when it comes to making money:

      a) price
      b) quanity or total # of units sold
      c) reduction of costs....

      IMHO, if more newbies were talk to judging each decision they had to make from this very simple "profit mindset" it would be A LOT EASIER to shut out the noise, stay away from glitzy things and avoid the hype...


      Everytime one of these so called gurus shoots me with an email (I mostly stay on the list to do market research....you guessed it on prices, goods sold and costs....) I say to myself when I'm tempted to buy something (we all have our emotional triggers...)

      1) is this thing going to help me get higher prices for products in the market place
      2) Gonna help me increase the total # of units sold (it doesn' t matter if its old or new products or if the person who buys it is a returning or unique visitor)
      3) Is it gonna help me significantly reduce my costs?

      Anything - and I jokingly challenge anyone to come up with a counter example - anything that is not 1)-3) is not going to have an effect on HOW MUCH MONEY YOU MAKE....

      Profit = Revenues - Costs......, like 1+1=2 (although some of these CB products want you to believe it equals 20! lol....)
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      • Originally Posted by moneykws View Post

        That's a good point but keep in mind my math anology:

        There are only 4 things you can do to a number:
        -add it
        -subtract it
        -multiply it
        -divide it

        When you sell *new* products to existing customer it all boils down to understanding 1 basic equation:
        Profits = Revenues - Costs.

        When you sell *new* products to existing customer what are you doing? You are simply increasing the "# of units sold" - total number of units.

        The point I am trying to get across here is that people need to understand there are only (3) levers you can play with when it comes to making money:

        a) price
        b) quanity or total # of units sold
        c) reduction of costs....

        IMHO, if more newbies were talk to judging each decision they had to make from this very simple "profit mindset" it would be A LOT EASIER to shut out the noise, stay away from glitzy things and avoid the hype...


        Everytime one of these so called gurus shoots me with an email (I mostly stay on the list to do market research....you guessed it on prices, goods sold and costs....) I say to myself when I'm tempted to buy something (we all have our emotional triggers...)

        1) is this thing going to help me get higher prices for products in the market place
        2) Gonna help me increase the total # of units sold (it doesn' t matter if its old or new products or if the person who buys it is a returning or unique visitor)
        3) Is it gonna help me significantly reduce my costs?

        Anything - and I jokingly challenge anyone to come up with a counter example - anything that is not 1)-3) is not going to have an effect on HOW MUCH MONEY YOU MAKE....

        Profit = Revenues - Costs......, like 1+1=2 (although some of these CB products want you to believe it equals 20! lol....)
        Well sure I've read Jay Abraham and I totally agree with him (err you). Just wanted to point out one more way, oh and there are other's too. Sure I think I know what you were driving at and I agree with you, after a fashion.
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  • Profile picture of the author Barry Unruh
    I cannot argue with your logic, but just knowing business logic does no good if you do not take the time to learn how to do those things.

    That is where courses come into play. Learning how to create more value so you can raise prices. Learning how to get more traffic so you can increase the # of units sold. Learning how to be more efficient so you can decrease costs.

    Just knowing core facts is useless if you do not know methods to implement them.
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    • Profile picture of the author iSoftware
      Originally Posted by KansasDragon View Post

      I cannot argue with your logic, but just knowing business logic does no good if you do not take the time to learn how to do those things.

      That is where courses come into play. Learning how to create more value so you can raise prices. Learning how to get more traffic so you can increase the # of units sold. Learning how to be more efficient so you can decrease costs.

      Just knowing core facts is useless if you do not know methods to implement them.
      I couldn't agree more with the first part of your saying. However, how many people really have a fundamental understanding of the basic facts?

      In any given day people who are in the digital space are bombarded with "buy, buy, buy". I personally do buy loads of products but my decisions are driven by understanding the fundamentals (how many people really get this?! It's just a question...)

      That new webinar software? Oh right, that will help me accelerate the relationship development process, which will enable me to add more value and charge higher prices and convert more prospects to sales (higher # units sold) PROFITS

      That ebook on list building? Oh right, that will help me lower my subscriber acquisition costs and increase PROFITS

      That new book? Oh that will help me be more authoritative which will increase conversions and allow me to charge higher prices....

      Get what I mean? I'm not saying "oh don't buy anything". By all means if it will do 1)-3) have a go at it!

      But let's be real, how many of these products are really adding that much value?

      By the way, people like Jimmy D Brown, Robert Puddy, Charlie Page and Mark Ling are excellent at presenting the core fundamentals as a benefit to buying in my book - that's why I'm a fan of their
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  • Profile picture of the author Warren.Richards
    Hey Moneykws,

    You just made me remember of my old Accounts lectures that I usually bunked. If I had learned that much in those boring classes then I would have never turned to IM.

    This obviously does not mean that I am against your post or something like that. Your post is actually helping me to remember the old basic formula to increase profit and reduce cost.

    I just wanted to tell you that make it a bit simple and easier to understand to other fellow warriors who never took Accounts as a subject.


    Btw great post but a bit complicated one.

    Regards
    Warren.
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  • Profile picture of the author activetrader
    Originally Posted by moneykws View Post

    I really hope this helps someone. Sometimes, it just takes someone taking the time spell things out in simple form to really getting - and not a WSO either....LOL
    Thank you OP. I will have my son read this - he wanted to get the basics on how people make money - just in time for starting a new school year
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  • Profile picture of the author DogScout
    Actually, he did put info from 2 semesters of Wharton business school in one post about as simply as can be done. Donald Trump would be proud. The basics are sound and every successful business,on or off the net uses them either by instinct or by design. if not, they fail. no ifs, ands or buts. (but plenty of butts. Lol.)
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  • Profile picture of the author davewebsmith
    i dont think it complicated .. read it twice and then again and it will make sense. Problem is like all things we humans in this age expect instant results ... faster services and flick your finger reactions ...

    The real money makers are those who understand how it works and how to make it work for them ...

    Or you can simply glance over it ... tell yourself taking 5 minutes to read this is way to much effort ... post a reply and move off to another thread ....

    I think this information is worth knowing ... I just printed it out and laminated it

    davewebsmith
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    watch this space ...
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    • Profile picture of the author jbsmith
      Spoken as a true Non-Marketer.

      This is what every business plan & strategy would look like if the CFO (Chief Financial Officer) ran the company...if you have ever belonged to one of those, you will know what a disaster that will turn out to be!

      Look - of course these are the economic fundamentals, what you say is not untrue.

      But...the "art" of business is how you do a better job at the psychology of understanding your market SO THAT you CAN offer your products at higher prices...that you know the psychology of a buyer SO THAT you CAN upsell effectively instead of ineffectively...

      Many people understand the economic fundamentals of business, but still fail miserably bacause they fail to get into the marketing mindset...yet there are people that know how to market and no **** about economic fundamentals that are still rolling in it.

      I rest my case!

      Jeff
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      • Profile picture of the author DogScout
        Originally Posted by jbsmith View Post

        Spoken as a true Non-Marketer.

        This is what every business plan & strategy would look like if the CFO (Chief Financial Officer) ran the company...if you have ever belonged to one of those, you will know what a disaster that will turn out to be!

        Look - of course these are the economic fundamentals, what you say is not untrue.

        But...the "art" of business is how you do a better job at the psychology of understanding your market SO THAT you CAN offer your products at higher prices...that you know the psychology of a buyer SO THAT you CAN upsell effectively instead of ineffectively...

        Many people understand the economic fundamentals of business, but still fail miserably bacause they fail to get into the marketing mindset...yet there are people that know how to market and no **** about economic fundamentals that are still rolling in it.

        I rest my case!

        Jeff
        Spoken like a true 'marketer', not 'seller', would have been (IMO) a better 1st sentence. There is a difference and that is to what you refer, unless I mis-understand (not the 1st time)


        Mark
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        • Profile picture of the author Steven Wagenheim
          Ways to make money on the Internet.

          1. Sell a product
          2. Sell your time (freelancing, copywriting, article writing, etc.)
          3. Adsense, CPA, etc. (where nothing is sold but you get paid for traffic)
          4. Work a job (VA, transcriptionist, etc.)

          I have NO idea WTF the OP is talking about.
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          • Profile picture of the author Fun to Write
            Steve

            This is fancy pants economics stuff. I have to admit that this kind of business analysis just rolls off of my brain and makes me tune out. Guess that's why I don't have an MBA.

            But, then again, I don't need one to make money online.

            Find a hungry market and offer something to them that they want.

            My 2 cents.
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            • Profile picture of the author theemperor
              To those who think 'WTF' and 'fancy pants'...

              The gold of the OP is at the bottom:

              So the next time you go to buy something or have something presented to you or find yourself spending time doing something,ask your self the (3) fundamental questions...
              1) Is this going to DIRECTLY help me increase my prices?
              2) Is this going to help me increase the number of units sold?
              3) Is going to DIRECTLY help me decrease my costs?
              Basically here are 3 questions to ask before buying a WSO or a product, spending time on anything, or outsourcing anything.

              If you can't say YES to one of them, then question if you need to buy it, do it or outsource it.
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              • Profile picture of the author iSoftware
                Originally Posted by theemperor View Post

                To those who think 'WTF' and 'fancy pants'...

                The gold of the OP is at the bottom:

                Basically here are 3 questions to ask before buying a WSO or a product, spending time on anything, or outsourcing anything.

                If you can't say YES to one of them, then question if you need to buy it, do it or outsource it.

                Hey - thanks for getting this. I honestly didn't expect the response that this is "fancy, ivory-tower stuff" would happen. The average person can understand this and perhaps what looks simply explained to me isn't to some.


                I like using the math anology because you can do 3rd grade fractions or you can do graduate school calculus....but the simple fact is that you can only:
                -add
                -subtract
                -multiply
                -divide

                The point I'm making is that alot of people feel so overwhelmed when it comes to all the IM stuff there is to learn and the simple fact of the matter is that if we all could spend *at least more time* laser focusing on the bottom line, think how easier it is to cut through the noise.

                For anyone who says this is too complicated it wasn't meant to be...

                For anyone who think how I explained it was too simple and "obvious" I have left out the calculus, the corporate finance or the "other fancy pants stuff" that may have added more value to you to keep things simple...

                Right now I'm going to email a budding business partner of mind so he'll install dropbox and we can reduce our business process management costs
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                • Profile picture of the author 4morereferrals
                  Wheres the instant gratification eBook on subject #1 Generate More Sales?

                  I mean its got to be simple right? OP says there's only 3 things you need to do ... let's start with the real easy one - generate more sales. I should be able to get that part down in what ... say 15 minutes?

                  God why didnt i think of this "generate more sales' step before?





                  Originally Posted by moneykws View Post

                  Hey - thanks for getting this. I honestly didn't expect the response that this is "fancy, ivory-tower stuff" would happen. The average person can understand this and perhaps what looks simply explained to me isn't to some.


                  I like using the math anology because you can do 3rd grade fractions or you can do graduate school calculus....but the simple fact is that you can only:
                  -add
                  -subtract
                  -multiply
                  -divide

                  The point I'm making is that alot of people feel so overwhelmed when it comes to all the IM stuff there is to learn and the simple fact of the matter is that if we all could spend *at least more time* laser focusing on the bottom line, think how easier it is to cut through the noise.

                  For anyone who says this is too complicated it wasn't meant to be...

                  For anyone who think how I explained it was too simple and "obvious" I have left out the calculus, the corporate finance or the "other fancy pants stuff" that may have added more value to you to keep things simple...

                  Right now I'm going to email a budding business partner of mind so he'll install dropbox and we can reduce our business process management costs
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                  • Profile picture of the author John Durham
                    Originally Posted by 4morereferrals View Post

                    Wheres the instant gratification eBook on subject #1 Generate More Sales?

                    I mean its got to be simple right? OP says there's only 3 things you need to do ... let's start with the real easy one - generate more sales. I should be able to get that part down in what ... say 15 minutes?

                    God why didnt i think of this "generate more sales' step before?
                    Actually. Yes, you can start getting that part in the next 15 minutes.
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                  • Profile picture of the author Gary King
                    Originally Posted by 4morereferrals View Post

                    Wheres the instant gratification eBook on subject #1 Generate More Sales?
                    Working on it as a WSO right now. Can I count on your glowing review?
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          • Profile picture of the author Alexa Smith
            Banned
            Originally Posted by Steven Wagenheim View Post

            I have NO idea WTF the OP is talking about.
            I'm not sure I do, either, but I'm certainly more than happy for all my competitors to read it.

            I liked the comment somewhere above along the lines of the corporation being run by the financial director rather than by a proper CEO. That I understood.
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            • Profile picture of the author iSoftware
              Originally Posted by Alexa Smith View Post

              I'm not sure I do, either, but I'm certainly more than happy for all my competitors to read it.

              I liked the comment somewhere above along the lines of the corporation being run by the financial director rather than by a proper CEO. That I understood.
              Actually this couldn't be further from the truth but I felt no need to comment (currently running marketing campaign with response rate consistently 2-300% higher than those profiled in the Direct Marketing Association's annual Industry Survey - http://www.the-dma.org/cgi/dispannou...s?article=1451...)

              I will say I consider myself an investor and a revenue strategist....in other words, unlike the typical marketer, we are keenly focused on ROI and Sales optimization....


              The $100 dollar challenge was real and is still up for grabs someone!!!
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              • Profile picture of the author ewenmack
                And If you want to make more profit here are 6 steps.

                There are more I'm sure.

                #1 Get more leads/prospects taking action

                #2 Lower the cost of getting leads/prospects per person

                #3 Convert more of the leads/prospects into customers

                #4 Increase the $value of each sale

                #5 Sell more often to each customer/client

                #6 Lower your fixed costs

                Under those 6 listings there are many ways you can go about it

                If you worked on all 6 at the same time, you are moving to exponential profit growth.

                This is more powerfull than multiplying.

                Some plain talk for easier understanding.

                All the best,
                Ewen
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          • Profile picture of the author midwest1
            I agree. He's tired of some "generalization of production flow" and I'm suppose to be bowled over??? It's like my kid complaining on whether he should pour skim or whole milk into his cereal. I don't mean to be rude and forgive me if I'm coming off a little strong but if he wants to impress me and everyone here I would like to see ONE specific breakdown of an info product and how he finds his niche traffic, reaches them and converts them - specifics please - and THEN I'll not only be impressed but we'll learn something......
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      • Profile picture of the author JohnMcCabe
        Moneykws...

        One interesting note about your graph - it has two break-even points.

        The first is the one most people grasp, perhaps intuitively. If you make more than you spend, you have a profit.

        The second is important to those who see higher sales (more revenues) as the holy grail. It is possible to reach a point where the marginal cost of selling that next unit is more than the return you will get for that unit. It's one reason some high-flying companies "succeed themselves right out of business."

        The key might seem to be finding the sweet spot, that point where total revenue exceeds total cost by the greatest amount. At that point, you are making the greatest profit per unit.

        The real key is knowing that your total profit is represented by the area bounded by the diagonal (TR) and the curve (TC) between the two places it crosses the diagonal. Of course, now we're straying into calculus...

        There are four ways to make that area larger:

        1. Change the TR line by either moving it up or making it steeper (increasing prices, or revenue per unit).

        2. Change the TC curve by moving it down (lowering total costs).

        3. Put a bigger "belly" in the TC curve (could be a combination of factors).

        4. Move the two break-even points further apart (again, could be a combination of factors).

        Originally Posted by jbsmith View Post

        But...the "art" of business is how you do a better job at the psychology of understanding your market SO THAT you CAN offer your products at higher prices...that you know the psychology of a buyer SO THAT you CAN upsell effectively instead of ineffectively...

        Many people understand the economic fundamentals of business, but still fail miserably because they fail to get into the marketing mindset...yet there are people that know how to market and no **** about economic fundamentals that are still rolling in it.

        I rest my case!

        Jeff
        Jeff, you might want to keep a hand on that case. You and moneykws are talking about yin and yang here. He's talking about what to do; you are talking about how to do it better.

        And those marketers who "no ****" and are rolling in it? They may not try to explain economic fundamentals the way the OP did, but you can be damn sure they understand them, even if on an intuitive level. Or they wouldn't be rolling in it.
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        • Profile picture of the author John Henderson
          Moneykws, your OP stopped me in my tracks and made me think. I like things that do that.

          Originally Posted by JohnMcCabe View Post

          One interesting note about your graph - it has two break-even points.

          The first is the one most people grasp, perhaps intuitively. If you make more than you spend, you have a profit.

          The second is important to those who see higher sales (more revenues) as the holy grail. It is possible to reach a point where the marginal cost of selling that next unit is more than the return you will get for that unit. It's one reason some high-flying companies "succeed themselves right out of business."

          ...

          4. Move the two break-even points further apart (again, could be a combination of factors).
          John, I've read about "succeeding yourself right out of business" in "The Knack" by Norm Brodsky -- Amazon.com: The Knack: How Street-Smart...Amazon.com: The Knack: How Street-Smart... .

          Brodsky warns companies that are sales-driven that securing an order that is 5 or 6 times the size of any previous order isn't necessarily good news. This puzzled me for a while before I realised that "sales cost money"; creating the goods takes materials, and materials cost money that the company may not have. So unless the company's cashflow is super-healthy, the company will have to borrow to buy materials to create the goods to fulfil the order -- and the payment for that order may be a long way off.

          So is the position of the second break-even point related to how much cash the company has?

          And does the second break-even point apply to internet marketers whose virtual goods require no "materials" (variable costs = $0?) and who get paid before anything is delivered to the customer?
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          • Profile picture of the author JohnMcCabe
            Originally Posted by John Henderson View Post

            So is the position of the second break-even point related to how much cash the company has?
            Available cash can definitely be a factor. The more cash on hand - and free to use - the less one would have to borrow. With the production of physical goods, the availability and cost of trade credit factors into it. Supplier X may want that 5x order as much as your company, and may extend terms accordingly. The more you have to borrow at interest, the steeper that end of the curve tends to become.

            When I say "free to use", there is a certain level of reserves that should not be touched - such as the amount needed to cover payroll and benefits payments.

            Originally Posted by John Henderson View Post

            And does the second break-even point apply to internet marketers whose virtual goods require no "materials" (variable costs = $0?) and who get paid before anything is delivered to the customer?
            It does, but not necessarily in the same way. Even with Cost of Goods Sold virtually zero, you still have to factor in other variable costs. Cost of Sales is the main one I can think of, although support costs could enter the picture depending on the product.

            At some point, the advertising cost to generate one more sale could potentially be higher than potential profit from that sale.

            As I mentioned to Lance, support costs (like processing refunds) add to the average cost per unit as well.
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  • Profile picture of the author MichaelHiles
    lol... you're pushing water uphill with a very large percentage here.

    Good discussion though.

    The reason you won't see this in a guru launch is because, well, because it's SO fundamental that you can actually procter university courses online... Sloane School of Business has a huge # of courses available.
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  • Profile picture of the author John Durham
    Okay we have all been enlightened that to make more money we need to
    -increase sales
    -decrease cost
    -increase price?

    Maybe Im too ignorant to understand why all that isnt obvious?
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    • Profile picture of the author John Henderson
      Originally Posted by John Durham View Post

      Okay we have all been enlightened that to make more money we need to
      -increase sales
      -decrease cost
      -increase price?

      Maybe Im too ignorant to understand why all that isnt obvious?
      IMHO, the OPer is showing the framework that's underneath every business -- even IM businesses (once all of the HTML, PDF, article marketing, Twitter, Aweber razzmatazz has been stripped away).

      He's giving some rock-solid criteria upon which the value-for-money of a business strategy or new WSO can be evaluated: Does this allow me to increase my prices? Will it shift more units? Can it lower my costs?

      And if the answer's "yes", then by how much?

      But if the answer's "no", then...
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    • Profile picture of the author iSoftware
      Originally Posted by John Durham View Post

      Okay we have all been enlightened that to make more money we need to
      -increase sales
      -decrease cost
      -increase price?

      Maybe Im too ignorant to understand why all that isnt obvious?
      Well as an example, use the tag function of this site and see how much discussion there is about Traffic....

      Most people assuming that increasing traffic=increasing profit.

      Yes, mass traffic generation can increase the # of units you sell to unique visitors but the average website converts @ 1%.

      In other words, just from answering some questions from people who have reached out to me I realize that many people aren't actually sitting down and saying
      "hang on a minute, there are only 3 things I really need to figure out...let me block out the noise and focus on the things that affect those 3 things the most...."

      As an example, let's talk about prices. How much time do people spend figuring out the 3 or 4 or 5 (maybe more) strategies there are to instantly get your AFFILIATE COMMISSIONS INCREASED...

      Think about it, someone right now has been struggling to get traffic to their site, when the simple act of doing a few things which would enable them to get DOUBLE THE AFFILIATE COMMISSION on the same products doesn't even cross their mind - I know because I've been working with some of the top affiliate networks out there and you CAN get an increase in COMMISSIONS and you don't have to be pulling in $25k/day to do that...

      Or let's talk about increasing the # of units sold. How many people doing affiliate marketing are even opting people in FIRST vs. direct linking?

      Optin in= a strategy to increase #of units sold not from UNIQUE VISITORS (i.e. mass traffic generation) but through sales to RETURN VISITORS...

      The simple act of opting people in to affiliate offers vs. direct linking could probably add more to the average affiliate marketer's bottom line than they have sat down and realized....

      Listened, this way of presenting an opinion isn't for everybody - I honestly had no idea people would react so strongly...

      I'm just saying for people who like to have things simply laid out and who may be a little left-brained, this works....
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      • Profile picture of the author John Durham
        Yes we must quantify EVERYTHING... even beyond the obvious things... like on a production line with 100 different employees doing 100 different tasks... then one guy somewhere in the middle of the line is turning his wrist the wrong way to do his task... it affects the whole production and causes them produce 200 units less per day... percentage wise, you could turn the production line speed up to compensate but you are still losing optimum productivity that could be achieved if that mans wrist movement isnt corrected so his job is done just a fraction more ergonomically. thus we can produce 200 more units per day.

        There are many things we can shift to get better results and more profit , even down to the minute nuances.



        Originally Posted by moneykws View Post

        Well as an example, use the tag function of this site and see how much discussion there is about Traffic....

        Most people assuming that increasing traffic=increasing profit.

        Yes, mass traffic generation can increase the # of units you sell to unique visitors but the average website converts @ 1%.

        In other words, just from answering some questions from people who have reached out to me I realize that many people aren't actually sitting down and saying
        "hang on a minute, there are only 3 things I really need to figure out...let me block out the noise and focus on the things that affect those 3 things the most...."

        As an example, let's talk about prices. How much time do people spend figuring out the 3 or 4 or 5 (maybe more) strategies there are to instantly get your AFFILIATE COMMISSIONS INCREASED...

        Think about it, someone right now has been struggling to get traffic to their site, when the simple act of doing a few things which would enable them to get DOUBLE THE AFFILIATE COMMISSION on the same products doesn't even cross their mind - I know because I've been working with some of the top affiliate networks out there and you CAN get an increase in COMMISSIONS and you don't have to be pulling in $25k/day to do that...

        Or let's talk about increasing the # of units sold. How many people doing affiliate marketing are even opting people in FIRST vs. direct linking?

        Optin in= a strategy to increase #of units sold not from UNIQUE VISITORS (i.e. mass traffic generation) but through sales to RETURN VISITORS...

        The simple act of opting people in to affiliate offers vs. direct linking could probably add more to the average affiliate marketer's bottom line than they have sat down and realized....

        Listened, this way of presenting an opinion isn't for everybody - I honestly had no idea people would react so strongly...

        I'm just saying for people who like to have things simply laid out and who may be a little left-brained, this works....
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        • Profile picture of the author eagle1984
          i think we realize more options to increase money?
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          • Profile picture of the author John Henderson
            Originally Posted by creative View Post

            In my experience, success come from continuously taking action towards your online business and researching about ways on how to improve it. Everything else is noise.
            I think that equipping warriors with the ability to recognise an "improvement" to their business was the motivation behind the opening post.

            Originally Posted by TomBuck View Post

            Very complicated.

            Three ways:

            1.) MLM Multi level marketing
            2.) Affiliate marketing
            3.) Paid to click sites
            *sigh*

            "Profit" (the money you keep) equals "Revenue" (the money customers give you for products) minus "Costs" (the money you have to spend to make/market/sell your products).

            "Revenue" can be broken down further: the quantity of things sold multiplied by the price of each thing.

            So here are the 3 ways to increase profits:
            1) Sell more things
            2) Increase prices
            3) Reduce costs

            That's it. Nothing complicated at all.
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    • Originally Posted by John Durham View Post

      Okay we have all been enlightened that to make more money we need to
      -increase sales
      -decrease cost
      -increase price?

      Maybe Im too ignorant to understand why all that isnt obvious?
      It's indeed obvious and, while interesting to theorize about, it actually adds nothing new. That's one of the reasons I was so disgusted from my 4 years in business college: too much obvious theory, too little real every-day application.
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  • You got to keep things simple dude. I understand where u are coming from especially with an economics back ground but the average person on the internet won't really grasp or have patient to read and analyze what you are saying. You got to dumb it down and simply things for people. this create a hurdle for people becuz it is a bit of a mental challange to see the big picture of what you are saying. Just my advice
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  • Profile picture of the author Hubb.co
    Quite a complex analysis of a business model, but interesting, thanks very much!
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  • Profile picture of the author Justin.Zimmerman
    I definitely have to say that there are a lot of great 'make money' products out there, that can give you a lot of education. With that said there is a benefit having basic knowledge from any business class. It helps with stream lining and with the back end of the business.

    IMO the point that was trying to be made was don't waste your money on the latest product unless it directly affects your bottom line.
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  • Profile picture of the author thebitbotdotcom
    raise prices, sell more units, reduce costs...how novel...
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  • Profile picture of the author Gladiator
    moneykws, I thank you for posting this - as we need more of real marketing advice and not just make $10,000 in a day crap!

    More discussion on jv, marketing, selling and closing real deals!

    Thinking like real business people, IM and wanting to build real businesses is what I like to see more off here in this Forum!

    We could do with less marketers selling marketers and learn more about marketing to the rest of the world! ClickBank and WSO is not the world!...etc.

    Andre
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  • Profile picture of the author AcmeDude
    That graph looks interesting, and i understand the there needs to be more value so you can rise the prices, get more traffic to get more sales, and to decrease the costs, and time you need to outsource some things so in that free tha you can market more.

    In this graph what TC, TR and TFC stand for?
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    • Profile picture of the author JohnMcCabe
      Originally Posted by AcmeDude View Post

      That graph looks interesting, and i understand the there needs to be more value so you can rise the prices, get more traffic to get more sales, and to decrease the costs, and time you need to outsource some things so in that free tha you can market more.

      In this graph what TC, TR and TFC stand for?
      TC = Total Cost

      TR = Total Revenue

      TFC = Total Fixed Cost
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    • Profile picture of the author tecHead
      Originally Posted by AcmeDude View Post

      ...

      In this graph what TC, TR and TFC stand for?
      TC = Total Cost
      TR = Total Revenue
      TFC = Total Fixed Cost

      dangit, John! 2min?! really??!
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  • Profile picture of the author AcmeDude
    Thanks, JohnMcCabe and tecHead for the clarification
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  • Profile picture of the author tommygadget
    You know, much of this comes down to the fact that people get into this business with a very haphazard mentality. It really takes a LOT of discipline to quit a job and create a plan and execute it each and every day until you replace that income you used to get with a job. Most people either 1) hop from ebook to ebook and don't actually do anything other than read those ebooks OR 2) make a half hearted attempt at a website and give up because they only get 1 or 2 visitors a day or a week or a month. The OP makes the obvious point that this is a business and in business, we strive to improve revenue by cutting costs and increasing sales.

    TomG.
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  • Profile picture of the author Hamish Jones
    Despite this thread in some form denigrating to nitpicking, there is actually a lot of useful information.

    The opening thread and title makes overlyn bold statements but the information is definitely worth considering. These are SOME options to consider to increase profitability.

    But, there are other issues to consider as have been mentioned by other Warriors. If you are a newbie reading this, one who is struggling to make ends meet, take the time to read through this post and take some of the information on board.
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    • Profile picture of the author iSoftware
      Originally Posted by Hamish Jones View Post

      Despite this thread in some form denigrating to nitpicking, there is actually a lot of useful information.

      The opening thread and title makes overlyn bold statements but the information is definitely worth considering. These are SOME options to consider to increase profitability.

      But, there are other issues to consider as have been mentioned by other Warriors. If you are a newbie reading this, one who is struggling to make ends meet, take the time to read through this post and take some of the information on board.
      Are there overgeneralizations? I'm not trying to be argumentative - we are all here to learn. In my mind (and I've learned from this post that people can see these differently!)

      What I was saying was the equivalent of the following:

      There are only (4) things you do in math:
      -add
      -subtract
      -multiply
      -divide

      Profit is definited as the difference between Revenues and Cost. Making Money IN MY MIND is the equivalent of MAXIMIZING PROFITS...

      Now I know for a lot of people they will go on and on about how they can create new products, create more value - many other factors are responsible for generating MAXIMIZED REVENUES & MINIMIZED COSTS...

      But at the end of the day, at least the way my decision tree runs, it's about those (3) factors that make up the PROFIT EQUATION....

      Now, to be positive, I don't really want the thread to turn into a "you're right, I'm wrong" sort of thing....

      The main point I'm trying to get at is that by starting with the fundamentals, it becomes so much easier to separate those factors that really matter...
      As an example, a newbie might be sitting around saying "there are 50 things I need to learn, where do I start?!?"

      Well guess what, if you are interested in PROFITS, start with those skills or tasks that have the greatest impact on your prices, # units sold and cost.

      As an example HERE'S A PRACTICAL TIP FOR ANYONE DOING AFFILIATE MARKETING - RAISE YOUR PRICES!

      When you are an affiliate marketer, you are basically selling your traffic to someone else - in this case an affiliate network.

      Instead of chasing after more and more traffic, why not call up your affiliate network and ask for them to increase your commissions?!

      WHEN'S THE LAST TIME YOU SAW A WSO SHOWING PEOPLE HOW TO CALL UP THEIR NETWORKS AND ASK FOR A COMMISSION BUMP?

      You have 1 hour to invest. What's going to yield more profits, all things being equal?

      Getting your payout bumped from $5 to $10, or getting 5 more extra visitors a day to your website (assuming the conversion rates are the same...)


      Just some thoughts guys...
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      • Profile picture of the author Lance K
        Originally Posted by moneykws View Post


        What I was saying was the equivalent of the following:

        There are only (4) things you do in math:
        -add
        -subtract
        -multiply
        -divide
        Just to add to the nit picking, I'd like to add ROUND to the above list.

        Really, I'm on your side regarding the topics covered in this thread. Just having a little fun.
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        • Profile picture of the author John Durham
          Originally Posted by Lance K View Post

          Just to add to the nit picking, I'd like to add ROUND to the above list.

          Really, I'm on your side regarding the topics covered in this thread. Just having a little fun.
          We all are. It makes sense what he's saying. Just kind stating the obvious. Sometimes thats just what we need.
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          • Profile picture of the author Lance K
            What's really fun is explaining these 3 things to someone, and then when they have that "ah ha" moment dropping this on them...

            Increasing prices, increasing the # of units sold, and decreasing costs could each lead to decreasing profits.
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        • Profile picture of the author tecHead
          Originally Posted by Lance K View Post

          Just to add to the nit picking, I'd like to add ROUND to the above list.

          Really, I'm on your side regarding the topics covered in this thread. Just having a little fun.
          I can nit-pick your nit-picking by saying that ROUNDing is a form of either SUBTRACTING or ADDING :p

          heh heh, I win! ::runs::
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          • Profile picture of the author Lance K
            Originally Posted by tecHead View Post

            I can nit-pick your nit-picking by saying that ROUNDing is a form of either SUBTRACTING or ADDING :p

            heh heh, I win! ::runs::
            Touche!

            You sure take the fun out of the unproductive practice of nit picking.
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  • Profile picture of the author Raydal
    The OP reminds me of Dan Kennedy's style of reducing
    everything to it's LCM. He teaches the sane approach
    about making more money from your business and how
    looking as the basic building blocks and making incremental
    changes can make a big difference in your bottom line.

    -Ray Edwards
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  • Profile picture of the author Manie Amari
    Great post moneykws! Bookmarked this thread :-)


    Manie
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  • Profile picture of the author Paul Barrs
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    • Profile picture of the author Frank Donovan
      Sam, I normally agree with your posts, but I have to take issue here:

      Originally Posted by NicheMayhem View Post

      You cannot increase prices without added value.
      Sure you can. Supermarkets do it all the time. And if your product is undervalued to start with or demand is outstripping supply, simply raising the price is a viable and painless option.

      You cannot decrease costs without subtle or major sacrifice.
      Not so. Many corporations can easily find areas in their business where costs can be cut virtually without noticing. For instance, sourcing a cheaper supplier or finding lower cost hosting etc.

      You cannot increase sales without increasing exposure.
      You might argue that repeat purchases were the result of increased exposure, but many additional sales also occur due to satisfaction with the original purchase, not to any extra exposure. You can also increase sales if you changed your business model to, for instance, a recurring payment or subscription model.

      Not that I'm arguing against the OP, but Dennis does have a point here:

      Originally Posted by Dennis Gaskill View Post

      Donations may not be the right word here. Contributions? Volunteered extra payments? I don't know. I counted it as income and paid taxes on it. It wasn't much. It was a marketing experiment that I scrapped.
      Every newsletter that Paul Myers sends out ends with the tag "Find this useful? Buy me a beer" followed by a PayPal link. I have no idea what the take-up is, but any additional revenue comes at no extra cost and is not dependent on or related to the sales of products mentioned elsewhere in the newsletter.

      I imagine this is similar to the experiment Dennis undertook. I vote he gets his $100.


      Frank
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      • Profile picture of the author NicheMayhem
        Originally Posted by Frank Donovan View Post

        Sam, I normally agree with your posts, but I have to take issue here:


        Frank
        Frankly Frank...you make a good point.

        I think we all could go around in circles with this for days adding technicalities and certain aspects of specific businesses where less is more and then have another come in saying more can be less but like I said I do mostly agree with the OP. I was more referring to the IM industry then any other as it is most pertinent to this forum but with your added input I do see a few places where my original thoughts do not encompass all possibilities.

        Hopefully this thread will be yet another bit of reason for people to not offer out a cash payment to get proven wrong, nobody can think of everything every time and I completely agree that Dennis brought up a solid contradiction to the challenge. Donations cost nothing to receive, period.
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  • Profile picture of the author mr2monster
    For the people battling over semantics.

    1. Increase transactional units (this is sales, clicks, ads, front end, back end, donations, theft, et al)
    2. Increase the value of transactional units
    3. Lower cost to perform a transaction. (all costs, including time)

    There they are. The only ways to increase PROFIT. Everything falls under those three.

    You can argue over semantics all you want... they all fall under one of the three.


    You made a new product? See #1
    You increased the price? See #2
    You sold back-end people stuff? See #1
    You sold the same exact thing twice to two separate people? See #1 & potentially #3
    You got a better ROI on your advertising? See #3
    You increased your conversion rate? See #1 & #3
    You're selling your time? See #1
    Adsense? See #1
    Reduced your refund rate? See #1 & #3
    Taking donations? See #1
    You won the lottery? See #2
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  • Profile picture of the author Kevin_Hutto
    I don't know why everybody is bashing the OP here... If you are trying to build a real business and grow it into something decent size, then these are the core fundamentals. These are the things that companies pay people like Paul Lemberg 6 figures to come in and figure out for them... How to figure out a way to do those 3 things. As a matter if fact, Paul's Formula5 course that was put out a couple years ago thru stompernet was just that - basically increase sales by 15%, increase prices by 15% and decrease costs by 15% and then 2 other things by 15% and the net result is that you double net profits... all by making these small 15% changes in these core areas...

    So, i think its a good and valuable post...
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    • Profile picture of the author Mac Wheeler
      Originally Posted by Kevin_Hutto View Post

      I don't know why everybody is bashing the OP here... If you are trying to build a real business and grow it into something decent size, then these are the core fundamentals. These are the things that companies pay people like Paul Lemberg 6 figures to come in and figure out for them... How to figure out a way to do those 3 things. As a matter if fact, Paul's Formula5 course that was put out a couple years ago thru stompernet was just that - basically increase sales by 15%, increase prices by 15% and decrease costs by 15% and then 2 other things by 15% and the net result is that you double net profits... all by making these small 15% changes in these core areas...

      So, i think its a good and valuable post...
      Indeed, as it is considering the interaction of price, cost and sales volume and their effect on profitability which allows a business to define a business development strategy.

      Additionally, there are some positive and negative relationships between these three indicators, which can be used to judge the overall health of a business.

      For example:

      High sales volume + high cost = high turnover but low profits. Not the best situation in the world, as most accountants will tell you, turnover is for vanity but profit is for sanity.

      Low cost + high sales volume = time to revise pricing, as there is probably some room for an increase.

      High price + low cost + high volume = Bingo!

      The real kicker here is keeping tabs on the cost indicator. Most business will already know their sales volume and of course their pricing, but without knowing exact costs, are missing one corner of the triangle.
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    • Profile picture of the author Dennis Gaskill
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      • Profile picture of the author Kevin_Hutto
        Originally Posted by Dennis Gaskill View Post

        I must have missed something here. I don't recall any "bashing" going on. Just some differences of opinion politely stated for the most part.
        I didnt even see page 2 of the thread... All i saw were the first 10 or 15 replies and everyone was saying that this stuff wasnt practical or real and that it was just business school junk... Thats what I was referring to :-)
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        • Profile picture of the author Dennis Gaskill
          Originally Posted by Kevin_Hutto View Post

          I didnt even see page 2 of the thread... All i saw were the first 10 or 15 replies and everyone was saying that this stuff wasnt practical or real and that it was just business school junk... Thats what I was referring to :-)
          Oh sure, NOW you post, right after I deleted the post you quoted.
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        • Profile picture of the author MichaelHiles
          Originally Posted by Kevin_Hutto View Post

          I didnt even see page 2 of the thread... All i saw were the first 10 or 15 replies and everyone was saying that this stuff wasnt practical or real and that it was just business school junk... Thats what I was referring to :-)
          Yeah... screw all that business school junk that created mega billion dollar empires. Some uneducated kids and their ebook dreams are going to rewrite business as we know it.

          lulz
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          • Profile picture of the author JohnMcCabe
            Originally Posted by Pollon View Post

            Can I join this contest too? I wouldn't mind 100$ : )

            You can increase your profit if you can deliver better quality for the same price. I did not mention any of your 3 points : P

            Better quality, lower the price and you will get more money because of the increased sales, but you will get more money because of the extra value you deliver not because you just increased the sales. Do you get my point?
            No, and I don't think you do, either. "Better" quality might be reflected in lower costs or additional units sold or higher prices.

            Otherwise, your statement is mathematically null.

            Originally Posted by ewenmack View Post

            #5 Sell more often to each customer/client

            Those are all "more customers." end quote.

            Since when is selling more often and each transaction being at a higher price to the same customer equate to "more customers"?

            Ewen
            It's not about "more customers", it's about more units sold. It doesn't matter whether ten new customers buy one unit or one existing customer buys ten more units. The net result is an additional ten units sold.

            Originally Posted by 2010 View Post

            I totally agree with the 3 ways of making money. No doubt....But what about the good old customer is always right...what about quality of a product/BRAND...
            .
            .
            .
            .
            Looking foward to your responses
            .
            .
            Without product quality how are we to use the 3 method ?
            "The customer", defined as your pool of potential buyers as a whole, is always right. Without a minimum acceptable quality level, you may have a smattering of sales in the beginning but you won't be able to sustain them.

            If you define "the customer" as an individual buyer, they are not always right - hence you get refunds, which are a cost.

            Although hard to do with digital products, for physical products it's possible to argue that too much quality is as harmful as not enough.

            > If the cost of added Quality Control inspections is more than the added revenue, you have a loss even though you have a 'better' product.

            > Here's one that might be twisted to fit a digital example. If you spend so much time 'improving your product quality' that you miss out on a crucial sales window, or you have to charge prices higher than the market will bear to recoup your sunk costs, your quality might just be too high.

            > On a cynical note, if your product quality is too good, you could be jeopardizing future sales. For example, I got a coffee maker for a wedding present. It was a good coffee maker, exceedingly high quality, and I used it for almost 24 years. With simply average quality, I might have bought 4 or 5 additional coffee makers in that time...
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  • Profile picture of the author teamalpha
    This all makes so much sense and is true in my opinion, how can you say you are making money if you have no idea of what it truly takes to make money. The formulas are awesome the explanation is spot on and I personaly want to thank you for taking the time to post this it is a true value to this site!
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  • Profile picture of the author rushindo
    Oooo I wanna play!

    First let me say that the OP's main point of there only being three ways to increase "profits" is correct.

    Secondly, ewenmack, selling more to existing customers is the OP's second way of increasing profits by "increasing the number of units sold."

    Thirdly, receiving "donations" as discussed in this thread is technically increasing price. We may call it "donations" but the IRS calls it revenue if the "donation" is linked to some type of value you provided to the "giver." Meaning the money is linked to whatever activity you did to cause that person to give you money.

    If that activity was providing a product (or content, etc), and that person loved your so much product that much that they decided to "give" you more money, the IRS calls it revenue and it is TIED to the original product, which technically increases the money you received for that product, hence its "price" was increased. To the IRS, a true donation is when someone gives you money and you did NOTHING for them in return.

    Fourthly, the OP did not create that graph. It is in economics text books everywhere.

    Fifthly, someone brought up a great point about the 2nd break even point on the graph where TOO MUCH REVENUE can actually result is LESS PROFITS. Someone else asked for an example. Does anyone have a good example? I'll come up with one if no one else has one.

    Good discussion. I love analytical conversations such as this. Hey, I'm an accountant.

    Brandon
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  • Profile picture of the author CDarklock
    Let's break this down a little more so people can actually grasp what we're getting at.

    Over any period of time and any amount of business, there is an amount of money that goes into your pocket and an amount of money that comes out of your pocket.

    The difference between these two is profit if you put more money into your pocket than you took out of it, or loss if you took more money out of your pocket than you put into it.

    The money that goes into your pocket is called revenue. The money that comes out of your pocket is called expense.

    So revenue - expense = profit, over any period of time and any number of transactions.

    Now, if you take a whole lot of transactions, and you divide the total revenue by the number of transactions, you will get an average revenue per transaction. And if all the transactions were for the same thing, you will find that this average revenue is awfully damn close to the sale price of that thing. So close, in fact, that they are often considered interchangeable.

    Similarly, if you do that with expenses, you get an average expense per transaction that is awfully damn close to the production cost. Again, so close, they are often considered interchangeable.

    Finally, every transaction involves one and only one customer. So on a theoretical level, transactions = customers. even if the same customer makes several transactions.

    So average revenue per transaction = revenue / customers = sale price.

    And average expense per transaction = expense / customers = production cost.

    Now we pull out the algebra.

    If revenue - expense = profit, then revenue / customers - expense / customers = profit / customers.

    And therefore, sale price - production cost = profit / customers.

    Which gives us ( sale price - production cost ) * customers = profit.

    Which is sufficiently precise for pretty much anyone of reasonable intelligence to make sensible decisions about how to increase profits in his business.

    When you complicate this simple and understandable equation with special cases and convoluted plans, you are not helping anyone. Most businesses do not have them, and most business owners cannot identify - let alone create - similar cases and plans.

    TecHead spends an awful lot of time reminding people of very basic and very reliable principles which can really help people. Unfortunately, some people spend an awful lot of time arguing with basic and reliable principles for no good reason.
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    • Profile picture of the author Dennis Gaskill
      Originally Posted by CDarklock View Post


      When you complicate this simple and understandable equation with special cases and convoluted plans, you are not helping anyone. Most businesses do not have them, and most business owners cannot identify - let alone create - similar cases and plans.

      TecHead spends an awful lot of time reminding people of very basic and very reliable principles which can really help people. Unfortunately, some people spend an awful lot of time arguing with basic and reliable principles for no good reason.
      There was no mention of not allowing special cases to the OP's challenge.

      No good reason? $100 was offered. Maybe $100 isn't a good reason to you, but it works for me.
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      • Profile picture of the author CDarklock
        Originally Posted by Dennis Gaskill View Post

        There was no mention of not allowing special cases to the OP's challenge.
        If someone gives you money and receives nothing in return, is that a customer?

        I know your answer to that is "well, it could be, if that person gave you money and got something in return on some other occasion" - but that's a load of crap and you know it.

        And that's the only way your "special case" works. You're trying to game the system, because you're more interested in $100 than you are in the principle of the thing, and you don't really give a damn how much damage you do in the pursuit of your payday.
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        • Profile picture of the author Andy Fletcher
          Originally Posted by CDarklock View Post

          If someone gives you money and receives nothing in return, is that a customer?

          I know your answer to that is "well, it could be, if that person gave you money and got something in return on some other occasion" - but that's a load of crap and you know it.

          And that's the only way your "special case" works. You're trying to game the system, because you're more interested in $100 than you are in the principle of the thing, and you don't really give a damn how much damage you do in the pursuit of your payday.
          The challenge was to add profit not customers and he's already said twice that he doesn't want to be paid.

          Personally I'd put donations under 'increasing number of units sold'. But we're clearly arguing semantics anyway so who cares.
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          • Profile picture of the author rushindo
            Originally Posted by Andy Fletcher View Post

            The challenge was to add profit not customers and he's already said twice that he doesn't want to be paid.

            Personally I'd put donations under 'increasing number of units sold'. But we're clearly arguing semantics anyway so who cares.
            I agree with your putting donations under 'increasing number of units sold' because that is what the IRS is going to say. Period.

            If you provided any value for that person that "donated" money to you - the IRS labels that as income, no matter what the Paypal button says.
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        • Profile picture of the author Dennis Gaskill
          Originally Posted by CDarklock View Post

          If someone gives you money and receives nothing in return, is that a customer?

          I know your answer to that is "well, it could be, if that person gave you money and got something in return on some other occasion" - but that's a load of crap and you know it.

          And that's the only way your "special case" works. You're trying to game the system, because you're more interested in $100 than you are in the principle of the thing, and you don't really give a damn how much damage you do in the pursuit of your payday.
          Damage? Get real. This is a discussion, there's no damage being done.

          Additionally, I said back in post #63 I didn't expect the money because the challenge wasn't issued to me. So there is no pursuit of a payday.

          This part that you wrote is especially silly: "I know your answer to that is 'well, it could be, if that person gave you money and got something in return on some other occasion' - but that's a load of crap and you know it."

          You make up an argument on my behalf and then call your imaginary conversation a load of crap. Yeah, good one. Wow, you win. :rolleyes:
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        • Profile picture of the author Lance K
          Originally Posted by CDarklock View Post

          If someone gives you money and receives nothing in return, is that a customer?

          I know your answer to that is "well, it could be, if that person gave you money and got something in return on some other occasion" - but that's a load of crap and you know it.

          And that's the only way your "special case" works. You're trying to game the system, because you're more interested in $100 than you are in the principle of the thing, and you don't really give a damn how much damage you do in the pursuit of your payday.
          Wasn't the $100 challenge kind of an invitation to try and "game the system"? :p

          Anyway, no damage is being done. Dennis is just engaging in a debate based on statements made by the OP. If anyone is caused damage by being exposed to both sides of a debate, it's a direct result of their own cognitive ability. :rolleyes:
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          • Profile picture of the author tecHead
            Originally Posted by Lance K View Post

            ..., it's a direct result of their own cognitive ability. :rolleyes:
            ...wouldn't that be incognitive ability?

            oops... sorry... thought we were still nit-picking heh :p
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          • Profile picture of the author CDarklock
            Originally Posted by Lance K View Post

            If anyone is caused damage by being exposed to both sides of a debate, it's a direct result of their own cognitive ability.
            Why, yes, it is.

            The OP is trying to help people who don't know any better.

            The other side of this "debate" is trying to confuse those people.

            And in this matter, the cognitive ability of people who don't know any better is not exactly high.

            So I'm forced to ask, what precisely is the motivation to prevent those people from being educated, and to defend those who try to prevent it?

            Does it make you feel smarter when more people are stupid?

            Or do you just sell more products?
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            • Profile picture of the author Tom B
              Banned
              Originally Posted by CDarklock View Post

              Why, yes, it is.

              The OP is trying to help people who don't know any better.

              The other side of this "debate" is trying to confuse those people.

              And in this matter, the cognitive ability of people who don't know any better is not exactly high.

              So I'm forced to ask, what precisely is the motivation to prevent those people from being educated, and to defend those who try to prevent it?

              Does it make you feel smarter when more people are stupid?

              Or do you just sell more products?
              You are casting aspersions at Dennis and it isn't cool at all.

              Dennis believed what he was saying was true. He doesn't have to sell more products or keep people stupid to feel smart. To try and say he is tells me you know nothing about him.



              So what is your motivation for making these types of statements in regards to Dennis?

              Are you trying to make yourself look better by putting others down? That would help sell more products since people would like you more.

              Is it to help your ego since Dennis seems to be doing very well with his business while you seem to be struggling?

              You're being melodramatic and taking things too far yet again.
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            • Profile picture of the author Lance K
              Originally Posted by CDarklock View Post

              The OP is trying to help people who don't know any better.
              I agree.

              Originally Posted by CDarklock View Post

              The other side of this "debate" is trying to confuse those people.
              I don't agree. I say they're offering a different opinion.

              Originally Posted by CDarklock View Post

              And in this matter, the cognitive ability of people who don't know any better is not exactly high.
              According to you. I'd say that it's more likely that they just don't understand. Not that their cognitive ability isn't "exactly high". Which is why they need to be expose to each side of the debate. So they can use their own judgment to make their own decisions which they are accountable for. My point was that if being exposed to both sides of a debate causes them "damage", perhaps their cognitive ability is limited.

              Originally Posted by CDarklock View Post

              So I'm forced to ask, what precisely is the motivation to prevent those people from being educated, and to defend those who try to prevent it?
              Forced by whom? :rolleyes: Why do you consider an alternative perspective to be prevention? It's simply an alternative.


              Originally Posted by CDarklock View Post

              Does it make you feel smarter when more people are stupid?
              Again, your words not mine. Regardless, I don't need to consider the intelligence of others in order to validate my own. It just so happens that I favor people being exposed to both sides of an argument in order to form their own opinions. If they are "harmed" by that exposure, then I feel the responsibility for that "harm" lies with them. Assuming, of course, that they are capable of making rational decisions. If not, what we say here doesn't really matter...does it?
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              • Profile picture of the author CDarklock
                Originally Posted by Lance K View Post

                I don't agree. I say they're offering a different opinion.
                Actually, they're just adding the complexity that the person getting the profit isn't necessarily in charge of the parameters. The fundamental principle is still the same.

                If I feel bad, and I want to stop feeling bad, I may go donate to a charity. The charity doesn't sell me a product; I sell myself a product. That product is my own altered emotional state. I set the price on that product myself. And the charity pays the cost of delivering that product - more accurately, of taking my donation - which puts a profit in their pocket.

                It's still ( price - cost ) * customers = profit.

                The opinion isn't different. It's just more complicated. It makes the principle harder to understand.
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                "The Golden Town is the Golden Town no longer. They have sold their pillars for brass and their temples for money, they have made coins out of their golden doors. It is become a dark town full of trouble, there is no ease in its streets, beauty has left it and the old songs are gone." - Lord Dunsany, The Messengers
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            • Profile picture of the author Michael Oksa
              Originally Posted by CDarklock View Post


              So I'm forced to ask, what precisely is the motivation to prevent those people from being educated, and to defend those who try to prevent it?

              Does it make you feel smarter when more people are stupid?
              This may be the best self-referential post I've ever seen.

              ~M~
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  • Profile picture of the author rushindo
    Oh yeah, is the contest for $100 still up for grabs (although we all entered ourselves into the contest considering the offer was made to one person LOL)?

    You can increase profits without raising prices, without selling more units, and without lowering costs by selling the business.

    And before you say it, that doesn't link to raising prices because none of that revenue is tied to a product.

    And if you want to get real technical, a large corporation can increase profits without doing any of the 3 things by selling a part of the business no longer needed, such as the distribution part of a business.

    On the books, that income goes underneath everything under a title called "Discontinued Operations." This results in net profits for the company (if they sell it for more than its cost of course).

    Now, let's see if someone can plug some holes in this. Maybe it's possible, but I don't think so. ;-)

    Brandon

    P.S. Sorry for being super technical but once again I'm accountant. Which is why I try to keep my mouth shut on this forum. Overanalytical is my middle name.
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    • Profile picture of the author Kevin_Hutto
      I think this is outside the scope of the OP's challenge... Changing ownership of a company is not the same thing as increasing profits. It might increase the "profit" of the owners, but not the profits of the company... And its either ordinary income or capital gains... Selling the business is capital gains unless building and selling businesses is your business, then you are a "dealer" and your income doesnt get cap gains treatment and has to be taxed at ordinary income levels. But if its open to ideas like this, you could always do a reg s or reg d offering and raise money from accredited investors in europe and then just pocket the dough and say the venture didnt work out. That increases "profits" too and was done a bunch in the 1990's and early 2000's...

      Originally Posted by rushindo View Post

      Oh yeah, is the contest for $100 still up for grabs (although we all entered ourselves into the contest considering the offer was made to one person LOL)?

      You can increase profits without raising prices, without selling more units, and without lowering costs by selling the business.

      And before you say it, that doesn't link to raising prices because none of that revenue is tied to a product.

      And if you want to get real technical, a large corporation can increase profits without doing any of the 3 things by selling a part of the business no longer needed, such as the distribution part of a business.

      On the books, that income goes underneath all things associated with the products being sold under a title called "Discontinued Operations." This results in net profits for the company (if they sell it for more than its cost of course).

      Now, let's see if someone can plug some holes in this. It's possible, but I don't think so. ;-)

      Brandon

      P.S. Sorry for being super technical but once again I'm accountant. Which is why I try to keep my mouth shut on this forum. Overanalytical is my middle name.
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      • Profile picture of the author rushindo
        Originally Posted by Kevin_Hutto View Post

        I think this is outside the scope of the OP's challenge... Changing ownership of a company is not the same thing as increasing profits. It might increase the "profit" of the owners, but not the profits of the company... And its either ordinary income or capital gains... Selling the business is capital gains unless building and selling businesses is your business, then you are a "dealer" and your income doesnt get cap gains treatment and has to be taxed at ordinary income levels. But if its open to ideas like this, you could always do a reg s or reg d offering and raise money from accredited investors in europe and then just pocket the dough and say the venture didnt work out. That increases "profits" too and was done a bunch in the 1990's and early 2000's...
        First, I agree with you that this can be somewhat outside of the scope of the OP's challenge, but I'm having fun here. :0)

        Secondly, selling the entire business is capital gains, correct. But selling a discontinued operation is income. On the income statement, if you sell a discontinued operation of a business, it is titled, "NET INCOME from discontinued operations."

        The company still exists, and this profit is added to the company's bottom line. Hence profit was increased for the company.
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    • Profile picture of the author Andy Fletcher
      Originally Posted by rushindo View Post

      Oh yeah, is the contest for $100 still up for grabs (although we all entered ourselves into the contest considering the offer was made to one person LOL)?

      You can increase profits without raising prices, without selling more units, and without lowering costs by selling the business.

      And before you say it, that doesn't link to raising prices because none of that revenue is tied to a product.

      And if you want to get real technical, a large corporation can increase profits without doing any of the 3 things by selling a part of the business no longer needed, such as the distribution part of a business.

      On the books, that income goes underneath everything under a title called "Discontinued Operations." This results in net profits for the company (if they sell it for more than its cost of course).

      Now, let's see if someone can plug some holes in this. Maybe it's possible, but I don't think so. ;-)

      Brandon

      P.S. Sorry for being super technical but once again I'm accountant. Which is why I try to keep my mouth shut on this forum. Overanalytical is my middle name.
      You increased the number of units sold by one ... And hopefully the price.
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      • Profile picture of the author rushindo
        Originally Posted by Andy Fletcher View Post

        You increased the number of units sold by one ... And hopefully the price.
        Darnet, you're right. Whether you sell the entire business or a discontinued operation, that is still a "unit" I suppose.

        Oh well, that was fun.

        Like I said, I did agree with the OP. But I still wanted to figure out a way to prove myself and him wrong... LOL
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  • Profile picture of the author Andy Fletcher
    For everyone saying it's so obvious take a look at all the comments in the thread saying they don't get it.

    The second break even point pretty much never applies to digital goods but about the closest I can come up with is ppc marketing with low profit margin. If you make 6c a click then you can only buy traffic priced 5c and below. At some point you cap out and your variable costs out strip your income.

    And finally, here's the accounting 101 test to see if you really "get it" - "we'll lose a buck a unit and make it up on volume."
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  • Profile picture of the author ocd
    I thought good business was having a warehouse full of something everybody wanted. Example: remember those super ugly cabbage patch dolls?

    I wish we could graph the stupidity of an emotional fad.
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    The link of great joy and happiness...but this one? This is the one that all window cleaning companies in the free world are inspired by. Hey, where did the sarcasm font go?
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    • Profile picture of the author rushindo
      Originally Posted by ocd View Post

      I thought good business was having a warehouse full of something everybody wanted. Example: remember those super ugly cabbage patch dolls?

      I wish we could graph the stupidity of an emotional fad.
      That last sentence is hilarious. I can graph it without graphing paper. Here goes: ^ (the line represents revenue).
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      • Profile picture of the author JDArchitecture
        The simple fact that this thread has generated so much discourse is proof that the OP's post was necessary.

        BTW, it's also valid.

        To some, the most profound is the most confusing.
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  • Profile picture of the author Alfred Shelver
    I really enjoyed the OP, I feel he is getting some un warranted criticism .... But i think this criticism is a product of the thread title and the reason the thread lasted so long, so it's not all bad.

    Those that get it this thread will be useful. Those that don't get it and are still making money you are actually getting it. Those that don't get it and are not making money then don't brush it off there may be things to learn.

    Every little bit of information that ads some value to you is useful this did for me.
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  • Profile picture of the author 2010
    I totally agree with the 3 ways of making money. No doubt....But what about the good old customer is always right...what about quality of a product/BRAND...
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    Looking foward to your responses
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    Without product quality how are we to use the 3 method ?
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  • Profile picture of the author Peter Ridell
    Hi Guys,

    The OP's statement is very clear and easy to understand, basically 3 points which when understood correctly and in combination with each other can increase profits hugely.

    But and its a big BUT... you need to have a business model before these come into play. I'd say for a lot of people that are new to internet marketing or making money online, they need to find ways to make money online that suits them.

    This is where the gold is hidden in the noise... Like all things you need to sort the wheat from the chaff, or sh*t from the clay (for any x-construction workers lol).

    Once you have a business model (products, delivery methods, promotions etc) then implicate the 3 criteria from the OP and watch your profits increase.

    Once again, my views only..

    Pete
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    • Profile picture of the author John Henderson
      Originally Posted by Andy Fletcher View Post

      Personally I'd put donations under 'increasing number of units sold'. But we're clearly arguing semantics anyway so who cares.
      I'm sorry Andy, I can't agree here. Donations shouldn't even have come into this thread. As CDarklock pointed out, a donor isn't a customer. The OP's formulas apply to exchanges of value. With a voluntary donation, there need be no exchange.

      Let's put it another way: suppose Dennis removed everything from his website apart from a PayPal "Donate" button; would we still try to apply the formulas describing the relationship between 'the cost of sales', 'the cost of production', 'the quantity sold' or 'profit' to Dennis's site? I don't think that we'd even bother to try, because donations are an entirely different ball game.

      Arguing that donations have increased your profits is like arguing that the points you scored in yesterday's basketball game should be added to your score in today's soccer match.

      Originally Posted by rushindo View Post

      I agree with your putting donations under 'increasing number of units sold' because that is what the IRS is going to say. Period.
      We're quoting the IRS for definitions in economic theory? I don't think that the IRS is really interested in economic theory...

      Originally Posted by rushindo View Post

      If you provided any value for that person that "donated" money to you - the IRS labels that as income, no matter what the Paypal button says.
      Income! Yeah, that's all the IRS is interested in.
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      • Profile picture of the author rushindo
        Originally Posted by John Henderson View Post

        I'm sorry Andy, I can't agree here. Donations shouldn't even have come into this thread. As CDarklock pointed out, a donor isn't a customer. The OP's formulas apply to exchanges of value. With a voluntary donation, there need be no exchange.

        Let's put it another way: suppose Dennis removed everything from his website apart from a PayPal "Donate" button; would we still try to apply the formulas describing the relationship between 'the cost of sales', 'the cost of production', 'the quantity sold' or 'profit' to Dennis's site? I don't think that we'd even bother to try, because donations are an entirely different ball game.

        Arguing that donations have increased your profits is like arguing that the points you scored in yesterday's basketball game should be added to your score in today's soccer match.
        I think donations came in because people were just having fun and being "technical' about a way to increase profits without using one of the OP's 3 ways.


        Originally Posted by John Henderson View Post

        We're quoting the IRS for definitions in economic theory? I don't think that the IRS is really interested in economic theory...
        Now you raise a good point... economic theory vs accounting theory. Economically, donations does not increase profit. But under accounting theory, donations described the way the poster described it, was not an actual donation, but income and contributed to profit. There was an exchange of value, hence why he donated. The poster said people donated over and beyond the price of the product later in the future because they wanted to. But if he described like you did, then yeah, of course there was no exchange of value.

        But again, nice point raised. No one said we are talking about economic theory, so my mind automatically shifts to accounting theory because that is what I studied in school... and it was BORING!!!

        Marketing is so much more fun. ;-)
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        • Profile picture of the author tecHead
          Originally Posted by rushindo View Post

          ...
          Now you raise a good point... economic theory vs accounting theory. Economically, donations does not increase profit. But under accounting theory, donations described the way the poster described it, was not an actual donation, but income and contributed to profit. There was an exchange of value, hence why he donated. The poster said people donated over and beyond the price of the product later in the future because they wanted to. But if he described like you did, then yeah, of course there was no exchange of value.

          But again, nice point raised. No one said we are talking about economic theory, so my mind automatically shifts to accounting theory because that is what I studied in school... and it was BORING!!!

          Marketing is so much more fun. ;-)
          ..see, this is why you don't get invited to the cool people parties. :p

          I was a Computer Science Major with an Accounting Minor; talk about boring!
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          • Profile picture of the author rushindo
            Originally Posted by tecHead View Post

            ..see, this is why you don't get invited to the cool people parties. :p

            I was a Computer Science Major with an Accounting Minor; talk about boring!
            LOL... Actually I'm in the "cool people" category and don't really enjoy most accounting personalities or the profession, hence why I never became an accountant and called it boring... ;-) But the mention of donations made the accountant side start jumping up and down like a chicken with its head cut off.
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        • Profile picture of the author John Henderson
          Originally Posted by rushindo View Post

          But under accounting theory, donations described the way the poster described it, was not an actual donation, but income and contributed to profit.
          I'm happy to concede that donations could be described as 'income', but I can't see how they could be described as 'profit' using the description given in the OP.

          Can you imagine the look on the bank manager's face if your business plan predicted that 2/3 of your profit would come from selling goods for more than you paid, and 1/3 of your profit would come from begging for change in the street?

          Originally Posted by rushindo View Post

          But again, nice point raised. No one said we are talking about economic theory, so my mind automatically shifts to accounting theory because that is what I studied in school... and it was BORING!!!

          Marketing is so much more fun. ;-)
          Confession: My current bedtime read is "Accounts Demystified" by Anthony Rice ( Accounts Demystified: The Astonishingly Simple...Accounts Demystified: The Astonishingly Simple... )
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  • Profile picture of the author John Durham
    When I was in my early 20's I used to have a part time gig playing guitar behind these two women from California who would come to Nashville once a month for a week at a time and book themselves up at all the amateur nights, songwriters clubs ahead of time... trying to make it big as songwriters.

    So anyway, one of them had a rich husband she was the one financing their adventures), and she was always teasing the other one about trying to be frugal...

    She said "You are always talking about saving money... the best thing I always say is just MAKE MORE"!

    That always stuck with me...

    BTW The Guys from "Bad Company" thought they were hot... so I got to hang around and party with Bad company for like 3 nights in a row because of them, which was a huge deal to me at the time! Just sayin...
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    • Profile picture of the author tecHead
      Originally Posted by John Durham View Post

      ...

      BTW The Guys from "Bad Company" thought they were hot... so I got to hang around and party with Bad company for like 3 nights in a row because of them, which was a huge deal to me at the time! Just sayin...
      LOL.. you are such a dork.. just sayin'...
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      • Profile picture of the author John Durham
        Originally Posted by tecHead View Post

        LOL.. you are such a dork.. just sayin'...
        Yer Mamas a dork
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        • Profile picture of the author tecHead
          Originally Posted by John Durham View Post

          Yer Mamas a dork
          your Mama so ignant, that when the HR Block™ rep asked her for the sum of her assets; she dialed 911 on her cell to report an attempted rape!

          OK, OK.. stop!... don't you have work to do?? sheesh..
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          • Profile picture of the author JohnMcCabe
            Originally Posted by tecHead View Post

            your Mama so ignant, that when the HR Block™ rep asked her for the sum of her assets; she dialed 911 on her cell to report an attempted rape!

            OK, OK.. stop!... don't you have work to do?? sheesh..
            Your mama is so ignorant, she tried to dial 911 but couldn't find the '11' button... (yes, I'm ashamed of myself :p)

            Sometimes the obvious isn't...
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  • Profile picture of the author Gary Pettit
    This is excellent information. You're right that many entrepreneurs do not understand the balance between fixed costs and variable costs. When I was the sales manager of a major automotive service supplier, I reminded the team repeatedly that if sales increase by just 10%, profits would increase 30%. And a sales increase of 30% would double profits, because the fixed costs remained the same (and didn't bleed the net profit in the end).
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  • Profile picture of the author PPC-Coach
    Hang on, all those fake gross numbers thrown around aren't real?
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  • Profile picture of the author John Durham
    Your mama was fillin out a job application down at the welfare office, and where it said sign here she put "kapricorn"... she thought Manuel Labor was the president of mexico.
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  • Profile picture of the author John Durham
    Yeah you probably never meet bad company dude talkin like that.
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  • Profile picture of the author dougp
    There is nothing complicated about this post, if someone takes an introductry class to economics the they will know the terms and terminology that the op lays out. With that being said, this is really an impractical post, and i fail to see how the op tied the title of their post with the content in it. There are only three ways to make money? LOL.
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    • Profile picture of the author iSoftware
      Originally Posted by dougp View Post

      There is nothing complicated about this post, if someone takes an introductry class to economics the they will know the terms and terminology that the op lays out. With that being said, this is really an impractical post, and i fail to see how the op tied the title of their post with the content in it. There are only three ways to make money? LOL.
      How is it impractical? I laid out in my first supposition that by my assumptions

      MAKING MONEY = MAKING PROFIT


      I defined profit as Revenues - Costs...

      Also, one thing I was hoping to create some discussion around was the issue of costs....

      If you have read any studies, you know that small/new businesses often have their PROFITS KILLED by HIDDEN COSTS....

      One of the biggest hidden costs in online business is....YOU GUESSED IT...
      this notion of FREE TRAFFIC!

      THERE IS NO SUCH THING AS FREE TRAFFIC!

      What kills alot of newbies and medium-level business owners alot is this hunt for the elusive "free traffic".

      Let's look at at this:

      -First of all, there are only 8700 (give or take) hours in a year.
      -SEO, requires time if you are doing it yourself
      -Time=labor hours
      -If you want to grow your business (meaning scale it), you need more labor hours
      -SEO requires YOUR TIME (often the most expensive labor input in any business is the owner's time)
      -Hence, SEO COSTS MONEY


      Think it doesn't? Try to remove yourself (using the term "your" generally) from the process of getting SEO traffic and hire it out and you will see exactly how much seo traffic costs...

      I don't think the average newbie has learned to sit down and actually "price" the cost of seo....

      In doing so, they could do a quick, back of the envelop, roi analysis...which would have them do something like (ex)

      "Ok, I could spend 20 labor hours of seo myself, which has a $20/hr labor cost associated with it and get 50 visitors a day in the next 30-90 days or I could spend $200 on a quick traffic source, get those visitors in 24 hours, make a quick profit, reinvest that profit and grow my business faster over that same time period...."

      Besides the hidden cost of "free" traffic there's also another HUGE hidden cost related to outsourcing

      To do outsourcing right you need to train your workers. I've personally spend $xx,xxx in tangible training and labor hours to train outsourcers.

      However, alot of people don't factor this HIDDEN COST in when they are looking to outsource. Even worse, they don't realize that it's alot better to find one outsourcer and develop a long term relationship. Why? Because if spend money on training someone who only stays on for a short period - then they go work for someone else.....often times the OTHER PERSON gets the results of your human resource investment as it takes time for that kind of HR training investment to pay off (people need time to get good at things....)

      I could go on and on about how a good "profit" frame of mind can assist virtually anyone with identifying hidden costs or other factors which affect the bottom line....I suspect other people could to here!
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      • Profile picture of the author tecHead
        Originally Posted by moneykws View Post

        ...

        Besides the hidden cost of "free" traffic there's also another HUGE hidden cost related to outsourcing

        To do outsourcing right you need to train your workers. I've personally spend ,xxx in tangible training and labor hours to train outsourcers.

        However, alot of people don't factor this HIDDEN COST in when they are looking to outsource. Even worse, they don't realize that it's alot better to find one outsourcer and develop a long term relationship. Why? Because if spend money on training someone who only stays on for a short period - then they go work for someone else.....often times the OTHER PERSON gets the results of your human resource investment as it takes time for that kind of HR training investment to pay off (people need time to get good at things....)...
        I bet it could be argued that the concept of high ticket training courses originated from a savvy outside of the box thinking business person as a way to recoup lost revenue from defected outsourced labor.
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        • Profile picture of the author Jill Carpenter
          Originally Posted by darylimjz View Post

          Sorry, it sounds kinda complicated...
          LOL, sounds like "work"


          Ok, I was expecting a totally different answer to the "3 ways of making money" which was:

          1. Sell your stuff
          2. Sell other peoples stuff
          3. Sell services.

          I think the key word in all of those is "sell"

          a) You can increase your prices (assuming costs stay constant)

          b) you can increase the number of units sold by either making repeat sales to returning visitors or new sales to unique visitors (again, assuming costs stay constant)

          c) you can decrease your costs (here, assuming revenues stay constant)
          Um, none of these will guarantee you will make money.

          I can have a store open on main street. I can increase prices. If I change nothing else, I may now be sitting on inventory that is just higher priced.

          I can increase the number of units sold. If it costs me more to increase production, I may wind up with less money and too much inventory if the demand is not there.

          I can decrease my costs. Again, this may not make me money if what ever I'm trying to sell is not selling.

          Making money comes from selling in general. You are discussing tweeks to improving ones ROI.
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          • Profile picture of the author JohnMcCabe
            Originally Posted by moneykws View Post

            In doing so, they could do a quick, back of the envelop, roi analysis...which would have them do something like (ex)

            "Ok, I could spend 20 labor hours of seo myself, which has a $20/hr labor cost associated with it and get 50 visitors a day in the next 30-90 days or I could spend $200 on a quick traffic source, get those visitors in 24 hours, make a quick profit, reinvest that profit and grow my business faster over that same time period...."
            Another way to look at this is to say "I could throw my $200 at a quick traffic source and find out if this product/service will even work in 24 hours, or I could invest 3-6 months in 'free' SEO work, find out the same thing, and potentially be 3-6 months behind."

            Originally Posted by avenuegirl View Post

            LOL, sounds like "work"


            Ok, I was expecting a totally different answer to the "3 ways of making money" which was:

            1. Sell your stuff
            2. Sell other peoples stuff
            3. Sell services.

            I think the key word in all of those is "sell"



            Um, none of these will guarantee you will make money.

            I can have a store open on main street. I can increase prices. If I change nothing else, I may now be sitting on inventory that is just higher priced.

            Which decreases the number of units sold, rather than increases them or even raises revenue from the same number of units sold.

            I can increase the number of units sold. If it costs me more to increase production, I may wind up with less money and too much inventory if the demand is not there.

            This is where the second break-even point on the graph kicks in. You can indeed sell more units and end up losing money if the cost to sell that next marginal unit is more than the revenue it brings.

            I can decrease my costs. Again, this may not make me money if what ever I'm trying to sell is not selling.

            There's a lower limit to decreasing costs. You can't lower your costs past zero - the point at which you are no longer in business. If whatever you are trying to sell is not selling, it's time to minimize the losses and sell something else. Which brings us back to selling more units - of something.

            Making money comes from selling in general. You are discussing tweeks to improving ones ROI.
            Jill, you obviously do understand the point the OP was trying to make. Product selection, production and sales and marketing all contribute to increasing one's profits and ROI. Perhaps a better opening subject line might have been 'there are only 3 ways to increase profits and ROI'...
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            • Profile picture of the author iSoftware
              Originally Posted by JohnMcCabe View Post


              Jill, you obviously do understand the point the OP was trying to make. Product selection, production and sales and marketing all contribute to increasing one's profits and ROI. Perhaps a better opening subject line might have been 'there are only 3 ways to increase profits and ROI'...
              Well I started the thread by saying that MAKING MONEY=MAKING A PROFIT.

              Revenues DOES NOT EQUAL Profit...was my point - I know you get this.

              Actually I really mispoke a little if we want to get "technical". There's only (1) to make a profit - and that is to maximize the difference between revenues and costs...

              Of course there are an infinite number of ways to do that, but at the end of the day it all boils down to the variables the 3 variables that are part of the profit equation, P, Q and C...

              Hey this way of looking at things may appeal to more left-brained among us I know.

              But in my opinion, it's the reason why super investors like Warren Buffet can jump into industries which they personally have never been in and pick winners...why?
              Because they block out the noise and get focused on figuring out which factors most effect the pricing structure, units sold (to repeat or new customers) and cost structure - fixed, variable, marginal and average....

              It doesn't matter if it's a company selling ebooks or exotic interest rate options (think Goldman Sachs...) it all boils down to those same factors.

              It's pretty empowering when you think about it!
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              • Profile picture of the author MichaelHiles
                Originally Posted by moneykws View Post

                Well I started the thread by saying that MAKING MONEY=MAKING A PROFIT.

                Revenues DOES NOT EQUAL Profit...was my point - I know you get this.

                Actually I really mispoke a little if we want to get "technical". There's only (1) to make a profit - and that is to maximize the difference between revenues and costs...

                Of course there are an infinite number of ways to do that, but at the end of the day it all boils down to the variables the 3 variables that are part of the profit equation, P, Q and C...

                Hey this way of looking at things may appeal to more left-brained among us I know.

                But in my opinion, it's the reason why super investors like Warren Buffet can jump into industries which they personally have never been in and pick winners...why?
                Because they block out the noise and get focused on figuring out which factors most effect the pricing structure, units sold (to repeat or new customers) and cost structure - fixed, variable, marginal and average....

                It doesn't matter if it's a company selling ebooks or exotic interest rate options (think Goldman Sachs...) it all boils down to those same factors.

                It's pretty empowering when you think about it!

                Bingo.

                Those stupid corporatey types sporting their stupid business degrees and all that nonsensical theory - well the best among them understand business at an even more fundamental level.

                There's labor.

                There's capital.

                Capital creates a return on investment for no other real effort than simply being put through a system that is designed to create a profit.

                The people who create and manage the systems, staff them, et al... that's labor.

                The investors that put money into the system... they are capital.

                Capital makes a profit by doing nothing other than existing in the proper context.

                I've actually had idiotic douchenuggets on this forum argue fundamental Adam Smith with me like they're juggernauts of capitalist theory.

                In general, you're fighting a losing battle in this place as it has been squarely overrun with short bus riders.
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                • Profile picture of the author Adam Nolan
                  Originally Posted by MichaelHiles View Post


                  In general, you're fighting a losing battle in this place as it has been squarely overrun with short bus riders.

                  LOL!!! Stealing that line.
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                • Profile picture of the author Jill Carpenter
                  Originally Posted by MichaelHiles View Post


                  In general, you're fighting a losing battle in this place as it has been squarely overrun with short bus riders.
                  Sometimes, I think the short bus rocks.
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                  "May I have ten thousand marbles, please?"

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              • Profile picture of the author John Henderson
                Originally Posted by moneykws View Post

                Hey this way of looking at things may appeal to more left-brained among us I know.

                But in my opinion, it's the reason why super investors like Warren Buffet can jump into industries which they personally have never been in and pick winners...why?
                Because they block out the noise and get focused on figuring out which factors most effect the pricing structure, units sold (to repeat or new customers) and cost structure - fixed, variable, marginal and average....

                It doesn't matter if it's a company selling ebooks or exotic interest rate options (think Goldman Sachs...) it all boils down to those same factors.

                It's pretty empowering when you think about it!
                It's incredibly empowering. It seems to be the "fundamental truth" underpinning free market capitalism. And as you say, it allows people like Warren Buffett to see the difference between companies that have a future and those that don't -- without knowing anything about how their products are created or what their website's PageRank is.

                For those people who think that the OP is a bit too theoretical, I found a worked example that puts some "meat on the bones"...

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        • Profile picture of the author John Durham
          Originally Posted by tecHead View Post

          I bet it could be argued that the concept of high ticket training courses originated from a savvy outside of the box thinking business person as a way to recoup lost revenue from defected outsourced labor.

          It was me.
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  • Profile picture of the author MeghanK
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    • Profile picture of the author tecHead
      Originally Posted by MeghanK View Post

      Time = Money

      How much did it cost you to read this entire thread? And comment
      How much will it cost you to ignore this thread? (and comment)
      Signature
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    • Profile picture of the author iSoftware
      Originally Posted by MeghanK View Post

      Time = Money

      How much did it cost you to read this entire thread? And comment
      Touche - lol. Actually though this is pure relaxation for me (geek alert!) so I consider myself off the clock....

      However, it's important to note that I do alot of automation+outsourcing so I can have more free time +more profits
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  • Profile picture of the author Adam Nolan
    I was gonna be all bitchy and get pissed because I thought this was another thread about a new system or just "just work harder" etc...

    But it's 100% accurate and right. 99% of the people on this forum don't know how to run a business.

    What you just quoted is the end goal of all the bells and whistles (such as outsourcing). But it really all boils down to those three items.

    Raise prices
    Sell more
    Lower costs.

    The graph was a nice touch

    -Adam
    CEO @ AIRiUS Media
    AIRiUS Media is Ottawa Marketing, Ottawa Advertising & Ottawa Promotion

    Originally Posted by moneykws View Post

    Is anyone else getting tired of the deluge of IM products out there, none of which teach people basic business fundamentals?

    The first thing that is getting to me is that you ask the average IMer what it means to "make money" and chances are they can't break it down to the core fundamentals......

    First, it seems to me that a lot of people are
    a) Just assuming that revenues=profits

    b) not accounting for hidden costs (example labor costs which need to be factored in if you are going to scale because you can't do it all yourself...)

    Where is the good old Business School 101 IM MBA Course that really needs to come out?

    By that I mean:

    Profits= (Revenues) - (Costs)
    Revenues = (Price)*(Quantity)
    Costs = (Fixed Costs) + (Variable Costs) (or average total costs)....[an important distinction that can make or break a business]
    Quantity= # of units sold = (visitors)*(conversion%)
    Visitors = Unique Visitors + Returning Visitors




    If you are paying attention to that formula you can see that there are OBVIOUSLY ONLY (3) Ways of making money:

    a) You can increase your prices
    (assuming costs stay constant)

    b) you can increase the number of units sold by either making repeat sales to returning visitors or new sales to unique visitors (
    again, assuming costs stay constant)

    c) you can decrease your costs
    (here, assuming revenues stay constant)

    All these gadgets and gizmos promising the stars....widgets this, super automation tool that, "outsourcing secrets" this, autoblog this, miracle content ebook that...it's just a distraction!

    My advice if you are a newbie (or vet, as we all can learn something new..) reading this is to sit down and really get to understand THE BUSINESS FUNDAMENTALS of your website or niche.

    One reason why I say this is that I was on a call with someone who was doing $1M a year without knowing some of this stuff - when he finally got it, he DOUBLED IS REVENUES in 3 MONTHS.....

    Start understanding how you can
    a) Increase your prices (if you sell your own product look at adding value, if you sell traffic i.e. you are an affiliate, look at asking for higher payouts...)
    b) look at how you can increase your # of units sold (by doing follow up sales to returning customers or converting more unique visitors...this right here is HUGE)
    c) understand the major COSTS of your business and look at how you can decrease them (alot of times the biggest cost is all that "free" time you spend doing work yourself....if you are doing work yourself that could be outsourced at a tenth of the cost you won't be able to scale your business...similarly, if you have not mapped out the proper business process for your organization, you won't be able to determine what you need to automate...)

    Just to reiterate,

    Making Money= Maximizing Profit.

    To maximize your profit there are only 3 variables you can push or pull....
    a) prices
    b) quantity or # of units sold
    c) costs (now the difference between fixed costs, variable costs and average costs!)

    So the next time you go to buy something or have something presented to you or find yourself spending time doing something,ask your self the (3) fundamental questions...
    1) Is this going to DIRECTLY help me increase my prices?
    2) Is this going to help me increase the number of units sold?
    3) Is going to DIRECTLY help me decrease my costs? If it is, is it going to help me decrease my fixed costs, my variable costs or my overalll average total costs (this is a subject in and of it sell but all those people chasing "free" traffic need to get the fact that it really ain't that free.....casual language done on purpose, btw....lol)


    I really hope this helps someone. Sometimes, it just takes someone taking the time spell things out in simple form to really getting - and not a WSO either....LOL
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  • Profile picture of the author John Durham
    I vote for Dennis view because "inspiring people to pay more without trying or taking any intentional action is like a 4th dimension of sales... that's like Jedi Sales".
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  • Profile picture of the author Mike Antoni
    I think it's interesting that some people get what the OP said right off the bat, some questioned it, and others dismissed it.

    I think it has to do more with what type of person you are as to how much you understand or agree with what he is saying. Salesman sell. That is what they do. If you tell a salesman you aren't going to hire him, he'll sell you on why you should right there on the spot.

    There's room for everyone in IM and the business world in general. My former title at my previous company was "Chief Strategist" lol Fancy title, but it meant that I was responsible for increasing profits...maybe that's why I like what the OP said.

    But, no matter what happens...if you want to grow your company changes will be made over time.
    A great book on this subject is Michael Masterson's Zero To 100 Million. It's especially cool for us here because it's about information product marketing. A great read for anyone looking for how a one man startup becomes a $100 million+ year juggernaut.
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    Check out my Affiliate Internet Marketing Blog, lots of cool free stuff. And make sure you take a peek at Trilateral Profits. Internet Marketing Management

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  • Profile picture of the author MichaelHiles
    GASP!!! SOMEONE REFERRED TO A BREAK EVEN ANALYSIS!!

    GIVE JOHN HENDERSON A FREAKING ROUND OF APPLAUSE!! I WOULD BUY YOU PINTS IF YOU WERE HERE IN THE STATES!!
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  • Profile picture of the author iSoftware
    Wow - I honestly didn't think the thread would spark any kind of "debate" (lol) - I was sincerely trying to spark some conversation on fundamental basics....

    I guess part of the problem is I have subscribed to alot of the "guru" emails to study their sales and marketing tactics and after a while (outside of a few that I've named like Jimmy D Brown, Charlie Page, etc) the rest were just showing people shiny bells and whistles and not really underscoring the basics.

    Also, in terms of people who disagree, hey we are all here to learn and we can differ in opinion. The way I see life I'll always consider myself a noob because I'm always learning new things (think mobile at the moment for instance!)

    I also think it's great how some people stepped in and presented the same theory but in a different matter....and some people who perhaps thought they way I described it was too dense, really got it after others elucidated!

    That's what real learning is about, IMHO...
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  • Profile picture of the author Adam Nolan
    Yeah but it stall all boils down to those three things.

    It's like with people. There are only 2 things EVER that motivate people. The desire to avoid pain and the desire to gain pleasure.

    Everything can be broken down to the lowest common denominator and the OP nailed it spot on for business.

    Cheers
    - Adam

    Originally Posted by precious007 View Post

    No,

    There's actually thousands of ways not 3, maybe some ways not even "explored yet"

    1) The only difference is that some people succeed while others don't.
    2) Some people make more money while some collect the pennies (it's a huge market)

    Bottom line : Persistence will always pay off and that is exactly what will finally drive your way to SUCCESS.

    PS Nothing is easy online..
    PSS Wondering what is easy to achieve in life? Nothing ... even if you'll win the lottery, there are possibilities that you'll invest the money into some unprofitable business and get back right from where you started.

    Learning your business from inside out is what it's all about and it takes both time and money.

    Cheers
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    • Profile picture of the author Lyn Woodring
      Wow! I can't thank the OP enough for this thread. And I want to also thank all those that chimed in clarifying.
      I also didn't realize that they are so many people here that understands economics. And apparently many that don't.
      I took economics in college and was bored silly, mainly because it was so obvious. It was one of the few things that I could take the concepts and run with.
      The reason I bring that up (college) is that in reading this thread I finally realized why I've been unable (to this point) get starting making any money on the internet. That because no program I'm aware of or that I've bought gives me any of those factors to work from. I knew something was missing and now I know what. The foundation! IM 101 so to speak.
      Take for instance in affilate marketing what are the costs of acquiring a sale. I know the cost varies with different markets but at least give me an across the board average. If I know that then I can make an informed decision on promoting a product.
      I simply don't have the money to test those costs nor the desire as the first rule of making money is to preserve your principal.
      So if someone knows these numbers in internet marketing or knows a program that teaches this please let me know.
      Wow! Again. This eases a lot of stress I was under as I never could seem to understand IM. I really did think I had become lazy, unmotivated, have 'old-timers' or stay stuck on the sidelines.
      -Lyn
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      • Profile picture of the author iSoftware
        Originally Posted by Lyn Woodring View Post

        Wow! I can't thank the OP enough for this thread. And I want to also thank all those that chimed in clarifying.
        I also didn't realize that they are so many people here that understands economics. And apparently many that don't.
        I took economics in college and was bored silly, mainly because it was so obvious. It was one of the few things that I could take the concepts and run with.
        The reason I bring that up (college) is that in reading this thread I finally realized why I've been unable (to this point) get starting making any money on the internet. That because no program I'm aware of or that I've bought gives me any of those factors to work from. I knew something was missing and now I know what. The foundation! IM 101 so to speak.
        Take for instance in affilate marketing what are the costs of acquiring a sale. I know the cost varies with different markets but at least give me an across the board average. If I know that then I can make an informed decision on promoting a product.
        I simply don't have the money to test those costs nor the desire as the first rule of making money is to preserve your principal.
        So if someone knows these numbers in internet marketing or knows a program that teaches this please let me know.
        Wow! Again. This eases a lot of stress I was under as I never could seem to understand IM. I really did think I had become lazy, unmotivated, have 'old-timers' or stay stuck on the sidelines.
        -Lyn
        Yes!! You should pat yourself on the back for even recognizing this. There IS a cost associated with this. Use the search function to check out some of the posts that Michael Hiles did a while back on this -it's great.

        As an example, alot of people keep calling seo traffic "free". WRONG. If you are trying to use seo to drive traffic, you need to know how much it costs in labor hours to say get 1 new sale, 2 new sales, etc, etc.

        Also, you have to compare the costs of a particular customer to their benefits - i.e. their lifetime customer value.

        As an example, alot of people don't build lists they just send traffic directly to merchants - HORRIBLE MOVE.

        If you collect contact info first,you can send the same prospect (that you incurred the cost to acquire as a customer once), MANY different offers and get more lifetime value out of them....

        From the perspective of the (3) things mentioned here, you can increase your # of units sold by either selling to unique visitors (traditional affiliate marketing) or returning visitors (they can't return if you don't collect their contact info and follow up guys!!)

        glad that you are thinking about this stuff..
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      • Profile picture of the author JohnMcCabe
        Originally Posted by Lyn Woodring View Post

        Take for instance in affilate marketing what are the costs of acquiring a sale. I know the cost varies with different markets but at least give me an across the board average. If I know that then I can make an informed decision on promoting a product.
        I simply don't have the money to test those costs nor the desire as the first rule of making money is to preserve your principal.

        -Lyn
        Lyn, you were doing so well... What happened? :confused:

        Any 'across the board average' anyone gives you is worthless. The cost of acquiring a sale to an established list with which you have an ongoing relationship, to pre-sold prospects coming from your article or blog, to cold prospects following a PPC ad are all different. As are sales of an ebook to remove warts, a stock-picking program, a high-end coaching program or any other product. Averaging them out would do more harm than good.

        At best, you can contact an individual vendor and ask for some estimates based on his product and process for different types of traffic and compare those to what you think you can deliver. A frightening number of vendors will have no idea, and many won't know what you're talking about.

        And the best way to preserve your principal is to simply stick your wallet back in your pocket and never risk it. Preservation of capital is important, don't get me wrong. But the way to make money with that capital (be it money, resources or your own labor) is to effectively deploy it.
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        • Profile picture of the author Lyn Woodring
          Originally Posted by JohnMcCabe View Post

          Lyn, you were doing so well... What happened? :confused:

          Any 'across the board average' anyone gives you is worthless. The cost of acquiring a sale to an established list with which you have an ongoing relationship, to pre-sold prospects coming from your article or blog, to cold prospects following a PPC ad are all different. As are sales of an ebook to remove warts, a stock-picking program, a high-end coaching program or any other product. Averaging them out would do more harm than good.

          At best, you can contact an individual vendor and ask for some estimates based on his product and process for different types of traffic and compare those to what you think you can deliver. A frightening number of vendors will have no idea, and many won't know what you're talking about.

          And the best way to preserve your principal is to simply stick your wallet back in your pocket and never risk it. Preservation of capital is important, don't get me wrong. But the way to make money with that capital (be it money, resources or your own labor) is to effectively deploy it.
          I mis-spoke. I should have said initial or first sale or one time sale or building a list. Sales to an existing list would be easy to know. Basically I'd like to know what the costs are per hundred to build a list through different channels and industries but an across the board average would beat nothing.
          If I know that building a list will cost me, for example, $50 per hundred and the product I'm selling pays $20 and converts at 2% then I'm losing $10 for each hundred people. Or said another way I'm losing $5 on every sale. Building a bigger list that way reminds me of the old saying about this guy selling watermelons and complaining about losing money. His solution buy a bigger truck. Make it up in volume.
          I realize people will say make it up with a backend or sell more later. That seems to me to be a little like the economies of scale in the watermelon story. Or at least it could turn into that.
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          • Profile picture of the author MichaelHiles
            Originally Posted by Lyn Woodring View Post

            I mis-spoke. I should have said initial or first sale or one time sale or building a list. Sales to an existing list would be easy to know. Basically I'd like to know what the costs are per hundred to build a list through different channels and industries but an across the board average would beat nothing.
            If I know that building a list will cost me, for example, $50 per hundred and the product I'm selling pays $20 and converts at 2% then I'm losing $10 for each hundred people. Or said another way I'm losing $5 on every sale. Building a bigger list that way reminds me of the old saying about this guy selling watermelons and complaining about losing money. His solution buy a bigger truck. Make it up in volume.
            I realize people will say make it up with a backend or sell more later. That seems to me to be a little like the economies of scale in the watermelon story. Or at least it could turn into that.
            Oh yess preach it!!

            If you don't have a SYSTEM in place, with benchmarks and metrics, you don't have a clue what happens when you put leads/prospects through that system.

            By not having an understanding of your LTV of a customer, you don't really know what you can afford to spend in cost of customer acquisition.

            It's extremely easy to build a $1,000,000 business that costs you $1,500,000. But people don't realize that the piper comes due and payable down the road when the economies of scale take their bite. Because the cash if flowing, the amateur hacks think, "WE GOIN' TO SIZZLAH WE GOIN' TO SIZZLAH".

            Then, three years later, when the county sheriff comes and padlocks the gate on their McMansion, they blame it on everything else.

            I see it all the time.
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            • Profile picture of the author Mac Wheeler
              Originally Posted by MichaelHiles View Post

              Then, three years later, when the county sheriff comes and padlocks the gate on their McMansion, they blame it on everything else.
              This is a very easy trap to fall into, nobody likes to admit they were wrong, I've done it myself a few times. Once when a client walked owing me more than $25,000, I blamed the client initially. Of course, it was my own fault for a) not safeguarding myself and b) not building in the occasional loss into my costs. Another time when a major client who had asked me to gear up my operation to meet their requirements, suddenly pulled the plug on the project at the last moment, leaving me with a team twice the size it needed to be and a very high wage bill, and not enough work to cover it. Again I initially blamed the client, but in reality it was my fault for not asking the client to sign a contract for services, with a clause to cover just this situation.

              Any time something goes wrong with your business, be it online or offline, it is always your fault, regardless of the situation. Your fault for mis-judging the situation, your fault for taking too many risks, your fault for employing the wrong people, the list goes on but it is always down to you alone.

              Accurately tracking costs is a crucial tool in avoiding some of the more common financial mistakes.
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  • Profile picture of the author iSoftware
    ..btw here's a really cool tool from my bookmarks some of you guys may want to check out....it's a Customer Lifetime Value Calculator

    Customer Lifetime Value Tool
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  • Profile picture of the author Lyn Woodring
    Along this same line in dealing with a product owner as an affilate either on clickbank or another network do you or should you assume that, first are conversion rates inflated and are those conversion rates assuming first contact or through the autoresponder series.
    I was curious as I assume products owners present the best case and everything I've read says repeated contact is needed for maximum sales.
    I've found through my experience that depending on the result desired doubling or halving any numbers is a good place to start.
    Just wondering what numbers are absolute.
    The reason I ask is that I'm on disability and partially from a medical operation I have a mild brain injury that one result is the inability to do sequencing.
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  • Profile picture of the author John Durham
    Are yall still talking about this? How many ways can one state the obvious?
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    • Profile picture of the author CDarklock
      Originally Posted by John Durham View Post

      How many ways can one state the obvious?
      Three.

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      "The Golden Town is the Golden Town no longer. They have sold their pillars for brass and their temples for money, they have made coins out of their golden doors. It is become a dark town full of trouble, there is no ease in its streets, beauty has left it and the old songs are gone." - Lord Dunsany, The Messengers
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  • Profile picture of the author solotr
    Thought I was the only person out here sharing this stuff. It doesn't take an MBA to learn about business - ask the guy who owns the local 7-11. If he looks stressed, there's a reason.

    Most of those looking for 'easy and simple' are coming online as employees from XYZ Company and have not one iota of how a real business works. They show up, get a check and go home.

    Thank you a thousand times for starting this thread. Hopefully some of the newbies will take the time to read it.
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  • Profile picture of the author asimasim
    Quality and dellivery alsomatter in revenue apart form three main points discussed above
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  • Profile picture of the author DJM587
    Thank you very much for this article. I think when it comes down to it people just need to GIVE A CRAP. The internet marketing business is plagued by quick fixes and automation tools.

    My day job is in finance. I get working capital for businesses. I cant tell you how many times I ask business owners questions like "what were your credit card sales for last month?" and they simply have no idea.

    Of course, everything in life is this way. Im not surprised that person double their profits in 3 months when they sat down and looked at their business. I am new in internet marketing so I will certainley keep this as a backbone business model for myself.

    Thanks Again,
    Darrin
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  • Profile picture of the author TomBuck
    Very complicated.

    Three ways:

    1.) MLM Multi level marketing
    2.) Affiliate marketing
    3.) Paid to click sites
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  • Profile picture of the author inventtis
    Banned
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    • Profile picture of the author Chris Grable
      The folks replying to this thread dismayed and irritated me the first time.... Now they are back. At first, I couldn't figure out why.... then it came to me!

      Halloween is just around the corner.
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  • Profile picture of the author John Romaine
    How to make money online (the simplified version)

    1. Go where the traffic is.
    2. Give people what they want

    It really is that simple.
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  • Profile picture of the author eiilers
    Thanks for this post. I think this is obvious to most of us, except maybe not the newbies. I see so many WSO's and people claiming "make $300/day" or "5k/month". Newbs need to realize a lot of time that is "revenue" and not profit. For instance I may have 5k in revenue each month but only 2k profit (or even less). Anyways, I would hope that isn't the case, but people have to realize that there is a difference even though it's obvious to most of us.
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    Steve Eilers
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  • Profile picture of the author natorob
    I think a lot of people are making this more complicated than it should be. Good basic intel is always that... basic.

    And I agree with the three basics... Either sell more units, cut costs, or increase the current price of individual units. Simple testing with enough traffic should be able to tell you the optimum on each one (save for cutting costs...)

    Nice graph; but it may confuse some warriors...
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  • Profile picture of the author rehema
    hey i did noy knoe that you also have to apply some economics in internet marketing to the extenxt of graphs
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