Margin is everything in business. It is what you have left over after you've paid for your final product but before you pay for phone bills, rent and yourself. It is more helpful to think of margin as sales than as margin.
For example, if you sell a widget for $100 and it cost you $95 to make it then your margin is $5. That is 5% margin. If you are able to lower your cost to $94 and raise your price to $101 then you would make $7 and your profit would increase to 6.9%...an increase of almost 40%.
Would a 40% increase in profit make your business better? If your business nets you 100k per year you are now making 140k per year. Now your problems are more along the lines of naming your new boat.
Do you see why margin is so important?
It is also helpful to think about it this way:
If you work for 20 weekdays per month and your margin is 10%, then you only get paid on the sales from the last 2 weekdays in the month. So you will spend 18 of those weekdays hoping/worrying if you have customers on the last 2 days so you can take some bacon home.
On the other hand if your margin is 25% that means that all of the sales from the last week of the month are available to take home. That is a much safer and more pleasant way to operate. In a low margin business one day of bad weather, or a holiday, or a broken machine could steal your profits for the month.
When thinking about businesses think in terms of margin. Think about how you can expand it by selling more higher margin products and services, or think of how you can negotiate better costs. Remember the example from above? If you are in a low margin business a 1% decrease in costs goes a long way towards the bottom line. So does a 1% increase in prices.
4.11.2016
10.26.2015
Start From Nothing: Nobody Has Started Something From Nothing
That's right. Nobody has started something from nothing.
Without the Napster, Zuckerberg is a nobody.
Without Bill Hewlett answering the phone Steve Jobs and Apple computer are nothing.
Without money from IBM Bill Gates and Paul Allen go bust.
A lucky break is required for success and too many entrepreneurs (with egos the size of Texas) take too much credit for their own lucky circumstances.
I once worked with a guy who claimed he was self-made. Turns out his dad lent him $200,000 to start his business.
There's a billionaire family who lives 20 miles from my house. From all the accolades they receive you'd think they started their $200 million dollar countertop business from nothing. Turns out they invested $34 million before they ever made a dime.
I'm pretty sure that most people could start a business from scratch given a $34 million dollar budget.
Take Steve Jobs. What a fake. Yes he made Apple from "nothing (reread above qualification)" but look at Next. Not even Steve Jobs could turn his money, connections and experience into a successful company. Even Steve needed something more...something unquantifiable.
The truth is you need resources to be successful. Money, experience, and connections are necessary but they are not enough. There has to be an opportunity that can sweep you up in it and that is something that you can't manufacture. It is a meeting of a need, a skill set and a passion all coming together at the same time. For entrepreneurs, they can only supply 2 of those 3 things. The need is illusive. I can only be found by accident. You can set out to discover it but you will fail multiple times before you find it.
Just ask AJ Khubani the infomercial king. He built a multimillion dollar business only to go bankrupt because he hit a dry spell. The need, or demand if you will, is lucky. Not even the experts can spot it. But if you find it it will take you away.
Luck is required. Nothing else matters. Luck supersedes money, experience and connections. It is necessary for success.
Without the Napster, Zuckerberg is a nobody.
Without Bill Hewlett answering the phone Steve Jobs and Apple computer are nothing.
Without money from IBM Bill Gates and Paul Allen go bust.
A lucky break is required for success and too many entrepreneurs (with egos the size of Texas) take too much credit for their own lucky circumstances.
I once worked with a guy who claimed he was self-made. Turns out his dad lent him $200,000 to start his business.
There's a billionaire family who lives 20 miles from my house. From all the accolades they receive you'd think they started their $200 million dollar countertop business from nothing. Turns out they invested $34 million before they ever made a dime.
I'm pretty sure that most people could start a business from scratch given a $34 million dollar budget.
Take Steve Jobs. What a fake. Yes he made Apple from "nothing (reread above qualification)" but look at Next. Not even Steve Jobs could turn his money, connections and experience into a successful company. Even Steve needed something more...something unquantifiable.
The truth is you need resources to be successful. Money, experience, and connections are necessary but they are not enough. There has to be an opportunity that can sweep you up in it and that is something that you can't manufacture. It is a meeting of a need, a skill set and a passion all coming together at the same time. For entrepreneurs, they can only supply 2 of those 3 things. The need is illusive. I can only be found by accident. You can set out to discover it but you will fail multiple times before you find it.
Just ask AJ Khubani the infomercial king. He built a multimillion dollar business only to go bankrupt because he hit a dry spell. The need, or demand if you will, is lucky. Not even the experts can spot it. But if you find it it will take you away.
Luck is required. Nothing else matters. Luck supersedes money, experience and connections. It is necessary for success.
Moron Gurus and The Ultimate Dare
Warning, this is a rant/vent.
I'm sick of gurus.
They talk and talk and the reality is they're all a bunch of idiots. Not a one of them can actually start something from nothing. They all had unusually favorable head starts and advantages that allowed them to make their millions and grow their businesses. Either that or they are narcissistic liars who have absolutely no empathy or feeling towards those that they fleece.
"We're awesome" they say.
"We can get you a 10 gazillion percent ROI!"
You just need a minimum $10,000 per month advertising budget. Oh, and we won't guarantee anything because the reality is we don't know if what we're going to do is actually going to work and so you can have 100% of the risk. Then when it fails we'll just blame your puny budget and ask for more money and promise the same old BS all over again.
F!
I once ran a business that sold to a half billion dollar per year TV shopping network. When I asked them how they get new customers they didn't know. They were struggling to find new customers too and they had an 87 million person audience on cable and satellite built in to their business model. When you ask small business owners which of their advertising works they don't know. What's the difference? Nobody seems to know.
When you ask an advertising agency what to expect for ROI they don't know either. I once did some consulting work for a company that grew from 0 to $3 million in revenue in 5 years. They got lucky and some reporter wrote a story about them that went national. Since then their business has declined substantially because they also don't know how advertising works.
Yet, the gurus continue to write and film useless articles and videos that are full of crappy, watered down, advertising advice.
Here's the question I have: Why not put your money where your mouth is? You spend $2000 per month for 6 months advertising my small business and I'll give you 100% of the ROI attributed directly to that marketing. If you're advice is worth what you say it is then that's a heck of an ROI. Any takers?
No.
There are no takers.
You see, nobody actually has the guts/brains to take that. If the promises were true a truthful guru would take that dare and print money like nobody's business. The returns would be too good to pass up--much better than the stock market. And, there would be customers lined up around the corner.
But the reality is that the returns on advertising suck and are unmeasurable. So no guru could ever take that bet and get an ROI. Therefore, neither can I...the small business owner.
So, what is a small business owner to do? Other than luck and happenstance, how can you grow your business?
I'm sick of gurus.
They talk and talk and the reality is they're all a bunch of idiots. Not a one of them can actually start something from nothing. They all had unusually favorable head starts and advantages that allowed them to make their millions and grow their businesses. Either that or they are narcissistic liars who have absolutely no empathy or feeling towards those that they fleece.
"We're awesome" they say.
"We can get you a 10 gazillion percent ROI!"
You just need a minimum $10,000 per month advertising budget. Oh, and we won't guarantee anything because the reality is we don't know if what we're going to do is actually going to work and so you can have 100% of the risk. Then when it fails we'll just blame your puny budget and ask for more money and promise the same old BS all over again.
F!
I once ran a business that sold to a half billion dollar per year TV shopping network. When I asked them how they get new customers they didn't know. They were struggling to find new customers too and they had an 87 million person audience on cable and satellite built in to their business model. When you ask small business owners which of their advertising works they don't know. What's the difference? Nobody seems to know.
When you ask an advertising agency what to expect for ROI they don't know either. I once did some consulting work for a company that grew from 0 to $3 million in revenue in 5 years. They got lucky and some reporter wrote a story about them that went national. Since then their business has declined substantially because they also don't know how advertising works.
Yet, the gurus continue to write and film useless articles and videos that are full of crappy, watered down, advertising advice.
Here's the question I have: Why not put your money where your mouth is? You spend $2000 per month for 6 months advertising my small business and I'll give you 100% of the ROI attributed directly to that marketing. If you're advice is worth what you say it is then that's a heck of an ROI. Any takers?
No.
There are no takers.
You see, nobody actually has the guts/brains to take that. If the promises were true a truthful guru would take that dare and print money like nobody's business. The returns would be too good to pass up--much better than the stock market. And, there would be customers lined up around the corner.
But the reality is that the returns on advertising suck and are unmeasurable. So no guru could ever take that bet and get an ROI. Therefore, neither can I...the small business owner.
So, what is a small business owner to do? Other than luck and happenstance, how can you grow your business?
7.21.2015
Invest in Bonds When Interest Rates Rise
Most people are fearful of investing in bonds when interest rates rise because that means the price of bonds will be dropping...significantly.
Most people can't take that heat. However, I think it's actually a great time to invest because the interest payments will allow you to buy the next batch of bonds for cheaper at a higher yield.
That means that every year your yield goes up with certainty instead of like the stock market where...hang on I have a phone call...no, for the second time I am not interested in a business opportunity with Amway!
Okay, back to stocks. Stocks are hard to predict so you never know what you are going to get and you are always looking for better returns. With bonds you can just sit back and watch the 7% roll it. Yes, that is correct, 7% yield is easy to find in investment grade bonds. You just have to look for it. And, as I mentioned before, with a little help from the Fed that yield will only increase.
So while bonds are boring and misunderstood. I think it's a great time to get in, so that's what I'm going to do.
Most people can't take that heat. However, I think it's actually a great time to invest because the interest payments will allow you to buy the next batch of bonds for cheaper at a higher yield.
That means that every year your yield goes up with certainty instead of like the stock market where...hang on I have a phone call...no, for the second time I am not interested in a business opportunity with Amway!
Okay, back to stocks. Stocks are hard to predict so you never know what you are going to get and you are always looking for better returns. With bonds you can just sit back and watch the 7% roll it. Yes, that is correct, 7% yield is easy to find in investment grade bonds. You just have to look for it. And, as I mentioned before, with a little help from the Fed that yield will only increase.
So while bonds are boring and misunderstood. I think it's a great time to get in, so that's what I'm going to do.
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