As stated in our previous post, we noted that most people reading this blog should focus on money. This means you need to generate revenue for a firm, obtain some equity or generate profit from your company. No other options. We’re going to outline a step by step process for the latter… Right here. Before we do that, however, we need to explain why no one will ever teach you to be rich. This includes us. We would never give away a 7 figure income. Will we help you start a career in investment banking for $150-250K a year? Sure. Hand over a real business opportunity? No.
Below is the outline:
1) Why no one will teach you to be rich
2) The basics of a business
3) How to do a basic test to determine if demand exists
4) How much does this process cost
5) How much will a small business spend in a year (screen cap included)
6) Revisiting money and time
7) Why you don’t want to be a public figure
Lets jump in:
1) I Will Teach You Be Rich! As soon as someone makes this claim you should run. No one is willing to hold your hand through a real business venture. The person is a scammer and a con-artist. If he claims that he wants to help you “get started” what this really means is that he wants to obtain recurring revenue off of the sale. In short, you’re going to end up paying a recurring fixed cost to line his pockets. It really is that simple.
Secondly, people who claim that they are teaching you to earn more income off of your career are usually doing you a disservice. How? The person is going to do everything in his power to get you to “switch firms” or “negotiate higher pay” based on market compensation. So you change companies or annoy a person high up the food chain because you’re underpaid… Only to ruin your entire standing with the firm and restart the political process. This usually nets you a meaningless $20K a year that you should not care one bit about. This is every head hunter in the world. They are not your friends.
Finally, if the person is not trying to nab some fixed recurring revenue from you and he is not trying to snatch a fee by switching you over to another firm… He’s likely a poverty mindset manipulator. The last angle, usually found on personal finance blogs, is to teach you how to scrimp and save to become rich. No one gets rich this way. While you run around looking to save an extra $200 a month, you feel like you “learned something”. So you keep going back… Over and over and over again… What do you learn through this process? You learn to be a cheap fool. You’re teaching yourself that spending money is bad. Anyone who has made real money knows this is a terrible mindset. To make a lot of money… You must spend a lot of money.
So how do you know if you should buy the product or work with the person? Quite simple really. You do two things. You 1) buy products that provide actual actionable advice only and 2) you only work with people willing to commit a meaningful amount of time to the project (5-10 hours a week for at least 6 months). If you buy products that provide tangible value and actionable advice, you’ll never be disappointed (assuming it works). Just make sure that the product doesn’t teach you poverty nonsense such as: how to get rich off of your 401K, how to negotiate a 5% pay raise or how to save 25% on e-books.
Finally, if the person is willing to commit real time to you and your future… That is a real mentor. Practically everything else is nonsense. If they are not willing to provide tangible advice and they are not willing to invest in you (invest meaning time) move on.
2) The Basics of a Business: Now that we have saved you hundreds of hours of time with the five paragraphs above, lets take a look at what a real business is. A real business is something that makes money while you sleep.
It really boils down to this:
Step 1) Find a product that people will pay for. If they are not willing to pay for it then it is clearly a terrible idea. You either create a brand new product category that no one has heard of or you make edits to an existing idea. Simple example: if you find a way to make a new smartphone that is better than all of the existing products on the market, you’ll make a lot of money. Alternatively, if you create a product that gets rid of the need for smartphones… You will make a lot more money.
Step 2) The assumption from step one is that the market is also large enough to generate income. Lets say you create a product that can teach Swahili to a person in less than 3 months. Great. How many people really need to speak Swahili? Not many. The addressable market is too small. Now if you can teach someone how to speak a major language (English/Spanish/Mandarin/French/German) in less than 3 months. You’ll be swimming in money that can fill an ocean .
Step 3) So you have both a product that people will pay for and a large enough market to generate income. How much does the product cost? You need to be certain that there is a healthy margin here. If you know that the market will pay $100 for the product but the cost of creating the product is $90… You’re simply wasting your time. Unless that $10 spread is going to be recurring when it is set up, you’ll lose money hand over fist since miscellaneous expenses always arise.
The three steps above are all you really need to know before you even begin: 1) will people pay for this, 2) is the market large enough for me to spend my valuable time chasing, 3) is the margin structure healthy. If you can answer yes to all of these items, you’re rocking and rolling.
Now… the obvious question is… how do I even know if step 1 works?!
3) How to Determine if Demand Exists: The beauty of the internet. If you followed the extremely basic and boiled down steps from above… you already know who you’re targeting. Are you targeting people in their 50s? Are you targeting gymnasts? Are you targeting druggies and alcoholics? Who are you targeting. If you cannot answer this question you do not have an idea. You have a colossal waste of time on your hands.
Okay. Point taken you say. Lets get specific with an example then. You’re targeting overweight men in their 30s who are looking to fix their weight issue. Good. Here is a step by step process on what you are going to do.
Step 1) Create a solid sales page (you did learn to sell correct?). Create the sales page first and make sure that it is perfect. No errors on the sales page. Videos are a plus. Once that sales page is absolutely perfect, you move on to Step 2.
Step 2) Buy traffic. People who think that buying traffic is “dumb”… have never made a lot of money. Period. You buy traffic from your target group on Facebook, Google and many other mediums that we will never mention.
Step 3) See the conversion rate. For the extreme beginners… this means how many people purchased the product? If you buy 1,000 visitors and 25 purchased, your conversion rate is 2.5%. The “standard” is generally 3%.
Step 4) Recalculate your total costs and decide if the venture is worth pursuing. We titled the post money making machine for a reason. That is what you have created if the product works. The only equation that matters for a “money making machine” is right here:
Long term value of customer – Cost of acquiring customer = Positive or Negative
That is all. Think about it this way… If you spend $10K a day to acquire customers… Does this mean anything? No. Who cares how much you spend. What matters is how much value you received from the customer over the long-term or the single point of sale. If your total expenses per day are $10K (marketing, producing the product etc.) but you generate $15K per day in revenue.. Your profit is $5K per day. You should spend more.
Reiteration.
This is the only thing that matters to the business.
Your total costs simply needs to be lower than the revenue line. So long as this is the case, you spend like mad to get more customers to view your sales page. Beyond the extremely basic equation above, the real takeaway from this section is the following: stop trying to “save”. Spend as much as you like until profit margins turn break even.
4) How Much Does This Process Cost? Instead of giving you the non-sense answer of “it depends” we’ll give you a real answer. If you’re looking at a business that you believe can generate $2 million, the start up cost is usually around $50K. This is exactly why low level, high risk angel investment rounds come in at roughly $25K . They want a large portion of equity in exchange for covering half of the cost for you. There are millions of markets and the number can of course be larger or smaller.
If you spend less to start up… your addressable market is usually smaller. So on and so forth. It is impossible to give an exact cost breakdown but we’ll go ahead and try.
1) $10K website design/sales page (20%). As you can see, by our awful blog design, this is not our expertise. If you want it done at an elite level, you need to hire a real designer. Get everything set up cleanly and if the product fails you’ll have a template to use later. Just make sure this page is rock solid.
2) $5K demand check (10%). You start with a quick demand check before you even get started with your idea. If you’re going in blind without even bothering to check for demand, you’re playing with fire. With social media, Google and many other tools on the internet… You can drop $5K to make sure there is a potential market. You can easily spend $500 in a day without anyone batting an eye at Google, Facebook or otherwise.
3) $20-25K product manufacturing and design (50% or so). This is the bulk of the costs. You have to find a place to produce your product. Send samples back and forth. Commit to a minimum number of units etc. You will pull your hair out during this process.
4) $10K miscellaneous specific items for your company. Unlike the first three items, this is vague because it is literally impossible to know what you’re making or where the problems will arise. There is one thing for sure however… problems will arise. Payment processing, quality control on the product, incorrect targeting etc. Something will go wrong and you’ll lose at least $10K.
So there you have it.
The goal is always to clear 7 figures.
If you can ever clear $500K or close to 7 figures in a year (net) this qualifies as an event. Something most people will never see and something that personal finance blogs never talk about… Because their personal finance blog is the event. Tricking regular people into getting “rich” by increasing their salary (insert laughter) or saving $10 a month on a phone bill (insert more laughter). Moving on….
5) How Much Will a Small Business Spend in a Year: As stated in point one, no one is ever going to hold your hand through the whole process. If real money is at stake, the person “teaching you” is going to seize the opportunity himself. Business is cut throat. Get used to it.
With that said you’ll see that the breakdown of expenses is extremely similar to what we recommend people in their 20s to do with their own lives. Once you are up and running, roughly 70% is spent on finding ways to generate more money (ie: buying traffic, advertising etc.).
Summary of 2014 Spending (click to enlarge):
1) ~70% on Business Services. If your business makes the majority of its income online… you’re going to spend a ton on advertising, marketing and other such items classified as business services. We provided a few screen caps of basic Google/Facebook spending but there is a zero percent chance we’re going to give the full breakdown. No one ever will. If they did, they would be giving away trade secrets.
2) ~22% Networking/Meetings. Even if you make your money online, you need to meet many new people (grow or die). This is true in every single business on the planet. In fact… this is a good way to see if someone matters to a company or not. Does he travel and spend a lot of time in restaurants/meetings. Pretty simple check. If he’s always around, no one cares that he’s around.
3) ~6% Merchandise supplies and other. No need to explain this category. This is typical junk that you need to buy to run your operations. Can’t give exact details here. That gives away 1) identity and 2) the market. Not willing to do this.
4) For some humor, check out the 125 comments from retards and trolls we had to flag as spam. The idiots have arrived and we won’t allow it =)
So there you have it, a basic snapshot of what you’re looking at on a full year basis. We’re not going to tell you what the margin structure is or anything like that. But. If you believe that someone would spend $1.03 million on business services/networking for “fun” or spend this much for tiny margins… You’re bonkers.
Note: In the future we will do a live, real time and impossible to fake screen cap.
6) Revisiting Money for Time: We have covered this over and over and over again. But the question continues to reappear.
“Don’t trade time for money what do you mean?!”
It means that you will never get rich off of an annual salary or hourly wage. Ever.
Even if you make $100 an hour and work 12 hours a day for life you’re clearing $438K gross… Post tax this is roughly $284K. You’re not going to be “rich” you’re going to be well off. There is a difference. There is nothing wrong with being well off and settling there. Just remember. You will never, ever, ever be rich.
If you need a reminder of what money for time means… Go to advertising. It is the best example. You spend money to buy a person’s time (potential customers see your product)
If you are investing your time on a specific platform… someone is making money. If you’re on facebook, twitter, linked-in etc. You are the product. The simple point is that if someone spends a lot of time in a specific area… They can be monetized.
You’re taught that marketing, advertising and sales is bad because… That’s the last piece of the puzzle. A great product with no audience does not exist.
“If a tree falls in a forest but no one is there to hear it, does it make a sound?” The answer is a resounding and absolute NO. If no one ever sees your product (the tree falling) it doesn’t exist. Period.
Again you are told that salaries and hourly wages are better than commissions. Why? No one wants more competition. Especially not from someone who is bright. That is a nightmare. They want a slave.
With the main items out of the way… Lets assume you make it. Please read the below…
7) Why You Don’t Want to Be a Public Figure: Since the vast majority of our readership is young or youngish, most are not rich enough to understand this. It is important. Once you reach a certain net worth, the last thing you want to do is become “famous”.
“Fame is harassment from regular people.” – Wall Street Playboys
Regular people have nothing better to do with their lives than live vicariously through someone else. This is why celebrities go nuts. They are harassed every single day as people charge after their cars just to touch their shirt or skin. Lunatics.
If you are truly committed to becoming a public figure (like Mike) you need to really understand what you are signing up for. We have no interest in it and wager that you won’t either. Again. This is once you are financially free. Being harassed by regular people is no where near fun.
To cap off this extremely important section, it is best served with some lyrics and a video.
“… be a Lennon and a fan leave you brainless. All in the paper, gettin’ buried by a neighbor. While all of your relatives spendin’ all the money that you gave ‘em, F*** it, don’t save ‘em… I don’t wanna be famous, I just wanna be rich. 40 mil with some acres…”
Concluding Remarks: So there you have it. For the long story short version here are the clear and concise bullet points, actionable steps and explanations in this post:
1) No one is going to hold your hand to obtain real money. If there is real money involved, the guy would go after it himself. If someone claims that they will “teach” you how to be rich. They are full of it. This is a great sales slogan but is far far far away from reality. No one can teach you. At most they can give you guidelines. Even then… Get a legitimate mentor who is willing to spend real time with you.
2) The basics of a business will always be the same. Find a product that people need (pain or pleasure, pain usually sells better: diet, skincare, “get rich” schemes) and drive massive amounts of traffic to the item.
3) Before you get all hyped up (a term used frequently by idiots) test the product first. Throw a few grand at the targeted audience and see if it is in demand or not. If people aren’t willing to buy, move on. If people do buy… flood that market as fast as possible. Push as much traffic as possible until the long term value of the customer equals the cost of acquiring the customer. Then reassess. Remember, it’s a money making machine as long as you are generating net income.
4) While it always “depends”. A typical answer for people who don’t want to answer the question. It will cost roughly $50K to start a meaningful venture. This also explains why most private equity investments require a minimum of $50K to get started and $25K is generally the number for angel investing.
5) Similar to your 20s… 70%+ of your money is going to spent on making… more money. Grow or die. No other choice.
6) If you are never able to sell and never able to scale… you can become “well off” but you will NEVER be rich. You need to make money in your sleep to generate real wealth.
7) You don’t want to be famous. You just want to be rich. Who cares about approval from regular people? Not you. If you must become public… Good luck and much respect from this side of the web.
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One little extra piece of advice… When you get to your numbers… Learn to play dumb. Be extremely dumb. Seem harmless. Only go all out when you need to go all out.
Until then? You sit, you wait, you gather information.
When you appear to be following a person’s advice… They like you. Works every time.