Author Topic: Episode 330 — Starting, Running and Building a Business  (Read 2968 times)

Offline Shadowrider

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Episode 330 — Starting, Running and Building a Business
« on: April 22, 2012, 01:35:45 PM »
Episode 330

Starting, Running, and Building a Business

December 4, 2009

EPISODE AUDIO LINK:
http://www.survivalpodcast.net/audio/dec-09/epi-00330-starting-running-and-building-a-business.mp3

EPISODE BLOG LINK:
http://www.thesurvivalpodcast.com/episode-330-starting-running-and-growing-a-business

SHOW DESCRIPTION:
Big time shifting in gears today folks. I think if you want security and you want to have a better life that a business of your own is a great way to make that happen. There are rules to business though.
Join me today as we discuss a few of them such as
    Find your why first
    Follow your passion
    Use your way and passion to find your what
In the middle of a recession a guy will buy a 800 dollar surf board and then turn off extra lights to save money
Do NOT pay attention to what other people are selling BEFORE you find your why, your passion and what
    You must know and I mean know the answer to “who do I serve”
    You can’t sell to the ignorant or the poor
    Always sell what people want, don’t bother with what they “need”
    Give a shit about your customers (listening is bullshit you have to care)
    Know what ARPU and VPV are, with out them you are screwed
    How you price items, how you know your price is right
    Why no one stole your idea, that is a bullshit cop out
    As a small business you should create markets not capture market share
    You don’t set your price your market does
    If you know what a visitor is worth you can’t loose money

RESOURCES FOR TODAY'S SHOW:
>Members Support Brigade (MSB) — http://www.thesurvivalpodcast.com/members-brigade
>TSP Gear Shop — http://store.survivalpodcast.net/
>Tactical Response Gear — http://www.tacticalresponsegear.com/catalog/
>The Berkey Guy — http://directive21.com/
>Gary Vaynerchuk — http://tv.winelibrary.com/
>Gary Vaynerchuk at the Web 2.0 Expo — http://www.youtube.com/watch?v=EhqZ0RU95d4  Warning I don’t advise you to watch this while you are pissed off at your boss, you may just walk out and quit.  I think this dude is my long lost brother, we were both born in Jersey, hmmmmm.
>TSP's Youtube Channel — http://www.youtube.com/user/survivalpodcasting

Offline Shadowrider

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Re: Episode 330 — Starting, Running and Building a Business
« Reply #1 on: April 22, 2012, 01:45:34 PM »
We're going to talk about something a bit differently today. What I'm going to tell you about today is running a business. Starting a business, having something of your own, having your own income stream. Living the American dream, so to speak as a small businessperson. And I’m going to do it in probably a way you've never heard before. I'm going to blend the advantages and the challenges of a small business with some of the concepts that are used by big business.

I spent a large part of my life in big business. I spent about almost four years with a company called Fluke Networks. I started out with a company called Microtest and then was acquired by Fluke. It was about a $500 million a year company, so I consider that a big business. And I don't like those guys that much because of the predators that they are, and not really Fluke, but more the parent company, which is Danaher. And those guys are pretty predatory. But I did learn a lot and I learned a lot about business concepts in what I considered misery of multiple long-term meetings in regional quarterly and annual meetings about pricing models and things like that. So I'm going to share some of that with you today.

And then I'm going to share what I've learned as a small businessman myself and I'm going to explain to you why I think so many small businesses fail, and again why they often have an advantage over big business if they're run right. And hopefully -- I'm not going to tell you what to go into business doing, but if you've ever wanted a business of your own, hopefully this advice not only will encourage you, but if you make the leap, if you take the shot at it, hopefully then you'll have a better shot at surviving, because that's the key.

Most small businesses do not survive or they languish because they're a part-time endeavor. So since it's part-time you still have a salary, it doesn't go out of business because any extra money is good and it's a good thing for you. But you never build it into what you really want. So I'm going to try to help you avoid the problems and succeed in business today. I know that doesn't sound like a survival topic, but trust me having a secondary income stream or having an income stream you control, or more importantly having multiple income streams will help you get through a lot of the crap that we talk about. And it'll help you set up your life they way you want it, under your rules. Nothing could be more applicable to living the life you want if times get tough or even if they don't.

I'm going to be jazzed up today. I'm going to be a little bit of motivational speaker Jack. That guy's inside of me. I want you to be inspired, I want you to go out there and look, and I want you create something for yourself. I want everybody that wants it—now not everybody wants it. If you don't want it, then it's not right for you. You have to want it because there's a lot of sacrifice. But I want everybody that wants it to have the opportunity to create their own stream of income going forward into the next year. Good time to talk about this.

So what is the first piece of advice I have for you as someone considering starting a business? So my rule number one, this is not real technical as some of the things are going to be today. It's not real mathematical. But it's the most important thing you can do, and it's why it's rule number one. Find your why. Let me explain what I mean by that.

I started working on businesses online as a secondary thing. As something that I would do while I was traveling with my sales job. And I'd be in a hotel room at 1:00 in the morning, having just finished up a forecast to keep my boss off my back, having just kept the 15 promises that I'd made in the last three days at business meals, and lunches and dinners, and things like that. And now I'm at 1:00 a.m. And now I can either go to bed and get up at 6:00 a.m. to start my next day, or I can work for an hour. And I would spend an hour working on sites that mostly back then were about phone service.

I sold long distance and local phone service online. Cell phones, and things like that. And this is going back into like 1999, 2000 that I started doing this. And I had no idea what my what was going to be. Because my what today is The Survival Podcast. But I already knew what my why was. My why was I hated being on the road. I hated being away from my family. I sure as hell liked the money, but I didn't like the travel, and I didn't like being accountable to people. And I didn't like having to do business with people that normally I wouldn't have shook hands with.

See, when you're in a corporate position like that you have to go kiss the ass of people that you probably would not want to shake the hand of. And I had to do that for a long time. My why was freedom from that life and still being able to have the things that I wanted. And I knew what I wanted. I wanted a place out in the country. I wanted to be far enough away from people to be able to live my life my own way. I wanted to walk out my backdoor, pick up my 22 rifle and do some plinking in my backyard and not have the cops show up, just like I did when I was a kid. I wanted a place where I could go fishing and hunting within miles from the house without paying a massive deer lease like we have to do in Texas. And I wanted most of all, most of all to have freedom. And that was my why.

That's a why for a lot of people, but you better make damn sure it's your why before you say this because it sounds good. What is your why? For some people it's going to be I want to make sure that my kids can go to any college that they want to. For some people it is my why is to help animals, so my business is going to be in the animal rescue industry. I'm going to figure out how to make money with it, because it's more important for me to help animals than anything else.

In the beginning for me, my why was freedom. The freedom to say, do, and act the way that I knew was right, according to my moral and ethical codes. In fact I've even done personality testing on myself, that Myers-Briggs personality test, and what I found is that my personality type, I have an ethical code, a moral code that I will not violate. It doesn't necessarily mean I won't break rules. I'll walk all over rules, but if I feel something is wrong, I'll die before I'll break it because that's who I am.

I'm not patting myself on the back about that or anything, because there's negative attributes to that trait as well. That means I'm unyielding, I'm uncompromising. I'm stubborn, I'm obstinate. But that stubborn obstinance means I have to run my own ship. So for the last three years, I've been on some level completely in business for myself. I've not been an employee, even though I've had a business that's tying me down and I've been part of it because I had to do that. But my why all those years ago, 10 years now on this journey, started with I want freedom. That was my why.

I'm not telling what your why is. I'm telling you find it first. Your why will lead you to your what. So I made the mistake, I’m going to caution you about today that made this journey 10 years for me when it should have been four years or maybe three years for me.

The next thing is following your passion to find your what. Your what is what you're going to do, what you're going to deliver, who you're—that's what it's all about. It's your product. Right? What you're going to sell and who you're going to sell it to, that's your what. Well don't look for a what. First follow your passion.

See, I looked for a what. I knew telecommunications, I knew technology, and I knew I could learn to build websites. So I looked around and said well there's all these sites out there that will let me sell cell phones, and long distance service, and local phone service, and calling cards, and all kinds of crap like that that people need and use everyday. Now if I could go out and carve out some little piece of that market, not only will I make money, but my sites will keep selling, I'll keep getting a check, and when I get somebody like a phone customer, I'll get a piece of their bill every single month for as long as they have phone service.

And I’m not going to tell you it didn't work. It taught me so much. I learned about making websites, I learned about the sales process online, I learned about tracking and analytics. I also learned that you never want to be in business selling people what they need. That it's the worst business model in the world. If you sell people what they need, you have more competition than if you sell people what they want. That's a business rule. If you're taking notes today, write it down. It is much harder to go into business selling people what they need than to go into business selling people what they want, due to competition.

In other words, if we think about one of the things that we most need, it's food. Now if you want to set up a little business selling specialty custom gourmet food, you can do that and it'll work. If you want to set up a business in the food industry teaching people how to cook, you can do that and it'll work. If you want to set up a business that directly competes with Kroger or Tom Thumb, or Safeway, or anything like that. If you want to go into the mass food industry, you're out of luck. It ain't going to happen. If you had $10 million you can't break into that market, in the supermarket industry because it's such a need, there's such hyper competition, that the competition's almost impossible to break through without hundreds of millions of dollars.

Another one would be electricity. For me it was phone service. That's the most hyper competitive world that there is. People will always be bashing each other over the consumers that are available and there's no market that you can create. That's the most important reason you don't sell what people need. If you're selling to a need, the entire market that's out there already exists. There's no new market segments. There's nothing new to create.

I formed a great relationship with Ron Hood, who's an icon in the industry. I'm really honored to be working with Ron. I'm actually going to be a guest author in his new magazine that's going to be coming out next year, and hopefully I'll be a regular contributor. I think we've been talking about doing it that way. He told me the reason he's working with me is because I created a new market in the preparedness industry. I didn't snipe other peoples' market. I didn't go into his forum and draw his people. I didn't go into Backwoods Home and draw their people. I didn't go over to Dirttime and try to steal their people. I created a market segment that didn't exist because I was selling people what they wanted.

You don't need to be a prepper. You should be, but day-to-day if you're not a prepper today, and as long as nothing bad happens by the end of the day, you're just there like everybody else. You're one of the sheep. No problem. So the only thing that I’m selling to people with TSP is what they want. They want knowledge. How do I be more prepared? They want the knowledge. How do I grow my own food? They want the knowledge. How do I take care of my own livestock? How do I create my own energy? These are wants, not needs. I spent the first part of my life selling to needs. It was a very, very bad idea, but I didn't know any better. I'm telling you that today.

Follow your passion. Find your what. And then take that what and sell to what people want. In the middle of a recession, people will buy an $800 surfboard and turn off a few extra lights to save electricity. I'm going to say that again. In the middle of a recession, people will buy an $800 surfboard and then turn around and turn off a few extra light bulbs to cut down the electric bill. The electricity is a need. They'll cut back to what the need is. The surfboard, if they guy's a surfing fanatic, is a want. He will go out and buy the surfboard.

On this journey to find your what, do not pay attention to what other people are selling successfully. Say it again. This is a rule. Do not pay attention to what other people are selling successfully. You can do that later if you need help figuring out a pricing model. If you do that early, you will chase somebody else's why and what and passion. And they will crush you like a grape because you can't stand up to somebody else's why, what, and passion unless you have it for yourself. You can't. And they will—even if they don't know about you, even if they don't care about you, your competition will crush you without even knowing you're there. The way an elephant may walk on top of an ant and crush an ant without even knowing he's ever done it any harm because the elephant is being the elephant and the ant's trying to imposter himself and pretend to be an elephant that he's not.

So if you look at somebody and say well that guy's selling tires and he's very successful, the tire business must be a good business to go into, if you're not passionate about making sure that people have good tires on their car, if you don't want to serve people that way, it won't work. It really won't work. And you're also selling to a need instead of a want. So if I was going to go in the tire industry, I would go to the custom tire and wheel industry. I would sell wheels and tires to guys with '69 Mustangs. I sure as hell wouldn't want to compete with Firestone. What a joke that is.

And I don't want to be the guy that owns the Firestone franchise because then I might as well have a job because Firestone tells me what I can and can't do. Who I can't buy from, what my pricing strategy has to be. Oh, you're an independent businessman. No, you can't sell that tire for next to nothing. No, you can't use that as a loss leader. No, you can't go source your materials from somebody else. No, you can't hire this kind of an employee. Bullshit. That's not being in business for yourself. That's being part of the machine, it's being part of the system. You don't have independence.

So do not pay attention to what other people are doing successfully in finding your what. Find your what and then maybe, then maybe go look and see is there anybody doing this successfully? And if so, then maybe you do emulate some of the things that they're doing. But don't look at somebody and go hey, you know what? Gary Vaynerchuk—check him out guys, you'll love him. You want know what podcasts I listen to that don't have anything to do with preparedness, check our Wine Library TV and Gary Vaynerchuk. Right? The Wine Guy. I love this guy. He's a little freak, man. But he's awesome and he tells me about great wines.

You go out and you say Gary Vaynerchuk has been on Jay Leno. He's been on NBC. He's been on ABC. He's been on every major network there is. He's been on Ellen, he's been on Oprah. Oh, my God, wine is the place to be. I'm going to go do a wine podcast. Gary Vaynerchuk will beat your brains out. You'll never carve out the industry if you're doing it to chase him. Now if you're passionate about wine, if you know about wine, if you love wine, there's probably a ton of room to build new markets in the wine industry. But go compete with him, you lose.

Look down the street, there's a guy selling custom made bass boats. He's really successful. You're going to go down the other street and sell custom made bass boats. Not going to happen unless you are passionate about it. So follow your passion to find your what.

Next, when you find your what, then you have to stop thinking about all this motivational crap, and you've got to get real, and you've got to get logical. And you've got to start thinking mathematically, and you've got to start putting together a business model that's based on reality. See, I see so many small business people that start up a business and fail because they came up with an idea and the business was the idea.

"I have an idea for blah blah blah blah Jack. What do you think?"

"What's your business model?"

"Well, I make blah blah blah blah and I'll sell it to the people."

"Who are the people?"

"Everybody."

"Really? Everybody's going to buy this?"

"No, just people that like blah blah blah blah."

"Who are they? What's their income range? What's their demographics? What's going to be your distribution channel? How are you going to deliver this?"

"I'm going to deliver it on the Internet."

"In what form? Is it going to be a physical or software product? Who's doing it? What are they selling it for? How much is your profit margin going to be? What's your investment required?"

"Oh, I was coming to you for an investment."

"Oh, we're on the wrong page right now. Because if you won't put your money into it, I'm not going to put my money into it."

Right? I mean that's just how I am as a businessperson and I'm not looking for a lot of venture capital opportunities anyway. See, but people don't think that way. All they think is they got this great idea. I'll build this website that massages widgets or whatever. It doesn't matter what it is. And I'm not saying the ideas are bad. I'm saying that they're not thought out conclusively to a point of the next thing.

Because the next thing you have to ask yourself, and you might as well not put keystroke one into a website, and every business needs a website, I don't care what you're doing. Every business needs a website. And it is your main marketing brochure to day. It is your story about who you are, even if you're primarily an offline business. But you don't put keystroke one into a website until you can answer yourself who do I serve? Who do I serve with my what, my why, and my passion? Who's my audience? What are they like? What do they want? What do they hate? What are they looking for that's not there? What's there but not sufficient? How can I help them get that? How much money do they have? Are they employed?

You don't want to sell to the unemployed. They don't have any money. They can't buy from you unless you're selling a very low-ticket item and then they'll buy it with their welfare check. But you're much better off selling to people that have money and jobs.

So who am I going to sell to? If you're going to sell to teenagers, it's got to be at the very top of their priority list. You can make a lot of money selling to teenagers. Ask EA Games, ask Nintendo, ask Sega. You can make billions selling to teenagers, but in a priority list from 1 to 10, if you're not 9 or 10, you can't sell to teenagers because they're broke. Their source of income is primarily their parents and part-time jobs. And only the things that they're willing to flip a burger for, deliver a plate of food for, cut the lawn for, or beg their parents for can you sell to them. That's probably not your primary marketplace if you want to be successful in the small business world.

Is it women? Great. Wonderful market segment. I hear that all the time, especially from moms. I'm going to sell to moms, moms like me. Great. I've seen so many people do that successfully. I think it's a wonderful idea.

"What kind of moms?"

"Well, moms."

"No, no. You're not going to sell to moms on welfare with no money now, are you?"

Not that there's—not I'm putting down that person, but they can't buy from you. You can't sell to two things. Another rule, write this down if you're taking notes. If you want to own a business and you want to be successful, write this down. There are two things that you can never sell to: ignorance and poverty. A person that has chosen ignorance: "The water is rising I want to sell you a boat." "The water's not rising." Done, the end of story.

And then poverty: "The water is rising, I'd like to sell you a boat." "I'm broke. I don't have any money." Can't sell to those two. Don't build a business model around it.

You want to sell to college students, you can sell them pizzas, not much more. Pizzas and electronics. The rest of their money, beer. You can open a bar if you want to sell to college students. But if you're going to build an online business that's based on selling a real product of value, I'm not saying you won't sell to any college students, but they're not your key demographic. So who do I serve?

One of my best friends has a website. He's dealing with this now in a very different way. And I won't get too specific because I don't want to tell you who it is. And you could probably figure it out if I got too specific. But he's at a point where one part of his market goes, "We love what you are doing. Please give us more of that." And another part of his market's going, "We don't like what you're doing. You're telling people things that we would prefer they don't know." And he said, "Well, which one do I go after? Which road do I follow?" You know what I told him. Follow your passion and find who you serve.

See the one part of the market that's telling him they don't like what he's doing, he looks at and he sees it's his primary source of revenue right now. So websites that -- we're talking about sponsorship type things. So there's some manufacturers that don't like the information that he's giving away. Leave it at that.

But my statement was, who do you serve? Do you serve your audience or do you serve your sponsors? If you serve your sponsors, then you stop giving away that information and you find a way to package things in a way that's more pleasing to them and you serve them. That's not your passion though, is it? And it wasn't for him. So why don't you say the hell with those people, find the people that want to play ball your way to be your sponsors, and your suppliers, and your go to people, and serve your frickin' market.

Another way to put this is, people say talk to your customers, ask your customers what they think. Design marketing, right? That's all great, there's nothing wrong with it. But I'll put it to you this way, give a shit about your customer. Care about your customer. I don't care if you listen to your customer, that you care about your customer. If you're following your why to find your what, and you're following your passion through the whole thing, of course you do.

You don't think I don't care about you guys? Of course I care about you guys. You think I could do this crap every frickin' day if I didn't care about you? You, right now, one person listening to me, hearing my voice. I give a shit about you. Period. The end. Anybody that says I don't and I will knock them on their ass for saying I don't care. There's a lot of things -- I get slings and arrows at me everyday. "You're destroying America. You're a fear monger." I get crap like that. I could care less. You tell me I don't care about my audience, that I'm in this for a buck, I will knock your ass flat on the ground. And I absolutely mean that. Is my business going to fail? Can anybody come take what I have away from me? Why? Passion and I give a shit.

Now, let's look a little bit at some pricing methodology. Some things I'm consulting with somebody on right now. We're talking about pricing per unit. Okay, so what we're talking about here is a pricing model, with kind of a small ticket item that costs about $4.75 a unit. And then we're talking about pricing point between $8.00 and $12.00. And we say okay, fine. Let's look at the low-end price. If we sell -- or let's look at the high-end price first. Let's say we're going to sell 300 of these units, 300 of these items. And we're going to sell 300 items at $12.00. How many would we have to sell at $8.00 to sell more for less to break even?

Now most people would look at that and go well, going from $8.00 to $12.00 is a 60% increase. So it's pretty logical that I need to sell 60% more, right, to break even. So if I would sell 300 items at $8.00, then I'm going to have to sell more at $8.00, but it'll be about, what, 480 -- 60% more. Everything's back to par and anything beyond 480 is profit. That's completely and totally wrong because we have to look at profit margin to figure this out. Now this is going to sound complex. It's mathematical, but you've got to follow me here because if you're going to be a business owner, and I'm not saying either one of these prices are right or wrong, I'm saying you need to know before you make decisions. Because when you set a price on something, it actually -- you have to actually fulfill it. Right?

So, now we look at it and we say well, if I was selling the $8.00 item at $12.00, my profit margin is $7.75 a unit. If I take $7.75 and multiply that by 300 units, I have a gross profit of $2,175. I'm not trying to get the sales number equal, I'm trying to get the profit number equal.

So now, let's think about this. I take my $8.00 price point and my cost of $4.75. Now I make $3.25 a unit. I take $3.25 a unit, I divide it by $2,175, my profit at 300 units together. I get 669 units. By cutting my price 60%, I am now required to increase my sales by about 120% to break even. Moreover, I now have to serve twice the number of customers, so I have to do twice the work, and twice the crap, and twice the customer support, twice the shipping, twice everything to make the same amount of money. Does that mean that I price the item at $12.00 or $8.00? Well, the reality is I can only price it where people will buy it. And this assumes that I'm going to do volume either way. But I do need this information and when you're pricing items, be it a soft product or a physical product you have to ask these questions because they do matter.

Now, what about the fact that this particular item is sold in a place where you can buy more than one thing? If this low-priced item is hot and most people that buy it buy something else on this website, then that formula is nowhere near as important, but you've got to run the formula first and you've got to ask yourself the question after that, what is going on here? It's great to say well, if they buy this, then they'll buy that and then I make more margin on that, so now my total sales go up and everything's better. Only if you're measuring it. That leads me to the next metric that most small business people never discuss. They don't even know what it is.

It's called ARPU. A-R-P-U. Average revenue per user or average revenue per unit. You decide how you want to say it. But what it means is I make sales all day long. Some are big, some are little, but in the end, there's an aggregate average revenue that comes out of every sale. What is my average revenue per sale?

I talk to small business people.

"How long have you been in business?"

"Oh, about 18 months."

"How are things going?"

"Pretty good."

"What's your ARPU?"

"Huh?"

"Okay, you don't know the term. I'm not going to beat you up for that. ARPU's your average sales. How much is your average sale?"

"Oh, it's all over the place."

"No, you have an average."

"No, it's all over the place. So I mean sometimes I sell $300 to one guy, sometimes I sell another guy $30. Sometimes I have a big order for $1,000."

"Do you know what average means?"

"Yes."

"Then tell me what your average revenue per sale is."

They don't know. Now they could actually figure it out pretty quick once you make them think that way. Because all they have to do is go I made 2,000 sales in 2009. And my total gross sales was X. And then you divide that and you get your average sales is $216.37. Why is that important? What was it in 2008? What do you want it to be in 2010? How are you going to plan the expansion of your business if you don't know your average revenue per sale?

The other metric that you absolutely have to know -- if you're going to be in the online world, then you have to be in the online world. VPV. Value per visit.

"What is a visitor to your site worth?"

 "I don't know, some of them come and buy something, some of them come 16 times and never do anything. I don't know."

Again, we're thinking one dimensionally here. If you had 10,000 visits to your site last month, and you made $1,000 from your site, your value per visitor is $0.10. Why is that so important? Because if you're going to buy advertising, don't you think you should know what a visitor is worth before you pay for it? And that you have to get very particular with web marketing and start segmenting things because you can. What's the value per visitor from Google versus the value per visitor from Yahoo? There is a difference. And for some people a Google visitor is worth more. For some people a Yahoo visitor is worth more. The Google visitor is the Macintosh PC demographic. The technology demographic. Yahoo is the NASCAR demographic. If you're selling to NASCAR (technical difficulty) Google. Trust me, I know. Do it for a living.

And it's so important that people understand that, but they don't do that. So you need to be tracking from the very beginning what your value per visitor is. Do you know how many people go to Google and they buy traffic? And they go, "I want to buy traffic. I'm a real estate agent. I want to buy Dallas real estate. And I'm going to put an ad up and I'm going to send people to my site." And then they start bidding and they spend $4.00 a person to get people on their site because they have to because that's how much the market is. And then they've been doing it for a while and they haven't sold any houses. And you say, "What's your value per visitor?" And they say they don't know. Well, I know. It's zero. You haven't made any money. When zero's in the equation, zero's always the answer, right?

But if you knew what your value per visitor was, then think about how powerful any form of online marketing is. If I have a website and I know that targeted traffic to that website is worth $1.00 a visit, period. That's the site, it's been up for six months, I've been tracking everything and as long as I'm not buying junk traffic, 10,000 hits for $5.00, some nonsense like that, if it's targeted traffic from a good banner advertisement campaign, from quality traffic I purchased from Google, organic traffic I get from Google from anything like that, any good, targeted advertising campaign that my traffic worth $1.00 a visit to my site. How much can I afford to buy for $0.50 a visit? Think about it. If I know that one visitor to my website on average is worth $1.00, how many visitors can I afford to buy at $0.50 a visitor? There's people going, "I don't know." You should know. There's people going, "As many as -- it's unlimited." Not quite.

As many as I can find. There's only so many visitors in any niche that I can buy at $0.50 a visit. But the reality is I can buy every single one of them because I'm making 100% markup profit on every person that comes to my site, if my value per visitor's actually $1.00. But is it $1.00 in profit or $1.00 in sales? Those are very, very different.

So I need to know my value per visitor based on my average revenue per unit and my average profit margin. With all those numbers, I can come up with a formula and an advertising campaign for a website that cannot lose a thin dime. It is impossible for the site to lose money.

Now you want the bad news? Most sites are absolutely not capable of doing this. Most websites are complete garbage. Most websites are built by people that have no idea how to sell and then they try to sell something to someone they don't even get to talk to or answer questions for. And they put no process into place, and most websites are nothing more than a catalog. And I don't care if you have a successful catalog style website, if you're not running the operation the proper way you're not making as much money as you could. You're not doing as good a job as you could, and that means you're not serving your customers to the level that you should be capable of serving your customers to. What do I mean by that?

When you go to a website that sells a good, a product, the first thing the customer should see is a welcome. If you walk in my store and I sell tires, and I'm on the street here, and you walk in, you'd expect that somebody in the store would say, "Hi, sir. How may I help you?" Or "Hey sir. Look, we have a special on Michelins today." But you hit a person's website, there's 15 items there laid out on the front, they're all different, they have no synergy. There's maybe a search box, and maybe if they're squared away enough there's categories, so I can look big tires, small tires, truck tires, car tires, off-road, street, racing. That's great.

But what would be great if I hit that and I saw a message that would tell me that hey, I'll tell you why it's important to have good tires on your car. Ten things you didn't know about what having the wrong tires on your car can do. Gas mileage, safety, whatever. I'm making it up here. But what you really should do as a small business person on your website is you should put together is you should put together a little report. An electronic report, an e-book, call it whatever you want to. And then trade the visitor for information. And then sell them the report.

They should hit your website and it should say, "Visitor, these are 10 things that you didn't know that could kill you tomorrow." No, I shouldn't really say that. Trying to get your attention here. Right. Whatever your niche is, whatever your business is. You're an expert on what you do.

If you have your why, you've found your what, you're following your passion, you know more than most people. If you know more than most people, you're an expert about that subject. Put something together and say, "You really need to have this. Write sales copy about it." That's a landing page. Right? Write that sales copy where it says, "Hey, you've got to get this. You need this. And it's really worth $20.00. Put your name and email here, I'll give it to you for free." Get them into a database. Do follow-up marketing to them. That is the process. You do that and then you can calculate your value per visitor on your website. I don't care if you have a form, I don't care what you have.

And you look at my site and you go, your site doesn't do that. It sure as hell does. Go to my website today, thesurvivalpodcast.com. And you will see a link over in the right hand corner that says e-notification list. Click on e-notification list and look at that. And look at the way that page is set up. And then let me tell you a little secret. I actually advertise with money for The Survival Podcast. I buy traffic. I buy it from Google, I buy it from Yahoo, and I buy it from a place called Stumble Upon. And I pay for people to come see my website.

When they come to my website, they do not go to thesurvivalpodcast.com. They go to that page that I just told you about right now. And I don't give them a free report because I have a show that's on every day. I simply tell them when they get here what the show is, what it's about, why it's so dadgone cool, and why they've just got to know about it.

Because of that, I have an email database now with over 6,000 people on it that everyday when I publish a new show, they get a little email. "Hey, guess what, Joe. There's a new episode of The Survival Podcast." 100% automated. Without that page, doesn't happen. And my show's not the success that it is today -- it would still be a success because so many of you found me in so many other ways and so many of you are so passionate and so many of you have helped grow the show. But that's my 1%, that page.

That's the 1% that separates a successful business from a failed business. I'm giving you the secrets of how I do my business right now. Do you know how few business people will do that? Especially for free? Listen, pay attention. I'm telling you, this stuff works. Do you know who I used to do this for? I don't want to brag today, but it's important that you know credibility. I used to do this for Donald Trump. I used to consult for Trump University. I told them how to run their web marketing. A lot of what they are still doing today, Donald Trump's Trump University, is based on the consulting that I did for them for over a year. I know what I'm talking about. I'm good at this and I'm telling you how to make your business more successful. And this goes to some of my sponsors out there. You guys need to do this too. My advertising works for you. It'll work better if you do this. If you help people understand why and how to do business with you.

The next thing I want to talk about a little bit more about pricing today. I want to talk to you about a pricing curve. And if you care enough to learn this, you're going to have to do it for yourself. Maybe you come back and listen to this again and you'll do it. I want you to sit down with a piece of paper in front of you right now and I want you to draw a graph. I want you to draw a vertical line on one side of the page with an arrow pointing up. And then down at the bottom of that line I want you to draw a line out to the right with an arrow pointing out to the end to the right.

On the bottom line I want you to write the word "cost" and on the line pointing up I want you to write the word "volume." That's how many you sell. And I want you to understand, I want you to put right in the place where those two lines meet, "0." Okay? And the rest -- no other numbers are necessary. And I want to know how much of your product do you think you'd sell if you gave it away for free? And the odds are you'd give away very little to none. It's not even worth putting a line there. And I want you to just a little bit further day your product is $1.00. And I want you to pretend in your mind, no matter what your product is really going to sell for, that your product is a product that should sell for about $100.00. So somewhere on the line write $100.00. Doesn't matter if the number's real or not.

At $1.00 I want you to understand that you'll probably sell nothing. How the hell would I sell nothing selling $100.00 product for $1.00? Everybody will think it's crap. Everybody'll think it's junk. It's too good a deal. If it sounds too good to be true, it probably is. Now you'll sell a little bit, but humor me here.

Start drawing a line that starts at the $1.00 line and it starts to go up. And about halfway to where you wrote $100.00, get really high on the graph. Okay? Now as you go forward toward $100.00, make a gentle curve and start to slowly come down to $100.00. When you get past $100.00 make the line get very steep and crash down to the bottom. That's a pricing curve. That's a very advanced economic analysis that people do in major corporations today.

Now where should you price the item is right where the number crashes off to the bottom. Draw a little circle where you made that crash. Now the numbers are hypothetical here, but the theory's not. The theory is sound. Wherever you actually come down you start to do less volume on the other side with the higher price, you want to get as close to the crash point as you can. You want to price your item as high as you possibly can without crashing off the backside of it. So what you do is you guess. And if you don't do much volume, you know what you do. You cut your price. If that doesn't help, raise your price. You might be all the way on the other side of the curve. You don't know yet. It's a new product. But you have to be asking these questions.

But when you find a point where you really are doing good and you raise the price 10% and it just crashes back up to that, you've got the price right. That's how you price your items. You don't price your items because you go well, I want to make $6.00 a unit, so I'm going to be -- that's a -- ugh. You don't set your price. The government doesn't -- it's not that socialist yet. The government doesn't set your price. The market sets your price. Let your market do its job. It'll tell you where your price point is.

Once you know where your price point is, then you can work on efficiencies. How can I cut the cost of goods to myself? What kind of deal can I make? What kind of volume -- how much volume can I deal? Now I can go back and cut a volume deal. Now I can improve my efficiency and increase my margin. But my pricing is not the margin I want. My pricing is how much can I sell to the largest number of people that will be easiest to serve?

Let me tell you another little thing. There's a bit business thing for you that's common knowledge if you look for it. If you look at a membership at Costco and a membership to Sam's Club, there's two levels of membership in each one. Costco's a little bit more expensive than Sam's Club for the low membership and the high membership. Why? Costco doesn't want Sam's customers. I'm going to say that to you again. Costco doesn't want Sam's customers. Costco constantly watches Sam's Club as their biggest competitor and says I want the cheapest customer, the customer that's all in this about savings to go there. And I want my customer to be the customer that's impressed with quality. I want people that'll come in and go, "I'll pay more for this, but it's better quality." Because Costco's model is to sell very high-end goods for a very thin margin. Sam's model is to sell inexpensive goods for a thin margin. So I'm going to pay more for a TV set on average at Costco because I'm going to get a better quality TV. But Costco gets a better quality customer.

When you sell to a higher level demographic, you get less returns, you have less customer service, you have less arguments, you have less unreasonable customers, and you do more overall money. They worked the pricing curve. How much can I possibly charge for this membership? And then if it's still not high enough, if it's still not more than my biggest competitors, I'll raise the price another 20% because I’m going to make damn sure that the cheapskate goes to Sam's.

And I'm not going to offend you if you go to Sam's. I'm telling you’re their corporate business practice, why they do what they do. And because of that, they are extremely successful and you can judge them on Wall Street against Wal-Mart if you want to, but that's not how they judge themselves. They judge themselves does my business grow? Can I pay my employees -- and I'll tell you what. You want a job? You don't want to work for Sam's. Costco pays their people about 45% more than Sam's does. And they give them better benefits because they serve a better customer. Economically, but not a better customer is a man or a woman, as an individual. I'm not insulting anybody. But for a businessperson, they serve a better quality customer.

These are all things that you have to think about when it comes to putting a business together and running a business. I know I might sound a little bit like a business lecturer today, like something you might hear in college. I've never been to college. I don't want to make this show boring. I want to make it exciting, but I also want to make it real. I want you to understand these things if you want.

I hear from people every frickin' week. "I want to go into business, Jack." A lot of them want to go into business with me. They want to pitch me their idea. I don't even listen to most of it because they haven't thought about these things. Where's your executive summary? "What?" Go find out what an executive summary is. Don't bother me. You're going to pitch a business plan to a person; it's not an idea. An idea is not a plan. An idea is an idea. Sometimes they're great ideas. But you know the guy that came up with the Pet Rock? It wasn't the idea that made him a bunch of money. You think nobody else could glue googly eyes on a frickin' rock? It was the marketing. It was the plan. How I'm going to take this product to market, as stupid as it is. But the business plan makes the product fly. Not the idea, not the product.

There's a great show you should watch. It's called "Shark Tank." I don't even know if it's on anymore. It was on for a while and it was business owners that would come in and pitch venture capitalists. So I'm the VC and I'm sitting behind the desk. The guy comes in and goes, "I make the greatest sweet potato pie in the world." And he gives me a piece of the pie and I eat it. It's frickin' great pie. And this is a real guy that was on there. The numbers will be off because I'm just doing it from memory here.

But the guy says, "Okay, I love the pie. What kind of business are you doing?" The guys says, "I've got two bakeries and we do $600,000 a year in business." The guys says, "Sounds like I'm in. How much money do you want from me? What are you going to do with it? And how much of your business do I get?" And the guy says, "I want $500,000 for a 20% share in my business. And I’m going to expand it." The guy says, "What? You have a $600,000 business, that's its valuation, that's what it's worth. You want me to give you $500,000, which is 90% of the value of your business and then you want to give me 20% of your business in return?" And they told the guy to go pound sand. Even though they loved his product, they loved his idea, they loved his concepts, they said, "You know what? You want too much for too little a piece."

Now if the guy walked in and said, "I have a $1 million existing business, I want to expand it. I need $100,000 worth of venture capital. For $100,000 worth of venture capital, I'll give you a 10% stake in my business" they would have probably -- maybe they would have negotiated from there. They might even have said, "You know what? I think your business is great but I don't want 10%. I want 20%, but I'll give you $200,000 or maybe if they really believed in the future value of the business, they'd say, "We'll give $250,000. But we want 20%. We'll give you $250,000, we want 25%." But they would have taken the guy seriously because he would have valued his business properly.

Most people never even value their business properly.

"What's your business worth?"

"Oh, long-term it's unlimited."

"How much did you do this year?"

"$60,000."

"Your business is worth $60,000." Being kind to it, because what's your profit? That's what it's really worth.

These are things that you have to think about. You have to think about them even if you're going to be a one-man show with one website selling two or three products. You have to think this way. Then you get to take all of this great knowledge that big business has and all of these ways that we think they abuse their customers. This is not customer abuse, this is customer service. I can't serve you unless I do the best job for my company and my shareholders. Because then my business doesn’t stay a going concern and I go away and if I'm not here I can't serve you anymore. To be in business you have to make a profit.

I do not begrudge any business making a profit. You can make as much profit as you want. If you're making a great profit, that means that people are buying from you because they want to buy from you, especially as a small business person. Small business people do not have monopolies. Does not exist.

Let me give you one more piece of advice today. This is the most important piece of advice I can give you. Never think somebody stole your idea. I talk to people, "I have this website and I do this. Now look at this guy. He's copying me." The guy that's more successful is probably the one that's not copying. But even if you never heard of him and he never heard of you, he's not copying you. You can't trademark an idea. You can't patent a concept. Now you can build a product and you can take elements of that product that you can patent. But if you come up with an idea for a way to carry eight hot drinks better than the little fold-y things that are out there, and somebody comes up with another way to carry eight hot drinks better than the little fold-y things that are out there and it doesn't violate any of your patents, they didn't steal your idea. They're serving the marketplace.

There's so many people that worry so much about their competition. When I worked for Fluke, our biggest competitor was a company called Agilent. After hearing Agilent this, Agilent that from 30 some odd sales people from my first month with them, you know what I said? "The next person that says the word Agilent to me owes me $5.00 for the slush fund for the end of year party. And every time I hear the word Agilent from this point forward, you're going to have to pay me $5.00. I don't want to hear the name. I don't want to hear the word. I don't care. If it's absolutely imperative that we talk about them, call them The Gray Tester Company. Do not use their name. Do not dignify their brand. Don't be out talking to your customers saying Agilent, Agilent, Agilent. You're branding our competition. Shut up about them. I don't care about them."

When you look at the end overall, we kicked their frickin' ass. Now if I was losing it to them every day, we might need to go in there and pay attention to what the hell they're doing. But since we're kicking their ass, let's pay attention to what we're doing right and not what they're doing wrong. And not the few things that they win because they sell to the cheap people because they drop their pants on a deal. We're not going to worry about that.

I don't care about the one deal that got, "Well, I lost a deal to them."

"How big was the deal?"

"$18,000."

"Well, since your quota is $2.5 million, I don't think that's really the reason you didn't make your quota now, is it since you're $500,000 under your quota. That deal wouldn't have made it any different."

Offline Shadowrider

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Re: Episode 330 — Starting, Running and Building a Business
« Reply #2 on: April 22, 2012, 01:46:40 PM »
So what can we do to grow our market share? What can we do to grow our market segment? Don't try to steal people. Don't think people are being stolen from you. If they're your customers they can't be stolen. If they could be taken away, they're not your customer. They're the market's customer. They're with you because you're the best deal they have at the time. If they're your customer, they're with you because they know you serve them, you care about them, you take care of them, and as long as they can afford to do business with you, they'll stay with you. And 57 people a day can knock on the door and sell the same widget you do and they'll tell them to go pound sand. Because I'm loyal to this company because this company's loyal to me. Take care of your customers and none of that shit matters.

Last piece of advice. Dream big. See your business bigger than it is today. If your business hasn't even started yet, you've to got see it as something that provides you everything that you need. You go back to your want, you write down "this is what I want in my life."

You have to see your business as a thing, an entity that provides that for you or you'll never build it. You won't be up at 2:00 a.m. working on it. You won't do it. You won't be doing your own customer service 7:00 in the morning and 12:00 at night. You won't do it. But if you see it that way, if you see it as it can become, you will. If somebody gets in the way, you knock them over. Sorry, you're in the way of my business, get the hell out of the way. Good-bye. You won't get distracted.

I have ADD. I have ADD out the butt. I can't focus on things for more than five minutes and I'm, "Oh, look at this. It's shiny." That's me. I have 15 projects going at the same time, but dadgone it this show gets done every day. The email that comes in for tech support gets done every day. The analysis of how the business is doing gets done every day. I drop by the forum to make sure that my moderators know I give a shit about them and to make sure that you know I give a shit about you, happens every day. Comments back on the blog to you since you took the time for me, happens every day.

No matter how ADD I am, this gets done because I see what it's becoming. And I saw it becoming that when there was a couple of hundred of you guys out there listening to me instead of 10,000. That's how you build a business. Nothing else will work. Everything else is bullshit. You don't go in business to have a job. It's harder, it sucks. The government will kick you in the ass. They will take so much of what you earn your first year it'll make you sick when you start paying double Social Security. Some of the ass clown regulations you might have to deal with in certain states. It's hard.

If you just wanted a job, go get a frickin' job. If you wanted to be just like it used to be, except you're your own boss, keep working hard so you get promoted. Sooner or later you'll be as high up as you can get. You might not be the CEO, but you won't answer to many people if that's what you want. You just want the freedom to have your own decision making process, plenty of jobs out there like that.

Go get a job putting frickin' siding on houses. All your boss is going to ask you is how many houses have you done this week? That's it. And as long as you're doing enough, you'll never hear from him, you'll see from him, you'll be out there every day bolting siding to the side of houses. No one will care. Put gutters on houses. There's still business doing that and that's just ideas. You can do anything you want. You want a business, that's different.

I can go out every day and put rain gutters on houses and not really give a shit. It's just a job, you get paid. Friday I'm off, go home, get home, kick back, watch TV, drink a beer, go fishing Saturday. Easy. And sooner or later I'll find a job that'll pay me so much damn money doing whatever the hell it is I don't really care about, it'll be worth doing for a long time. And then I can put money in my 401K, and one day I can retire, and blah blah blah, the American dream, yadda yadda yadda, frickin' yadda.

You want a business, it doesn't work that way. If you want a business, it's all about passion. It's all about belief, and it's about knowing exactly who you serve. And then you dedicate your business to the service of those people.

And some people say, "That sounds really noble." It is. But all it does is follow the law of the universe and when it comes down to it, in some ways it is the most selfish thing you can do, depending on how you define selfish. Because it is the biggest way that you can guarantee that your business will become financially successful and thrive. It's the best thing you can do for yourself. So in that way, it's selfish. But it doesn't hurt anyone. In fact, what it does is it makes your business, your product, what you deliver, more valuable. It makes people loyal to you. It builds a segment in the economy that supports others when you build a business that way. It empowers people to do something with whatever they want that you've sold to them. Best business model in the world. And for people that are running businesses that are people businesses, businesses that can be run by two or three people, not giant mega corporations. Best business model you could ever come up with.

So I know this show was different today and occasionally I'll just go out in left field with something like this because I know with this many people there's people that want this for themselves. But I've been honest with you today about how hard it is and about how rewarding it is. About the sacrifices required and the benefits that come back to you.

But what I want you to take away from this, when you see the guy that runs a little small business somewhere, landscaping company or whatever, lives in that big house, drives that nice car, don't begrudge that guy anything because he worked harder than you can imagine to get to where he is. "Ah, his dad had the business and he took it over." That's even harder. That myth that ah, your day just gives you the business and then -- oh my God. If you have kids, how tough are you on your kids when you give them something about what they do with it?

It's tough to be a businessman. Respect the businessman, especially if you want to be one. That's my final, final piece of advice today. I've seen people out there that want to be wealthy, that want to be business owners, but yet they have a socialist mindset, at least on some level. They look at a rich guy and go, "Jerk, greedy asshole." Whatever. You know? "Stupid corporations." And the corporation isn't Exxon. It's like Joe, Inc. and he has like four employees. Four people who he puts food on the table for everyday. And like, "Oh, look at his house, look at his car. Blech." What do you want to be? "I want to be successful. I want to have money." You'll never become what you despise. If you have any resentment of successful people in your life, you'll never be a successful person. That's as real as I can make it.

So if you want something more, and I don't care if it's a little tiny hobby business that makes you $10,000 a year, that's fine. That's okay. And if you keep a job or that's all the money you need because you're into that lifestyle now and the type of thing we talk about every day has given you that, all your bills are paid, house is paid for, little homestead, extra $10,000 is all you need, great. You want $1 million a year, great. Any where between the $10,000 and the $1 million is still the same: why, what, who, and passion behind it. And live your life that way, even if you don't want a business.

If you're going to do something, anything, with your time, with your effort, away from your family or with your family, why are you doing it? What do you want out of it? Who do you serve? And find your passion. And I might sound a little bit like one of these motivational speakers today, but hopefully you've heard a lot of truth in it. And I hope you've got some factual things as well. Some hard, brass tacks things as well to judge whether or not this is the right decision for you.

And with that I'll close. This has been Jack Spirko with another edition of The Survival Podcast, helping you figure out how to live that better life if times get tough, or even if they don't.