Home
>
Wealth Building
>
The Mathematical Formula For Making Money

The Mathematical Formula For Making Money

No matter what markets you serve; what products you sell; or what marketing tools you use, in business there's one truth you cannot escape.

Embrace this truth and profits will flood your business.

Disregard this truth and financial-cancer will eat you.

What is this truth?

Quite simply, the size and speed of your entrepreneurial success is directly proportional to your understanding of The Mathematical Formula For Making Money.

Despite serving as the corner stone of every single commercial success since the dawn of commerce most businesses neglect its power. Being so familiar with the diluted version of the formula these businesses overlook the enormous profit-potential held within.

The Formula

Mindful of this blind-spot, let's now take a close look at the Mathematical Formula For Making Money:

Leads x Conversion Rate = Customers

Customers x Average Dollar Sale x Sales Per Customer = Gross Profits

Gross Profits x Profit Margin = Net Profits

Please pay close attention to what I am about to tell you: your number of customers; your gross profits; and your net profits are the least important figures in this formula.

Why?

Because they merely represent outcomes. They tell you how good or bad you're doing without telling you why. And without knowing why you're doing so well (or so bad) you are in no position to fix the cause with speed and accuracy. All you can do is guess and implement random strategies in the hope that one day your results will improve.

The real power of this formula is stored within the five highlighted variables (a.k.a. levers).

A Demonstration Of Power

Quite literally, when you apply these levers to your business your profits will increase exponentially.

Allow me to demonstrate.

Assume for the moment that your business currently operates under these circumstances:

Leads Per Annum = 10,000

Conversion Rate = 0.1 (10%)

Av. Dollar Sale = $50

Sales / Customer = 2 per annum

Profit Margin = 0.2 (20%)

Plugging these into the formula gives you a net profit of $20,000 per annum.

Let's now demonstrate the impact of improving progressively more levers without increasing your overall effort:

Case #1: Improve leads by 100%

Net profit = $40,000

Profit to Effort ratio = 1:1

I.e. for every % increase in effort you get the same % increase in profit.

Case #2: Improve leads and conversion rate by 50% each.

Net profit = $45,000

Profit to Effort ratio = 1.25:1

I.e. for every % increase in effort you get a 1.25% increase in profit.

Case #3: Improve your leads, conversion rate and average dollar sale by 33% each.

Net profit = $47,052

Profit to Effort ratio = 1.35:1

I.e. for every % increase in effort you get a 1.35% increase in profit.

Case#4: Improve all levers except profit margin by 25% each.

Net profit = $48,828

Profit to Effort ratio = 1.44:1

I.e. for every % increase in effort you a 1.44% increase in profit.

Case #5: Improve all five levers by 20% each.

Net profit = $49,766

Profit to Effort ratio = 1.49:1

I.e. for every % increase in effort you get a 1.49% increase in profit.

Observation: By simply increasing the number of levers you improve you magnify your leverage. In other words, for the same amount of effort, the more levers you improve the more your profits improve.

In this example we see that by spreading your effort over all five levers you increased your net profits by $29,766. Compared to the $20,000 increase gained from improving only one variable we see that your profit growth is almost 50% greater for doing nothing more than spreading your resources over all five levers. Imagine all the extra money you could be generating right now without any extra effort. All it takes is a simple change in focus.

Conclusion: To leverage your efforts for maximum returns you must focus on improving all five levers in your business.

An Even More Powerful Demonstration

Next, let's demonstrate the impact of improving all five variables by progressively larger amounts:

Case #1: Improve all 5 levers by 10% each.

Net profit = $32,210

Profit to Effort ratio = 1.22:1

N.B. Here's how to work out the Profit to Effort ratio. First of all work out the % increase in profit. This is derived by taking the original profit of $20,000 away from the new Net Profit and dividing the result by $20,000. In this instance our $12,210 increase in profit represents a 61% growth. Next, determine the relative effort by simply adding the % increases in each lever. In this example our relative effort is 50% (i.e. 5 x 10%). Finally, divide the % increase in profit by the % relative effort and you'll have the Profit to Effort ratio.

Case #2: Improve all 5 levers by 25% each.

Net profit = $61,035

Profit to Effort ratio = 1.64:1

Case #3: Improve all five levers by 50% each.

Net profit = $151,875

Profit to Effort ratio = 2.64:1

Case #4: Improve all 5 levers by 100% each.

Net profit = $640,000

Profit to Effort ratio = 6.20:1

Observation: As you continue to improve all five levers the magnification factor on your net profit increases at an exponential rate.

In this example we see that when we doubled our effort from case #2 to case #3 our leverage increased by 61% (i.e. ((2.64 - 1.64) ? 1.64) x 100). But when we doubled our efforts once more from Case #3 to case #4 our leverage increased by 135%

This has to be one of the most magnificent realisations you could ever make in business.

Conclusion: Never stop improving all five levers of your business.

A Tragic Habit - And How To Fix It

Clearly these two examples demonstrate the power of leveraging all five variables in your business.

Tragically, most businesses seem to care about only one of these levers - the number of leads. To make matters worse, of all the levers this one will cost you the most to improve!

So if you're stuck in the 'drive-more-traffic-to-my-business' trap - STOP! Instead, harness the multiplying power of all five levers and you'll find that your profit to effort ratio will skyrocket.

Or to put it another way, by applying all five levers to your business (instead of only one) you will make more money with less effort.

Right about now you may be thinking to yourself, "That's all well and good in theory but how could I possibly increase all five levers by such large amounts?"

Although there are over 200 ways to amplify these levers space restrictions preclude me from discussing the how-to's here. What's important for now is that you understand the magnifying potential stored within this formula. With this understanding achieving a 100%, a 200% or even a 1000% increase in profit is well within your grasp.

About The Author

Learn how to systematically amplify all five levers of the Mathematical Formula For Making Money quickly and easily.

Enrol in the FREE Web Baron E-Class now: http://www.outrageousprofit.com/minicourse/af.asp?id=108

http://www.outrageousprofit.com/minicourse/af.asp?id=108

shuttle to Midway Beardstown .. Lockport Chicago limo O’Hare

In The News:

The FBI has issued a warning that scammers are impersonating doctors, police and banks using spoofed numbers as "smishing" texts surge nationwide.

Communities with unreliable internet service stand to gain after Amazon's Project Kuiper launched its first full batch of satellites into orbit April 28.

Tech expert Kurt “CyberGuy" Knutsson says unsubscribing from spam might actually backfire. Learn when to avoid it and stop junk effectively.

Tech expert Kurt “CyberGuy" Knutsson talks about how the first nonstop beating heart transplant, called zero ischemic time, at Taiwan hospital changes surgery.

Kurt “CyberGuy" Knutsson: FBI warns of "time-traveling" hackers.

Kurt “CyberGuy" Knutsson talks about a soft, vine-like robot called SPROUT that aids safe survivor rescues in collapsed buildings.

Health insurance giant Blue Shield of California confirmed it had been sharing private health data of 4.7 million users with Google for three years without even realizing it.

Delta and JetZero’s blended wing body aircraft marks a meaningful step toward a cleaner, quieter and more efficient future for air travel.

Recent reports show many common passwords can be cracked in literally seconds. Kurt the CyberGuy explains how to strengthen your passwords.

Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.

Iron, a robot that stands 5 feet, 8 inches tall and weighs 154 pounds, combines advanced artificial intelligence with human-like movement and exceptional vision.

Hertz, the rental car giant, recently confirmed that customer information was exposed through a cyberattack on one of its software vendors.

There are a number of features with AirPods you may or may not know about to take your listening experience to the next level. Kurt the CyberGuy explains.

These 35 Chrome extensions have privacy and security concerns. Tech expert Kurt “CyberGuy" Knutsson says to delete them now.

Tech expert Kurt “CyberGuy" Knutsson says 329,000 mph fusion rocket promises to be fast, disruptive and enable deep-space missions.

Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.

Tech expert Kurt “CyberGuy" Knutsson says a new autonomous AI is a game changer that also raises privacy risks. Is your data safe?

Tech expert Kurt “CyberGuy" Knutsson says robots and drones are revolutionizing fruit farming with faster picking and smarter handling.

Landmark Admin revises May 2024 cyberattack scope to show twice as many people were affected. Kurt “CyberGuy" Knutsson gives tips to help stay safe from an insurance data breach.

Tech expert Kurt “CyberGuy" Knutsson talks about how Yamaha’s hydrogen outboard motor could revolutionize boating with zero emissions.

Tech expert Kurt “CyberGuy" Knutsson reveals how to memorialize or remove a deceased loved one’s Facebook account and protect their digital legacy from misuse or scams.

Tech expert Kurt “CyberGuy" Knutsson says an Apple Watch saved psychiatrist Amanda Faulkner by detecting deadly leukemia early.

Scammers and fraudsters are increasingly targeting the most vulnerable, especially nursing homes and the personal data of their residents. Kurt the CyberGuy has safety tips.

Infected USB flash drives can spread malware among multiple organizations in ways that can easily bypass traditional security systems.

With a fully automated warehouse system and AI-powered robots, Ocado's Hive picks, packs and delivers grocery store orders in just a few minutes.

The Mathematical Formula For Making Money

Wealth Building