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Keep up with the Profit Buyer Newsletter that finds you profitable startup ideas, business insights and leverage.
Keep up with the Profit Buyer Newsletter that finds you profitable startup ideas, business insights and leverage.
Disclaimer: This is not investment advice and is only intended for educational purposes.
WARNING: Most models of the world and frameworks for navigating it are flawed. There is a 100% probability that this one is too.
TWO MINUTE SUMMARY:
The Profit Buyer Framework is intended to be a guide for assessing how to buy profit your way. The secret that every intrapreneur and entrepreneur knows is that we all buy profit...most buy profit with employment contracts, some as independent contractors or freelancers, and fewer as business owners. This framework will give you Leverage insights so that you can increase the velocity to which you acquire and build profit streams with as much Leverage in your favor as possible. We are all standing on the shoulders of giants and this framework is a synthesis of many great thinkers and doers.
Though there will be broad truths within, you need to validate or invalidate these ideas through your own experience. Question all of the assumptions you find, including your own. The tell tale sign of opportunity alignment is that after careful validation and stress testing you still feel that it's a 'Hell Yes' opportunity...one which you would *regret* not pursuing.
The saying "complex fails and simple scales" is often true. Make relatively small bets on opportunities that can produce big wins. If you have ample capital the goal is preservation but if you don't then know that defense rarely scores points. The earlier you are on your wealth journey, try to weigh more heavily opportunities which are hard to fail, rather than hard to succeed. Let your wins compound. In contrast, the quote "hard choices, easy life; easy choices, hard life" is a helpful reminder that there is no such thing as free money. Skepticism can be useful, but intellectual curiosity even more so.
Keep in mind that long-term retirement is overrated but freedom is not. Beware of being on the hook for too much risk, debt or obligations as the Guarantor. Most bait is not worth the bite. You must determine what matters to you in life and business. Compounding knowledge, skills, leverage and capital is your force multiplier. No matter your opportunity, you are in the business of marketing yourself and your business. Find mental models that help reduce bad decision making. Making fewer bad choices is vital to avoid being knocked out of the game.
A value proposition without a distinct competitive advantage is usually commodity positioning. Business opportunities of any kind are risky endeavors and no framework, system or process can de-risk it all or do the work for you. Most things don't matter. Accurate thinking does...
Buy Profit Your Way.
We all "BUY" profit...it's just a question of how, right? If you are an employee you buy profit through your allocated time and skillsets. If you are a business owner you buy profit through value creation. Whether you are an employee or entrepreneur, the game is to buy your way to leveraged profits. Leverage is all about generating higher outputs from lower inputs. The question that resonates with a Profit Buyer is what if you could make more money with less of your time? ProfitBuyer.com serves as a resource in service of those who dare to seek more.
Great questions often lead to obscure answers such as "it depends". Your Personal Intangibles such as goals, skillsets, interests, relationships and even location may be greater determinants of what constitutes a good opportunity, more so than even the nature of the business opportunities themselves. For example, if you want a 3 day per week lifestyle business then maybe 'owner operator' style businesses would not be as good of a fit vs. 'broker' style businesses which may be more optimal from the standpoint of time required to fulfill the deliverable sold.
That said, the quality of opportunity is determined by the intersection of the Opportunity Tangibles across business model, target market and business strategy.
Most people start with an idea of a business model they like...such as a vending machine business, marketing services or insurance agency. Then prospective business owners evaluate different target markets to specialize in and try to deduce where they feel they have the best odds of being successful. Alternatively, if you have relationships or deep understanding of a target market due to past experience, you may start with your target market in mind and evaluate potential business models to serve that clientele with. Fewer start with Business Strategy and try to reverse engineer the model or market that would best fit that strategy, perhaps Dropshipping or Affiliate Marketing, but beware of the risk of not knowing your ideal customers intimately enough while in pursuit of what seems like a hypothetically optimal fit for your desired strategy.
Let's explore more concretely what this could look like. In the hypothetical example below the business ideation and validation process will develop as:
Generally speaking you may start with a 'Who Problem' Approach to find a Target Market you'd like to serve (for example Jewelry Industry that want more sales) and collect Market Research to better understand your prospective customers and competitors. Perhaps on a high level you would uncover that there are roughly 20,000 Jewelry stores across the US, that these stores' ideal client is purchasing a wedding ring to get engaged and that jewelry stores on average tend to have +70% profit margins across the different types of jewelry that they sell. Through the data you collect and the insights you uncover, you develop Competitive Intelligence that wedding rings have +90% profit margin and that on average roughly half of a store's profit each month comes from the sales of engagement and wedding rings. With deeper understanding around pain points, desires, demographics, firmographics, competitor positioning, S.W.O.T gap analysis (Strengths, Weaknesses, Opportunities and Threats) and acquisition insights you can begin to ferret out if there's a Business Strategy that would add value while still generating profit. The purest form of that Business Strategy is funneling down that logic to a Competitive Advantage. Having a distinct advantage over competitors is highly desireable and difficult to maintain as a protective moat around your business. For our Jewelry Store example, maybe you uncover that these store owners struggle to get their marketing in front of men in their 20s and 30s that may be soon in the market for an engagement ring. Maybe after surveying that ideal customer avatar you conclude that young men feel uncomfortable going to jewelry stores and that they'd rather look online so you decide to offer better prices (at still +60% margin) and develop an e-commerce platform that makes it easy for them to learn about diamonds and compare rings. Maybe you'd end up creating BlueNile.com and be a disruptive force in the jewelry industry by solving a significant problem of how to sell more wedding rings to young men in a way which jewelry stores struggle to do.
In an alternative origin sequence the business ideation and validation process could have developed as:
Had you reversed the market research parameters by trying to instead figure out how to fit the business model of selling Marketing Services to Jewelry Shops ('Who Solution' Approach), you might have an entirely different outcome. Amongst the infinite approaches that could be envisioned, maybe you would have focused on one major market and created a wedding website for a specific metropolitan service area like Atlanta and made a comprehensive resource and marketplace that helped young men and women navigate one of the larger sequential purchases of their life surrounding the identifiable behavioral trigger of an engagement and wedding event, where you could charge vendors for advertising, sell leads or partner on a pay-for-performance basis. The core point is that there are endless iterations for how you can interpret opportunity and what's important is being as objective as possible...the questions you ask during market research set the frame for the scope of answers you will find.
Here are alternative conclusions you may have arrived at:
The above alternatives list demonstrates that there is an abundance of ideas and opportunity for just about every business niche that you can fathom. It's finding a Competitive Advantage and Execution Leverage that is in much scarcer supply...
Proven mental models will help reduce the amount to which your decisions are made from a place of emotion rather than logic. Even Robin Hood only would have had so many arrows in his quiver...missing your shots early on can stack the pressure against you, so be careful to take your shots pragmatically.
Trillions of dollars circulate in the economy every single day across all sorts of niches, markets and sectors. There is an astounding abundance of opportunity and certainly no shortage of problems to be solved right? New millionaires are regularly minted in all sorts of seemingly farfetched businesses but inversely, many seemingly "proven opportunities" often result in painful business closures. Where then should the prudent profit buyer pursue?
It does seem to be that the majority of ventures fall short of achieving profitability and most of those which do make *some profit*, struggle to do so sustainably over time. Cautionary tales aside, there certainly are paths to generate sustainable profit despite the challenges and cons which may be unearthed in the evaluation of just about any business idea.
The core truth is that you must find your greatest means of leverage to maximize your rewards and defy the 'high risk' odds which besiege every Profit Buyer. You could argue business is just too risky without leverage...
Comparably, being an employee can be a good opportunity, as a business of one. In the employee model of buying profit, your client is your employer and a major benefit is the significant risk that can be offloaded through employment. While this model of employment might sound impenetrably secure, you can be sure it is not 100% free of risk either. Renting time to an employer still has risk in the sense that you are likely replaceable and accessing the minimal amount of leverage to earn...even in the more white collar career paths. The classic tale of achieving career "success" into one's fifties or sixties, only to be let go sooner than intended certainly introduces food for thought when alternatively one could have potentially built assets that generate consistent cash flow much farther into the future. Employment and entrepreneurship are not necessarily mutually exclusive [beware of false dichotomies]...but few can have their cake and eat it too. Pick your camp and give yourself the flexibility to reassess as you acquire more insights.
A good question to ponder is whether you would rather earn more money renting your time over the typical timeline of an average 40 year career or if you would still prefer to make less money over the longer-term from owned businesses if it meant you got pursue your vision, your way? Would you still go for it if you ended up making a 25%, 50% or even 75% less than if you were an employee? We all dream about the upside potential of making more, but true commitment and conviction comes through acknowledging the thorns that may come with the rose. Many retire at 65 without an axe to grind and though still sharp, settle early into their late 60's and beyond...there's great meaning in being productive even if not just for the money. What if the employee had pursued that business idea as an entrepreneur? Or inversely, what if the entrepreneur had less stress after 5 pm as an employee? You only live once...design your life thoughtfully and intentionally.
MAN IN THE ARENA SPEECH BY THEODORE ROOSEVELT:
"It is not the CRITIC who counts;
Not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better.
The credit belongs to the man who is actually IN THE ARENA...
Whose face is marred by dust and sweat and blood;
Who strives valiantly;
Who errs, who comes short again and again, because THERE IS NO EFFORT without error and shortcoming.
But WHO DOES ACTUALLY STRIVE to do the deeds;
Who KNOWS great enthusiasms, the great devotions;
Who spends himself in a WORTHY CAUSE;
Who at best knows in the end the triumph of high achievement and who AT THE WORST if he fails, at least fails while DARING GREATLY so that his place shall never be with those cold and timid souls who neither know victory nor defeat." - Theodore Roosevelt
The perfect business does not exist objectively...it's all subjective and for that matter, the same is true for jobs. People often acquire wealth by figuring out how to do a complex thing repeatedly...
Consider 2 scenarios of complexity solved repeatedly:
Scenario 1) $150,000 per year income job x 40 year career as an intrapreneur = $6,000,000 earned over the course of a 40 year career of employment to retire at around age 60 - 65.
Scenario 2) $100,000 per year profits on average as an entrepreneur with many ups and downs x 55 year horizon = $5,500,000 earned over the course of a typical professional career and extended earning years into 70's as an entrepreneur. Did we mention that some or all of those profit producing assets can be sold when you are ready to cash in your chips?
In the above hypothetical you can imagine potentially making more or less money through entrepeneurship. Maybe your distributions are much more or much less than in the example but you enjoy the freedom 10X as much. Maybe you are able to exit a business at a multiple and earn far more? Alternatively, maybe you make less, work harder and stress more...you have to do your calculus and speculate towards your own bets.
It's probably not how long you work but more so, what ideas you work on that will determine your satisfaction emotionally and financially.
Money is great at solving money problems...
If your primary concern is making the most money with the least risk then renting your time out may be preferable, but not all money earned is equal. The cost of commuting, travel expenses, eating out, professional attire, child care, pet care and the likes adds up. If you place value on the intangibles there are other things to consider such as limited personal days, arbitrary meetings, questionable budgets, random deadlines and maybe even just the inflexibility to handle personal and family obligations as they arise.
You have to determine what leverage point you are pursuing for you and your family.
Below are 10 criteria to consider in no specific order, but again only you can decide how to weigh them in pursuit of the best opportunity for you.
Good Employment Opportunity Criteria:
Good Entrepreneurship Opportunity Criteria:
A business model is how a business creates, delivers and captures value. There are 8 core business models according to Harvard Business School. NOTE: You will find all sorts of categorizations out there on business models and after reflection it seems that there's very little marginal utility in identifying a "more optimal" hierarchy. There's a fine line between Planning and Procrastinating with a slippery slope to diminishing returns on the activity.
These high level business model categories can be helpful for a wider perspective, but inside of each core business model you will find more nuanced derivations which may be more useful by the fact that they best leverage different strategies for winning in today's dynamic marketplace. Under each business model you will find a couple of examples to help illustrate the characteristics of each subjective sub-business model.
Do not get caught up in the minutia of this. Clarity is the goal...not perfection. Many business models will have overlapping characteristics and most of the benefits of model mapping are achieved at the simplest stages of analysis.
For any of these business models you can envision companies in any given sub-business model working to position themselves for maximum competitive advantage. The aim of positioning is to be maximally relevant for attracting certain customers and inversely irrelevant to the customers you want to repel. Moats are built with impenetrable value creation that can be emulated but not replicated. Let's evaluate a high level spectrum of business positioning from commodity perception all the way up to positioning as the preeminent authority:
Inventing unvalidated sub-specialties is a double edged sword. Beware of targeting an audience of none's unseen problem with an unwanted solution for which they don't care, don't have a budget and don't want to be educated about. Specialization is not a panacea...there are tons of niches or sub-specialties which simply will not have a large enough total addressable market (TAM) for your solution. A pet massaging service may be an exact solution for someone out there but to how many people in a small town with a serviceable population of just 10,000 people would that resonate?
Tim Ferriss, author of the Four Hour Workweek, coined the term being a Specialized Generalist where by you take one core monetizable skill and stack on complimentary skills such as public speaking, writing and negotiating to achieve greater leverage and create competitive advantage for yourself versus the rest of the labor market as an employee or competitive landscape as business owner.
Remember that beyond foundational concepts of supply and demand that solutions compete on a spectrum of Perceived Value, Relative Price, Market Differentiation, Profit Margin and Scalability. Does the business model improve as it scales? Are your points of differentiation perceived as added value (merited bundling) or bloated cost (merited unbundling)? Does your market have an existing budget for this solution's expenditure that your pricing strategy does not explode in contrast to their prioritization of expenditures? Do market forces make it likely that your points of differentiation (rarely competitive advantage) and profitability should be defensible? How deep of a pain is your specialty's problem and how strong of a desire do they have for your exact solution? Are you intrinsically motivated to the point of obsession or extrinsically motivated from a point of curiosity? If market forces converge against your business model will this positioning be a hill for you to die on, will you agnostically rely on data to adapt or will you want to quit?
Narrower scope problems and solutions are often easier to validate quickly. If you are targeting specialty retail stores with inventory management problems you can pick up the metaphorical phone book and start dialing mom and pops. If you are targeting all consumers in the USA you may have a tougher time finding product/market fit with the countless customer segments that would exist within this market. Steve Jobs iPhone moonshot was done without much market validation, but there are thousands of unmarked graves of startups that failed with a similar 'I know best' strategy combined with 'everybody needs this' planning. On the flip side, many software businesses have started out focused on a very specific niche and expanded after successful validation.
Have you considered how scaling fulifilment of your offering may be limited pre-validation vs as you build a customer base vs at scale?
Time to fulfill, repeatability of fulfillment, retention of recurring revenue clients and leverage all have a signifiant impact on your scalability. Think about the Offer Modality differences between a Do-It-Yourself (DIY) offer vs a Done-With-You (DWY) offer vs a Done-For-You (DFY) offer...
Just as well, you should consider how the Offer Modality (solution method / method of treatment) and Offer Structure (solution mechanics / integration and implementation) support growing your revenue to levels you consider worthy of operating and capable of sustaining.
- Time To Result (For Both Parties), Confidence In Solution, Trust In Problem Solver, Offer Resistibility, Diminishing Returns / Problem Continuation, Prioritization Of Expenditure / Budget Constraints, ROI
- graphic design, conversion rate optimization, accounting, sales rep, customer service, IT
We all stand on the shoulders of giants and thankfully concepts of leverage have been well explored. Naval Ravikant points to leverage beyond renting out your own Time as Labor, Capital, and Intellectual Property in the forms of primarily Media and Code. The hidden form of leverage Profit Buyers utilize to grow exponentially is Negotiating. Negotiating is the X-factor because no matter your business model you have to profitably acquire, retain and scale your client base, fulfillment labor or deliverables; this even applies to your business development partnerships.
We will dive into each of the levers and evaluate their strengths and weaknesses...
TIME
Employees sell or rent time-bound applications of their skillsets which we will just call Time.
It's easy to dismiss renting out your time as an employee or consultant as undesirable. The media idolizes rare outcomes with headlines of tech startup successes, celebrates syndicated house flipping or touts whatever the trend of the year may be. You rarely see the losses and certainly not the gut wrenching hardship behind those failed ventures. Renting Time is a very linear value exchange based on the arbitrary rate of 'per hour' or aggregated as a 40 hour work week, but it can be fruitful if done in a somewhat leveraged way through the skillsets we are contracted to provide.
Skillsets vary wildly and lower-skill work as say, a cook at a fast food restaurant may reward laborers at 1/1,000th the "profit" of higher-skill work for example, as a CEO at a publicly traded fast food restaurant.
Selling our time is a limited form of leverage which is constrained by our skillsets, relationships and track record. Renting Time has a 1:1 ratio. 1 unit of time that you input for an employer creates 1 unit of agreed upon compensation as your output. Proof of value in the form of irrefutable, irresistible past results is the distinction of those who climb the ladder - - fastest - - to the highest echelons of Time leverage. To be given more compensation you will be given more responsibility and to be given more responsibility you need proof that you have been competent in the past and have the skills to continue competently in a more leveraged role.
It's true that most employees will not build the rare and illusive skillsets needed to become a CEO of a major publicly traded company, but many do raise their skillsets to earn outsized compensation on the basis of results. For example, elite sales professionals can make 7 figures as bounty for the revenues they generate companies, elite programmers can make 7 figures for writing code which solves massive problems without constraints and elite medical specialists can make 7 figures stewarding higher than average medical outcomes with the latest technology, procedures or nuanced experience. The career opportunities are numerous and though much less sexy than being on the cover of Forbes or Inc Magazine, this path has many intangible benefits including the removal of risk that any venture can go bust on its shareholders. Employees have a lot to be grateful for to their employers. Entrepreneurship is rarely greener grass...just bigger pastures.
Income is not the only metric of success and your prioritization of things like work life balance, the ability to control your time or even the joy that work gives you could very well mean that true success for you is not about 7 figure pay days. Are you aiming to build a lifestyle business or to exit a 7 figure business atop a year of month-on-month growth positioning the idealic outcome? Having your own business can have more or less of the intangible benefits that employment has depending on the business opportunity you choose and your definition of success. You don't need to be a doctor or lawyer to be "successful" and unfortunately the reality is that many in traditionally admired professions are dissatisfied. Financial freedom, freedom to control your time and work life balance have been achieved by pet sitters, retail store owners and countless obscure niche opportunities. You have to do your own calculus...
Emotions aside, Time (and our skillsets) exist on a spectrum of perceived value. The world seeks to systemetize and teach all valuable skillsets in pursuit of consistent replication and replaceable commoditization. Those skills which are inherently hard to teach or difficult to replicate are recognized as deserved of highest Time-based compensation. Employees that provide non-commoditizable value and solutions that are scarce in the marketplace (untrainable) are able to detach their compensation from time. Simply put, do more complicated things that can't be easily put in an S.O.P or training program and employers will pay you more to retain you as a high performer.
For example, if you have a Gulfstream jet manufacturing assembly line halted, the value of an expert aernautics engineer or mechanic that can diagnose, troubleshoot and fix "the problem" in an emergency through efficient and effective decision making would not necessarily be constrained by the possibility that "the solution" was as simple as twisting one wrench on one bolt by just one more rotation in less than one minute...the value of the solution scales to that of the 'problem bottleneck' it clears or the revenue opportunity it unlocks. In this case a $20,000,000 jet is certainly meaningful revenue right? Surely having dozens of specialized employees in the assembly line idle and equipment overhead underutilized creates a mounting cost center. Is that mechanic's fix worth 1 hour of "time" or is it worth the cumulative value their solution unlocks?
To achieve leverage through Time as an employee you must build the skillsets and experience which allows you to produce outsized results in ways which Time can no longer accurately reflect your value. Being a profit center and producer for a company is easier proof of value but just as in our jet manufacturing example, non-revenue generating expertises that save costs or improve efficiency can be highly rewarded as well.
Aside from non-commoditizable skillsets you may look to find alternative market disparities where supply is limited and an excess of demand enables you to earn more than Time may typically warrant. This disparity could be reflected for example in Service niches such as emergency water damage home repair where urgency and scarcity trump all else. Another example could be reflected in Product niches such as rare sports memorabilia and collectibles where artwork, perhaps as a *trendy* NFT, of highly sought after players like Tom Brady may be worth 1,000X more to the right buyer.
If demand far exceeds supply, even with a more teachable and commoditized deliverable, the value of your time, skills and offer can multiply exponentially.
Renting Time as an employee may be a limited form of leverage but the skillsets we apply with our time and the problems those skillsets solve, in certain market dynamics, can decouple compensation from time in the mind of your employer (client).
Still whether you buy profit from an employer or from clients, the key is to find a game where the outputs you generate far exceed the input of time, tools and overhead that you input, to the point that time can no longer accurately measure the value you create.
Do you look forward to Mondays? Does the day of the week even matter if you find joy in your work, directly or indirectly? Good questions to marinate on when considering the value of your time and the opportunity cost of renting your time...
Regardless of how you feel about renting your time to an employer, you must trade your time for knowledge by being a perpetual or lifelong learner. Without honed skills even the greenest grass in the biggest pasture would likely not be sufficient on your first rodeo...
CAPITAL
Accumulating and putting money to work is as leveraged a game as it gets. Whether it's the 4% rule that enables financial freedom in the context of your own wealth ratio or capital invested in the form of properties (rental or digital), putting money to work in a more passive manner is what most people dream of.
You must either raise capital from investors who require you to return capital to them or you must earn far in excess of your expenses so that your accrued wealth becomes a meaningful sum. Compound interest has a light lift with small sums in short time horizons...
Debt funded ventures offer the highest risk without inherently having higher rewards. Loans, lines of credit, credit cards and equity backed investments all can have you in the driver's seat as a Guarantor with your savings and collateral at stake...
Debt can knock you out of the game. Debt can make the most enjoyable opportunity miserable. Are you using debt to buy existing, predictable profits or using debt with "rose tinted" glasses in hopes of building future profitability...perhaps ontop of unvalidated go-to-market initiatives?
A lot can go wrong between a plan, execution and reality. Someone once said, the cleanliness of theory is no match for the mess of reality. Never lose your optimism but being skeptical of debt fueled growth and conservative with your usage of debt is equally as wise. The stock market and Silicon Valley has normalized no-profit, money losing, growth guzzlers. Warning: bridge may ice in cold weather.
Private equity is built on the idea that with earned or raised capital and greater models of productivity that the right assets (companies) will grow in value disproportionately to the capital invested in the acquisition. High risk, high reward...
On the other hand, the stock market is built on the idea that with any amount of capital and greater models of diversification that the right assets (companies) will grow in value while mitigating against the risk that future cash flows could be disrupted for some of the companies in their portfolio. Medium risk, medium reward...
Stored values, such as gold or crypto investments, function on the idea that, with scarcity, capital allocated in this asset class will grow in value somewhere around par to inflation (bubbles aside). No matter what occurs in the markets or broader economy, it *might* be a safer store of value. Lower risk, lower reward...
Capital invested in specific companies, indexes of companies or stores of value all have pros and cons. Sitting on cash will erode its value through inflation. Risk is part of the game but risk mitigation is the game. It's just a question of how much risk you are comfortable with and what return on investment you seek. Preferably you can make relatively small bets with high upside if you are correct and some insurance through adaptability with ways to profit from your losses if not. Failing forward is underestimated.
$1,000,000 invested on the basis of the 4% rule would in theory return $40,000 annually without touching the principle. $5,000,000 invested could return $200,000 annually at a 4% return on investment. Once your investments produce returns beyond your cost of living you are leveraging capital and allowing compound interest to work its magic over longer time horizons.
Would you rather leverage your Time or put your accrued money to work?
LABOR
This is the founding father of leverage. Pay people with certain skills for their dedicated time. It has been an extremely productive means to generate profit but this lever is far from perfect. To find dedicated, skilled, loyal and highly productive labor is easier said then done.
Employees and broker based models around contractors, sub-contractors and white label or private label partnerships have all evolved to solve the problem of scaling upon labor. The entire drop shipping industry has emerged from a desire of e-commerce resellers that wanted to avoid the logistical pains that come with manufacturing, fulfillment and shipping.
Broker models are also helpful from the standpoint of cost deferral or offloading onto other parties which to some degree have a win-win stake in your continued performance. This applies to both outsourcing and automation. For example a 3PL last mile delivery company may value your relationship enough to give you NET 30 payment terms or absorb the cost of managing returns as part of their relationship with you. Just as well, a freelancer platform like Upwork may provide managed hiring services or pre-vetted vendors which eliminates or greatly reduces the internal need of ownership, management or HR (if you are a larger firm) to qualify candidates to the nth degree.
With labor, hiring can be a perpetual problem and is self evident just by the fact that many industries rely on recruiters that can earn a significant percentage of that employee's first year of salary for qualifying and placing them in the position. Making labor work as a lever of growth has been done, but it also has been undone by many in pursuit of more minimalist means of leverage. Do you have a competitive advantage in hiring, training and leading a team?
That considered, beware of key man risk both internally and externally. Relying on an external parties can have the challenge of profit motivation misalignment and it's all too common for:
Anything that sounds almost too good to be true just might be too good to be true.
MEDIA
In this case Media is used as a bucket term for all sorts of content information such as e-books, audiobooks, podcasts, articles, videos and the likes, which educate and/or entertain. This includes purchasing the rights to these assets which you could aggregate, resell, upsell / downsell, rent or license to other companies.
The time horizon of which Media is relevant tends to expand or contract ROI per media asset outside of the most viral short-term fads. I'm sure somebody could have made a course on how to make your own fidget spinner and sold it to hundreds or thousands of customers for $79, but after the 'flash in the pan' of that few months of vitality that came with the fidget spinner fad, it would depreciate in value equally as fast and become potentially value-less in less than a year.
Maximizing returns is why evergreen content, which is relevant far into the future, is an ideal media type. Who wouldn't want to continue to make money off an asset that took a one-time investment to create 5 years ago? While this is true, it's also true that education media is perceived as most valuable right after when somebody buys and once they learn the knowledge it often drops in perceived value precipitously. Another risk is that the pace of change and democratization of knowledge available on the internet for free (i.e. YouTube) may make today's asset be tomorrow's liability if you cannot recoup investment quickly. This is why creating content without high cost of production (cheaply) is so lucrative...digital assets or information products can be created with close to zero cost other than a little time and a little editing.
The virtue of media is that you can turn on a camera and record your knowledge without the permission of anyone else. Unlike being an employee it does not require the permission of a boss, unlike capital it does not require the permission of investors and unlike labor it does not require the permission of employees to follow your leadership.
As Naval explains, permissionless leverage is a modern gift and since media has nearly zero cost of marginal replication, each additional "transaction" has close to 100% profit margin aside from customer acquisition costs.
CODE
Other than Capital, the most powerful form of Leverage in recent decades has been Code. Automating manual processes into software driven workflows saves labor cost, improves efficiency and creates greater leverage for companies and consumers.
Think of the wealth that has been created from digital marketplaces across all the different niches that were loosely served by Craigslist initially in the late 1990s and early 2000s...
The same can be said for the wealth created via software as a service (SaaS) companies by streamlining workflows across accounting, customer relationship management, landing page builders and numerous other aspects of business operations.
There is great opportunity in programming away B2B and B2C problems.
Within code would be Encoded leverage which includes franchise systems, e-Learning and even automation of processes or workflows.
NEGOTIATING
Negotiating is the core skill of business development. The definition of negotiating is "discussion aimed at reaching agreement" and often requires you to "find a way over or through roadblocks" at every step of the journey. Negotiating via a formal sales process with a full pipeline of prospects makes exponentially more conversions possible.
The goal of passive income leads many to hype ideas around vending machines, e-commerce, self service or even order taking as a clerk to be a panacea since it *could* remove or reduce cost. Maybe it could have that affect for you (if effective - great!) but beware of cutting off your nose to spite your face or eliminating manual negotiating in pursuit of efficiency if the result ineffectively leaves money on the table. Food for thought at the least...maybe being more passive is worth a decrease in effectiveness? All good as long as you are being analytical and intentional.
You could argue that sales mastery or communication is the lever more so than negotiating here but there are many ideas to gain agreement around beyond that initial sale to a customer. For example, retention often requires the art of working with clients to re-callibrate their concerns back into balance with the transformational benefits of continuing to do business with you. Also you might want to negotiate to reduce the expense of your cost centers. You may even want to negotiate to expand your profit centers through partnerships and alliances. What about executing price increases to your existing customers or coercing satisfied clients to share reviews, testimonials and referrals? Negotiating is at the crux of creating internal and external change.
Communicating a big vision is important but negotiating its utility and necessity is where the rubber meets the road. Communication in sales requires negotiating to level up your results. You can communicate marketing messages and lose huge swaths of sales. You can work sales and still lose massive chunks of conversions. While all that is true, you can leverage negotiating and even in spite of below average marketing communications or a sub-par sales process, still persuasively produce clients, partners and agreement on all sorts of initiatives.
Persuasion is the amplified output of effective negotiating.
The best profit opportunities are often enabled by Compound Leverage.
If you can combine multiple of the levers of Capital + Labor + Media + Code + Negotiating you can see exponential results. The sum is greater than its parts!
This is also true of combining multiple hard to teach skills such as combining skills in Anatomy + Nursing + Injectables can potentially create far more leverage for Nurse Botox Injectors versus being an Anatomy teacher. Alternatively Anatomy + Nursing + Legal can potentially create far more leverage for Nurse Expert Witnesses versus being an ICU Nurse. You could even imagine that Anatomy + Nursing + Legal + Coding can potentially create far more leverage via HIPPA Compliant Software used in hospitals and medical practices. The examples go on and on...
PayPal combined venture capital + software developer labor + eBay listings checkout + code to become a major player in online payments.
Shopify combined venture capital + software developer labor + e-com resource guides + code to become a major player in e-commerce.
Facebook combined venture capital + software developer labor + crowdsourced media from university students + code to become a major player in social media.
Billion dollar companies tend to have most of these levers working and compounding in their favor...lofty valuations reflect their leveraged trajectories. While we rarely get to see the breakthrough negotiations that occur behind closed doors in these Unicorns, clearly somebody negotiated well in earning PayPal the right to be the best option for checking out on eBay purchases...just look at how they parlayed that early mover advantage into a dynasty.
In more modest comparison, e-Learning businesses that are focused on specific skillsets, niche industries and even hobbies have all enabled great wealth. Sometimes these leverage machines use just their intellectual property through systems and processes that become encoded in their Media as a DIY offering, or even automated with Code in many cases as a Done With You (DWY) offering if it includes hand holding or Done For You (DFY) offering if the task / problem is altogether solved without the necessity of their involvement. Sam Ovens helps delineate the limitations of each level of involvement in delivering the outcome and how DIY offers unlock your ability to scale. The same leverage from Capital, Media, Code and Negotiating could be pointed to for affiliate marketers, marketplaces and many fundraising contestants that have been featured on the show Shark Tank.
Thought to marinate on:
Is stacking leverage the 80/20 rule of buying profit?
Negotiating agreement is what moves the needle for any pursuit.
We ALL are in sales one way or another. Even conversion rate optimization is about micro sales.
Choose what is important to you and prioritize it. Your future self will thank you...
It does not matter if your vision is making $1,000 per month passively (NOTE: $1,000 per month extrapolates to 4% returns off $300,000 of capital invested) or $100,000 per month actively. What matters is that you buy profit your way and that the cash flow works in your favor.
Over time we want to earn from what we know, what assets we own and what business opportunities we grow. On the journey to buy profit your way it may be behoove of you to rent your time out to an employer and that often is the right thing to do. The career steps we take need to be expansive, force us to learn new skillsets and enable us to grow as professionals...
Stacking skillsets compounds your value and opens entirely new opportunities. Look for Throughline opportunities where the momentum and successes that you have had as of late can be parlayed to increase the altitude with which you conduct business at. A sales rep that can become a sales manager that can become an industry trainer would be examples of leveling up when the right opportunities present themselves at the right time.
There's only 2 worthwhile career tasks: learning and earning.
Never stop learning. In the long run that growth trajectory will free your time away from laboriously earning, towards leveraged earning. Knowledge is only truly gained when you apply learned concepts. Learn things that could and would have significant impact for you professionally...then with your conceptual comprehension implement the theory into the chaos of reality. The bridge between being a thinker and a doer is execution.
Be mindful that renting your time has an opportunity cost and building businesses does too.
Don't lose sight of the goals you are aiming for.
This answer has to be personalized against your own criteria but there are some opportunity traits which are more favorable than others. Your core competencies should self select some opportunities over others by sheer advantage or ease of differentiation.
In terms of a process we evaluate Ideas, pursue Validation of the best ideas, plan Execution on the best idea, Execute your plan, track Execution metrics, benchmarks and goals and prepare the business as the ultimate product in and of itself for achieving the best Exit possible if / when that day comes.
This process basically alludes that if we select a viable, validated idea to execute on, that it's then up to you to use leverage for success in execution of that plan and to be in a position to sell equity in your business if the right liquidity opportunity presents itself.
Let's explore some of the signs that many opportune startup ideas may share in common.
IDEA: RESIDUALS
Recurring revenue or residual profits tend to facilitate leverage much more nicely than one-time transactions. This can take the form of memberships, subscriptions or ascension paths for your clients. Few customers stay forever so churn is the X-factor for your success with continuity offers in capturing higher customer lifetime values.
If you have a pest control company that charges $100 per month and the customers on average stay 2 years then the customer lifetime value is roughly $2,400. Revenue is less meaningful of a metric as no two businesses are alike, even in the same industry. One pest control business (Company A) could have a 10% profit margin and another pest control business (Company B) a 70% profit margin...making $240 profit for Company A's owner vs $1,680 profit for Company B's owner over the duration of one single customer relationship are two entirely different outcomes. Does your solution have a switching cost for the customer? Why will they stay and not churn at the first sight of a "cheaper" solution? It's certainly helpful to have a moat around your client base and games that have some barrier of entry can support your retention as well.
It's safe to say that maintaining client accounts requires more skillsets and introduces more risk of LTV being disrupted. However, the multiple at which these subscription companies sell for, for the small percent that actually achieve an exit, tends to be significantly higher than those that operate on a transactional model.
Prudence is required to not misinterpret the data based on the best case outcomes of a business model. High ticket, one-time transactions can be a perfectly reasonable model if that deliverable is done in a systematized or templatized manner. Even low ticket transactions can work at scale right? Custom work is the chaos factor and though creative endeavors can be rewarding, one off projects can erode your passion over time...not to mention they are much more difficult to scale with Labor leverage from a process standpoint.
You have to decide what model suits you best. If a pest control business generates $200,000 profit per year with a recurring service model and a solar panel installation company generates $200,000 profit per year with a transactional model, which is better? Neither objectively...it just depends on how you *personally* weigh the myriad of factors that comprises each venture.
Remember that business buyers will likely not risk their capital to buy themselves a job. That said, many a profit buyer would buy a turnkey, predictable cash flow stream which they could operate in a leveraged manner or integrate into their existing business.
To build a saleable business you must treat your venture as the product itself. Very few people are able to sell their business at a multiple they are pleased with and most simply liquidate assets upon closure. Those which sell at strong multiples for meaningful sums have their ducks in a row and usually have predictable profits that make it easy for the acquirer to see less risk in the transaction, specially for the vast majority that finance their acquisitions and hence need to meet their debt repayment obligations.
Knowing that the odds are against you for a significant exit, take measures to ensure you make profit now in the short-term. Pandemics, recessions and market disruptions happen right? Time value of money reminds us that money is worth more today...
Do you have to achieve critical mass with economies of scale before the business "works" or can you start achieving profitability from day 1? Velocity to the breakeven point (losing $1 is not offset holistically by making $1...it may be more like $10, $100 or even $1,000 of upside to reach par when you consider your opportunity cost) and profitability levels that can sustain you thereafter cannot be underestimated.
Any service businesses should be templatized or highly systematized...fulfillment can be overwhelming otherwise and you should aspire to generate a positive flywheel effect where each additional customer makes things better, not more likely to crash.
For continuity businesses your customer lifetime value, new customer acquisition rate, and churn rate determines the constraint or cap of how high you can scale until you resolve the next bottleneck in your business.
For example if you owned a B2B training company that was doing $10,000 per month in monthly recurring revenue that charged clients $100 per month for access to your program and customers on average stayed 10 months, then we could say you have roughly a 10% churn rate each month or retain 90% of your customers each month. We could also conclude that 1 client at $1oo per month x 10 months of retention means that you have an average customer lifetime value of $1,000 over the lifetime of the one client relationship.
Now if you add to this with context that you have a total of 100 training clients and that you acquire an average of 20 new clients per month (remembering that presently with 10% monthly churn rate you would automatically lose 10 clients this month from your client base of 100 existing clients) then we could calculate whether you are on path to grow, sustain or shrink as well as reverse engineer the cap number of clients and monthly recurring revenue (MRR) capacity for your training business, until you improve any aspect of your business's profit mechanics.
In this case 20 new clients acquired - 10 clients churning out from your existing client base = net positive of 10 more clients. Growth of 10 more clients this month means that the business should grow this month to 110 clients or net 10% month-over-month growth rate.
Until this business either raises its price, reduces its cost, adds ascension offers, adds marketing channels, increases customer acquisition rate or improves retention, all things equal this business would have a cap of $20,000 per month before you would only be able to hope to sustain your client base by replacing the 20 clients you lost on any given month with the next 20 new clients you worked to sell that same month. The churn that month simply erases your present maximum ability to bring on new clients in that same 30 day period.
Lastly, we could conclude that if the business continues performance at the same trajectory that it would take you 10 more months growing at net 10 more clients per month before you would scale up from your existing client base of 100 clients to reach the present hypothetical max capacity of 200 future clients. At 200 monthly clients this business's churn (20 clients lost per month) and acquisition (20 clients gained per month) would reach a theoretical stalemate. Alex Hormozi explains the dynamic between these variables of capacity well with what he calls the Pie Equation.
Building a book of business and understanding how your residuals compound or erode with a recurring revenue model is critical.
IDEA: ACQUIRABLE
The most popular form of customer acuisition is through Paid Marketing which lets us spend money to gain awareness of potential prospects and customers. Alex Hormozi champions the concept of Customer Financed Acquisition whereby your offer's pricing enables strong enough profits to self fund your next customer's acquisition cost and still distribute healthy profit today from this current sale. NOTE: You could forgo today's allocated profit from that transaction and double down on acquiring mutliple customers with those funds if your positive flywheel is humming and in consideration of your time to recoup funds through the next sale being short enough that you might not mind the temporary growing pains...maximizing growth isn't a bad thing, it's just not the only thing. If you are going to spend money on ads, leads, appointments and the likes, customer financed acquisition ensures that you can scale to the potential of your model rather than getting stuck at the bottleneck of too few prospects.
The most desirable type of customer acquisition is Organic Marketing in the forms of search engine optimization, social media posting, referral campaigns and even networking because they have relatively tiny cost of acquisition compared to alternatives. If every time you complete a transaction with a customer you are able to get them to refer you to a family member, friend or colleague then your growth theoretically climbs forever. John Jantzch's book The Referral Engine is helpful for expanding this paradigm. In today's digital world getting a customer to share their testimonial on social media or leave you a review on Google turns one customer success into a mini sales machine. Customer and partner endorsements deliver ROI to you by reducing or eliminating your next customer's acquisition cost, perhaps more than one customer results as an output or even customer acquisition benefits in perpetuity with the right endorsement (again reference Shark Tank). Jay Abraham's concepts around leveraging partners' underutilized assets and just being more resourceful through referrals is an excellent reference point. Strategically, the phrase "content is king" still holds true even with search engines and social media platforms aggressively changing the way their audience is presented with relevant organic results or content on a tactical level...
The most controllable type of customer acquisition is Outbound Marketing whereby you are creating an ideal customer avatar and reaching out directly to prospects that could potentially meet those firmographic or demographic criteria. The concept of identifying behavioral triggers which correlate with when your avatar should soon be in-market for your solution or is presently now in-market for your solution is extremely helpful. What things do your customers research, buy and solve before, during and after requiring your solution? Algorithms change visibility on platforms like Facebook that you may leverage, but for the forseeable future emails, text messages, direct mail, social media messages and phone calls are 100% in your control. You don't want the platform gatekeepers being able to restrict access, inflate cost or silo your relationships with your audience at the flip of a switch on any given day. The reality is that most of these platforms have profit motivations which are not aligned with maximizing yours...the same way which employees through the 'principle-agent problem' are often not seamlessly aligned with maximizing their employer's profits. Chet Holmes's concept of your Dream 100 clients is amazingly useful for you to be able to go above and beyond for a sub-set of your ideal client in prospecting. It would be difficult to give white glove treatment to all potential prospects but it is possible to more strategically nurture your 'Dream 100' relationships. This is an extremely useful concept when developing a prospect list or database before you begin reaching out via multiple channels because it enables you to lead with a value added approach as you cultivate your network. It's said that your network is your net worth.
The most leveraged type of customer acquisition is through Synergistic Acquisitions whereby, vertically and/or horizontally, you can acquire companies that have access to your ideal customers and allow you to expand profitability. This has been the M&A industry's bread and butter...private equity firms have leveraged this concept in creative ways with rollups, takeovers and buy outs. To avoid confusion, corporate acquisitions utilize leverage in both senses of the word: outsized outputs + financed capital. It just so happens that acquiring competitors, vendors and referral sources also in turn acquires your business new customers...
The more of these (Paid + Organic + Outbound + Synergistic Acquisition) marketing channels that you can develop as profitable customer acquisition sources, the greater the pipeline you will have and the more you control you will have over your destiny in the face of an ever-changing tech and competitive landscape. The same applies to distribution channels...with the only difference being that the aim is to get your product in front of buyers.
Customer acquisition is the ultimate arbitrage.
IDEA: MARGIN
You could have the perfect business opportunity with residuals, diversified customer acquisition and stacked leverage, but without adequate profit margins it would be hollow. The best metric to consider aside from Net Profit Margin for this is Cost of Goods Sold.
Your pricing and offer is 100% in control of your margin so stick to win-win propositions. If your offer is resistible it means it's perceived as a win-lose offer. If your offer is a no brainer but you are not netting profit it may just mean that you are making a lose-win offer which only works if you are well funded in pursuit of market share or it's a loss leader attached to an ascension path...when possible one high ticket, backend offer can make all the difference here.
The ability to sell a product or service, cover it's production or fulfillment and have profits left on the bottom line is dependent on the concept that the offer's pricing not be swallowed whole by the cost of the "goods" sold. Otherwise you have no room in your margins for acquiring new customers through paid marketing or distribution partners...let alone leveraging labor by way of in-house sales reps.
In an ideal world your prospects would be aware of the problem, have an existing budget for the solution, be free from the prioritization of expenditures that could hinder their ability to make the purchase and simultaneously be able to pay before products or services are delivered so that your fulfillment of this sale is cash flow positive.
Consider the difference between water filtration system installers vs bottled water companies. If your water is high in minerals (hard water) you may be aware that it's less than desirable drinking based on the taste and less desirable washing water (for both clothes, dishes and skin) based on the residue. A +$3,000 whole home water filtration system may be highly desirable for a homeowner to have purified (softened) water coming out of every spout in the home including the shower, washing machine, dish washer, and sprinklers. However if the family is on a fixed income, has debt and a disadvantaged credit score rating then their prioritization of expenditure may funnel their focus towards maintaining their mortgage and kicking the pale down the road by continuing to buy water bottles; even if more expensive annually. An irresistible offer would likely want to overcome this prioritization of expenditure by perhaps demonstrating savings, offering financing for cash strapped homeowners and overcoming the both logical and emotional objections around money with tipping point bonuses like free laundry detergent for a year.
Dr. Robert Cialdini's research around principles of influence and persuasion are foundational to understanding an effective sales process from psychology.
These principles should be used with integrity and not manipulatively. People need to arrive at their own decisions for their own needs.
Tony Robbins 6 Core Human Needs is an excellent way to remember how you can best serve people beyond the mere matching of solutions to problems or coldness of a calculated unique value proposition. There's an argument to be made that the majority of buyers remorse cases are due to misgivings related to these psychological needs a consumer or buyer has more than deliverable of the product or service itself.
Furthermore, Motivational Interviewing by William R. Miller and Stephen Rollnick is arguably the underpinning of modern sales training.
That said, there's a wonderful saying, however illusive it is in the real world, and that is that the goal of marketing is to make sales irrelevant...self service transactions are certainly more passive but many businesses that are not literally vending machines do not function well with a vending machine style monetization approach.
For example, specialty retail stores rarely perform well on a clerk-based sales process as average tickets will fair too low and most high end solutions require education to fully perceive their value. If it does not require education to perceive the value of the product, support to install the product or maintenance to upkeep the product then how should the buyer know that they should purchase the product from this specialty retail store in the first place? The customer cannot ignore convenience or commodity savings with Wal-Mart, Amazon or (insert niche e-com store or big box retailer) if they are unaware of the added value you bring to the table, let alone if they are oblivious to the specific product(s) they should buy instead.
The holy grail is being able to sell offerings which cost close to zero so that your profit margin is as close to 100% as possible. If your cost is incurred one time or shared widely across a big client base then the lion's share of your revenue will be distributable to shareholders as profit. If you can avoid sitting on inventory overhead that is certainly desirable...slow turning inventory across an expansive number of SKUs can bog down a good business quickly.
Think of cellular service providers where the core investment they made was in cell phone towers and the cost of upkeep, upgrades and expansion is now minimal relevant to revenue for telecom companies. Another example could be video game creators, movie studios or online schools which invest in creating media that is sold with very little cost of replication to each additional customer that accesses it. You could also look at something like Coca Cola which makes it's drink for pennies and sells it for dollars with such strong margins that they can benefit from a distribution channel or reseller network of restaurants with even the restaurants themselves being able to generate healthy profits from reselling the soda.
If you have little to no profit margin it's like Sisyphus from Greek mythology cursed to push the boulder up the hill forever with endless resistance. However if you have +50% profit margins you may still struggle to scale your customer acquisition or retain your customers but the customers that you do sell will be the equivalent to down hill skiing when contrasted to fighting uphill against a profitless model.
Become adept at selling not on price but value and your scope of opportunity expands.
An irresistible offer combined with irrefutable proof can move mountains. The burden is on you to demonstrate proof of value.
Read Alex Hormozi's $100M Offers to fully discover mastery in making offers that people feel dumb saying no to. It may very well be the best business book ever written.
IDEA: RISK
There's no way to avoid ALL risk, but we should be vigilant to not let risk hide in our blind spots. Naseem Taleb's concept of not being "fooled by randomness" is foundational for understanding probability, luck and unseen risk. Skepticism and appreciation for prudent uncertainty can be useful survival mechanisms when judging opportunities.
When analyzing business ideas we must remember that we are often evaluating the surviving winners and those who were knocked out of the game are unseen, even if they are the majority.
NOTE: Mental models and awareness of cognitive biases are helpful tools to keep yourself honest. Even the human tendency to look for patterns in things which we do not understand can quickly lead us astray. For example, a market leader may have spent $50,000 on highly produced, live action videos and animation videos for paid marketing on TikTok but there may not any be a causal connection between their market leadership and their video marketing efforts...
Even when evaluating the Profit Buyer Framework there is endless variation across all potential business use cases that this model of the world could very well fail to be useful for buying or generating profit under. For example, if you live in a barter-based, underdeveloped country the ease with which you could likely conduct transactions in that economy is likely strained. This would be analogous to the same way that 200 years ago in the United States there was not widely democratized access to capital for businesses and customers alike to buy beyond their present means. (It's amazing the impact financing has had on the world even when just in relation to 2 pivotal aspects of modern society in homeownership and car ownership.)
Underlying assumptions of the strength of the economy, timeline for artificial intelligence to disrupt employment models and even trust in the American dollar as reserve currency are all keystones that if drastically adjusted could potentially upend not only this framework but the expectations we can have of how the world conducts business altogether. Ah, but better to risk dancing in the rain than burying your head in the sand right?
One helpful question for thinking through risk is:
What is your irreplicable advantage for how the competitors in your market will be irrelevant?
This could be intellectual property (software, patent or process) that supersedes the competition's. This could be exclusive partnerships which present you as the preeminent leader and thus the only logical choice. This could be vertical integration which is able to solve problems the customers have before and after their core need which positions you as the one-stop-shop. This could be first mover advantage if you are in a blue ocean...though beware risk of no demand for your solution. This could be expansion revenue opportunities which increase your customer lifetime value and thus enable you to spend more than your competitors to acquire customers.
There are many more strategies for mitigating risk with varying effectiveness and permanency.
Inactivity is the most risky choice. Decisive decisions are rewarded by validation or accelerated iteration.
VALIDATION: Liquidity + Advantage + Allocation + Trends + Trial
Sometimes it's helpful to look at the most successful businesses in the world (worth emulating) and reverse engineer what makes them have such a leg up in the marketplace. The same is true for fact finding about the businesses that perform(ed) poorly which you will hope to steer clear of their shortcomings.
You will not be likely to find any opportunity that checks every single box and pursuing perfection is only likely to lead to analysis paralysis. You are just looking for some resemblance of a gap in the market and product market fit.
You can do competitive analysis of top performers' search engine traffic around core keywords, online reputation around review ratings, estimations of money spent advertising online, survey their past customers and even quiz relevant prospects in your network using a survey funnel approach like Ryan Levesque advocates.
That said, it's very easy to go too far with market research. We don't need to know what content management system their website runs on or how many shares their homepage has on Facebook. Data collection can get pedantic quickly. You will extract the most insights from data points closely related to how they acquire customers, what the pain points and desires of their customers are, what their customer experience is like, what prospect list you could target in that space, and what gap in the marketplace you could better serve.
Also you want to evaluate what learning curve will be required to get you up to speed. If you are not computer savvy and you want to get into javascript (programming language) it may take you many months to years before you become proficient. If you are a handyman and you want to start a storage shed building business it may take you days or weeks to become proficient.
Look for mentors and programs which can short-cut the time it takes to mastery. There are franchise systems and white label franchises, or coaching programs, which focus mostly on fulfillment but let you leverage their systems and processes under your own brand. There are partnerships where a 3rd party handles fulfillment for you and you are responsible for marketing, sales and account management. There are jobs where you are guaranteed compensation, paid to train on new skills and rewarded handsomely for focusing on critical pieces of their operations without the burden of problems and risk that exist elsewhere in the business independently of what's under your control in the work that you do.
You can't be everything to everybody and you can't do every task of every aspect of your business.
Knowing your lane or lanes and being as productive as possible in that lane can be much more useful than achieving mediocrity in one more additional low value skill. For example, if you are sales rep that wants to start your own business you don't need to learn logo design just because the startup you think you might want to try as a side hustle could have a logo...less than $300 will solve that one-time problem and free your bandwidth to go deep on the skill stack that matters most for you on your path.
Speed to scale is important or you risk burning out, opportunity hopping and being knocked out of the game just as quick.
There's no shortage of shiny objects to distract you when the going gets tough. Have you exhausted shiny opportunities within your business and saturated your market share beyond the first two or three ceilings that you hit? Why would hopping to an unrelated startup idea be more prudent than expanding vertically, horizontally or acquiring competitors?
There's no validation without experimentation. This is your minimum viable product which will form your proof of concept.
EXECUTION
The idea is 1% of the equation. Execution is the remaining 99%.
Plan and define the objectives, goals and activities needed to meet your goals.
Commit to taking massive action. Grant Cardone's concept of 10X bigger goals and 10X more activities is the energy needed to do big things and applies to more than just sales.
Track and celebrate your inputs. Reward working the process correctly and actually taking massive action.
Monitor your outputs and tweak or increase your activities accordingly. Identify the bottleneck in growth and make it public enemy number one. Not enough store visitors? Remarket to your past customers. Not enough leads for your course? Generate more lead magnets to gift to new prospects as entry into your sales pipeline. Prescription without diagnosis is malpractice but more times than not the answer is more sales activity and better execution of those sales activities. Cody Butler's book the 90 Day Marketing Plan and Allan Dib's 1 Page Marketing Plan are good at getting you to lift your head up and see the marketing opportunities around you. Cody exemplifies the importance of the Key Performance Indicator of how many more people are aware of you, your solution to their problem and their need for your solution each day. The simplicity and consistency of focusing on bringing in new prospects every single day as a priority is the math equation that sums to the volume of sales you design into your business.
Is the resistance to ascending higher due to the drag of minimal altitude of scope and scale level that can be elevated out of with more time and repetition?
There's no replacement for hard work. Pride yourself in the action you take more than the ideas you pursue.
In regards to marketing and sales, know that most businesses come to fail without ever having reached more than a couple thousand prospects. Death by lack of awareness is a quiet one.
If you must close up shop why not go down having pushed the word out by every means possible?
Failing forward is underrated. Can you pivot to solve another parallel need uncovered in your go-to-market experience? If you cannot profit from your losses indirectly then you wil be stuck starting from inside the hole you just dug yourself...
What parrallel or perpendicular business would love to have the client relationshios that you presently have as leads for their own business?
Expand, partner or pivot.
This is an unusual construction of a book in that it's not intended to ever be complete. The broader framework may hold shape, but with endless new data coming in over time you should refresh and derive new insights on opportunities that are best for you. For example, in 1995 being a web developer would have been a blue ocean but that may be a deep red ocean now.
NOTE: Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne is helpful for exploring the saturation relationship between opportunity vs competition.
The wider resource available on ProfitBuyer.com is a work in progress and will evolve over the years through the blog. It should serve almost like a paint by numbers portrait in that it lets you see the bigger picture before you ever pick up a brush.
The only thing which is constant is change...
The remainder of this Profit Buyer resource is intended to be more dynamic and expansive topics for your consideration. Only certain publications may be relevant to your respective pursuits. Think of this as a choose your own adventure series where the opportunities and challenges before you will best determine what is useful to you at any given time.
Perhaps certain information is irrelevant for you today and if so, then you have complete permission and encouragement to skim, skip or entirely omit aspects from your journey.
There's no need to procrastinate making tough decisions until some future date that you find the perfect insight. An okay solution implemented today is better than a perfect one 365 days from now. Delaying action to learn more and more is like holding off on starting to swim until you better understand osmosis. It's learning the precise right insights at the precise right moment you need it that propels you fastest and furthest. Don't let anybody fool you into thinking that you must know everything to be worthy...doubt, fear of failure and imposter syndrome are warnings from your subconscious intended to keep you safe but more times than not just keeps you small.
What counts most is that your inputs produce your outputs. If un-leveraged you may receive a 1 to 0.1 ratio, if sufficient a 1:1 ratio and if great a 1:1,000 ratio. Good or bad, over time regression to the mean will win out over any day's random chance odds and pull us towards the results that fit the impact you have. Work like today depends on it because primarily it does. Learn like tomorrow depends on it because secondarily it does.
Better to stack the odds, and leverage, in your favor...
Below are further domains to explore on your journey to seek truth, buy profit and live your best life with leverage.
Think of being at the starting line of a marathon looking over the first mile and down a long windy road...
For many, taking the first step is scariest. Maybe it's the anxiety of what remorse may wait in a long, painful race. Maybe it's the recognition of a daunting challenge and the fear of a public failure.
F.E.A.R
Somebody once said that fear stands as an achronym for "False Evidence Appearing Real".
That's very true. Most things we fear are only suffered in imagination. However when it comes to something like a grueling race, steep mountain climb or treacherous business endeavor, that fear can represent a sincere risk.
Your brain wants to keep you from getting knocked out of the game. Maybe it's just difficult for it to delineate life and death danger from "existential danger".
The existential crisises will come...that's par for the course but those moments can mostly be overcome. Even contending with failure or quitting is not as bad in reality as it feels internally. We are our worst critics after all...nothing is as good or bad as it seems. There's an old proverb which tails the ups and downs of a farmer to whom at each twist of fait stoically says 'maybe...we will see' to his neighbors alternating congratulations and condolences...
Humans adapt. You would rebound. Your life would continue...maybe quite disrupted in the short-term but probably much more well lived in the long-term.
Choose to hold yourself to the highest standard. Choose to raise your expectations of yourself higher and higher. The external voices will not surpass your internal force. David Goggins audiobook Can't Hurt Me is extremely helpful for reminding yourself of what you are capable of and what you can persevere.
Imposter syndrome is another breed of road block. You or others around you may believe that you are not yet "ready"...however Yoda will never come find you, tap you on the shoulder and say "the force is strong in you...start your business now you must." If every entrepreneur waited to become a billionaire before giving themselves permission to start there would be no billionaires. Every great leader or "guru" was once earlier on their journey as well. If your intentions are to provide value and you operate with reasonably strong principles, then you are not a charlatan, poser or imposter. You can't hit a home run from the dugout.
The winner's mindset is defined in your times of challenge. There's a great quote that sets the tone for what it takes: "Pressure is a privilege."
Don't wish the challenge was easier, wish to be better...work to be better.
The only thing that is constant is change...the natural selection analogy is adapt or die. Remember that even most formal companies have less than six months of cash in the bank before bankruptcy. The average business has less than a month of cash on hand. Everybody is bowling without bumpers outside of employment. Embrace it.
One of the most unfortunate road blocks to getting started is Shiny Object Syndrome. Coveting other opportunities that seem easier or better, rather than nurturing what you have. It's safe to say that there have been people before you that have done more with worse opportunities...they just sprinted like hell.
Some get knocked out of the game at the starting line by simply not having a framework, process or utilizing leverage to beat the odds. That often times is starting with an inferior business model, commodity positioning, razor thin margins or any number of strategic errors that take you off course from the first step. You have the advantage of framework and in the digital age you have unlimited information and connectivity at your finger tips. In the old days the closest thing to Code was an abacus. In the old days the closest thing to Media was a manual printing press. If you think about it you have more advantage today than ever before in history.
Actually it is massive action that buys you the time and resources to get better. Without first finding effectiveness you cannot develop efficiency. If you have an opportunity that may be a diamond in the rough, best to begin mining and over time we can improve the color, cut, clarity and carat weight of the diamonds that bare our brand. Too many people get lost in the tactics without the first principles of strategy. There's endless minutia on the path but you can't major in the minors.
Tony Robbins once said something to effect that if you don't have resources you simply need more resourcefulness. Leveraging others' underutilized assets is underestimated for getting off the ground running.
You just need to develop your first atomic network to start achieving network effects as Andrew Chen lays out in his book The Cold Start Problem.
If you feel stressed, that's rather normal isn't it? Here's a micro lesson on reframing stress by Scott Adams that simplifies the stress equation. You might notice that Scott's list is very parallel to if he had generated them through the principle of Inversion by asking "how could you guarantee you'd be stressed?" and then suggesting the opposites to reduce stress...
Guaranteed Stress System:
Scott shares good food for thought on systematizing the antidotes into your daily life.
Not all quitting is bad. Quitting smoking cigarettes is positive right? So why is quitting a business opportunity that is causing you harm rather than benefits so frowned upon?
In Viktor Frankl's book Man's search for meaning he shares the atrocities that he and countless others had to persevere through in Nazi concentration camps and find meaning in life through the surviving of unthinkable attrocities.
Surely quitting a business opportunity that is failing would not be that big of a deal in comparison to true evil...
You can move past a business or career setback. You can rewrite your own story with what you do from today forward. Yesterday is the past and no matter how painful the failure you can find new meaning with the help of Frankl's accounts and perspective.
Find your next thing if you must, but don't carry the unnecessary baggage with you.
Realism is helpful. Roughly 95% of businesses fail in some 5 to 10 years after launching...put another way, the law of averages says your first business should fail statistically speaking. Temporary business survival and relatively quick closures is the rule. Selling a business for millions of dollars is the exception, not the rule.
Pick yourself up. Dust yourself off and focus on the best progress that can be made.
As Charlie Munger of Berkshire Hathaway says, self pity is not going to improve any situation.
It takes courage to be decisive and it takes little skill to be a critic so ignore any haters to whom you do not deeply value and trust the opinions of. Oftentimes quitting the wrong opportunity creates the room for something better to fill its space.
The philosophy of stoicism helps.
It seems the more you learn the exponentially more you realize how little you truly know. This resource was made understanding you will likely encounter the good, bad and ugly in the game of business. Be a student of the game and humbly optimistic on your journey. The hope of this resource is to help somebody else on their journey and keep you from having to learn any more lessons the hard way than necessary.
Here are others worth studying and that may serve you on your journey through a wide set of book recommendations but you can also subscribe to the newsletter below to get periodic recommendations on information that can change your life should you embrace the challenge to put them into practice...
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