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The_Mathematecal_Formula_For_Making_Money_How_To_Apply_Its_Leverage_To_Increase_Yor_Profits_Exponentially
| The Mathematecal Formula For Making Money: How To Apply Its Leverage To Increase Yor Profits Exponentially.
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. 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).
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 Per
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
Increase in Profit(%) = $20,000 (100%)
Effort(%) = 100% 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 = $40,000
Increase in Profit(%) = $25,000 (125%)
Effort(%) = 100% 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 leads, conversion rate and average
dollar sale by 33% each. Net profit = $47,052
Increase in Profit(%) = $27,052 (135%)
Effort(%) = 100% 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
Increase in Profit(%) = $28,828 (144%)
Effort(%) = 100% 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
Increase in Profit(%) = $29,766 (149%)
Effort(%) = 100% 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 #1: To leverage your efforts for maximum
returns you must focus on improving all five levers in your
business. 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
Increase in Profit(%) = $12,210 (61%)
Effort(%) = 50% Profit to Effort ratio = 1.22:1 Case #2:
Improve all 5 levers by 25% each. Net profit = $61,035
Increase in Profit(%) = $41,035 (205%)
Effort(%) = 125% Profit to Effort ratio = 1.64:1 Case #3:
Improve all five levers by 50% each. Net profit = $151,875
Increase in Profit(%) = $131,875 (659%)
Effort(%) = 250% Profit to Effort ratio = 2.64:1 Case #4:
Improve all 5 levers by 100% each. Net profit = $640,000
Increase in Profit(%) = $620,000 (3100%)
Effort(%) = 500% 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. 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 of 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.
Copyright © 2003 Angelo Ioanides
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=90
mailto:angelo@marketingunveiled.com
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