Business Lyceum
e-Letter
Practical
Instruction in the Arts and Sciences of Making Money
FEBRUARY 2001
Greetings & Salutations:
Are you still thinking like a Wage-Earner?
Although some less-than-bright business writers have (for
more years than I care to remember) advised their readers that
there are ...
Two Ways To Get Rich ...
Make More Money - or - Spend Less Money.
That Is "Wage-Earner"
Thinking -- Not "Business" Thinking!
Granted, in order for a 40-hour-a-week salary-slave to improve
their financial position, they must either make more money ...
by getting a pay raise or a better job ... or, they must spend
less of the "salary" they are currently earning.
Either way, their disposable income increases.
In the business community, it just ain't so.
You can get rich by making more money - but ...
No matter how brilliant you think you are, you
will never get rich by spending less money.
Think about it! -- If a wage-earner decides to spend less
money by reducing their living expenses ... moneys spent for
food, clothing, lodging, communication, and transportation ...
it doesn't affect their cashflow. Their salary (cashflow)
remains the same. -- Every penny they don't spend becomes disposable
income to save, invest, or use to pay-off old, outstanding bills.
Wage-earners do not spend money to generate income.
Their cashflow is generated by selling their time and skills
to their employer. Therefore, if a wage-earner reduces
their out-of-pocket expenses, the resulting savings go directly
to their bottom line because it doesn't change the
time and skills they are selling.
In the business community, cashflow (revenue) is a result
of spending money ... buying equipment, fixtures, signage,
inventory, packaging, office supplies ... paying for advertising,
shipping, telephones, utilities, building rent or mortgage, postage
... and, in most cases, paying people to facilitate the warehousing
or stocking of your wares, and the sale and distribution to your
customers. Each cost helps create ... directly or
indirectly ... the resulting cashflow.
Unfortunately, all too many small business people attempt
to "make more money" by "spending less money"
in their business without considering what effect it will have
on their revenue. -- Why? -- Because, most of them, having come
from a wage-earner background, still have a ...
Wage-Earner Mentality
Since they have been told (frequently and repeatedly) that
to "get rich" they either have to make more money,
or spend less, they usually opt for spending less; because it
looks easier than trying to increase the business' revenues.
Looking through their costs, they see some on-going big expenditures,
and, determined to "spend less,"
they decide to cut those costs ... just because those costs are
obvious. -- Their wage-earner mentality tells them that, "if
we don't spend that money, it will be ours to keep" (after
paying Uncle Sam his share, of course).
Since they can't cut their on-going fixed overhead costs ...
like rent and utilities ... they usually decide to cut such things
as inventory and advertising. -- After all, "since people
already know where we are and what we sell, why should we spend
all that extra money on advertising" - and - "we've
got enough inventory, I'll just keep the money in my pocket and
reorder when I run-out."
But, unlike the wage-earner environment in which they were
reared, their income isn't static. The "paychecks"
don't just keep coming in ... regardless of the amount spent.
With the advertising expenses cut, fewer people come through
the doors ... fewer sales are made. Or, worse yet, the
people keep coming through the door, but, because the inventory
expense has been cut, they can't find what they came to buy and
don't come back later to look again. -- Either way, the money
that wasn't spent doesn't come back in to be put into the pocket
of the business owner ... .unlike the wage-earner's paycheck
that just keeps coming as long as they have a job.
Spending less money might actually allow a wage-earner to
get rich - but - the only way you are going to get rich in a
business of your own is by making more money. -- When a business
owner tries to grow their business by spending less, they inevitably
end up shrinking the business instead ... adding to the business
failure statistics.
Quit thinking like a wage-earner. Forget about "spending
less." Concentrate on learning ...
How To Make More Money In Your Business!
In accord with the advice of the not-too-bright business writers,
wage-earners who want to be better-off financially have an option
... either spend less, or make more. Business owners only
have one choice. They must do two things ...
Do More Of Whatever Makes The Most Money!
- and -
Do Less Of Whatever Makes The Least Money!
This is not an either/or situation. The business must
do both. -- That means evaluating your current cashflow and profit
centers to determine which are generating the most cashflow,
which are generating the most profits, which may be costing you
money without enhancing the viability of your business, which
may be costing you money but do enhance the viability of your
business, and which are losing money.
In order to accomplish your goal of business growth, each
primary product or service you sell should be considered as a
separate business entity. Then, each should be evaluated
independently to determine whether or not the marketing for that
product or service should be increased, decreased, or eliminated
all together.
Did you notice that I said, each "primary" product
or service, not "each and every" product or service
you sell?
Beyond its "primary" products and services, each
business (usually) has some "peripheral" products and
services that ... although sometimes highly profitable ...
cannot generate enough cashflow on their own to justify any separate
sales efforts. These are the products or services your
customers may want or need in conjunction with your "primary"
products or services but wouldn't normally buy as a separate
product or service.
To best explain the evaluations you must do in order to grow
your business, let's pretend that your business has just three
"primary" products.
Product "A" has annual sales of $25,000. -- Product
"B" has annual sales of $10,000. -- Product "C"
has annual sales of $5,000.
Although, at first blush, it might appear that you need to
put more effort into selling product "A" and
less effort into selling product "C" ... it ain't necessarily
so.
Product "A" has a higher cashflow, but let me 'splain
something to ya ...
Cashflow Allows A Business To Survive
Profits Allow A Business To Grow
"Cashflow" can be used to pay the bills ... maintain
the same level of sales ... but only returns the direct and indirect
costs of doing business (i.e., overhead costs, salaries, inventory,
advertising, shipping, etc.).
"Profits" ... over and above the costs of doing
business ... are the only money you can use to increase your
inventory and advertising; the two elements necessary to the
growth of your business.
NO ... I'm not talking about "net" (taxable) profits.
I am talking about "gross" profits against sales. --
"Gross" profits spent in the growth of your business
never reach your bottom line to become taxable.
And, when I talk about "inventory," I am referring
to whatever you sell ... whether your cost of inventory
is tied-up in tangible goods in a warehouse, stockroom or display
area; or just "available" from a drop shipper ... or
the intangible services you provide yourself; or employee others
to provide. -- Only "profits" allow you to increase
the availability of your inventory ... whatever it may be.
Going back to our example ...
Product "A" ... with gross sales of $25,000 ...
has a direct inventory cost of $15,000 and a direct advertising
cost of $5,000 (direct advertising cost being the amount of money
specifically spent on selling that product). -- That leaves a
"gross" profit of $5,000 from the sales of product
"A".
Product "B" ... with gross sales of $10,000 ...
has a direct inventory cost of $5,000 and a direct advertising
cost of $2,000; leaving a "gross" profit of $3,000.
Product "C" ... with gross sales of $5,000 ... has
a direct inventory cost of $2,000 and a direct advertising cost
of $1,500; leaving a "gross" profit of $1,500.
Although product "A" has the highest cashflow, it
only allows a "gross" profit margin of 20%. If
you take 100% of the gross profit generated by product "A"
and spend it for more of the same advertising, you will increase
the sales of that product by 100%.
Products "B" and "C" provide much lower
cashflows - but - each of them allows a "gross" profit
margin of 30%.
Like product "A", if you take 100% of the gross
profit generated by product "C" and spend it for more
of the same advertising, you will increase the sales of that
product by 100%. -- BUT ...
If you take 100% of the gross profit generated by product
"B" and spend it for more of the same advertising,
you will increase the sales of that product by 150%.
Get the picture?
A wage-earner can "spend less" in order to improve
their financial position but, in business, the idea is to "spend
the same amount but make more usable money." -- The increased
"gross" profit can, then, be spent to make even more
- or - improve your lifestyle, since a smaller piece (percentage)
of a big pie (net profit) will be much bigger than a bigger piece
of a small pie.
Now is the time to go back over your detailed revenues and
costs to determine how you can ...
Do More Of Whatever Makes The Most Money! - and -
Do Less Of Whatever Makes The Least Money!
Quit trying to "spend less" to "make
more" and figure out how you can "spend the same amount
but make more usable money."
Now, let's do some ...
Questions & Answers, Comments
& Other Good Stuff!
Dr. John K. Flynn wrote: :
"Thanks for your interesting newsletters. I recently
had a real mail letter from a firm in Kansas called xxxxxxxxxxxxxxx.
They say they have been in business for 6 years. They are offering
me a Joint venture to sell my software products on US cable TV
with telephone sales, service, packaging and shipping included.
They reckon they get 1/4 Million sales on average for each product
they sell.with a minimum of 100,000 sales. They ask for
$7000 to do the video and get it screened nationwide. I
telephoned the marketing manager and he was very enthusiastic
and personable. He then sent me a fancy brochure and a
promo video. They take about 50% of the profit. I can't find
any bad reports except for a company called xxxx-pet supplies
(also in Kansas) who have come under scrutiny from the inventors
association for unprofessional conduct. They seek inventors
and offer to get their products 'patented.' Do you think
they are genuine? I have read that 'If it sounds too good
to be true, then it probably is.'"
John:
I have no personal knowledge of xxxxx - but - if they can
sell a minimum of 100,000 units (of anything) I am wondering
why they are requiring $7,000 up front. It would seem to
me that 50% of the revenue would more than entice them to front
the project themselves.
Over the years, when I have found something I want to sell
... because I know I can sell it ... I have
always fronted the money to get the product to market.
That's the way it usually is in the "real" business
world. -- An "entrepreneur" by definition is the person
who "takes the risk." No risk = no gain.
Before I can comment further, I would need to see the "wording"
of their offer and, if you have them, the names of the principals.
If it sounds too good to be true,
then it probably is!
Good advice - BUT ... when you hear that phrase, remember
that it ONLY refers to things outside your knowledge and experience;
NOT to everything you hear that sounds too good to be
true.
Having spent over 40 years of my life "doing" business
... not just writing about it ... I can tell you things about
how business is done that you would, without doubt, consider
"too good to be true," but those things are done, every
day, in the "real" business world.
So, when something sounds too good to be true, to YOU ...
with neither knowledge nor experience in that particular field
of endeavor ... do yourself a favor and seek out someone who
has had experience in that area and ask their advice - but -
don't ask for advice from someone who has the same limited knowledge
and experience as yourself.
What "sounds too good to be true" to
you, may be an everyday occurrence in the "real" business
world.
David McKamey asked:
"I found out about your company web site via searches
on 'self liquidating loans'. Thus, I ask are
you legal? You basically are selling information,
I understand that, but is the information valid?
For example, can you give me the name and address of a few companies/individuals
that have raised capital for business purposes using 'self liquidating
loans'?"
David:
There are NO companies who have raised capital using the classic
"self-liquidating loan" procedures as promoted by the
con-men, because what they are promoting would be a "self-FUNDING
loan" rather than a "self-liquidating loan."
No such loan exists. (That's why so many law enforcement
agencies have ordered copies of my report in order to prosecute
the con-men.) However ...
If you need money for your business, you may be able to use
the methods explained in the last chapter of the report.
Of course, that is dependent upon you having a legitimate business
for which you want to raise money, credit worthiness, and a proven
ability to operate that business profitably once it is funded.
Sorry ... there ain't no free lunches.
Anony Mouse asked:
"I hope you can spare a minute to help me get started.
I confess to having spent some money a few weeks back on an informercial
on "direct marketing"... it was a spontaneous purchase
brought on by a lack of sleep and being late at night when my
defenses were down ... SWEAR! It was only after I had ordered
that I remembered some things you had written and I realized
that what I really need is provided right here. So here's
the problem I need your input on ... I've put aside an initial
$250 which will have to also include the purchase of course work.
With that in mind ... where or should I say, which course do
I begin with. I want them all ... but FINALLY I've become
rational and responsible enough to realize that I can buy everything
and do LOTS of reading with no action or start small and gradually
gain more and more ammo. Can you steer me in the right
direction, Mr. Straw? Any and all suggestions will be followed
as I've tried to do things MY way without success long enough,
it's time to listen to the pro."
Hey, Mouse ...
It really doesn't matter whose marketing information you buy
... mine, or someone else's ... as long as your remember that
"ALL of us are right - and - ALL of us are wrong."
Most of us teach what we have done. Some teach from
what they have read. In either case, the ONLY way
you can tell if something will work for you is to TEST it ...
again, & again, & again ... until you find "what
works for YOU" -- that is the only education worth having.
Alvin Corbett wrote:
"I am interested in selling to department stores and
Mail order houses my new lingerie line from Cyprus. Can
you recommend any companies that sell detailed lists with not
only the name of the store but the buyers of that stores different
departments?"
Alvin:
Usually, when one of the 'gurus' get a question like this,
they refer the person asking the question to SRDS (Standard
Rate & Data Services, 3004 Glenview Rd., Wilmette, IL
60091) - but ...
Although SRDS provides a wide variety of directories of mailing
lists; and mailing list providers, those directories are costly
... some of them costing over $1,000 per year. Beyond that,
the demographic break downs in the directories are somewhat limited.
So ...
To find mailing lists with the exact specific demographics
you want, I highly recommend that you contact any full-service
Mailing List Broker and give them the demographics of the people
you want to reach. Let them do the research and get back
to you with a list of lists.
Beyond that, I most highly recommend that you buy E. Joseph
Cossman's remarkable new CD-Rom called "Marketing Synergy"
... with the Cossman International Marketing Database fully integrated
into the program so all you have to do is "click" on
the links to go directly to the web addresses of "real"
buyers. -- It's only $149 ... well worth 100 times the price
to anyone wanting to market anything. -- You can get it directly
from: Cossman International Marketing, P.O. Box 4112, Thousand
Oaks, CA 91360 -- (818) 879-0339 -- FAX: (818) 879-9326
-- OnLine: www.cossman.net
Don Evans wrote:
"As a customer of and a big fan of yours, I need your
advise. I have recently joined a local company here in South
Jersey as a Business Broker. Are there any any publications
or books that you can recommend that I read? Also I have
plenty of sellers, can you recommend a method(s) to find buyers?"
Don:
As you probably know, there are always books available on
any subject - but - since you have joined a company involved
in the business, it is better if you look & learn directly
from those who have been doing it.
Now ... about finding buyers.
Believe it or not, I once sold a business in less than an
hour after a friend of mine told me he wanted to sell it (or
course, it took a month or so for the sale to finalize, but I
found a buyer in less than an hour). -- How did I did it? --
Well ...
Most Business Brokers run classified ads in the local newspaper
trying to sell a local business - but - by and large, their ads
just invite lookyloos. All I did was call every business
in town that was involved in the SAME industry. None of
them were interested - but - one of them told me about another
business; just like it, in a nearby town that was looking to
open a second store in our town. -- I called that business and
made the sale (well, I told him all about it and he said he would
come see it the next day).
So ... when you are trying to sell a business, contact other
similar businesses. It is an easy way for them to expand
their operations without the start-up costs. Beyond that,
when you are dealing with the bigger businesses (not necessarily
local), you should look through the various periodicals in that
industry and call the companies in the same business. If
they don't want to buy the business, they may know somebody who
might.
Frank Kern wanted to know:
"I was wondering if you would mind asking your readers
if any of them would enjoy doing a joint venture with me to promote
Dan Kennedy's marketing products."
Hokey, dokey ... if any of you wanna get into a Joint Venture
selling Dan Kennedy's products, contact Frank.
In last month's issue of "TalkBiz," Paul Myers
answered the question ...
"If I can't send them bulk email, how am I
supposed to get in touch with potential business partners?"
The article, entitled "First Contact," is
way too long to publish here but he has made it into a PDF file.
You can get it from ...
http://www.talkbiz.com/news/Contact.pdf
- or - http://www.talkbiz.com/news/Contact.zip
Well worth reading.
Bud Somers, C & B Custom Products
has just put together a fantastic 70% commission Affiliate
Program... says you can ...
Earn Thousands of $$$$$$$ Giving Away "Free
Hotel Rooms" In Your Spare Time!
Ask Bud for all the details.
Well ... that's it for this month. -- In order to make every
issue responsive to YOUR needs, please send me your questions;
or tell me what sources or resources you need to build your business;
or give me any thoughts you want to share with your fellow members.
Believe it or don't ... I ain't a mind-reader. -- If'n you
doesn't tell me what you need, I may never touch upon the information,
sources or resources you need.
This is your publication for you to use to your benefit ...
I am just your moderator.
Until next month, keep well ...
J.F. (Jim) STRAW
Too Good to be True
Thought For The Month!
"Perhaps the most valuable result of all education is
the ability to make yourself do the thing you have to do, when
it ought to be done, whether you like it or not." -- Walter
Bagehot
Can you stump the old master? --
Betcha can't!
Over the past 40 years (man and boy), I have made bundles
of money in direct selling, service
contracting, wholesale merchandising, entertainment (I was a
professional Trumpet player, vocalist & Radio Announcer),
freight forwarding, import/export, retail merchandising, warehousing,
real estate, electronics manufacturing, finder's fees, closeout
merchandising, financial brokerage, business consulting, steel
fabrication, gold and coal mining, offshore banking, mailorder,
writing, and publishing. -- That being the case ...
No matter what business you're in ... whether you're just
starting, well on your way, or at the top of the heap ... I've
probably been where you are, done what you are doing. -- So ...
Anytime you have a question about 'how' to do something in
your business - or - if you have
any comments about anything I've said in issues of this e-Letter;
or if you want to add your 2
cents worth ... just "ask" me or "tell" me.
Send your Questions, Comments or 2 Cents Worth
to ...
with "Question" - "Comment"
- or, "2 Cents Worth" in the SUBJECT.
If I, personally, don't have an answer to any question you
may ask, I will contact some of the
professionals in your field of endeavor (I will probably know
one or more personally) to get the real 'skinny' for you.
No Paid Advertising!
We DO NOT accept 'paid advertising'
in the "Business Lyceum e-Letter." -- Why? -- Because, when you offer 'paid advertising,'
you are obligated to run the ad, or have a valid excuse for not
running it. (An excuse that will hold-up in court because
all too many people like to sue for any seeming slight.)
Therefore ...
Any time you see something offered in
the "e-Letter," you can bet your bippy I am telling
you about it because it is something I, personally, would recommend
to my friends and family. -- It's here because I
like it; not because I am being paid to tell you about it --
BUT -- that does not mean that I don't accept payment in the
form of commissions (never in advance) from some of the offers
I tell you about.
'Nuff said?
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Copyright - 2001, J.F. (Jim) Straw. All rights reserved.