The 12 Undeniable Truths About Business
September 2nd, 2009 by Bob Bly
Here are 12 business principles I believe to be inviolate. Are there any you disagree with? Any missing that you would add?
1?The bulk of your profits will be made on the ?back end? (repeat sales to existing customers), not the ?front end? (the first sale to a new customer). Therefore, creating and selling a single product with no back-end is almost never profitable.
2?The Internet is the least effective way to market (i.e., most people don?t respond to online marketing), but it is the most efficient (i.e., because it?s so inexpensive, even a small response rate can make your promotions very profitable).
3?Simple ideas are better than complex ideas.
4?Ideas are a dime a dozen ? everyone has them, all the time.
5?Ideas without action are worthless.
6?Action creates business success, yet 99% of people never act on their ideas.
7?If you create a base of 10,000 loyal fans who each spend a hundred dollars a year with you, you will gross a million dollars a year.
8?You do not need a lot of money to launch a successful business today: the low cost of doing business on the Internet reduces your risk to easily manageable levels.
9?If you do not have a lot of money to launch your business, then you must invest a lot of your time to make it happen. You cannot start and build a successful business with neither time nor money ? you need one or the other.
10?Profitability is determined by the formula: P = S ? E: Profits equal sales minus expenses. Too many businesspeople focus on increasing S (sales), when they could be getting an equal profit boost by reducing E (expenses).
11?The ultimate measure of marketing success is ROMD ? return on marketing dollars. For every $1 spent on marketing, how much did I generate in revenues? (e.g., My e-mail marketing has an ROMD of $75 in revenues per dollar spent).
12?If you cannot accurately measure ROMD, you do not know whether your marketing is worthwhile or not. You may have a strong FEELING that it is worthwhile, and you may be right. But you don?t know.
This entry was posted on Wednesday, September 2nd, 2009 at 7:04 am and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
September 2nd, 2009 at 10:56 am
This is a great list, especially number 2.
I recently made a very large purchase. As a marketer I was curios as to how this company got me to spend so much money so I looked at their system.
I first made a small purchase with them online which put me on their radar. Then I made a slightly larger purchase. Then I started getting direct mail from them. But the really big purchase was made over the telephone.
They generated leads the most efficient way possible then made the big sale the most effective way they could.
It was a good marketing lesson.
September 2nd, 2009 at 11:57 am
GREAT list, Bob!
One point I would add is something I wrote about in an article today. It can be summed up with this quote from Dan Kennedy: “Businesses must be market driven, NOT personal joy driven.”
By the way, Bob, what’s you policy on reprinting your blog entries as a “guest” column on other blogs? I’d love to repoublish this entire post on my Lone Wolf blog, with proper credit and a link back to your blog, of course.
September 2nd, 2009 at 1:47 pm
Lone: you can republish any and all of the posts here on your blog, as long as you give proper credit and a link back to my blog.
September 2nd, 2009 at 2:06 pm
#10: If you are losing money on each unit sold, you can always make it up in volume.
Sometimes, this is actually true, but I have known too many people selling too many products where no matter how many units they sold, there was never a breakeven.
Good list!
September 2nd, 2009 at 3:14 pm
Great, thanks Bob!
September 2nd, 2009 at 3:46 pm
Greg: #10 doesn’t say that if you lose money on each unit sold, you won’t lose money if you sell many. On the contrary, the more you sell, the more you will lose. The only way to make money is to reduce cost of goods and cost of selling until you MAKE money on each unit sold.
September 2nd, 2009 at 5:22 pm
this is a good list, mostly promotion oriented. Maybe you could add an undeniable truth about customer support.
For example, isn’t there a quote that says that unhappy customers tend to complain about services much more than happy customers recommend services?
Re: General business truths, what about the old standard that 80% of results come from 20% of efforts.
And, I wish I had known this one before I went into business: generally speaking, you can only bill for about half the time you spend working on a project.
September 2nd, 2009 at 5:23 pm
I know! I was kidding a little, although that is hard to get across online.
Sometimes you can make more money by increasing units sold after your revenue has paid your fixed costs. You lose money on each unit until you’ve paid your fixed costs but make money after.
But I have also seen cases where it is impossible to cross that threshold.
September 2nd, 2009 at 6:14 pm
Dave: Great rules, and I will add them to Part II when I publish it on this blog — stay tuned.
September 2nd, 2009 at 11:55 pm
I like number six. Action doesn’t guarantee success but inactivity can be an even greater tragedy, if you believe in your idea.
September 3rd, 2009 at 1:21 am
business is really the ultimate way to create money because most of the people at present are already attached to it. so in order to work with excellent in that area, it is also a must to know it better. thank you that you’ve posts these truths about it unveiling things that can really be useful to everyone. keep it up.
September 3rd, 2009 at 7:04 am
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September 3rd, 2009 at 2:26 pm
Great list! Since I quit my job a few weeks ago to start a new company, I’m tacking a copy of these to my board as a helpful reminder of the basics. Thanks!
September 4th, 2009 at 4:52 am
I believe in # 6 “Action creates business success, yet 99% of people never act on their ideas.” They want to have their own business but they are not willing to invest their time starting their own business. However, some people started their own business, but don’t want to spend much of their time in managing. In both cases, they are only after of the money, but not willing to work hard to earn it.
September 4th, 2009 at 7:47 pm
Bob
I love this list, especially #9.
I would add that prior to starting a business, a person should spend a great deal of time figuring out what will motivate them to KEEP acting, and not quit when the going gets rough.
I was looking at a story about JFK on the Biography Channel. Joe Kennedy was devastated when after having reached a respectable level of affluence, he was snubbed by New England society. They couldn’t get past his Irish Heritage.
He then decided to become so rich, and gain so much political influence that (hopefully) his background wouldn’t matter. The respect of his small-minded neighbors were what kept him going!!!
I am not saying we should think and act like the Kennedy’s, just figure out what will get us to keep going even when the “going” gets rough.
September 9th, 2009 at 2:39 am
I’ve been meaning to put up my own business too.. too many stuff to consider though, that’s why its all still a bunch of plans.