What To Sell

by admin | Aug 14, 2019 | Sales

In PART ONE we explored two examples of expense structures.

In the case of Structure One, we allowed 50% of the Gross Sales Volume for expenses. We saw that if we were selling electronic information, there was no additional “Cost of Goods” over and above the expenses, which we will go into more detail on later.

In the case of Structure Two, we saw that if there was a “Cost of Goods” involved, that cost affected the Gross Profit because the cost of the product was over and above the 50% cost that we are allowing for all other Overhead and Operating expenses.

To refresh your memory, let’s review the following three illustrations that we went over in Chapter Six:

“INFORMATION” SALES PROJECTION:

In the case of the Sale of Electronic Information, such as an E-Book, or an E-Course, there are no costs for the Product or for the Delivery. Therefore, the Gross Sales amount is ALSO the Gross Profit amount. See the projection below.

Dollar amount of Sales per Day: $700

Number of Days per Month x 30

—————————————————–

Gross Sales per Month $ 21,000

Total Percentage of Expenses 50%

Gross Sales per Month $21,000

Estimated Percentage of Expenses x 50%

—————————————————-

Gross Profit per Month $10,500

Number of Months for theYear x 12

—————————————————-

Gross Profit for the Year $126,000

Estimated Tax Liability $ 26,000

—————————————————-

NET PROFIT GENERATED = $100,000

“PRODUCT” SALES PROJECTION NUMBER ONE:

In this Projection, we take a look at what happens to the Profit if you have Gross Sales of $700 per Day but you have a 33% Cost of Goods to Factor into the equation:

Dollar amount of Sales per Day $700

Less 33% for Cost of Goods $233

————————————————–

Gross Profit Per Day $467

Gross Profit per Day $467 instead of $700

Number of Days per Month x 30

—————————————————–

Gross Profit per Month $ 14,010 instead of $21,000

Total Percentage of Expenses 50%

Gross Profit per Month $14,010

Estimated Percentage of Expenses x 50%

—————————————————-

Net Profit before Tax per Month $ 7,005 instead of $10,500

Net Profit before Tax per Month $ 7,005

Number of Months for theYear x 12

—————————————————-

Annual Net Profit Before Tax $ 84,060 instead of $126,000

Annual Net Profit Before Tax $ 84,060

Estimated Tax Liability @ 25% $ 21,015

—————————————————-

NET PROFIT GENERATED = $ 63,045 instead of $100,000

“PRODUCT” SALES PROJECTION NUMBER TWO:

To compensate for the Cost of Goods at 33%, Gross Sales need HIGHER than the $700 per day in Projection Number One by the AMOUNT OF THE COST OF GOODS, so that when the Cost of Goods is deducted, there is still a $700 per day Generated Gross Profit.

Dollar amount of Sales per Day: $1050 instead of $700

Less 33% for Cost of Goods $ 350

—————————————————–

Gross Profit per Day $700

Number of Days per Month x 30

—————————————————–

Gross Profit per Month $ 21,000

Total Percentage of Expenses 50%

Gross Profit per Month $21,000

Estimated Percentage of Expenses x 50%

—————————————————-

Net Profit before Tax per Month $10,500

Number of Months for theYear x 12

—————————————————-

Annual Net Profit Before Tax $126,000

Estimated Tax Liability $ 26,000

—————————————————-

NET PROFIT GENERATED = $100,000

As a reminder, these three illustrations are based on the assumption that Your First Goal is to generate a Net Profit of $100,000, based on a 50% Overhead and Operating Expense.

The “INFORMATION” illustration shows that you need to achieve a Gross Sales Volume of $700 per day to generate Gross Profits of $126,000 for the Year, and thus generate a Net Profit of $100,000.

The first “PRODUCT” illustration shows that if there is a 33% Cost of Goods in ADDITION to the 50% Overhead and Operating Expense, the generated Net Profit for the Year would only be $63,045 instead of $100,000 with the Gross Sales amount as in the “INFORMATION” illustration.

The second “PRODUCT” illustration shows that assuming 50% Total Expense PLUS a 33% Cost of Goods, in order to achieve a $100,000 Net Profit, you’d have to INCREASE Gross Sales from $700 a day to $1050 Per Day to cover the Cost of Goods.

This does NOT mean that a Site that sells “Product” will be less profitable than a Site that sells “Information.” It DOES, however, mean that you MUST take this factor into consideration as you decide WHAT to sell on your Site!!!

Remember, the ENTIRE PURPOSE of what we are doing here is to do one thing:

GENERATE THE DESIRED AMOUNT OF PROFIT

In order to do this; one of the MOST CRITICAL thoughts that go into your SUCCESS is what we are doing RIGHT NOW –

Axiom Number Twenty-Five – DETERMINE WHAT TO SELL BASED ON THE ANTICIPATED AMOUNT OF GENERATED PROFITS

Let’s assume that you are selling a Widget for three times what it cost you to buy it. If you buy a Widget at a cost of $49, and you resell it for 3 times this cost, or $147, your Gross Profit is $147 – $49 = $98.

If 50% of the Gross Profit, which is $98, is the Total Cost of Expenses, then this means that out of $98, $49 is the Gross Expense Costs and $49 is the Profit.

See the Illustration below:

$ 49 Your Cost of Widget (This is known as the Wholesale Cost)

x 3 Based on a Mark-Up or Resell amount of Three times the Cost

—-

$147 Gross Sales Amount (This is known as the Retail Cost)

$ 147 Gross Sales Amount

– $49 – Cost of Goods

– $98 – All Expenses Totaling 50% of the Gross Sales Amount

——

$49 – $49 out of $147 equals a 33% profit margin

This means if you choose to sell PRODUCT, instead of INFORMATION, you will generate a Gross Profit of $33 for every $100 of Gross Sales.

If you sell INFORMATION, because there is no additional 33% for the Cost of Goods, 50% of the Gross Sales Price is Profit.

This means that if you sell $100 worth of your own INFORMATION, 50% is Gross Expense Cost, and 50% or $50 is the Gross Profit before taxes.

Whether the Net Profit before Tax is 33% of Gross Sales ($49 out of $147) or

whether the Net Profit before Tax is 50% of Gross Sales ($49 out of $98), the amount of Profit generated per Sale is IDENTICAL. So it is NOT to be said that a PRODUCT Site is necessarily LESS profitable. There’s a LOT of factors involved, which we will talk about now as we consider:

Axiom Number Twenty-Six – YOU DREAM BIG, YOU THINK BIG!

One of the biggest things I see so often is that even when people dare to DREAM BIG, they don’t expand their THINKING to THINK BIG!

Remember, right back on the FIRST PAGE of Chapter One, we said that ultimately, Success begins where?

That’s right. BETWEEN YOUR EARS!

IF you THINK SMALL, you will get SMALL RESULTS. And SMALL RESULTS DO NOT BUILD BIG DREAMS!

What I am trying to get across to you is that whether you sell INFORMATION, or whether you sell a PRODUCT, you need to sell ENOUGH of them at the RIGHT PRICE so that the Profit comes out to what YOU DESIRE for them to come out.

In other words, let’s say that you feel that you can write an INFORMATION piece that you feel you could sell to a particular market for $98.

Now, let’s say that you feel that you can sell a particular PRODUCT to a particular market for $147 and it cost you $49.

In the first example, selling an E-book Set or Course of your own origin for $98, assuming a 50% Gross Expense, you are generating a Gross Profit of $49 for every Book Sold.

In the second example, selling a $147 Widget, less the $49 Cost of Goods, leaving $98 in Gross Profit before expenses, and less a 50% Gross Expense Allowance, which is $49, you are generating the same Gross Profit of $49 for every Widget Sold.

Accordingly, for every 100 Books Sold, you generate $4900 in Profit. For every 100 Widgets Sold, you generate $4900 in Profit.

So it is not necessarily the case that INFORMATION is better to sell than PRODUCT. Only ONE of the many Variables is the DOLLAR AMOUNT OF PROFIT that you can generate from each Sale.

The next variable to consider is HOW MANY units you can expect to sell.

Let’s say that the WIDGET has UNIVERSAL APPEAL. There’s COUNTLESS Prospects for this Widget! You can Post your Advertisements in accordance with Your Marketing Plan and never run out of potential Prospects!

Let’s say that the E-book, on the other hand, is only for a very small niche market. Your feeling is that you will sell WAY LESS books than you will sell Widgets.

In this case, the Widget is the BETTER CHOICE, isn’t it!

After all, your purpose is to develop a Site that will GENERATE the PROFIT that YOU DESIRE!

The next Critical Element to explore is the amount of RELATED PRODUCTS that you can also offer.

In most cases, there are Related Products available on the Internet that you can offer for Sale on Your Site. You earn a Commission on these products. We will discuss this in much more depth in a later Chapter.

For now it is important to know that most Sites on the Internet offer what is called an “Affiliate” program, meaning that you can link to their Site, sell their product, and earn a percentage of the Sale for doing so.

With this is mind, let’s say that you have an INFORMATION book that you can write in an area in which you can develop yourself as an “EXPERT”. And let’s say that the topic of this book is a topic that has a lot of products available on the Internet that is complimentary to your Topic. If this is the case, you can develop a Site that sells your book, PLUS you can offer a WIDE SELECTION of complimentary Products and/or Services to your Customer.

Can you see that you NOW have the Profit potential from YOUR book PLUS a collection of other products as well?

Let’s take it a step further. Let’s say that you have several choices of what you can write about. Well, the first factor would be the SIZE OF THE MARKET for which you are writing.

If you can write two books, one of which would be interesting to only a few people, and one that would be appealing to MANY, then the book that has a Market of MANY would be the better choice….

AS LONG AS THAT MARKET IS REACHABLE!

Axiom Number Twenty-Seven – IF YOU CAN’T REACH YOUR POTENTIAL CUSTOMER, YOU WILL NEVER HAVE A CUSTOMER!

Make SURE when you are considering a Market that you do your homework and find out where people that would be interested in YOUR INFORMATION or PRODUCT are FOUND on the Internet.

Note: In Part Three we will talk about techniques to reach Prospects that are off-line as well. For starting out however, we will confine Prospecting to the Internet due to Cost Considerations.

Let’s say that you have two books that you could write, on two different, UNRELATED subjects. And let’s say they have equal Market appeal. And they both have complimentary products available on the Internet that you can link to as an Affiliate to add to your Site and increase the Profits that you generate. What would be the determining factor?

In this case, the determining factor is the Price, Percentage, and Potential Number of Units you’d expect to sell through the Affiliate programs.

Let’s say that one subject has complimentary products that you can offer, but they are low priced and a review of the Affiliate programs show that you get 20% of the Sale. So the average sales price of the complimentary products are $20 each, and you make 20% on average, which is $4. THAT’S SMALL!!!!

AND WE THINK BIG!

However, the second subject has complimentary products that average $100 each and the average percentage for you as an affiliate is 30% per Sale for every sale you generate by sending visitors their way.

Which makes more sense to you. To refer people to a Site where you can make $4 per Sale, or to refer people to a Site where you can make $30 per Sale?

As you can see, there are several CRITICAL FACTORS to review when deciding what PRODUCT, SERVICE, or INFORMATION to sell.

The purpose of this exercise is to get you thinking about what you are going to be selling within the context of how much PROFIT it will generate. A lot of times, people sell on the Internet, and make money, but NO WHERE NEAR the money they DESIRE to make. One BIG reason for this is a lack of the understanding of the DYNAMICS that go into GENERATING PROFIT.

KNOWLEDGE IS POWER!

The following Variables need to be considered when determining What to Sell:

The type of item, INFORMATION, or PRODUCT,
The SIZE of the Market,
The REACHABILITY of the Market,
The PRICE of the item,
The amount of GROSS PROFIT of the item,
The amount of COMPLIMENTARY products that can be offered,
The average PRICE of those products, and
The average PERCENTAGE the Affiliate Programs are offering to you in return for generating Affiliate Sales.

Let’s explore several different scenarios with regards to developing a SOLID FOUNDATION for YOUR BUSINESS while keeping in mind the following:

REMEMBER TO THINK PROFIT!!!

What you DO NOT want to do is to put all of your effort into setting up a Site that is limited to low-priced products. Unless you are planning on selling THOUSANDS UPONS THOUSANDS UPON THOUSANDS of $1 widgets!

THE SINGLE MOST SUCCESSFUL RESULT WILL OCCUR IF YOU CAN FIND A SIZEABLE, REACHABLE MARKET FOR INFORMATION, A PRODUCT OR A SERVICE, AND THEN YOU CAN PROVIDE RELATED INFORMATION, PRODUCTS OR SERVICES THROUGH AFFILIATE OFFERINGS AS WELL.

Let’s take a look at Four different Scenarios, and Critique of them as whether they form the basis for the Foundation of a Sound Business Plan.

Scenario Number One: UNIQUE INFORMATION

You have the ability to write meaningful Information that a Specific, Sizable market, that you can Reach, wants and/or needs
You have looked at competitive Information and you feel confident that Your Information can compete.
You have reviewed the Affiliate Programs in this Market and you see numerous products with attractive pricing and percentage

Note that there are two ways to go about finding Affiliates. One way to find Affiliate Programs is to type Google.com and then enter “affiliate programs” in the search area. A second way is to enter a keyword instead of “affiliate programs” that is related to your subject and then look at the top 40 or so individual sites to see what you are competing with, and what type of Affiliate Programs they offer with regards to price and percentage.

Critique of Scenario Number One:

While a lot of factors have not yet been raised or discussed, based on the Information supplied, this Scenario provides a solid basis for the development of a Successful Business Plan because of a Competitive, Unique Information Product with a Sizeable, Reachable Market and Attractive Related Affiliate programs.

One of the points to consider is the Sales Price that you can charge for your information. As we saw in our tables, in order to generate $100,000 per year in Net Profit, you needed to generate $700 per day in Gross Sales. If the Information that you are trying to sell can be competitive only if it is sold for $9.95, you may not be able to generate enough traffic to make enough sales to generate 70 sales per day in order to reach a Gross Sales Volume of $700.

However, if your Information’s Sales Price is $98, you’d only have to sell 7.4 per day to have a Gross Sales Volume of $700. We’ll talk about Merchandising and Building Value later on in the Course.

Scenario Number Two – UNIQUE PRODUCT

You have the rights to a unique Product that a Sizable market, that you can reach, wants and/or needs.
You have looked at competitive Products and you feel confident that Your Product can compete.
You have reviewed the Affiliate Programs in this Market and you see numerous products with attractive pricing and percentage

Critique of Scenario Number Two:

While a lot of factors have not been raised or discussed, based on the Information supplied, this Scenario also provides a solid basis for the development of a Successful Business Plan because of a Competitive, Unique Product with a sizeable, reachable Market and attractive related Affiliate programs.

One of the points to consider is the Sales Price that you can charge for your Product. As we saw in our tables, in order to generate $100,000 per year in Net Profit, you needed to generate $1050 per day in Gross Sales based on Mark-up of a multiple of 3.

If the Product that you are trying to sell can be competitive only if it is sold for $19.95, you may not be able to generate enough traffic to make enough sales to generate over 50 sales per day in order to reach a Gross Sales Volume of $1050.

However, if your Product’s Sales Price was $147 for example, you’d only have to sell the same 7.4 per day to have a Gross Sales Volume of $1050.

Before we go any further, let’s review Scenario One and Scenario Two from the perspective that 7.4 E-Books at $98 will generate the same amount of profit as 7.4 Widgets at $147. If you have a choice of which one of these two to start off with, you can see how some of the other factors that we discussed; namely:

Market size,
Market reachability,
Product want/need, and
The attractiveness of Affiliate programs

Play an important role in your decision as to which is a better opportunity. There is one more CRITICAL ISSUE TO POINT OUT HERE!

MARK-UP FACTORS:

If you can mark-up the Widget that you are selling by MORE than 3 times your cost, then based on the $147 retail price, you will of Course generate MORE than $98 in Gross Profit, because Your Cost will be less than $49.

But if you can only mark-up the Widget by 2 times, instead of 3, then Your Cost, based on the $147 retail price, at 50% is $73.50 instead of $49. This means that in order to generate the same $700 a day, you will have to sell MORE Widgets to make up for Your Higher Cost.

See the illustration below:

BASED ON A MARK-UP OF 3. YOUR COST OF $49, RETAIL PRICE 3 TIMES $49 = $147

$ 147 – Retail Price

7.4 – Sales per day

——

$1,050 – Gross Sales

– 33% – Cost of Goods

—————————

$700 Gross Profit for the Day

BASED ON A MARK-UP OF 2. YOUR COST OF $73.50, RETAIL PRICE 2 TIMES $73.50 = $147

$ 147 – Retail Price

7.4 – Sales per day

——

$1,050 – Gross Sales

– 50% – Cost of Goods

—————————

$ 525 Gross Profit for the Day instead of $700

THIS MEANS THAT INSTEAD OF HAVING TO SELL 7.4 WIDGETS PER DAY, YOU NOW HAVE TO SELL 9.5 WIDGETS AT $147 TO GROSS $1400, SO THAT AFTER A 50% COST OF GOODS, YOU STILL GENERATED A GROSS PROFIT FOR THE DAY OF $700.

See the illustration below:

BASED ON A MARK-UP OF 2, YOUR COST OF $73.50, RETAIL PRICE 2 TIMES $73.50 = $147 WITH THE INTENT TO GENERATE $700 PER DAY IN GROSS PROFIT:

$ 147 – Retail Price

9.5 – Sales per day instead of 7.4

——

$1,400 – Gross Sales instead of $1,050

$1,400 – Gross Sales

– 50% – Cost of Goods

—————————

$ 700 – Gross Profit for the Day

Obviously, the LOWER Your Profit Margin is, the MORE SALES you must make in order to generate the Required Amount of Profit. As you will see when we get to generating Traffic to Your Site, the More Sales that are required in order to generate the Desired Profit, the more challenging Your Task of generating Traffic to Your Site will be.

Scenario Number Three – Drop Shipped Product

You have an arrangement with a supplier to Drop Ship Product to your customer so you do not have to stock any product or spend any money on inventory. You do not have exclusive rights to a unique Product, and it is a market that has this very product already offered.
You have looked at the Identical Product(s) and you feel confident that there is enough room in this Market for more than one Site to sell this product.
You have reviewed the Affiliate Programs in this Market and you see numerous products with attractive pricing and percentage

Critique of Scenario Number Three:

While a lot of factors have not been raised or discussed, based on the information supplied, this Scenario provides a more challenging basis for the development of a Successful Business Plan because though there is a sizeable, reachable Market for this product, this product is already being offered.

However, one of the points to consider is that McDonalds, Wendys, Burger King and Jack-in-the-Box can often be found within a few yards of one another! The notion that there is already another Site with the same product, so you shouldn’t “waste your time” is only for those that are beginners! And, the idea that the only way to compete with these other Sites is to be the lowest price, in which case you will have a more difficult time generating the desired Profit, is a MYTH!

What it WILL TAKE, however, is INGENUITY! YOUR OFFER will need to STAND OUT, in IMAGE, in MERCHANDISING, and in EXPERTISE! We will deal with ALL THREE of these issues shortly.

The bigger issue with regard to this scenario is that you have NO CONTROL over the Product. What happens if you get a bunch of Sales, and the Drop-Shipper is out of stock for two to four weeks?! In order for this type of scenario to work, you need to have a CREDIBLE SUPPLIER, someone you can speak with directly, a discussion of how much inventory of an item that they will keep in stock for you, and a guarantee on your price as well. If you are ordering products out of a catalog, with no guarantee on price or availability, no agreement and no rep to speak with, you are NOT on solid ground!!

Scenario Number Four – Purchasing and Reselling Product

You purchase product, and then you ship to your customer. This gives you control over distribution. You do not have exclusive rights to a unique Product, and it is a market that has this very product already offered.
You have looked at the Identical Product(s) and you feel confident that there is enough room in this Market for more than one Site to sell this product.
You have reviewed the Affiliate Programs in this Market and you see numerous products with attractive pricing and percentage

Critique of Scenario Number Four:

The bigger issue of Scenario Three, with regard to the fact that you have NO CONTROL over the product, has been resolved by taking control of the product here in Scenario Four. This means you can control the quantity that you keep in stock. And you can control the shipping time.

The offset to the Quality Control, of course, is the cost of laying out the money to purchase the Product, and expending the manpower to physically ship the Product. If it’s a small item, storage won’t be as big of a factor. But if it’s a big, heavy item, you may need space, which may translate into rent, plus equipment, etc. And then you may get into employees, insurance, theft, breakage, etc. All of these ADDITIONAL COSTS need to be calculated into Your Cost of Goods and THEN the 3-times Mark-up needs to be done, in order to cover all of the expenses incurred in this Scenario.

One way that this Scenario would be effective would be if the price per item were large enough to justify the expenses. Let’s say for example that you are selling motorized beds for $2000 each. If that were the case, depending on how many units you can sell, you may not need a 3-times Mark-up in order to generate SIZABLE PROFITS.

Obviously, this Scenario requires a LOT more work than writing your own E-book and selling it so that it is automatically delivered! But, it is a Scenario that will work so long as the Target Number of Sales can be achieved. If for example, you can sell 1 bed per day, based on a 2-times Mark-up, you would generate approximately $126,000 Annually in Net Profit.

See the illustration below:

PROFIT BASED ON 2-TIMES MARK-UP OF A HIGH TICKET ITEM

$ 1,000- Wholesale Cost of Bed PLUS all expenses to purchase, store & ship

x 2 – 2-times Mark-Up

———

$2,000 – Gross Sales Amount

-1,000 – Total Cost of Goods

——–

$1,000 – Gross Profit before Expenses

x 50% – Total Expenses

——–

$ 500 – Net Profit before Taxes

x 30 – 30 Days in a Month

——-

$15,000 Monthly Profit

x 12 – 12 Months in a Year

———

$180,000 Net Profit before Taxes

x 30% Estimated Tax Liability

———–

$ 54,000 Dollar Amount of Estimated Tax Liability

$180,000 Net Profit before Taxes

– $54,000 30% Estimated Tax Liability

———-

$126,000 NET INCOME based on the Sale of 1 Bed per day at $2,000 with a 2-times Mark-up and 50% Expenses verses Gross Profit

In this Chapter, we looked at 4 different Scenario’s for establishing the Foundation of Your Business. We discussed the differences, the plusses and the minuses of each Scenario and we correlated our findings with their effect on the PROFIT that will be generated based on each Scenario.

When it comes to offering INFORMATION, PRODUCT OR SERVICES, remember this:

Axiom Number Twenty-Eight – YOU ARE LIMITED ONLY BY YOUR IMAGINATION

We discussed that the best way to be Successful is to IDENTIFY A MARKET, AND THEN FIND OR CREATE INFORMATION, A PRODUCT, OR A SERVICE THAT FITS THE NEED OF THAT MARKET. Remember that the Market must be REACHABLE.

As we continue through Part Two, we will go over many Marketing Techniques to Drive Traffic to Your Site. And, we will discuss the difference between Traffic and “QUALIFIED TRAFFIC”.

We will also discuss the many different ways to maximize your Sales-To-Prospect Ratio so that once you get a Prospect, you CLOSE THE SALE!

We will discuss the ways in which you can continue to Market the Customer once they have purchased your key product or products.

We will explore the ways in which you can continue to Sell to your Prospects that didn’t buy Your Offer the first time they visited.

We will discuss Merchandising so that when we DO make Sales, we make the Biggest Dollar Volume Sales that we can make to that Customer!

We will also discuss DUPLICATION, which is of CRITICAL IMPORTANCE, as well as AUTOMATION so you can maximize the time you spend on PROMOTION and not ADMINISTRATION!

I am giving you EVERY BIT of the Knowledge that I have learned in my lifetime to give you the BEST POSSIBILITY OF SUCCESS. So long as you are absorbing the information, making notes, and building your Confidence through your newly acquired KNOWLEDGE, you have the BEST OPPORTUNITY FOR SUCCESS that you can POSSIBLY HAVE because you are learning from someone who has ACTUALLY DONE IT!

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