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The Mathematical Formula For Making Money

Category: Business Development Date: 2003-06-02
The Mathematical Formula For Making Money: How To Apply Its
Leverage To Increase Your Profits Exponentially

No matter what markets you serve; what products you sell; or what marketing tools you use, in business heres 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:

Leads x Conversion Rate = Customers

Customers x Av. Dollar Sale x Sales Per Customer = Gross Profits

Gross Profits x Profit Margin = Net Profits

Heres the trick - contrary to popular belief 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 youre doing without telling you why. And without knowing why youre doing so well (or so bad) youre 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 true power lies within the five highlighted variables (a.k.a. levers).

Quite literally, when you apply these levers to your business your profits 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.

Lets now look at what happens when you improve progressively more levers without increasing your overall effort:

Case #1: Improve leads by 100%

Net profit = $40,000

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 = $45,000

Profit to Effort ratio = 1.25:1

I.e. for the same amount of effort you get a 125% increase in profit.

Case #3: Improve your leads, conversion rate and average dollar
sale by 33% each.

Net profit = $47,052

Profit to Effort ratio = 1.35:1

I.e. for the same amount of effort you get a 135% increase in
profit.

Case #4: Improve all levers except profit margin by 25% each.

Net profit = $48,828

Profit to Effort ratio = 1.44:1

I.e. for every the same amount of effort you get a 144% increase
in profit.

Case #5: Improve all five levers by 20% each.

Net profit = $49,766

Profit to Effort ratio = 1.49:1

I.e. for the same amount of effort you get a 149% increase in
profit.

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.

And thats only half the story. Because as you increase all five levers by progressively larger amounts the magnification factor on your net profit increases at an exponential rate.

This has to be one of the most magnificent realisations you could ever make in business.

So if you want to make more money with maximum leverage you must focus on continually improving all five levers in your business.


With over 200 ways to amplify these levers achieving a 100%, a 200% or even a 1000% increase in profit is now 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=96

profitformula@marketingunveiled.com
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 • Affiliate Marketing
 • Affiliate Marketing - Basics
 • Affiliate Marketing - Development
 • Affiliate Marketing - Setting Up
 • Archive catalogue
 • Autoresponders
 • Banner Advertising
 • Business Development
 • Checklists
 • Competitors
 • Copy Writing
 • Copy Writing - ad copy
 • Copy Writing - email copy
 • Copy Writing - sales copy
 • Customer Service
 • Database Marketing
 • Direct Mail
 • Domain Names
 • E-books
 • E-commerce
 • E-mail Marketing
 • E-zines
 • E-zines: Advertising
 • E-zines: Promotion
 • E-zines: Subscribers
 • E-zines: Writing
 • Entrepreneurship
 • Free Services
 • Home Based Business
 • Home Based Business - Finance
 • Home Based Business - Getting Started
 • Home Based Business - is it for YOU?
 • Home Based Business - Marketing
 • Internet Tips
 • Market Research
 • Marketing
 • Marketing Strategy
 • Net Business Start ups
 • Networking(MLM)
 • Newsletters/Newsgroups
 • Online Payments
 • Online Promotion
 • PC KNOW HOW
 • Personal Development For Marketeers
 • PR/Publicity and Media
 • Sales Tips
 • Search Engines
 • Search Engines - Keywords
 • Search engines - Optimisation
 • Selling Techniques
 • Surveys and Statistics
 • Telesales
 • Top 10 Tips
 • Traffic and Tracking
 • Viral Marketing
 • Website Design and Development
 • ZeLatest