In my first two posts in this series I talked about the three Golden Rules of Business Success ; Audience, Conversion and Economics.
As a reminder
- Audience refers to the crowd of people your business is there for. Are there enough customers who you are able to relate to on some level. Have you “walked a mile in their shoes?“
- Conversion is offering a product or service that your chosen audience are looking for. What is the problem you’re offering a solution for?
- Economics is making sure you can offer your product at the right price. So it costs less than the price to create or provide it. And more important the customer believes it’s worth far more than the price.
I also said that if your business isn’t working as well as you’d like then the formula is broken in some way.
So lets look at the third rule and see what can go wrong there.
Golden Rule of Business Success #3 – Economics
It makes sense to start by being clear about who your audience is. The next step is to make sure that your product or service really does help this crowd of people. The final step is to make sure this can operate as a business.
To do this you’ll need to be already be clear about what problems or needs this group of people have. You’ll also need to be offering a solution that they are interested in. Finally you need to present the offer in a way that they think the cost is less that what its worth to them.
Using the example I used in the previous posts you plan to put on a webinar for people who are short-sighted – you have a natural solution that means they can throw away their glasses or contact lenses. Using some rough math, you’ve come up with a number of about 100,000 people that you would be able to interest with an offer.
So the questions for this section are:
- What are the costs associated with putting on a webinar – including advertising for the event and the hosting?
- What value would a potential customer put on the solution you’re offering?
- How can you package the offer to make it easy for enough customers to say yes?
- Can the offer be scaled – i.e. how big is your potential audience?
These questions are important to answer as you’ll need to make sure it’s run as a proper business activity (unless it’s for lead generation but that is a subject for another day) .
Question 1 on this list has two parts – the first should be quite straightforward – there are a number of solutions – I’d start off with GotoWebinar which is about $100 for up to 100 attendees or $300 for up to 500 attendees. Next there is advertising cost, to keep the math simple lets assume we can set up a name capture and campaign that would register names for $5 per person.
Question 2 is partly guesswork – what is a fair price to pay for getting your eyesight back? lets say it’s in the range $100 – $2,000
Question 3 then is making sure you can present an offer that is likely to attract potential customers to say yes. One obvious approach here is to compare the natural solution you have with laser eye surgery. You can offer a better solution based on cost, reliable laser eye surgery starts at about $1,000 per eye. Even better is the risk as any surgery has a risk associated but hopefully your natural solution has little or ideally no side effects. What’s more you can offer a zero risk guarantee – if it does’t work or only partly works then its easy to repay any money and the customer is no worse off.
So you could imagine the costs of running a webinar for 100 people working out to be $600 – $100 for GoToWebinar and 100 x $5 for the name capture.
Looking at the pricing it would be reasonable I think to assume that 20 people would be happy to pay $200 for a guaranteed, risk free solution to their poor eyesight. That works out to be $4,000. Less the $600 costs that is $3,400 as a balance – say 2 people aren’t happy and ask for a refund that still leaves $3,000 net profit. Which is a good start.
So think about this example and apply it to your business – do all the figures stack up?
They need to make sense both from your customer and your accountant’s point of view. If they don’t then you have a problem that is now a lot clearer!
I hope this was useful – If you’d like to find out more on this subject then I’ve just released a free video series – 7 Reasons Why Your Online Business is Failing – click here for more details which I think you’ll find interesting.
Bye for Now,