The Mathematecal Formula For Making Money: How To Apply Its Leverage To Increase Yor Profits Exponentially.

 No matter what markets you serve; what products you sell; or what marketing tools you use, in business there's 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.

Despite serving as the corner stone of every single commercial success since the dawn of commerce most businesses neglect its power. Being so familiar with the diluted version of the formula these businesses overlook the enormous profit-potential held within.

Mindful of this blind-spot, let's now take a close look at the Mathematical Formula For Making Money:

Leads x Conversion Rate = Customers

Customers x Average Dollar Sale x Sales Per Customer = Gross Profits

Gross Profits x Profit Margin = Net Profits

Please pay close attention to what I am about to tell you: 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 you're doing without telling you why. And without knowing why you're doing so well (or so bad) you are 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 real power of this formula is stored within the five highlighted variables (a.k.a. levers).

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

Let's now demonstrate the impact of improving progressively more levers without increasing your overall effort:

Case #1: Improve leads by 100%

Net profit = $40,000

Increase in Profit(%) = $20,000 (100%)

Effort(%) = 100%

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 = $40,000

Increase in Profit(%) = $25,000 (125%)

Effort(%) = 100%

Profit to Effort ratio = 1.25:1

I.e. for every % increase in effort you get a 1.25 % increase in profit.


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

Net profit = $47,052

Increase in Profit(%) = $27,052 (135%)

Effort(%) = 100%

Profit to Effort ratio = 1.35:1

I.e. for every % increase in effort you get a 1.35% increase in profit.

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

Net profit = $48,828

Increase in Profit(%) = $28,828 (144%)

Effort(%) = 100%

Profit to Effort ratio = 1.44:1

I.e. for every % increase in effort you a 1.44 % increase in profit.

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

Net profit = $49,766

Increase in Profit(%) = $29,766 (149%)

Effort(%) = 100%

Profit to Effort ratio = 1.49:1

I.e. for every % increase in effort you get a 1.49 % increase in profit.

Observation: 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.

In this example we see that by spreading your effort over all five levers you increased your net profits by $29,766. Compared to the $20,000 increase gained from improving only one variable we see that your profit growth is almost 50% greater for doing nothing more than spreading your resources over all five levers. Imagine all the extra money you could be generating right now without any extra effort. All it takes is a simple change in focus.

Conclusion #1: To leverage your efforts for maximum returns you must focus on improving all five levers in your business.

Next, let's demonstrate the impact of improving all five variables by progressively larger amounts:

Case #1: Improve all 5 levers by 10% each.

Net profit = $32,210

Increase in Profit(%) = $12,210 (61%)

Effort(%) = 50%

Profit to Effort ratio = 1.22:1

Case #2: Improve all 5 levers by 25% each.

Net profit = $61,035

Increase in Profit(%) = $41,035 (205%)

Effort(%) = 125%

Profit to Effort ratio = 1.64:1

Case #3: Improve all five levers by 50% each.

Net profit = $151,875

Increase in Profit(%) = $131,875 (659%)

Effort(%) = 250%

Profit to Effort ratio = 2.64:1

Case #4: Improve all 5 levers by 100% each.

Net profit = $640,000

Increase in Profit(%) = $620,000 (3100%)

Effort(%) = 500%

Profit to Effort ratio = 6.20:1

Observation: As you continue to improve all five levers the magnification factor on your net profit increases at an exponential rate.

In this example we see that when we doubled our effort from case #2 to case #3 our leverage increased by 61% (i.e. ((2.64 - 1.64) ÷ 1.64) x 100). But when we doubled our efforts once more from Case #3 to case #4 our leverage increased by 135%

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

Conclusion: Never stop improving all five levers of your business.

Clearly these two examples demonstrate the power of leveraging all five variables in your business.

Tragically, most businesses seem to care about only one of these levers - the number of leads. To make matters worse, of all the levers this one will cost you the most to improve!

So if you're stuck in the 'drive-more-traffic-to-my-business' trap - STOP! Instead, harness the multiplying power of all five levers and you'll find that your profit to effort ratio will skyrocket.

Or to put it another way, by applying all five levers to your business (instead of only one) you will make more money with less effort.

Right about now you may be thinking to yourself, "That's all well and good in theory but how could I possibly increase all five levers by such large amounts?"

Although there are over 200 ways to amplify these levers space restrictions preclude me from discussing the how-to's here. What's important for now is that you understand of the magnifying potential stored within this formula. With this understanding achieving a 100%, a 200% or even a 1000% increase in profit is well 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=90
mailto:angelo@marketingunveiled.com

 Angelo Ioanides

More Articles 

Making Money on the Internet for Beginners - Gwen McClure
If you’re interested in making some extra money to pay off creditors or earn enough income to replace your current job or career then the Internet is the place where aspiring entrepreneurs are turning. Unlike traditional businesses, a business...

10 Tips To Help You Create Your Own Money Making Affiliate Program - Ken Hill
1. View your affiliate program as a partnership between you and your affiliates, and make it your priority to develop good relationships between you and your affiliate sales force. 2. Answer any questions your visitors or affiliates have...

Sheep Spend and Lose, Leaders Make Money - Sopan Greene
Remember that leaders spend more money on learning and growing, but they do their homework and work hard to make money. Sheep follow the herd blindly with their wallets open hoping someone else will will do their work for them. Jumping into...

Calling Cards and Prepaid Phone Cards To Help You Save Money - Mike Yeager
You can now save quite a bit of money on your long distance calling simply by using prepaid phone cards. It wasn't too many years ago that making a call overseas or even to an old friend in a neighboring state would be very expensive and even...

Can You Really Make Money with Surf for Cash Programs? - Ed Zivkovic
This article will focus on the Spedia Surf for Cash Program. I first came across spedia.net from my Alexa Toolbar as a result of visiting another non related site. I was looking for programs to promote and spedia sounded good on the outside and I...

Making money with digital photography and live events - Richard Meredith
A few years ago I became interested in digital photography, mainly for web publishing and personal reasons. You know, how nice is it now to NOT have to deal with film, scanning pictures, and the costs of developing all of those "not great" photos...

Transform Your Hobbies Into Money - Aaron Saki
On Cyberspace On Cyberspace (Internet), there is a method from which you can make thousands of dollars per month without needing to have your own product or service. This method is highly flexible, and can be used in different forms to...

Make Free Money With Google - John Baker
Have you received your check from Google? If you own a business web-site you should be receiving a check from Google. Why not accept a check every month from Google by placing their ads on your site? Google AdSense allows you to serve...

Quick, Easy Money...And Horse Feathers - Kirk Bannerman
Enter the horse feathers. Does it ever end? I've been involved with Internet-based home businesses for some time and I continue to be exposed to a seemingly endless barrage of offers (all costing me money, of course) claiming to be "the...

Don't Expect To Earn Fast Money Online - Torgeir Sunnarvik
Copyright © 2005 Torgeir Sunnarvik Every Pleasures http://www.everypleasures.com/ I've spent the last three years working towards actually earning money online. In most of that time period though, the money has been leaving my...

Market Research Means Money - Jason Carr
I recently made a critical mistake in my progression towards business success: I forgot about market research. I had decided that I was going to make some money with an online store. I thought to myself, where should I start? What can I sell?...

There is Not Enough Gold, or Paper Money in this world to Buy This Spiritual Truth - Ina Bliss
What is the very highest, most abstract state of mind in which we can be? Jesus The Christ's, the only being ever with an absolute untainted concept of the truth. How could He have the truth? He is God incarnate (Isaiah 9:6). Did you know, God...