“I believe we’ll get to the point where when you’re born, you’ll be issued a domain name.” – Bob Parsons
Calculating profits is just part of what we talk about. There are some details in the blog below, but Max did a fantastic job with the video today so definitely check it out below.
Income and Expense Summary
- TOTAL INCOME TO DATE: $88.00
- TOTAL EXPENSES TO DATE: $2.34
Day 12 Video Summary
For the 30 day business experiment, we are focusing on maximizing gross profit, or top-line revenue. That means that we care more about the amount of money we bring in than we do about our expenses. Just so we didn’t let expenses get out of control, we do have a stipulation that our business will always be net positive. That simply means that we will never spend more than we make.
Profits are hard to calculate when you’re getting started. They are much easier to go back and calculate after you’ve sold the product, but to predict all of your expenses up front can be difficult.
When we started talking about cash flow on Day 8, we had the cost of the product + cost of shipping the product from the supplier to us + cost of packaging and shipping the product out to our customers.
Now that we’ve dug a little deeper, we see that we missed quite a few costs.
- Labels. We have to supply the custom labels for our product. Labels aren’t incredibly expensive, but they are just one of several items that are normally sold in bulk. To get a spool of labels that the supplier can use to label our bags, we would need to spend about $150. Considering we’ve only made $88.00 to date, this is a problem.
- Initial Inventory. A few of the smaller suppliers will produce in low quantities. The larger supplier, which we are strongly considering, only provides free shipping if you purchase 100 pounds or more. We are selling 12 ounce bags, so that’s 134 bags. At about $6.00 a bag, that’s $804.00. Again, not idea.
- Transaction Fees. We will be using either Stripe or PayPal. Both of them make it pretty easy to set up subscription models. PayPal is definitely easier because you don’t need an SSL or TSL certificate (basically a way to make that transactions are secure), but I don’t like that you have to leave your site and go to the PayPal site to finish the transaction. However, that’s the same reason that you don’t need an SSL certificate. If you’re using Stripe, I would recommend using WordPress and purchasing a plugin to allow you to process payments if you’re new to Stripe. Just do a Google search for “Stripe WordPress plugin” and figure out one that works for you. Either way you go, Stripe or PayPal, it’s going to cost you 2.9% of the cost + 30 cents. Let’s look what that means for a $1500 project. Let’s say it takes 50 transactions of $30 for us to earn $1500. That means we will be paying 2.9% of $1500, plus 30 cents on all 50 transactions. That adds up to $58.50. I don’t know about you, but I’d take $58.50 if someone gave it to me… so I’d like to keep you.
That’s a long-winded explanation, but it’s important that you think very thoroughly through your expenses. Make sure you go through every stage of your supply chain and discuss what known and potentially unknown costs could creep up.
Designing a Landing Page
You may have heard of landing pages, but not everyone knows that they are. A landing page is a simple page that is used to perform a very specific task. We are creating a landing page to collect email addresses before we go live. There are some things to consider when you look at landing pages.
- Be very clear and specific about what you are offering. The fewer words, the better.
- Offer something in return. Even if it’s future value, someone won’t give you something for nothing. If you want my email address, you have to tell me what value I’m getting now (or later) that would make me think my email address is worth the trade.
- Focus on benefits, not functions. We deliver flavored coffee to your door. But that’s not what people want. That’s a function, not a benefit. You can get that birthday cake flavor without the calories. That’s a benefit. You can entertain your friends with the best coffee they’ve had this year. That’s a benefit. We want to know the benefits of the products we buy. We typically know the function. Sell us on the benefits.
- Anticipate the objections. Writing sales copy is an art and I don’t claim to be an expert. When you are writing your sales copy for your landing page, try to anticipate all the reasons your potential customers would say no and address them one at a time. Write a paragraph about the most probable objection. Give them an option to sign up. After that, write a paragraph about the second most probable objection. Give them an option to sign up. The flow of the page should go back and forth between stating the benefits, addressing anticipated objections and giving your visitors a chance to sign up for whatever you’re selling.
- There are plenty of awesome articles on this topic. Here’s one of my favorite.
This is Josh. I’m out. Catch you on Day 13!