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A business model with only two numbers

 2 years ago
source link: https://sive.rs/ayw5
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from the book “Anything You Want”:

A business model with only two numbers

2011-07-05

Like most people, I had no idea what to charge.

So I went to the local record store in Woodstock, where they had some local musicians’ CDs on the counter. I asked the woman at the store, “How does it work if I sell my CD here?”

She said, “You set the selling price at whatever you want. We keep a flat $4 cut. And we pay you every week.”

So I went home and wrote, on my new cdbaby.com website, “You set the selling price at whatever you want. We keep a flat $4 cut. And we pay you every week.”

I figured if it worked for her, it was fine for me.

Because it was taking me about forty-five minutes of work to add a new album to the site, I also had to charge $25 per album as compensation for my time. (Shows you how much I thought my time was worth in those days.) A few days later, I realized that $35 feels about the same as $25, so I bumped it up to $35 per album, which left me room to give discounts and still make a profit.

And that’s it! Six years and $10 million later, those same two numbers were the sole source of income for the company: a $35 setup fee and a $4 cut per CD sold.

A business plan should never take more than a few hours of work. Hopefully no more than a few minutes. The best plans start simple. A quick glance and common sense should tell you if the numbers will work. The rest are details.

© 2011 Derek Sivers. ( « previous || next » )

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Comments

  1. Robin Ram (2017-02-21) #

    Hi Derek,

    My name is Robin from China. I'm now starting up my own business online in education services. Recently by reading your blog here, I'm really impressed at how simple but explicit your arcticles are. I think I have the same vision and philosophy towards work and life as you do. So I cann't agree more with many of your words.

    Thank you from my heart for your sharing. BTW, you said now you're a programmer, did you build this website by yourself, which system or prototype did you employ>\?

    I hope some day I can have the same personal site as yours.

    Sincerely,


    Robin

  2. Sean Crawford (2019-02-05) #

    I am reminded of a small advice book by a small businessman who couldn't research very much before starting his business, because his business was too unusual. Besides, he wasn't research oriented.

    So he guessed. And everything turned out as well as if he had heavily researched. He had a good sense of humour about the whole thing. And humor for life, too. Which always helps—or so I am told.

    ...Wait a minute. If humor in the big workplace is widely known as such a good thing, then why do business magazine articles on humor always start out with excuses and justifications for humor? And if business is a serious thing—as it must be, judging from all the other articles—then why do the humor ones take such a light tone?

    Since I am only the teacher, you can't ask me: I leave the answers for my student readers.

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