Bua outsourcer takes a piece of the revenue pie. Here is what the general profit-loss might look like
for a hypothetical $80 product sold via phone and developed with the help of an expert, who is paid a royalty. I recommend calculating profit margins using higher-than-anticipated expenses. This will account for unforeseen costs (read: screwups) and miscellaneous fees such as monthly reports, etc.
REVENUE Product cost $80.00 Shipping/Handling $12.95 Total Revenue $92.95 EXPENSES Product manufacturing $10.00 Call center ($0.83 per minute x average
call time of 4 minutes) $3.32 Shipping $5.80 Fulfillment ($1.85 per package + $0.50 for
boxes/packing) $2.35 Credit card processing (2.75% of $92.95) $2.56 Returns + declined cards (6% of $92.95) $5.58 Royalties (5% of wholesale price of $48 [$80 = .6]) $2.40 Total expenses $32.01 PROFIT (revenue minus expenses) $60.94
How do you factor in advertising cost? If a $1,000 ad or $1,000 in PPC produces 50 sales, my advertising cost per order (CPO) is $20. This makes the actual‘ per-unit profit $40.94.
I set a new goal after that experience, and when I was interviewed six months later as a follow-up, one change was more pronounced than all others: silence. I had redesigned the business from the ground up so that I had no phone calls to answer and no e-mail to respond to.
I’m often asked how big my company is—how many people I employ full-time. The answer is one. Most people lose interest at that point. If someone were to ask me how many people run Brain-
QUICKEN LLC, on the other hand, the answer is different: between 200 and 300. I am the ghost in the
machine 22
From advertisements—print in this example—to a cash deposit in my bank account, the diagram is what a simplified version of my architecture looks like, including some sample costs. If you have developed a product based on the guidelines in the last two chapters, it will plug into this structure hand- in-glove.
Where am I in the diagram? Nowhere.
I am not a tollbooth through which anything needs to pass. I am more like a police officer on the side of the road who can step in if need be, and I use detailed reports from outsourcers to ensure the cogs are moving as intended. I check reports from fulfillment each Monday and monthly reports from the same the first of each month. The latter reports include orders received from the call center, which I can compare to the call center bills to gauge profit. Otherwise, I just check bank accounts online on the first and fifteenth of each month to look for odd deductions. If I find something, one e-mail will fix it, and if not, it’s back to kendo, painting, hiking, or whatever I happen to be doing at the time.
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