The three pillars of business. These three pillars are essential to building a profitable and scalable business and yet many business owners are unaware of their true significance. These three pillars are not revolutionary or complex to understand but their implications are profound.
First Pillar: Scope of market
This pillar is known by most business people and that is the size of your market. It is essential to understand the scope of your market and the income you are hoping to earn from your business.
If the expectation is to earn 20k a year then there are plenty of small and localised markets where you can earn such an income. However if the expectation is to earn a million a year then you need access to a much bigger market.
Second Pillar: A good profit margin to spend on marketing
Again this might seem obvious but it has to also include your marketing budget and this is where many businesses come undone. They factor in all the costs except for marketing as this is either an afterthought or worse they don’t have one. If you have no margin left to invest in marketing then how can you scale your business and acquire new customers?
Third Pillar: ASMS – Affordable Scalable Marketing Strategy
Despite marketing being essential to all businesses, you will find loads of businesses who under invest in this critical area. The phrase ‘I rely on word of mouth’ to build my business is crazy and rarely works. In order for word of mouth to become an effective tool you already need a very big pool of customers to begin with which very few businesses actually have.
However an acknowledgement of the importance of marketing is the easy step. The hardest part is finding a strategy that is cost effective and can be built into your profit margin.
With the rise of digital marketing through Google and social media it is never been easy to reach loads of potential customers. However the cost per click to reach them is becoming prohibitively expensive. The key to a successful ASMS is ultimately in your conversion rate and profit margin.
A good conversion rate unlocks the true potential of your business. For online companies this rate normally sits between 1% and 2%.
To help explain how important conversion rate is let’s take two examples:
Example 1
Your sell a product for £100 and your net margin (excluding your marketing budget) comes to £50. The cost per click online is £1 per click and your conversion rate is just 1%.
In such a case you will spend £100 to get one new customer who will pay you £100. The product has cost £50 so you have lost £50 on this sale.
Example 2
Your sell a product for £100 and your net margin (excluding your marketing budget) comes to £50. The cost per click online is £1 per click and your conversion rate is now 3%.
In such a case you will spend £100 to get three new customer who together will pay you £300. The total cost of the three products is £150 so you have made a final profit of £50 from these three sales.
Example 2 is perfect ASMS and providing the market is big enough (pillar 1) this is an opportunity to build substantial wealth.
Conclusion
If you are looking to build substantial wealth and change your life then you need to indentify a business that has all three of these pillars: A big market, a good profit margin to spend on marketing and a successful ASMS.