The 8 essential steps to making a successful business.
- Create a product or service based on your most valuable skill or the most valuable skill of someone you know.
- Use the 4 types of leverage: capital, employee, code, and media.
- Make your packaging and customer service great.
- Use the traditional growth strategy.
- Charge 2-3x the average market price.
- Then, try growth hacking.
- Minimize expenses (taxes are your biggest expense).
- Reinvest all the profit back into the business.
- Create a product or service based on your most valuable skill or the most valuable skill of someone you know. A business is simply a vehicle for you to use your skills to make a product or service. So it makes sense to use your most valuable skill because it's the most valuable. It is also essential (for longevity) to find what your passion is. Your passion is something that feels like play to you, looks like work to others, and makes money. To develop skills and find your passion, read books.
- Leverage capital, employees, code, and media. Capital leverage is money. You can get it by persuading people to invest in your business. Employee leverage is hiring employees. Code leverage is writing computer software. Media leverage is making YouTube, blog, TikTok, or other online content. Different forms of leverage can help you get other forms of leverage. Capital leverage, for instance, can help you afford employee leverage. And employee leverage can help you get code or media leverage (if your employees know how to program or make content).
- Make your packaging and customer service great. It's essential to make sure that your packaging (for physical products), customer service (for services), and website are appealing. Be like Apple. They have a fun unboxing experience, well-designed physical locations, and an aesthetic website.
- Use the traditional growth strategy. Ask your friends and family to try your product or service for free. Then ask them for feedback and 2 referrals. Once your product is good enough, start charging for it.
- Charge 2-3x the average market price. What's the difference between a Michael Kors purse and a Louis Vuitton purse? Price. They're virtually the same purse. They're probably made in the same factory. The only difference is the metal logo they put on the front. But Louis Vuitton charges 10x the price of Michael Kors. What makes Louis Vuitton 10x better? It's simply that they charge more. 3 main benefits to high prices: (1) Customers will perceive you as a high-end brand. (2) You will have wealthy, high-quality customers who are not price-sensitive, even in a recession. (3) You will have more money to reinvest into your business to make better products and hire better employees.
- Do growth hacks: Ask influencers to become affiliate marketers. Find influencers with less than 10k subscribers because the big influencers probably already have big sponsor deals. Give them 70% of the profit. Why? 3 reasons: (1) It, paradoxically, makes you more money. It's better to get a smaller portion of a big pie than a big portion of a small pie. It's better, for instance, to get 30% of $100,000 than 100% of $10,000. (2) It aligns incentives. It makes them take selling your product seriously because it could make them a lot of money. (3) Giving them the majority of the profit shows them that you're not trying to take advantage of them and want to be partners for a long time. Do YouTube ads or Facebook ads. Go to www.facebook.com/ads/library to view a library of successful Facebook ads. Research 10+ competitors in your niche or market. Figure out what makes them good. Always test if your offer can get sales and has a positive ROI by giving the offer to your email list or YouTube subscribers. If you don’t have an email list, start very slowly with YouTube or Facebook ads ($25/day). Send the traffic to a landing page with a sales letter and a button to purchase.
- Minimize expenses. This one's self-explanatory. Spend less than you make. Taxes are your biggest expense. Most people don't realize taxes are a big expense and never try to mitigate them. Read the book Tax-Free Wealth by Tom Wheelright to learn how to reduce your income, sales, and property taxes. Don't forget to always collect sales tax–many businesses go bankrupt because they don't understand the sales tax law.
- Reinvest all the profit back into the business. There are 3 ways that a business can provide value: (1) breakthrough innovation, (2) complex coordination, and (3) incremental refinement. Unless you're a unicorn tech startup, you probably don't have any innovations in artificial intelligence, biotech, rockets, or battery technology. If you're a small business, you also don't have complex coordination–you don't have a lot of employees, materials, or inventory to coordinate. That leaves only incremental refinement. Reinvesting all of your profit back into the business–making better products and services and hiring better employees–is the easiest way to ensure incremental refinement. If you have too much cash to effectively reinvest back into the business, buy some assets like Bitcoin and Tesla stock.