

How to Build a Million-Dollar Business - nate
http://www.trizle.com/topics/1250-how-to-build-a-million-dollar-business

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martingordon
To build a million dollar business, you only have to convert 300K out of 30M,
which is only 1%! Unfortunately, there are numbers less than 1%. It's entirely
possible to only convert 0.1% or 0.01%. Are you okay living off of $100K? What
about $10K (0.01%)?

See: <http://sivers.org/1pct>

~~~
atree
Hey sivers. I mentioned it below, but throwing your marketing dollars entirely
on the 30M probably won't be the best idea because you don't know your initial
conversion ratios. You can try it on a sample size to get the ratios, and then
build up gradually as you're hitting your numbers profitably.

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natemartin
I love how "make the product" is step one. That's the easy part, right?

I also think the complete premise is off target. This guy is talking about
selling a newsletter for $25/month.

Most high-quality magazines go for $25/year, or even less. And most of those
magazines have large staffs generating quality (usually) content so that the
customer is willing to part with that $25/year.

If this guy wants to sell me a weekly newsletter for $25/month, that better be
one hell of a newsletter.

Unless the whole point of this article was describing how to fool people into
buying a low-quality product. In which case, why not just go all the way and
start pushing fake Viagra? You'll get a lot more than 300 "contacts" a day if
you're spamming!

What the hell happened to "Make a quality product, promote that product, sell
the product, improve the product, repeat"?

~~~
jamesk2
Yeah, making the product is hard but there are many newsletters that cost way
more than $25 month.

Here's a list of investing newsletters that cost more than $25/month.

[http://www.marketwatch.com/news/newsletters/newsletters.asp?...](http://www.marketwatch.com/news/newsletters/newsletters.asp?dist=#frm)

There's even one that is $100 month and I've seen others that are even more.

The difference between these and "high-quality magazines" is that these are
extremely targeted to a specific audience with a minimum of advertising.

~~~
natemartin
Then they probably have a staff working full time generating content for those
newsletters?

I'm not doubting that there are newsletters worth $25/month, I'm doubting that
creating a newsletter worth that is a one-man job. (And especially a one-man
job where that one man spends most of his time making cold calls.)

~~~
atree
Hey Nate. Sorry for the clarity issue. Running a $1M one-man operation is
definitely pushing it; it's possible, but that's probably too much to put on
one's shoulders. A typical $1M company probably has around 5 employees, which
I should've mentioned. (The exact revenue per employee however should be based
on your industry's averages to see how you fare with your
competitors/industry)

~~~
natemartin
I saw your post below, thanks for explaining a bit more of the context.

Sorry if I came through a bit cynical and sarcastic, reading your post I
thought you were pushing a more get-rich-quick philosophy. Thanks for
clarifying.

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intellectronica
Baloney. If growing a business was so predictable there would be absolutely no
place for startups. that's the sort of intellectual fraud Taleb refers to in
the Black Swan.

~~~
northwind
Three cheers for calling this article what it is!

Quoting from a comment I made previously:

\----------------------------------------

A good friend of mine described the articles displayed here as a "rat's nest"
which does not lead anywhere. At first, I thought he was crazy; then I began
critically looking at said articles.

I signed up here looking for what the original post posits providing; what I
found were articles about startups, business, marketing, the current/next
great gold rush, followed by the token (recently it has been improving)
programmer/hacker article. And the articles about startups, business, and
marketing were not great on any scale; in fact upon critical review, said
articles advocated rather bad strategies. Strategies which amounted to little
more than legalized scams, strategies which optimize for the short term,
strategies promoting win at any cost, strategies which advocate me first and
to hell with the consequences; in short, strategies of which Phineas Taylor
Barnum would have been proud.

Before joining the Hacker News community, I was interested in starting my own
business. Now that I see what is advocated as "startup culture", I want
nothing to do with starting a business in the United States (because my
conclusion is the culture and laws of the U.S. have optimized for short term
gain, with the resulting push towards the strategies mentioned earlier). What
happened to a business (either startup or established business) having
integrity in all of their relationships, being a responsible citizen of the
business ecosystem it operates within, and providing a legacy beyond the
generation within which it was founded?

\----------------------------------------

So now here is my dissenting opinion of the linked article: if all you are
concerned about is the money, then you have already lost.

~~~
evgen
It is hard to k ow where to begin when addressing all of the delusions about
building a successful and worthwhile business that you seem to be suffering
from. If you want to create a business that operates with integrity and
honesty that lasts for generations you start by creating one that can last for
a month. Get feedback from your customers and the environment in which you
operate to see if you can make it last for a year. Rinse. Lather. Repeat. No
one who creates a worthwhile multi-generational enterprise starts out knowing
exactly how it will be accomplished, and most are honest/knowledgible enough
to admit this.

It sounds like you are not cut out for entrepreneurship in any culture; I
would suggest a return to academia...

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dpcan
Well gosh, that IS easy. Why not simplify it even further then.

Just pitch until you sell to 1 person. That person will tell their friends and
create 1 more customer, and so on. Now you can just sit back and wait while
the millions roll in. The rest, as they say, is maaaaagggggiiiiic.

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atree
Hey guys. I'm the topic's author.

I think Trizle makes more sense if you read it in context with everything else
on there; my total apologies for the ambiguity.

Some points:

1\. The typical $1M business has about 5 full-time employees working on it
(~$200K in revenue per employee); so while building a business that generates
that much by yourself is possible, it's out of the norm. I should've
definitely mentioned that.

2\. You probably don't want to throw X market dollars at something without
understanding your conversion rates first. First, get your average conversion
rates (you can do that through statistical inference) from a random sample of
your target market, determine if the model is profitable, then gradually
expand your reach.

3\. The "$25 bi-weekly newsletter" is just one product example; you can
replace it with whatever product you're selling, and then use the model to
determine your conversion rates to get an idea of how many pitches it'll take
with your current model. For instance, selling a $200 product would take 10x
less pitches than a $20 product (in terms of revs) to make X.

4\. The free market creates incentives to provide as much value to your
customers as possible; it's a broken system when you let get-rich-quick folks
exploit others and get rich; mechanisms drive society, and that's why the
Trizle articles tend to emphasize that providing immense customer value as the
sole way to building a solid company for the long-term in a free-market
economy.

There are no get-rich-quick-schemes, and any model that tells you that you can
consistently earn greater returns than Warren Buffett's annual ROE of 20% is
likely suspect. Solid, long-term companies, are built over years/decades.

\------

BTW, I love Ycombinator's board (pleasantly surprise someones posted the
article here); I come back daily to read the stuff you guys/gals post on here.
I come from a technical background (EE degree, using Rails daily), so it's
always a fun read every time.

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petercooper
Sounds simple and... it sorta is. If you spend some time learning about sales,
you'll recognize the "rejection is good - it's one step closer to the next
yes!" theme.

In this vein, I want to recommend "Ready, Fire, Aim" by Michael Masterson. It
focuses on the same topic (selling subscriptions to information products) but
the ideas can be applied to most product businesses. The focus is on getting
those first sales, figuring out how to convert, _then_ fleshing out the
product.

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synnik
This article has an underlying assumption -- that you have already created a
product for which people are willing to pay $25 a month, if only they hear
about it. Which must include testing, revisions, etc, which can only be well
done if you receive feedback from a customer base.

In other words, to build a Million dollar business, first you need to... build
a million dollar business.

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jhancock
Its a good reminder that you have to sell, sell, sell.

But his example that your selling an email newsletter with valuable
information, leaves you wondering when you have time to create the newsletter.
If you actually did have time to talk to 100 prospectives a day, you would
have zero time left for anything else.

A better representation might be: say you have what it takes to research and
put together a very compelling newsletter that you can charge $25 a month for.
Now lets say, your wife is also at home unemployed and you both magically can
last a year trying to bootstrap the business. You bust your butt creating the
product and your wife makes 100++ phones calls a day. Sell, sell, sell.

~~~
Murkin
Well said !

I am surprised an article of such low quality made it.

The difficult part would be to create a _bi-weekly_ newsletter that people
these days will be willing to pay 25$/m for.

What has this to do with startups ? This article is about making infomercials
to sell the next AbsShaper.

~~~
atree
Hi Murkin. I'm not saying it's typical, and I'm probably using a bad example
here, but business owners in my experiences dealing with them fall heads over
heals for purchases that will help them grow revenue. A solid product that
just does that, and pitched well, will make the $25 seem like a pretty good
deal for them. 7-page business research reports (e.g. from Forrester, Gartner,
etc.), for instance, tend to go for a few hundred dollars, so businesses do
spend on investments that give them good returns.

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edw519
This advice may be good for someone selling a commodity, but for software, it
doesn't make sense to me.

Basically, OP says to sell a large volume of a commodity product to many
customers. Since you only convert 1% of your prospects, you'll have to do a
lot of pitching. (100 * a large number = a really large number).

Sounds like you'd be selling all the time with no time left for programming.

I'd suggest exactly the opposite: Spend almost all of your time building a
great product, and do one of two things with it:

1\. Make it a niche product and sell it to a small number of tightly targeted
customers. Your conversion rate should be much higher than 1% and you can
charge much more, not needing so many customers.

2\. Make it a web-based commodity and leverage technology (SEO, blogging,
etc.) to reach a large audience. You don't "pitch" thousands of users, you
just reach them and let your product pitch them for you.

I just don't understand how someone who can program (which is the critical
path for software products) should be spending all of their time selling.

~~~
antidaily
Mark Cuban says sales solves all problems. I think he's right. The company
with the best sales (not the best product, best SEO'd website, most
informative blog, etc.) will probably have the most success. Doesn't mean you
have to cold call.

~~~
jasonlbaptiste
To boil it down more, it's customer acquisition costs (CAC) and lifetime value
of the customer (LVC). Great products help drive down the CAC and increase the
lifetime value of the customer. Sales are great and an often overlooked
aspect, but just one piece of the puzzle. You can have an awesome close rate,
but if the product sucks and they leave, the LVC goes to shit. You can do a
ton of sales as well, but if the cost to close those sales and acquire the
customer is too large, you become unprofitable.

