Nonused
Power Member
- Oct 13, 2022
- 770
- 584
The idea isn’t as important as the foundational principles. Think of it as a gaming console. You can have the latest and greatest game that people want to buy but if you don’t have a good operating system to control the game then you’re dead in the water.
Operating System first then amazing idea:
You need to understand how to build an operating system for your low cost business that is sustainable and scalable.
There is no Grand Theft Auto without PlayStation and Xbox.
There is no lemonade stand without supply, demand, capital, price, and labor.
Some definitions:
Supply: Amount of product or service providers in a market place.
Demand: Customer wants problem or solution and will pay money for it.
Capital: The value of assets either in raw goods for products and the brain power of the people making the product or providing the service.
Price: The amount of cash a customer will give you for your product or service.
Labor: The time it takes for people to build your product or provide your service.
Supply and Demand:
Most people mix up the order of Supply and Demand. It should be Demand and Supply.
Lawn care services have high demand. The supply of lawn care labor is high and therefore the price you can demand will be low.
High Demand + High Supply = Lower Prices.
The capital required for lawn care services are pretty high.
Truck: $15,000 (Decent truck with ok miles)
Mowers (Commercial Grade): $1000
Weed eaters and blowers (Commercial Grade): $500
Ooops lawn care business capital exceeds $1000 in capital.
Understanding the Demand + Supply + Capital + Price + Labor formula is the key in understanding where to spend your time and effort.
First: Figure out what types of work you’re most interested in. If you have a knack for fixing stuff then start a business centered around fixing stuff.
Second: Apply the Economic Formula to the work you’re most interested in and see if there is a demand.
Look for an opportunity that gives you this formula:
High Demand + Low Supply = Higher Prices
Low Capital + Low Labor = Higher Return on Investment
If it takes you $10,000 in capital and 100 labor hours at $25 per hour to make $2500 then you will go out of business. People do it all of the time.
High Capital + High Labor Costs = Lower return on investment or profit margin.
Tesla = High Capital + High Labor Costs = -14% net profit. (Real numbers from their last quarterly income report)
Gas Car Market: High Demand + High Supply = Lower price
Electric Car Market: Low Demand + Low Supply = High Price
When there is low supply of something the price is high. If there is low demand and low supply you run an unprofitable business. Elon Musk is the only dude I know who has had a negative net company and he get’s lauded as a rockstar.
Now you see why Tesla is trying to get a $35K car to market.
Facebook = Low Capital + Low Labor Costs = 40% NET PROFIT. It’s crazy!
Marketing to 2 Billion people: High Demand + Low Supply = HIGH prices.
Facebook and Google are the only two companies than can supply advertising power to billions of people. Now do you see why they’re making so much money?
To sum up:
Look for High Demand and Low Supply markets to exploit. It’s very difficult I know.
Until you find that market niche at least look for High Demand markets with high supply. Your prices will be lower but that’s ok you’re learning the most important fundamental principle in business and that’s understanding what’s in high demand.
Don’t believe the bull crappers that tell you that you can “create” demand.
Steve Jobs didn’t “create” demand with iPods and smart phones. A music player was already in demand. Phones and music players have been in demand for 150 years. Steve just did it better than everybody else.
Operating System first then amazing idea:
You need to understand how to build an operating system for your low cost business that is sustainable and scalable.
There is no Grand Theft Auto without PlayStation and Xbox.
There is no lemonade stand without supply, demand, capital, price, and labor.
Some definitions:
Supply: Amount of product or service providers in a market place.
Demand: Customer wants problem or solution and will pay money for it.
Capital: The value of assets either in raw goods for products and the brain power of the people making the product or providing the service.
Price: The amount of cash a customer will give you for your product or service.
Labor: The time it takes for people to build your product or provide your service.
Supply and Demand:
Most people mix up the order of Supply and Demand. It should be Demand and Supply.
Lawn care services have high demand. The supply of lawn care labor is high and therefore the price you can demand will be low.
High Demand + High Supply = Lower Prices.
The capital required for lawn care services are pretty high.
Truck: $15,000 (Decent truck with ok miles)
Mowers (Commercial Grade): $1000
Weed eaters and blowers (Commercial Grade): $500
Ooops lawn care business capital exceeds $1000 in capital.
Understanding the Demand + Supply + Capital + Price + Labor formula is the key in understanding where to spend your time and effort.
First: Figure out what types of work you’re most interested in. If you have a knack for fixing stuff then start a business centered around fixing stuff.
Second: Apply the Economic Formula to the work you’re most interested in and see if there is a demand.
Look for an opportunity that gives you this formula:
High Demand + Low Supply = Higher Prices
Low Capital + Low Labor = Higher Return on Investment
If it takes you $10,000 in capital and 100 labor hours at $25 per hour to make $2500 then you will go out of business. People do it all of the time.
High Capital + High Labor Costs = Lower return on investment or profit margin.
Tesla = High Capital + High Labor Costs = -14% net profit. (Real numbers from their last quarterly income report)
Gas Car Market: High Demand + High Supply = Lower price
Electric Car Market: Low Demand + Low Supply = High Price
When there is low supply of something the price is high. If there is low demand and low supply you run an unprofitable business. Elon Musk is the only dude I know who has had a negative net company and he get’s lauded as a rockstar.
Now you see why Tesla is trying to get a $35K car to market.
Facebook = Low Capital + Low Labor Costs = 40% NET PROFIT. It’s crazy!
Marketing to 2 Billion people: High Demand + Low Supply = HIGH prices.
Facebook and Google are the only two companies than can supply advertising power to billions of people. Now do you see why they’re making so much money?
To sum up:
Look for High Demand and Low Supply markets to exploit. It’s very difficult I know.
Until you find that market niche at least look for High Demand markets with high supply. Your prices will be lower but that’s ok you’re learning the most important fundamental principle in business and that’s understanding what’s in high demand.
Don’t believe the bull crappers that tell you that you can “create” demand.
Steve Jobs didn’t “create” demand with iPods and smart phones. A music player was already in demand. Phones and music players have been in demand for 150 years. Steve just did it better than everybody else.
