Victim or Victor?

When you subscribe to the belief that everything is out of your control, you give up your power.  To create the life of your dreams, you don’t have to be smarter, better connected nor luckier than anyone else. You’ve only got to be willing to take control of your life. Start now by doing these things:

“The best way to predict the future is to create it.”  Peter Drucker

What do you want your life to look, smell, taste and feel like?  There’s a reason why all my articles about success start with a vision.  It’s the foundation for everything. Until you’re completely engaged, excited and immersed in your future vision, you’re just going through the motions. Every thing and everyone will be able to make you react instead of act.  It’s when you react to people and situations that bad things happen. Or, you’ll be so busy dealing with everything coming at you that you can’t act on opportunity. If you don’t know what the outcome looks like, you can’t make the best choices on how to get there.

Write out a plan

Success is where preparation and opportunity meet.”  Bobby Unser

With your vision firmly in mind, it’s time to write down exactly how you’re going to make it a reality. I’m not going to lie, it’ll be hard work. Most people you think of as lucky are just way more prepared than you are.  What will you do every hour, every day, every year to make your vision real? Your plan is part inspiration, perspiration and aspiration. Reach high, work hard, believe in your future. Ready to get to work?

Live with integrity

Borrow trouble for yourself, if that’s your nature, but don’t lend it to your neighbours.” Rudyard Kipling

If your plan is the map, your values determine which road you’ll take.  We all have friends who say one thing and do the opposite.  We call them hypocrites. They’re also unhappy. Be honest about what’s important to you and then hold yourself and everyone in your life to the highest standards. Don’t allow anyone in your life who’s not going to live by the same standards you set for yourself. When you loosen this rule, you end up hanging out with people who will distract you from your journey. If misery loves company, happiness demands a certain level of solitude.

Live below your means

Net worth has nothing to do with your annual income. It’s all about how you handle your cash flow. Every month cash comes in and it goes back out. Where is your cash going? Are you spending your cash on stuff or assets? Even worse, are you using credit cards to purchase that stuff? Here’s one easy way to spend less money: don’t smoke, drink, gamble or do illegal drugs. All of these addictions cost lots of money.

Stay out of debt 

“I can get no remedy against this consumption of the purse: borrowing only lingers and lingers it out, but the disease is incurable.”  William Shakespeare

Do whatever it takes to get and stay out of debt. If you don’t have debt, it’s a lot easier to live below your means. When you’re debt-free, you have more options, more freedom, more happiness.

Work your plan everyday

Are you ready to work hard everyday to make your perfect future a reality?  Do something everyday that will move you toward your outcome. Don’t get sidetracked by the frivolous, futile, or feel-good for now. Sacrifice today for tomorrow.

Invest in yourself and your future

What do you need to know, do or be to reach your goal?  Go to school, find a mentor, take an apprenticeship to get the knowledge you need.  Practice these skills every day until you become unconsciously competent. Delay the gratification that comes from spending money you don’t have on trinkets, alcohol and frivolity. Spend your time planning, learning and practicing.

Create a network

We all want to do business with someone we know, trust and who gives us business in return. This is the premise of all networking.  When you meet someone new, ask yourself: “How can I be of unique service?” and  ”Who do I know who can be of benefit to this person?”  You’ll need to know your market, your product, and how to communicate its benefits concisely. This should not be a sales pitch; it should be a natural extension of your introduction. Linking your connections to others maximizes your exposure and brings additional value to your inner circle.

Be thankful 

Take a moment every day to give thanks for all that you have,  Don’t think you have much?  Concentrate on all the people who have even less than you.

Follow these steps and people will call you lucky.

Cause and Effect Meets Profit and Loss

 Cause and Effect meets Profit and Loss

 

Our real-world business lesson of the day comes to us from Rachel Brown, owner of Need a Cake bakery in Woodley, Berkshire, UK.  Rachel, wanting to embrace social media, offered a discounted dozen cupcakes through Groupon. Her strategy succeeded, as Groupon delivered her 8,500 customers.

Journalists reported on Rachel’s story with sensationalistic headlines like “Baker Forced to Make 102,000 Cupcakes” , “Baker is Burnt on Cake Offer” and my favorite, “Bakery Terrorized by Groupon Deal”. According to Rachel, “We are still working to make up the lost money and will not be doing this again.” Instead of blaming Groupon, let’s look at what went wrong:

Price

Groupon.com says the company negotiates each deal individually, but a quick search shows that Groupon usually gets half the gross income on redeemed deals and all the income from unredeemed vouchers.

Here’s Rachel’s offer:

“Twelve Cupcakes with a Choice of Flavours and Designs for £6.50 from Need a Cake (Value £26).”

Groupon and Need a Cake sold 13,078 deals, 65% of which were redeemed*. The proceeds were split between the 2 parties as follows:

GrouponNeed a Cake
Deals Redeemed£27,625£27,625
Deals Purchased but not Redeemed £29,7570
Total£55,250£27,625

Note: All of these numbers are based on the statements in the linked articles.  I have no idea if they’re accurate.*According to this extremely detailed post and this case study.

I’m sure Rachel looked at the £27,625 gross income and thought: “Wow, that’s pretty close to what I make in a year.** How can I go wrong?” Here’s what I estimate her normal annual income is:

Gross income
(from 1200 dozen cupcakes per year)
£31,200
Ordinary overhead£5,136
Net Income£26,064

Do you know how much it costs you to make $1?  Do you even know how to find out? Rachel didn’t.

Here are the numbers she easily could have run before doing the Groupon deal:

Per DozenTotal
Gross income£3.25£27,625
Ordinary overhead£4.28£36,380
Projected loss-£1.03-£8,755
Extra overhead£1.47£12,495
Actual loss-£2.50-£21,250

The Groupon deal price couldn’t cover Rachel’s ordinary overhead, let alone her additional expenses due to overwhelming demand.

If you want to build a profitable business, you have to know your numbers.  Learn how to read a balance sheet and a cash flow statement.  Set reasonable and competitive prices, but never charge below cost.  You’re not Walmart.  Volume won’t make up your losses. Get rid of all non-performing services, items or divisions.

Production & Distribution

Rachel normally produces 1200 dozen cupcakes per year. After 8500 customers redeemed her Groupon deal, she had to pump out more than 7 years’ worth of product in just a few months.  Rachel ended up paying £12,500 for extra staff and distribution.

You’ve created a great product, priced it right, and now the customers are clamoring.   Do you have the infrastructure in place to deliver?

-Simplify and automate your ordering process. Or outsource it.

-Offer the minimum customization required to compete.  If Rachel had at least limited the flavors and designs, she wouldn’t have needed quite so much help filling the orders.

-Streamline your production by breaking it down into easily duplicated steps. Then you can use checklists and assembly line tactics to ensure a consistent outcome.

-Limit your sales until you’re sure you can accurately deliver an exceptional product on time. If Rachel had limited her deal to 200 customers, she would probably have been able to complete the extra orders with minimal additional staff and expense.

Strategy

Rachel didn’t have a strategy, or even a stated goal, for her Groupon partnership.

Do you have a plan? Where do you want your business to be in 2 years? 5 years?  How will using Groupon, or any other advertising and marketing campaign, help get you there?

Here’s what Rachel’s plan could have looked like:

  • 12 cupcakes for £13
  • Limit 200 customers
  • 65% of the vouchers will be redeemed before they expire
  • 40% of those customers will buy an additional item at £3 each
  • 20% of customers who redeemed the voucher will return at least once more to spend the same amount of money

Projected
Profit & Loss
Coupon income
(130 coupons)
£845
Additional income
(52 sales @ £3)
£156
Repeat business
(26 sales @ £13)
£338
Total Gross Income£1,339
Ordinary overhead
(130 coupons plus 26 repeat sales)
£668
Overhead on Additional Income (16%)£25Based on normal overhead
Extra overhead
(130 coupons)
£96Half of extra overhead with 8500 orders
Total overhead£789
Projected profit£550

This post shows you how to calculate return on investment for a Groupon campaign.

To execute this plan, you need a to give a compelling reason and make it easy for your new customers to spend more. In-store advertising, buy-one-get-one deals and redirecting your web order confirmations to a sales landing page are just 3 ways to sell your other services.

Since Groupon doesn’t share its mailing lists, you’ll need to collect customer contact information and set up consistent, compelling follow-up announcements and offers.  Your goal is to convert the one-time repeat sales into forever customers.

Math, Math. (And only then, Location).

These are the (new) three most important words in real estate today.

In preparation for my class of the above name on Thursday, I scoured the Las Vegas Multiple Listing Service for residential resales to use as examples.  Here’s what I found:

Property 1:

3 bedrooms/3 baths, 1180 square feet in northeast Las Vegas just 4 miles from Nellis Air Force Base.
Seller is a bank or finance company.
List price is $50,900. Year built, 2007
Based on photos, the property is in good condition with artificial wood floors, clean carpet and new paint, but no appliances.
At list price with a 20% down payment, 6% in closing costs, $1800 for appliances and a 5% 30-year fixed loan, the property is estimated to cash flow at $2,221 before taxes.

If you could get the seller to discount the price to $46,800, the annual income jumps to $2,739.

Property 2:
3 bedrooms/3 baths, 1598 square feet in Henderson, Nevada, near the intersection of two auxiliary interstate highways.
This is a short sale.
List price is $79,900. Year built, 2001
Based on photos, the property is in good condition with carpeted floors throughout and all appliances.
At list price with a 20% down payment, 6% in closing costs and a 5% 30-year fixed loan, the property is estimated to cash flow at $3,941 before taxes.

I thought the list price was high so I also ran the numbers with a sales price of $69,900 (a 12.5% discount).  The reduced price brings in $4,456 before taxes.

Property 3:
3 bedrooms/2 baths in Henderson, Nevada within one of the top school zones in the county.
This is a short sale.
List price is $95,000. Year built 1985
Based on photos, the property is in fair condition.
At list price with 20% down payment, 6% in closing costs and a 5% 30-year fixed loan, the property is estimated to cash flow at $3,753 before taxes.

At $90,000, the property would cash flow $4,010.

An embarrassment of riches.  Each property flows positively.  Each would make a great investment. If you were investing, which property would you choose and why?

If you want to learn more about these properties and similar ones; how to calculate rates of return for real estate investments; and how to find, negotiate and close on great real estate deals, come to my class:

Thursday, October 20th, 2pm
Keller Williams Realty Las Vegas
3090 S. Durango #100 (at Sahara)
RSVP KMcMurray@KW.com

**This article is featured in theHow to Make Money with Real Estate Blog Carnival: December 1, 2011 Edition**