Even without fast food or a salon, you can still make $200+/hour AFTER-TAX as a middleman.
What do you sell?
You either sell software (including SaaS), equipment (industrial/medical/data center), houses, vehicles, or something scalable online.
After processing over $2.8 billion in transactions over 10 years, four definitive conclusions is that you need to focus 1) your inventory and 2) your market while optimizing 3) alternatives for your customers and 4) your outsourcing.
- INVENTORY MANAGEMENT: LESS VARIETY MORE FOCUS
Marginal cost bisects average cost at the minima of the average cost. If you can reduce inventory you will improve your profit by maximizing your output variables. Inventory turns, is a measure of how many times inventory turns over in a year. The higher the number of inventory turns-or the lower the inventory days–the tighter your
management of inventory and the better your cash position. As long as you have enough inventory on hand to meet customer demands, the more efficient you can be.
Inventory is “frozen cash” the faster you can get it out of the door, the better off you will be. The longer you keep inventory, the more money you lose in opportunity cost. Low inventories will also mean you can afford to sell your product at comparatively low prices. You would be able to sell your product cheaper because you would be able to sell them more quickly.
Everything in life operates on first and second order derivatives. The second order derivative shows that with each added different item in your inventory, the curve in relation to the cost will get steeper as your costs increase but not pro rata with the different items you add. Each different item/product line takes time and effort to sell (the most expensive things), so trying to sell more different items is like trying to fill many pools with 1 garden hose. Its easier to fill 1 pool rather than 2. The solution is to sell less variety but to make more money off of each product line. Consequently rather than spending $100,000 on X different categories of inventory, you can spend the same money on half the variety.
2. ONLY 2 MARKETS: WOMEN AND RICH PEOPLE
- Rich people (people who earn over $137,790 per year in Edmonton) – they control 70% of Alberta’s wealth.
What about men who earn less than $137,790 per year in Edmonton? They simply don’t count – their women control their money – if you’re not selling houses over $500,000 or vehicles over $50,000 then sell what women want.
It’s important to choose your market and your customer. You have to know what the ideal customer wants. Everyone can get want they need, but you will earn more if you can give the customer what they want. When someone wants something they
will pay higher margins compared to when they need something.
3. GIVE YOUR CUSTOMERS ALTERNATIVES
Not having any reasonably similar alternatives will mean you lose customers.
Brand your company with a compelling and focused mission that leverages your combined special skills. People get rich by adding value to other people’s lives, rather than just acting as a middleman/retailer.
The path to success is not as clear as the path to failure. So by doing the opposite of 90% of your competitors, it will ensure you will succeed. There is always a choice between status and money. Most people choose status and have more variety rather than being content with a smaller presence and more money.
4. OUTSOURCE WHEN APPROPRIATE
Now that you make over $200/hour AFTER-TAX (calculated by taking your after-tax income and dividing into the hours you work. ) you know should enforce it. Like Naval Ravikant iterates in his famous tweet storm, “If fixing a problem will save less than your hourly rate, ignore it. If outsourcing a task will cost less than your hourly rate, outsource it.”
If your problem is business related than you can use your pre-tax hourly rate since business expenses are paid with pre-tax dollars, while residential repairs and maintenance are paid for with after-tax dollars.