How the stock market is like a online business.
Everyone knows the most basic rule in the stock market: “buy low, sell high”.
Buying stocks lower than where you sell ensures your survival as a broker, trader, or investor. If you can do that on a consistent basis, you can get a job on Wall Street – or better yet, start your own investment blog.
But buying low and selling high is bigger than the markets. What is true for hedge fund managers is also true for business owners. Successful online businesses must find ways to buy something for less than they sell it for – on a consistent basis.
A “Buy Low, Sell High” Business
True, there are more moving parts than the aphorism suggests. But at its core, that’s what a good business is: the practice of consistently purchasing something for a lower price than you sell it for.
Let’s say you like the t-shirt business. So you buy a screen printer, materials, and you happen to have a line of customers at your front door. If it costs you $4 dollars to print a t-shirt – as long as you sell that t-shirt for $5 – you’re profitable (after you pay off your startup costs and expenses).
You bought t-shirt materials low, you sold t-shirts higher – you won.
Buying Chocolates Low, Selling Chocolates Lower
Let’s take it a step further. Say you start a website selling specialty chocolate. To make it simple, you only offer one box of chocolate for $15. Your cost to produce the chocolate is $5. You have boxes of chocolate on hand – now you’re ready to market your chocolate.
So you write a sales letter and slap it on the home page. Your site has an integrated blog – so you write about chocolates. The search engines don’t see your site so you buy some traffic from Google Adwords.
Now you’re getting some qualified visitors, but they’re just not converting the way you expected. Sure, you’re getting a few sales, but not enough to pay your startup costs and advertising. Right now you have a garage full of chocolates and a dwindling bank account.
You’re in the red.
Fail to cover chocolate and marketing expenses long enough, then you’re out of business. That is, unless you’re expecting government stimulus money to cover your struggling chocolate venture. Don’t count on it.
You bought low, you sold lower – you lost.
How To Buy Low and Sell High In Business
Nobody wants a failing online business. But there are ways to lower your costs while you raising your potential for success. Here are six ways you can buy low and sell high in your online business.
#1 – Buy Lower
Maybe your normal supplier is your brother-in-law. There’s a cost to that – namely that your relative could be taking more than you could give to his competitor. Research to see if there’s a cheaper supplier. You could cut costs by half and double your margin. That could be the difference between profit and loss.
#2 – Sell Higher
Maybe you’re not charging enough for your product. A few years ago, we tested an investment Ebook at four price points: $97, $197, $297, and $397. We actually sold more units at the $297 price than the $97 price point. By testing the prices we discovered the market would pay a higher price than we originally suspected. Which price do you think we went with? You just never know until you test it.
#3 – Add (Buy) Value
Maybe your prospects don’t know your story. J. Peterman tells great stories. This catalog, now an ecommerce site, sells everything from Men’s Italian Spectator Shoes to old fashioned peppermills. Each item comes with a story – one that transports their customers to another place before they pull out their credit card. That’s why J. Peterman sells peppermills for $78 – ouch!
#4 – Buy Conferences (Ideas & Contact)
An established business can walk away from internet marketing conferences with one idea that pays for the conference in full. More than that, you can make contacts with fellow business owners looking for partners with your assets and skill set. You can now leverage those new relationships and new ideas and add digits to your top line.
#5 – Buy Knowledge
But you don’t have to leave home to get smarter. Read books, read blogs. That’s what Amazon is for – not to mention your blog reader. That kind of knowledge is cheap. The main thing is costs you is time, but your time is still an investment.
#6- Sell Smarter (Higher)
In direct marketing, they say that 40% of your success depends on your offer. Maybe you’re doing well in a product line, but you’ve never tested a better offer on your site. Try it out. You may discover the extra sales will pay for your better offer and add to your profit margins.
Did I miss anything? Feel free to add your thoughts about buying low and selling high in business.