How to Make $1 Million Dollars Per Year Ep 291

Summary Notes


In this episode, the host and entrepreneur, Speaker A, demystifies the process of making a million dollars by breaking down the math required to achieve this financial goal. He emphasizes the importance of understanding the difference between revenue and net income, setting precise targets, and knowing the lifetime value (LTV) of a customer. Speaker A advocates for starting with premium offerings to provide significant value without the need for extensive operational skills. He also suggests that high-paying jobs can be a more realistic path to a six-figure income than entrepreneurship, given the risks involved. The conversation concludes with advice on scaling sales efforts and the necessity of high LTV for sustainable customer acquisition. Speaker D reinforces the value of word-of-mouth promotion for the podcast's growth.

Summary Notes

Over-Delivering for Clients

  • Focusing on over-delivering to clients is recommended over worrying about scalability initially.
  • The priority is to start generating income before considering how to scale the business.

"It's easier to just over deliver like crazy for a client rather than trying to think about, like, how do I make this scalable? It's like, you don't need to worry about that yet. Like, you need to just start making money."

This quote emphasizes the importance of prioritizing client satisfaction and income generation over the complexities of scaling a business in the early stages.

Podcast Introduction

  • The podcast aims to discuss strategies for acquiring customers, increasing customer value, and retaining them.
  • It also covers the hosts' personal experiences with failures and lessons learned in business.

"Welcome to the game, where we talk about how to get more customers, how to make more per customer, and how to keep them longer, and the many failures and lessons we have learned along the way. I hope you enjoy and subscribe."

This quote serves as an introduction to the podcast and outlines the topics and value the podcast aims to provide to its listeners.

Making a Million Dollars

  • The topic of how to make a million dollars is commonly asked and is perceived as clickbait, but the host intends to break down the actual math behind it.
  • Understanding the math is crucial to achieving financial goals.
  • Difference between making a million in revenue versus take-home income is highlighted.
  • Being in the top 1% in America requires an income of $400,000 a year.
  • Running a business with 40% net margins is considered very good.

"And so the number one way that I know that someone has no chance in actually doing this is they don't even know the math behind how to accomplish their goals."

This quote underscores that a fundamental lack of understanding of the financial calculations necessary to reach a goal is often a predictor of failure to achieve that goal.

Revenue vs. Net Profit

  • Making a million dollars in revenue does not equate to a million dollars in take-home income.
  • A business with 40% net margins would yield $400,000 a year in net profit from a million dollars in revenue.
  • The host believes that having a high-paying job is underrated and may be a more realistic path to a six-figure income than starting a business.

"And so let's say you have a business that run 40% net margins, which, mind you, is very good if you run 40% net margins. That means if you made a million dollars in revenue, you would make $400,000 a year in net profit."

This quote explains the concept of net margins and how they impact the actual take-home income from a business's revenue, using 40% net margins as an example of a successful business metric.

Job vs. Entrepreneurship

  • The host reflects on the risks of starting a business and the likelihood of achieving financial success through employment.
  • Acquiring a high-paying job is often faster and less risky than learning all the skills required to run a business.
  • The host shares a personal anecdote about starting a business out of dissatisfaction with his job rather than an entrepreneurial drive.

"Which is why, by the way, I think that having a job that pays well is very underrated. I think it's just, if I'm being realistic, if you're looking at the odds, I think it's far, far more likely that you can achieve a six figure or multi six figure income fast by having a really high paying job because you've acquired a skill than trying to learn basically all the skills and own your own business."

This quote presents an argument that securing a high-paying job may be a more viable and less risky path to financial success than entrepreneurship for most people.

Breaking Down the Math

  • The host breaks down the math to make a million dollars per year, starting with monthly and then daily revenue targets.
  • The importance of setting clear price points for products or services is emphasized.

"But let's get to the meat and the potatoes, right? So a lot of times people haven't even figured out their price points on things yet. And so the easiest way to understand this is that if you have a million dollars a year, which is what you want to make, then you want to break this down. Right? A million dollars a year is going to be eighty three k per month."

This quote highlights the need to understand and break down financial goals into manageable parts, such as monthly and daily revenue targets, to make a million dollars a year. It also points out a common oversight in not determining product price points.

Goal Setting and Breaking Down Targets

  • Discusses the importance of setting precise, achievable goals.
  • Breaks down an annual revenue goal into smaller, manageable targets.
  • Emphasizes that vague goals are difficult to achieve, hence the need for specificity.
  • Uses a $1 million annual goal as an example and breaks it down into weekly, daily, and per-deal targets.

"Fuzzy targets don't get hit."

This quote highlights the concept that vague or imprecise goals are unlikely to be reached, stressing the importance of having clear and specific targets.

"So we need to make this a very precise, clean, pristine target."

The speaker is emphasizing the necessity of having a well-defined and unambiguous goal to increase the chances of success.

"So we got a million dollars a year breaks down to month. Twenty one k per week. Excuse me? Twenty one k per week. And then from there, seven days would be about three k plus per day."

This quote demonstrates the process of breaking down an annual revenue goal into smaller, more manageable weekly and daily targets.

Understanding Lifetime Value (LTV) and Sales Targets

  • Introduces the concept of Lifetime Value (LTV) of a customer.
  • Provides examples of how LTV can be calculated across different business models.
  • Suggests that knowing the LTV is crucial for determining the number of units needed to be sold to meet revenue goals.
  • Breaks down the number of units to be sold per week and per day based on the LTV.

"The thing is, we just have to know what the lifetime value of our customer is."

This quote points out the importance of understanding the total revenue a customer is expected to generate over the course of their relationship with a business.

"If I have to get to a million dollars, then I need to sell 21 units per week, right? And so that would be 21 divided by 1000, which is 21, right, units per week to hit our goal."

Here, the speaker calculates the number of units needed to be sold on a weekly basis to reach the annual revenue target, assuming an LTV of $1,000 per customer.

Sales Process and Conversion Rates

  • Discusses the practical application of the sales target by considering the number of deals required per day.
  • Introduces the concept of conversion rates and how it affects the number of interactions needed to achieve sales goals.
  • Suggests setting a daily goal slightly higher than the minimum requirement to create a buffer.

"So I got to sell five deals a day, right? And if I have five deals a day, and the nice thing is, with this process that I'm walking you through right now, you can add as many zeros as you want. It works the same way, right? You can add zeros to your product, zeros to your goal. Everything works the same way."

This quote explains the scalability of the goal-setting process and how the same principles apply regardless of the size of the goal or the cost of the product.

"I may know my math, right, and know that five deals a day, we close, let's say one out of three phone calls, which means I'm going to need 15 phone calls."

The speaker is calculating the number of phone calls needed to achieve the daily sales target, based on a conversion rate of one sale per three calls.

Podcast Promotion Strategy

  • The growth of the podcast is reliant on word-of-mouth promotion.
  • The host does not use traditional advertising methods such as ads, sponsorships, or product sales.
  • Listeners are encouraged to share the podcast as they were introduced to it, to spread good karma among entrepreneurs.

"The only way this grows is through word of mouth."

This quote emphasizes that the podcast's audience expansion is solely dependent on listeners sharing it with others.

"And so I don't run ads, I don't do sponsorships. I don't sell anything. My only ask is that you continue to pay it forward to whoever showed you or however you found out about."

Here, the host clarifies that they rely on organic growth rather than paid promotions, and they request listeners to keep the sharing cycle going as a form of support.

Sales and Conversion Strategy

  • Discusses the concept of site conversion rates and its impact on sales targets.
  • Uses an example of an e-commerce store with a 1% conversion rate to explain the need for a certain number of clicks to achieve sales goals.
  • Introduces the concept of setting appointments and show-up rates to meet sales objectives.

"So if I have like a 1% conversion on my store, an ecommerce store, for example, then I would need 100 times the amount of sales I need, right?"

This quote explains that with a 1% conversion rate, the host would need to multiply their sales target by 100 to determine the necessary clicks to achieve their sales goals.

"And let's say that I know my show up rate on these calls is 66%, so I'd have 22 set appointments per day."

The speaker calculates the number of appointments needed based on the expected show-up rate to achieve the desired number of sales.

Outreach Effort and Deal Size

  • Discusses the relationship between outreach efforts and appointment setting.
  • Highlights the inefficiency of high-effort sales tactics for low-value deals.
  • Suggests that increasing deal size can significantly impact revenue goals.

"And the thing is, I know that based on my either outreach efforts, it takes, let's say, 50 outreach efforts to get one appointment. I need 1000 outreach efforts a day right."

This quote reveals the speaker's understanding of the ratio of outreach efforts to appointments and the high volume of outreach needed for a single deal.

"Now, mind you, $1,000 deal would not be worth any kind of effort like that because this is way too low to have kind of like a hand to hand combat sale type system."

The speaker indicates that the effort required for a $1,000 deal is not justifiable, suggesting that higher-value deals are more efficient.

Scaling Business Revenue

  • Illustrates different strategies to reach a million-dollar business based on the size of the deals.
  • Compares the effort required to sell high-value deals versus low-value, high-volume products.
  • Concludes that selling premium, high-value items is easier when starting a business.

"You could either sell 910k deals per month and have a million dollar business. Wow."

This quote provides an example of how selling a small number of high-value deals can lead to significant revenue.

"You could sell 100k deal per month to have a million dollar business. That sounds pretty chill."

The speaker contrasts the effort of selling one high-value deal per month with selling multiple smaller deals to achieve the same revenue goal.

"And honestly, it's hard to sell 83 things a month. Selling nine easier."

Here, the speaker reflects on personal experience, stating that selling fewer high-value items is more manageable than selling a large number of low-value items.

Starting a Business and Scaling

  • Focus on generating income before considering scalability.
  • Aim for a pricing sweet spot that provides substantial value without needing extensive operational skills.
  • Operations at lower price points require high volume management.
  • Higher price points can lead to more earnings with fewer operational demands.

"Rather than trying to think about like, how do I make this scalable? It's like, you don't need to worry about that yet. You need to just start making money, right?"

This quote stresses the importance of prioritizing income generation over scalability when starting a business.

"How can I find a sweet spot in here, right? This like 5000, 10,000, $15,000 mark."

The speaker suggests targeting a price range that balances value with manageable operational demands.

"You have to be able to support so much volume that you're very good with people."

At lower price points, operations become complex due to the volume, necessitating strong people management skills.

Customer Lifetime Value (LTV)

  • High LTV is crucial for business sustainability.
  • Acquiring new customers is difficult, so increasing LTV is essential.
  • Employ strategies to make customers more valuable over time.
  • Focus on unique, expensive, and habit-forming products or services.

"Acquiring customers is just too difficult to not have a high LTV."

This quote highlights the challenge of customer acquisition and the importance of maximizing customer lifetime value.

"You have to find ways to make customers worth more, right? Unique, expensive, sticky air, if you remember that from before, habit forming, something that they're going to continue to come back again and again and again."

The speaker advises on creating products or services that encourage repeat business, thereby increasing LTV.

Making a Million Dollars

  • Calculate the weekly revenue needed to reach a million-dollar goal.
  • Consider various unit prices and their corresponding sales volume to meet the target.
  • For sales professionals, relate commission to the number of units needed to sell.

"How to make a million dollars? I think most people do not do this math on this, which is you got to make $21,000 a week."

The speaker breaks down the weekly income target necessary to achieve a million-dollar annual income.

"So if you want to make a million dollars yield as a salesperson, then you're going to need to sell, let's say you get $1,000 commission, then you need to sell 83 units a month of your thing, right?"

This quote translates the weekly revenue target into a tangible sales goal for a salesperson based on commission.

Time Management and Income Goals

  • Recognize the time constraints inherent in any position.
  • Reverse engineer the math to set realistic income goals.
  • Align sales or business activities with time availability to achieve targets.

"And so anywho, reverse the math on your own business and your own products that you're selling. And a lot of times this will help you get your goals a lot faster."

The speaker suggests working backward from income goals to determine the necessary actions and time investment needed to achieve them.

"There's only 24 hours in a day."

This quote acknowledges the finite nature of time, emphasizing the need for efficient time management in relation to income goals.

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