Discover Hidden Wealth: 7 Business Ideas That Can Skyrocket Your Earnings! - Must Know in 2024!
In the world of business and making money, we're always on the lookout for new opportunities.
As we enter 2024, there are some cool business ideas worth checking out.
This article will give you insights and tips on these ideas that could help you make more money.
Whether you're someone who knows a lot about investing or someone dreaming of starting your own business, stick around. We're about to explore these ideas that could bring you financial success this year.
Today, let's dive into seven key investment concepts that can significantly impact your profitability.
Starting with the first one:
"Lifetime Gross Profit compared to Cost to Acquire a Customer" – a fundamental metric in business economics. It essentially measures the profit generated from each customer compared to the cost of acquiring them.
To break it down, imagine spending a dollar to attract a customer, and in return, making a dollar in profit. A ratio of 1:1 may not be groundbreaking, but if it's, say, 20:1, that means for every dollar spent, you make $20 in profit. This ratio is crucial for scalability and business attractiveness.
Now, let's get clear on the terms.
Lifetime Gross Profit (LTGP) involves understanding how many times a customer pays within a product's lifespan. For instance, a Shopify store might tell you that, on average, a customer buys 4.3 times. If you lack this data, a simple back-of-napkin method involves tracking customer numbers at the beginning and end of a month to calculate churn and average lifespan.
Moving on to Gross Profit – it's the extra cash left after each transaction, calculated by subtracting the cost of goods sold from the selling price. For example, selling a product for $2 that cost $1 to produce gives you $1 in gross profit.
Combining LTGP and Gross Profit, you get the Lifetime Gross Profit per customer, a crucial metric indicating how much a customer is worth to your business over time. This figure is pivotal for determining how much you can afford to spend on customer acquisition and overall business operations.
Now, let's shift focus to the Cost to Acquire a Customer (CAC). It's not just about ad spend; it encompasses all costs associated with acquiring customers, including labor. For instance, if your monthly company costs are $100,000 and you acquire 83 customers in a month, your CAC is $1,224.
The magic lies in the LTGP to CAC ratio. If spending $1,224 results in a customer bringing in $6,000 in lifetime gross profit, you're in good shape with a 5:1 ratio. A ratio greater than 3:1 is generally considered favorable for scalability.
Moving on to Return on Invested Capital (ROIC), it gauges how much money it costs to expand the business. For example, if opening a new location requires an investment of $100,000, you'd ideally want a 3:1 to 5:1 return, meaning for every $1 invested, you get $3 to $5 in profit.
Next up is Payback Period, indicating how quickly you recoup the cost of acquiring a customer. Strategies like upfront payments, fees, upsells, or financing can influence this period, ensuring quicker positive cash flow for the business.
Sales Velocity times Lifetime Gross Profit and Sales Velocity divided by Churn provide insights into future projections. They help estimate potential revenue at scale and assess the business's ability to handle growth.
Lastly, the secret bonus – evaluating the Total Addressable Market (TAM) in relation to potential units, LTGP, and risk. This helps gauge the overall opportunity and assess the knowable risks associated with achieving the business's full potential.
In conclusion, understanding and optimizing these concepts can empower you to make more informed investment decisions and enhance the overall health and scalability of your business.
