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Who Cares How Much You Gross?

September 7, 2006

When I first started in business I was always enamoured with the big numbers people would talk about themselves earning in business.  There weren’t a lot of Internet marketers doing it way back in 1996, but there were people in other fields such as network marketers doing it.  They’d show their big $80,000 monthly check from the business they were a part of…and there would be a hush around the audience as people sat in awe.

What they didn’t always tell us was about the large staff they had…all the mailing pieces that were going out…and how they ended up spending $100,000 a month to keep that check at that level. 

Now that I’ve both earned an extremely good income online and the fact that I’ve been on the “inside” of hundreds of business as a coach and consultant, gross numbers simply don’t impress me the least little bit anymore. 

I’ve seen companies selling products telling people about how they earn $8,000,000 a year online…and then they go bankrupt the next year because their expenses exceeded their income.  I wonder how much people would have wanted to emulate that part?

Let’s look at it this way in an example of two fictional companies (not wanting anyone to think I’m picking on them):

Company A has gross earnings of $900,000 per year.  They have five staff members and they spend quite a bit on product costs, their affiliate program, and advertising.  In all, their bills end up costing them $885,000 a year.  So they net $15,000 for the owner.

Company B has gross earnings of $85,000 per year.  That’s extremely low.  Yet they do it while only creating expenses equaling $10,000 per year.  So they net $75,000 per year for the owner.

Which business would you rather own?

Let’s look at it from another point of view.  We’ll take a business grossing $2,000,000 a year…with expenses totalling $1.5 million so they earn $500,000 a year.  Impressive, isn’t it?  What if the owner ends up having to work 12 hours a day 7 days a week to produce that income?

And let’s say they have a tiny little competitor grossing $250,000 with $100,000 in expenses so they earn $150,000 a year.  And they only work 2 hours a day 3 days a week?  Now which business is more successful?  Which one would you personally rather own? 

If they both work 50 weeks a year (to make the math simple), owner A works 4,200 hours and owner B works 300 hours.  Owner A with his $500,000 net income earns $119.05 an hour.  Owner B with only $150,000 net income earns $500 an hour. 

There are always a lot of things going on behind the scenes in every company you look at.  Gross numbers really don’t mean a whole lot.  And this isn’t just true in small companies.   I’ll be the investors of Enron a few years ago wished they knew more of things going on behind the scenes of their big gross numbers.

If you want to show a large gross income some month in your business, run a huge JV promotion with a lot of partners and pay them 100%.  Your gross income will look wonderful and you’ll be able to show your merchant statements to the world to prove how successful you are.  Your bank account might not look all that great next month after you pay your partners and spend all the money on fulfillment, but you don’t care about that part, do you?

Again, this isn’t an attack on anyone specifically.  It’s just me rambling on as usual.  If you want to find people who’ve succeeded using virtually any marketing tactic you’ve learned, I can usually point them out.  I’ve seen people using every tactic under the sun to build profitable businesses online, but the majority of them rarely let you in on the secret of exactly how much they’re earning.  In many cases, they’d prefer you didn’t know. 

Am I saying everybody showing earnings is being dishonest…of course not!  Showing earnings is one way of showing proof for your claims.  It’s good copywriting sense.  I’m just telling you that things aren’t always what they appear…and the best strategies for one business owner may not be the best strategies for your business.

 

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Written by Terry · Filed Under All 

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2 Responses to “Who Cares How Much You Gross?”

  1. Jim Galiano on September 8th, 2006 12:24 pm

    Hi Terry,

    I used to wonder if you, too, spent untold hours (eventually) with your original info-product business. Sometimes in the process of building a business, you can unwittingly build a monster.

  2. Terry on September 8th, 2006 1:12 pm

    There were times where I did work a little too much, but I at least had the wisdom to take off almost every weekend.

    I did make some serious mistakes with Netbreakthoughs though which caused more work than I should have without outsourcing enough…

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