Now today, because it’s Monday, I’m assuming you’re more awake than later in the week, so I’m going to give you a load of calculations and numbers.
But don’t worry, I’ll be making them up as I go along, you don’t have to work them out. You just need to follow along, please bear with me.
So reverse engineering is one of the most fantastic ways you can work out what you need to do in your business.
Reverse engineering means taking the finished product and then reversing it back to where it started from. It can be applied to advertising, to all kinds of problems.
But in your business, you have challenges, you will have needs and sometimes you just look at the end result and you think, how on earth am I going to do that?
But if you back it up, if you reverse engineer it, you can find that it’s actually a lot more manageable.
But you can then break it down into figures and you can work out timeline, how long it’s going to take you, what it’s going to cost, whether it’s actually worth doing in the first place, whether it’s a goal that should be set or whether that should be changed.
So, for example, you want to increase sales. Now you want to increase your sales and it doesn’t matter whether this is over a month or over a year, just a figure.
I am going to give you easy figures, I am what to make of things so it’s easy calculations, that’s for me, by the way.
But say you want to increase sales by 10,000, we’ll call this pounds, £10,000, it could be a month, it could be a year, it depends on how big or small your business is, it does not matter, the same principle applies. You could want to increase it by 10 million, it would be the same. So 10,000.
Now your average order we are going to assume is £200, so to generate £10,000, we now know that we need to generate 50 orders, 50 orders an average of £200.
Okay, so we are one step back. Now let’s say we’re going to generate those orders by sending out some form of direct mailing, or handing out our sending out or delivering them in leaflet form.
So we’re not going to go into the mechanics of how you do it, it’s just the theory part you see, bear with me.
I did talk the other day about offers, everything should be a form of offer. It doesn’t have to be a discount, just some form of offer, just not “This is our product, this is what it costs.”
So, when you send that out, perhaps on your leaflet it has something, you are trying to generate leads, see you have something that you want to give to people, say a report, and they can go to a website and opt in, go to a landing page, go to this website and just signed up for it there, it would be delivered straight away.
But, the leaflet says “For more information, to find out more, call us free at XXXX.” Something like that, it doesn’t matter what the service is.
Now what we’re going to assume is that when you send those out, 20% of the people, so one in five of those people that get that leaflet, will go to the website and sign up and get the free report, whatever it is, something of value that they think “Gasp!”
Don’t forget this is a targeted audience, you will have only sent it to people that would be interested, could possibly be interested, your potential customers.
So 20% to get that. But 10% actually make that phone call. So 10% think “Hmm.” Because these are targeted, they think “That is interesting, I’ll get the thing and I’m with the ring them up because I want to know more about this.” So one in ten.
Remember, we need to generate £10,000, £200 average will… So we need 50 orders. Of the people that call you, 10% are going to buy your products. So one in ten is converted on the phone.
Now that’s not outrageous, that’s pretty low because these are people who have chosen to call you because they are interested.
So you need fifty orders, so you need five hundred people to phone. This could be over a year, it could be any period of time, so you need five hundred people to ring.
Now of those leaflets, yes 20% opted in online and we’re going to say 10% of them actually phoned you, so one in ten. So that means five thousand leaflets because the 20% that opted into your offer is something else, we are concentrating on just people on the phone.
Five thousand leaflets go out, 10%, so five hundred of them phone up, 10% of them buy, that’s fifty of them, they spend an average of £200 to generate your 10,000.
Now if you know the cost of sending out a leaflet, printing it, posting it, or perhaps these are done
through leaflet draw ups, you know the cost per leaflet, you know your profit when you make so when you make that sale of £200, you need to know your profit margin.
If it’s your services, then perhaps it’s just your time. So if you are a landscape gardener or something like that, it’s just your time, but don’t forget to value your time, yes, there is the cost of your time, there is only twenty four hours in a day.
But if you are selling a product and for every £200 order it costs you £80, you’re making £120 profit, then you need to know the numbers that you’ve got to play with.
What Are the Numbers
Now when you go back and you think, so say for instance, you wanted to post them and it’s £.50 per stamp, five thousand leaflets, that’s £2500. So you wanted to make £10,000 and it’s cost you £2500 to actually post these out.
The actual printing of leaflets these days is pennies, so that’s going to add, just another ten pence or something.
But you need those envelopes printed, somebody has to actually generate the thing, I don’t suggest hand writing five thousand of them, but it can be done, you can print them out and stick them on and so on, but generally it’s easier in time to get someone to do it. So you need to know these costs.
Then, as long as that cost is going to leave you with a little profit, and it certainly doesn’t lose you money, depending on what your service is, if you do it right, you get customers and then as long as you don’t lose money, once you’ve got customers, you can get more business from those customers.
You can get repeat, if you’re that landscape gardener, hopefully you’re going to get maintenance ongoing, more updates, annual refreshing or whatever landscape gardeners do.
But there is going to be more business. Hopefully you are not just trying to get one sale and it’s done, you’re going to turn them from a purchaser into a repeat purchaser, into a regular purchaser and there are going to be a percentage of people that do that.
But from that 10,000, if you reverse it back, you reverse engineer, you know now what it takes to do it.
So things you need to remember, know your numbers, know your conversion rates at every stage, know the results, record the results of everything you do so that you know for every X number of people who you phone or speak to on the phone, a number of them will buy.
And then you know how many phone calls need to be made, how long does an average phone call take? You know how much time it will take. Yes, etc.
Because you think, “Well if that happens, if we did twice as many, we can do this. But we need to know how long it would take to do twice as many, can we handle that much? Or if we need to employ someone else. Can we afford them?
Yes, we can work it out because we know the profit.” Etc.
So remember, reverse engineer it from what you want to get. You might decide, we need to up our prices because that’s not going to make us enough profit; or we need to up our conversion rate. So much can be learned from this.
Anyway, that’s enough, is going to cook your brain for a while. But figure these out with your own things and just think how that can work.
Monday Book Recommendation
It is a Monday, it is time for book for the week and today I’m just going to give you a quick one. This is from James Altucher
He is great and he is a genuine guy, heart on his sleeve and all that. But this is called Choose Yourself Guide To Wealth.
Now this is not how to make money, this is how to keep money.
James Altucher, I have recommended before the Choose Yourself Guide, fantastic book, I seriously recommend you read Choose Yourself, James has got an incredible story.
But the Choose Yourself Guide To Wealth is a follow up, it is great, you should read it. I did, I enjoyed it.
Anyway, I will have another nugget for you tomorrow and I promise it won’t be full of figures and it won’t cook your brain. See you then.