One of the most fundamental ways that entrepreneurs go wrong is when they try to increase their sales volume instead of their margin, and vice versa.
The first thing you have to know when you start a new business is what kind of business you’re in: is it a margin business or a volume business? Everything is either one or the other.
As a rule of thumb, if it is not a mass market product, then you’re going for margin. If it IS a mass market product, you can go for volume.
Let’s have an example:
A burger. There’s a limit to how much you can reasonably charge for a burger. I think even on the high end, I’ve never seen a burger selling for more than £10. And on the low end, quite famously, 99p.
McDonalds is in the volume business. They know that their product is a widely affordable. And they know the key to making more money is to sell more burgers. That’s why they have outlets in nearly every country in the world and boast that they serve 1 million people daily. It’s a volume game. And they’ve become masters of it.
The £10 GBK burger is in a different market. While it’s still very much about volume, there’s a much higher margin on that burger so they can afford to sell fewer of them. It’s aiming at a different demographic of customer.
Let’s have another example:
Wedding magician. One of my former occupations. There are a couple of special things about wedding magic. First and foremost it depends on me. I am the magician. As such, I cannot scale that. There’s only one of me. So I am 100% in the margin game.
I have to aim to sell my services at higher prices and in order to make a bigger margin.
Even if I lower my prices and book my whole calendar up (not easy), I’ll still have an income limit and I’ll be exhausted. Not worth it.
So figure out what suits you and what suits your product.
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