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| FROM LBS Current Students Blog: #LifeAtBusinessSchool : How do I make money? |
When I heard this question I used to think, no way is someone going to be me a concise straightforward answer on how this can be done. I mean, it’s too good to be true. Why would someone tell me how to make money rather than just go out and do it himself?![]() Actually I think there is a paradox- all of us know how to make money, yet very few of us actually go out and do it. Back to the question, how do I make money? Actually it’s pretty simple, you just need a couple of things: i) Give customers something they want ii) Make sure price is higher than costs Now most people think it stops here. This is what separates those who make enough money to get by, and those who make a decent sum of cash. Before I tell you what the third and final condition is, let’s consider an example. Imagine there is an empty place near where you’re favourite concert is being held. After the concert everyone is dead thirsty. This gives you an idea. You can set up a drinks stand and start selling water. The people need it, water is pretty cheap and you can sell it to them for more than how much you bought it. Both conditions are satisfied. But what’s the problem with this? Just take moment to think. ![]() The problem is that someone else can see you doing this, and very easily set up a stand and do the exact same thing, taking your profits. Eventually as more people move into the market, your profits tend to 0. But what if you had a SPECIAL type of drink that could quench thirst better than any of the other drinks available at a much lower cost? This leads me on to the third point iii) Make sure what you give them cannot be provided by anyone else This is the most important point that a lot of people forget about. Consider Uber. There were hundreds of apps that did exactly what Uber did when it entered the market. But now Uber is the market leader. Why? It’s a phone app like all the others. What is it about Uber that the others cannot do? The answer is Uber’s pricing algorithm. Uber has access to data and can process that data with an algorithm that no one else can match. None of the other apps have such a good pricing algorithm and it is difficult for them to make one without a huge investment both in physical and human capital. So whenever you’re thinking how do I make money and have a new business idea; before you start thinking into the business plan, model, details, etc. Answer the three questions first. Do customers want this, can I charge a price higher than costs and will someone else be able to enter and steal my customers. Feel free to leave comments below, and follow me on social media: Twitter: @umarahmed12 Instagram: @umarahmed122 Youtube: Coming Soon Blog: www.umarahmed12.blogspot.com |
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