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Wednesday, April 13, 2011

How to make a million dollars

One popular method is to make a dollar in profit from each of a million people. Or a penny from a hundred million. This is the China strategy. It almost never works.

It almost never works because the challenge of reaching that many people is just too great. It's too risky and too expensive. Doesn't matter that you're only hoping for a dollar or a penny. The price isn't the challenge, it's the difficulty in spreading your idea.

Far easier to make a thousand dollars from each of a thousand people, or even $10,000 from a hundred organizations. You can focus on a small hive of people, a group that talks to itself. You can push through a smaller dip and reach a level of recommendation and dominance that makes incremental sales far easier.

And you can learn much earlier in the process if you've gotten it right or not. Because you're making more per sale, you can spend the time necessary to figure out what really sells and modify your offering sooner in the process.

The irony is that many products and services that have reached huge masses of people actually have significant margins (Windows, for example, or a cup of Starbucks). They got the best of both worlds because first they focused on winning small communities over and that led to the larger market.

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