Business Concepts You've Never Heard Of

This Will Make You LOTS Of Money

Author

Millionaire Syrup
February 06, 2024

Business Concepts You've Never Heard Of

This Will Make You LOTS Of Money

Lifetime Gross Profit : Cost To Acquire Customer

What this means is, how much money you make in profit from every person who comes into a business compared to how much it costs to get them to buy.

This is the fundamental economic unit of the business. Buy attention to get customers and then you sell those customers something that you're going to make a profit from. All the profit that gets generated from the business comes from this one ratio.

Let's break it down with some examples. A 1:1 ratio means that for every dollar someone spends, you make a dollar back. But picture this: a 20:1 ratio. For every dollar you invest in acquiring customers, you get a whopping $20 back as profit. That's the kind of business that can scale endlessly and become incredibly attractive. This is the core to growing anything.

Lifetime - How many times does someone buy, on average, over a lifespan.

Gross Profit - Price minus all costs that you have to incur to deliver the product.

Cost to Acquire Customers - Expenses incurred by a business in order to attract and convert new customers. It includes various marketing and advertising costs, as well as any other investments made to bring in new customers.

PAYBACK PERIOD
This is how quickly you are paid back for getting a new customer. The time it takes you to get paid back is an indicator of how cash flow positive the business is. Ways to get customers to pay faster (which is the goal), is encourage customers to pay upfront, implement fees, offer upsells, or arrange financing options. These strategies help you get more cash faster.

Return On Invested Capital

This is how much money it cost you to expand the business. Find out how much it cost you to make a location and scale it.

Imagine you have a business and you decide to invest $10,000 in new equipment and marketing efforts. Over the course of a year, that investment generates $2,000 in additional profit for your business. To calculate the ROIC, you divide the additional profit ($2,000) by the amount invested ($10,000), which gives you a return of 0.2 or 20%.

This means that for every dollar you invested, you earned an additional 20 cents in profit. ROIC helps you understand how efficiently your capital is being used to generate profit. The higher the ROIC, the more effectively your investment is generating returns.

ROIC is a valuable metric because it allows you to compare the performance of different investments or evaluate the overall profitability of your business. It helps you make informed decisions about where to allocate your resources and identify areas for improvement.

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