:: Profit for Dummies - Graduation ::

Sorry to patronize but as I meet so many that have forgotten. Here is a wrap up of the concept.

Rules:

Produce at a given cost, sell for more, turn a profit.

Different people will be willing to pay a different price for the same product or service.

Tips and Tricks:

A. The second rule will sometimes be called "The Demand Curve".

B. The Demand curve is plotted on a plain between to axes - Price and Quantity (we want through that on previous lessons and though it looks hard it is not that hard. Stay focused). The demand curve goes down from left to right, meaning there are more people willing to buy for less and less people willing to buy for more

C. O.K, I know you have tons of cash from the last financing round and you only care about time-to-market not price. Most people act differently. O.K, never mind. Assume they do.

D. If none will use you product or service when it is distributed for free, we say that the demand is flat and equal to Zero, or that there is no demand.

E. The situation described clearly shows your product or service sucks.

F. The fact that investors have given you money does not change the demand curve. It does not change the possibility that your product sucks and does not effect your chances to turn a profit.

G. If the demand curve is as described, your chances to turn a profit are Zero.

H. If you do the math and find out that you need to sell for a certain price, it does not necessarily mean you will be able to. The fact that someone paid something somewhere will not necessarily mean you will be able to get the same price.

I. No, you can't just make up a price. O.K, I know this is how you approached your investors, it doesn't count. Why?. It doesn't. O.K, O.K, never mind. Assume it doesn't.

J. If you find someone who pays the price you want, you need to make sure there are enough of them to cover the cost.

K. No. You can't use the cash you got from the investors to cover the cost. Why?. Because this is how things work. No, you can't raise the price instead, you will lose the customers you already have. O.K, I know this is how you approached your second round investors, it won't work here. Why? Because it won't. O.K, you do have tons of cash from your last financing round. Right, I don't have tons of cash. Yep, in a way you are richer than me. Yes, profits are meant to make one richer. True. Some will say you are more profitable than me. Yes, yes, I think you got a grip on things. Yep, you got it going. Yes, you will get the diploma.

L. This is the new economy.

The end.

Wadi Writer #1 (Gray)

WadiList@mail.com