How would you explain to a 10-year old why 3^0 = 1 beyond "it's necessary to make the algebra of powers work out". I use an "expand-o-tron" analogy to wrap my head around what exponents are really doing: some amount of growth (base) for some amount of time (power). This gives you a "multiplier effect". So, 3^0 means "3x growth for 0 seconds" which, being 0 seconds, changes nothing -- the multiplier is 1. "0x growth for 0 seconds" is also 1, since it was never applied. "0x growth for .00001 seconds" is 0, since a miniscule amount of obliteration still obliterates you.
It was a fascinating discussion, but I'm most interested in the bolded part which says it perfectly - "a minuscule amount of obliteration still obliterates you."
This is very important in business, especially if you're doing online type stuff where many of the probabilities are invisible to you unless you carefully study the analytics. Analytics-inclined people already do this, but in 2011 that's still definitely a minority of the business population.
So if you want to get a sale, you might have something like this -
You send out 10,000 flyers.
9,000 go in the trash without being looked at. 1,000 are glanced at.
Of those, 100 people actually go check out what you're offering.
50 of them like it and decide to buy.
40 of them can figure out the "Checkout" button on your website (seriously).
30 of them successfully put in payment options and pay.
10% * 10% * 50% * 80% * 75% = .003 = .3%
30 buyers out of 10,000 people solicited.
Now, numbers are pretty amazing. The first and most crucial lesson here is plugging a 0 anywhere into the equation drops your success down to 0.
It doesn't matter where - if you put a *0% anywhere (your payment options are broken, your website URL is broken, you forget to mention your website on the advertisement - don't laugh because it actually does happen) - then you lose.
So, you might be laughing at this point. What kind of idiots do that? Well, the most common *0% isn't technical errors which eventually get sorted out, but rather not trying a particular marketing channel at all. You're getting 0 sales and 0 profits out of anything that you're not trying at all.
Unfortunately, when you do try a new marketing channel, that's when you don't understand the benchmarks of what's possible and what's common. If you're multiplying by 0 or otherwise a very low number because you made an error with your marketing copy or your offer or your technical side of things wasn't correct, then the marketing channel looks like it sucks and you move on. But it might have been worthwhile and useful.
If you were getting a magazine advertisement, for instance, you might find that:
"TRY NOW FOR FREE: productnamefreetrial.com" might very much outperform "Find out more" or something more generic. Of course, many people write advertisements that sound reasonable and unobtrusive and don't want to be obnoxious, so they write "Find out more" in their ad, of the 50,000 readers of the magazine they only get 20 visits to their website, and they conclude that advertising in that magazine sucks and doesn't work.
But it's multiplying by a very low number - not quite obliteration (which entirely kills you at any point in the process) but something near obliteration wrecks your numbers.
How to deal with it? Find someone in a non-competing industry using a particular channel successfully and knowledge share with them on what benchmarks are common, and work and fight until you get near those benchmarks, or it appears like you can't get near those benchmarks with your particular product/offer/channel mix.
Of course, that takes a while and can be a big stressful pain in the ass, which is why most small business owners don't venture too far away from their established channels after a while and thus give up a lot of growth - after all, the most common form of multiply-by-zero is not trying.
Today I'd like to introduce you to Venkat Rao. He writes Ribbonfarm, and he's mastered the difficult challenge of writing smart, novel, entertaining, eloquent, controversial, and accessible content - at the same time. Most people can't do this.
Venkat wrote an excellent reply on Quora to the question, "Is it hard to build, market and maintain a web app that makes at least $1000 a month?" Quora's TOS actually allows you to republish things in full with attribution (and some other requirements), and I thought this would be an excellent introduction to Venkat for you.
This whole reply is brilliant. He's got the orders of magnitude on money, time, and requirements basically dead-on. Extraordinarily impressive read here -
"Is it hard to build, market and maintain a web app that makes at least $1000 a month?"
This is a very interesting question, and the responses are very revealing. It is instantly clear who knows what they are talking about.
If you could live in major world capital for one month, what would you do?
About two months ago, I was in Spain (read my previous blog post) giving graffiti workshops to Belgian teenagers. This sparked an idea in my head. If somebody is paying me right now to be in another part of the world to do what I do best. Then I can replicate that and move all around the world while people pay me for it. Genius!
Here's the plan. I pick a destination that I would love to explore. By exploring I mean, living in that area for a period of three to four weeks so I know all the ins and outs. Once I picked my mark it's time for research. I google for potential clients, lay down a database of contact information and contact them. This technique is called shotgunning, I approach a huge amount of people, hoping that a few fish will bite. Once I've gathered a few customers I can start calculating and measuring my budget. If I reach a certain amount of revenue, I'm able to buy the plain tickets,book a room somewhere and off I go!
My favorite big city at the moment is Stockholm. But since it is fall right now and I'm planning to leave in a few months, Stockholm'll be freezing cold! So I pick a more sunny destination. Within seconds, Cape Town pops into my head. It's almost one of the most distant destinations I could pick! I hear my head thinking . 'Dream big, or stay home.' So I start working on it.