Tuesday, August 13, 2019

MBA in a Nutshell #1 : Universal Business Formula

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If you want to summarize the running of a business into just one simple formula,  it should look like this :

1) Revenue - Costs = Operating Income
2) Operating Income - Tax and interest expenses = Net Income

There are only two ways for anyone to make more money in any business endeavour:

a) Increase Revenues

This happens only if I can get more customers to sign up for my program. One way would be to keep varying my marketing preview messages so that more potential customers sign up. Another way would be to increase the frequency of my preview talks.

There is also the possibility of adding more courses. The answer I have chosen for myself is to keep improving the value of the cost to justify fee increases.

b) Reduce Costs

It is much harder for me to reduce costs so I do avoid taking this route in my work.

Other trainers may try to squeeze in more students per class to keep costs down. What is unthinkable for me would be to look for a cheaper venue or reconfigure what students eat for lunch.

There are just four ways for a business to grow :

a) Sell old products to existing customers. Eg. Course refreshers for existing customers.
b) Sell new products to existing customers. Eg. Advanced Investment Courses.
c) Sell new products to new customers. Eg. Personal Finance Course for Millenials.
d) Sell old products to new customers. Eg. Previewing my existing course offering.

Most investment training products are about hawking established courses to new customers but my course material changes sufficiently for older customers to possibly want a refresher. ( As I am still quite new to this business, I have not started working on this arrangement yet.)

Maybe in about 2-3 years, I may consider an Advanced Investment Class to run a hardcore session for intermediate investors.

You can use this same framework to review businesses in your investment portfolio.

Can Netlink NBN Trust find new ways of generating revenue ? What about SPH ?
If not, how can they improve operational efficiency and reduce their costs further ?

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