How to make a million dollars in cold, hard cash
Think about the unit economics of what you do.
If you’re running any kind of business, whether it’s freelancing as a creative or building a software company, you have to look at how you make money, what your units are and how much you charge, what your overheads are, and what combinations of products, prices, services and scale are going to get you where you want to be.
This is what a million bucks looks like per unit.
Here’s an image I’ve found and kept saved in my Evernote for a while now.
(if anyone has the source for this, let me know)
To make a million dollars, you need…
- 5,000 people to buy a $200 product
- 2,000 people to buy a $500 product
- 1,000 people to buy a $1,000 product
- 500 people to buy a $2,000 product
- 300 people to buy a $3,333 product
- Get 5,000 people to pay $17 a month for a year
- Get 2,000 people to pay $42 a month for a year
- Get 1,000 people to pay $83 a month for a year
- Get 500 people to pay $167 a month for a year
- Get 300 people to pay $278 a month for a year
I love that break down. I love it because it makes that million seem so incredibly achievable. It’s just a matter of what you sell for what price to how many people for how long.
Right there, that’s your millionaire equation. Right there…that’s what you’ve got to base the economics of your business on.
But you’ve got to start, first. And make sure it works.
I’m a big believer in the $1,000 business. That’s a business that turns over $1,000 in profit, every single month. Depending on where you are in the world, that may or may not sound like a whole lot, but it is very achievable number.
If you’re looking at the unit metrics that it’s going to take to reach a million dollars, you can then break that down into an even easier chunk. What do your metrics look like, if you want to hit $1,000 a month?
For example, if you ultimately want 5,000 people to buy a $200 product in order to hit your milli, you only need to have 5 people buy it to hit your thou. That’s an easier number.
And hitting that number is going to validate your business and your product, making it the best first step.
Once you’ve started, you’ve got to scale by 5x
Once you hit the $1,000 mark, you scale that to hit $5,000 a month. Again, may or may not sound huge, but if you’ve persuaded 5 people to buy your $200 product, that’s only scaling it by 5x.
If scaling it by 5x isn’t possible, you’ve already found a problem in your business model. So you know, that it can’t possibly be scaled to the size that you’re dreaming about. Which means you modify your units and you go right back to the start and make it a $1,000 business all over again.
After you’ve scaled by 5x, double that
If you have a successful business that has now scaled by 5x, on the unit metrics of $200 a pop, you’re looking at turning over $5,000. This is where you repeat the scale process again, and you find out whether or not your business can scale to $10,000. If it can’t, you modify your metrics and — say it with me — you get back to a grand.
And you repeat the process until you have a business that scales to a million.
This may all sound like an over simplification, but I’ve got no problem with that. Simple works. Simple makes anything achievable. Simple makes the first steps possible. Simple makes entrepreneurs.
Making a million dollars is big. I think that’s a goal for a lot of people. Make a million dollars. It seems like everyone I talk to wants to talk about how it will feel when they reach that milestone, or thinks that if their business is a hit, there’s no possible way they could fail.
Now, making a million bucks isn’t the hardest thing in the world. Making a million bucks isn’t impossible. But there is a good chance you are never going to get there — if you’ve never actually worked out the economics of what you do.
But more importantly, you don’t have to have a million bucks as your goal. Your goal could be to replace your full time salary. It could be to start a business that pays off your car. Both of those are perfectly fine. The only way to reach them is to understand the unit economics.
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MJ from Thymos works with people trying to create more joy and success in their life: from abuse survivors all the way through to startup founders — really anyone who is looking for more meaning and a sharper edge to approach life with. I’ve managed to convince him to give everyone who emails him a free consultation. You can reach him on firstname.lastname@example.org and he responds to every email.