What windfall profits say about your business trajectory
Jay Abraham is known for his uncanny ability to help businesses uncover their hidden assets. Identifying, then ethically using them to a business’s best advantage allows Jay to frequently create windfall profits for his clients. Maybe you’ve heard about windfall profits and taxes – they are subject to taxation in multiple countries, though in the United States there used to be a tax, it was unpopular and repealed in 1988, and any talk since then of reintroducing such a tax always draws much debate in government and financial circles.
Although the standard definition of windfall profits is that they are one-time events and not the norm, Jay sees windfall profits slightly differently. Here we’ll cover why windfall profits matter, how they connect to leverage and how you can use them to monitor your business’s health.
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What are windfall profits?
Typically, windfall profits are unexpected, single instances where you make more money than the norm. For an individual, windfall gains might come from winning the lottery, game show or a lawsuit; other examples include receiving an unexpected inheritance, large gift, or employment bonus. In a business setting, windfall profits can come from a price spike or drop, supply shortage or other market shift; sometimes windfall profits benefit an entire industry, sometimes just a business or two. Yet Jay says your business should have cash windfalls every month. How is this even possible?
The connection of windfall profits to leverage
If you’re taking full advantage of leverage marketing, we bet you are making incredible gains from testing out simple changes. That’s the power of leverage: you use very little to get a whole lot more. But how can you tell if you’re actually making the real, game-changing gains? Look for the windfalls.
Jay says that mining windfalls out of your business every month is key to understanding whether or not you’re on the right path. Not only is it important psychologically to produce short-term wins, but they also indicate if the changes you make are actually improving your business. These windfalls don’t have to be huge profits or giant victories, but over time they will show you the multiplying power of leverage. So commit to seeking a windfall every month, whether that’s from your market, strategy or sales. You’ll find yourself refining and optimizing your business even more as a result.
Find the hidden windfalls in your business practice
Locate unexploited avenues for increasing your sales and the windfalls will follow. Sometimes all it takes is looking from a new perspective. For example, Lisa supplies her local pro soccer team with soccer balls. But instead of selling single soccer balls at $30 each, she offers the team a deal: they can buy 3 balls for $75 or 10 at once for an even deeper discounted price. She’ll even deliver the balls to their practice grounds. By offering them a discount and continuous supply, she’s made it that much easier for her client to not only choose her over other businesses, but give her more in a single transaction than before and built the pathway for continued profit.
Let’s look at the math. We’ll say normally Lisa makes a 50% profit, so $15 on each soccer ball. They cost her $15. So 3 balls for $75 gives her client three times the product for just two and a half times the price. By basically giving away her profit on the third item, she’s still made more from the transaction than she normally would with a single item purchase. Volume incentives are popular for both clients and businesses for this reason, particularly for services. For Jay, the important point is to always focus on the increased profit – not lost profit – that an add-on transaction brings you. That’s where you find your windfall.
In fact, when you increase the size or frequency of the purchase, you rarely lose future sales. Interestingly, normally quite the opposite effect occurs: people start using more of your product or service than they did in the past. Using more of your product or service actually benefits them at a much higher level, so they end up winning on the transaction even more than you do.
Or take another example. You’re part of a joint venture where you sell a product at a deep discount, so you’ll only be making $2 a piece. But this alliance gives you access to a completely new market that you’d never expected to gain. Sell a million in this windfall market and you’ve made $2 million more; and even if only a third of those people come back to buy again at full price, your profits will simply continue to rise.
Jay Abraham is a proven business leader and top executive coach in the United States, and a close friend of Tony Robbins. Jay has spent his entire career solving complex problems and fixing underperforming businesses. He has significantly increased the bottom lines of over 10,000 clients in more than 1,000 industries, and over 7,200 sub industries, worldwide. Jay has dealt with virtually every type of business scenario and issue. He has studied, and solved, almost every type of business question, challenge and opportunity. His principles can be the difference between mediocrity and a business that generates millions of dollars in additional revenue.
Windfall profits don't come by mistake...
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