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Hi there Donat Plenter here again, Homazooma where of course we help you build wealth around
your house. So this segment is going to be talking about we are going to cover profit
and well what's profit What's that? Right. This whole thing about you know making money
and profit and just a peculiar word. So lets go over what profit really should mean to
you. So We just put the basic elements of what people think of as the components that
effect profit. So you've got materials, you have manufacturing you've got over head you
got packaging, marketing and delivery. This is all kind of stuff that when you put on
Google and you checking about your business and figuring out all these things and how
they're going to fit. Well lets go back to our baking cookies example. because it's simple
and there is really no difference between baking cookies for business whether it's one
cookie or ten million cookies or auto manufacturing or you name it all these things apply. so
lets go step by step. Now we've got materials so for cookies what is it? It's ingredients
right? So for manufacturing what do you need? Well you need equipment, so in this case it's an oven
so what's your over head. well in this case it's electricity probably. or gas if you have
a gas oven. Packaging, well you can go down to your local craft store and get some boxes
and paper and string and stuff like that. To make your package look really really cool.
Marketing, well thats just a fancy way of saying how are people going to find out about
your cookies and your cookies are the best cookies because all your friends tell you
so and your parents tell you so. Well Marketing doesn't have to cost a fortune. You don't
have to spend a hundred thousand dollars on a television commercial. You can send out
emails, tell your friends, family, SkillShare right? Show the world how you do it. Use Shout
You can put it on local online ads local groceries, talk to your local grocer or even bakery,
They might even sell your products. All your local stores. All of this has one thing in
common and that it's free. Zero budget requirement here. free! So Now we are talking about delivery
well are you going to FedEx your cookies. No you're going to ride your bicycle or drive
your car. So that you and just gas that you have to pay for. There is one other component
here that's missing here that most people don't think about it's the value of their
own time and that's labour. That's your Labour. Now some people think their labour is worth
hundred dollars an hour, some people think their labour is worth 5 dollars an hour or
800 dollars an hour. Don't worry about this too much right now at all for getting out
your first batch of cookies. But I will explain to you why not. So these are all the components
and once all this stuff gets sorted out you'll know if you've made a profit or not. Because
rest assured the first thing that everybody is going to ask you, what would be called
wiser adviser all your friends and family and everybody else who probably know somewhere
between nothing and a little about business so it's key to only get advice from people
who are in business, who are already successful at what they are doing in business. Never
take advice from people who are not in business about business. You don't take medical advice
from someone who's not a doctor, You don't take dental advice from someone who's not
a dentist or accounting advice from someone who's not an accountant. Why would you take
advice from someone who's not in business? Makes sense right? So let's drill down about.
You've made your cookies and you've got your first batch and you sold it on consignment
to a local coffee shop and they sold out. Did you make any money? Let's find out. So
let's your ingredients cost you 5 dollars. Your electricity for your oven or gas, let's
say 25 cents. Now we have a tool on Homazooma where you can calculate how much electricity
you use exactly. Really cool. But you don't need that for this. So How about your packaging.
Let's say you spent 2 dollars on your little boxes maybe some wrapping paper some string
that kind of stuff and then you got in your car and you drove around and you spent 5 dollars
on gas. Your labour, let's say you hired somebody theoretically, so you're think if I had to
hire somebody to do this, I would have to pay them, let's say 10 dollars an hour. It
would take those 8 hours to make the cookie and wrap and package the cookies and then
deliver them. Don't have to make this overly scientific. You would probably be pretty close
to the reality anyway. So let's say 8 hours at ten dollars an hour it would cost you 80
dollars in labour. So you add all that up and you come up with 92 dollars 25 cents.
So it cost you 92. and 25 cents to make twelve cookies if you hired someone else. And you
sold twelve cookies for 2 dollars each. so you made 24 bucks. So what does that mean?
That means that 68 and 25 cents you're in the whole you just lost $68.25 You just lost
$68.25 this is bad business right? Wrong. Absolutely wrong. You know why? Why it's not
a lose? Nope? Because what you have done is you have proven your product. You have proven
that you're cookies sell for a measly $68.25 and that's assuming you hired someone else
to do it. You probably did at this stage of the game you probably used your own time.
And since you would have been maybe watching TV. instead you didn't actually lose money
and for just the cost for the ingredients the gas and 25 cents you have proven that
your cookies sell. So this proves that you were monumentally successful because you sold
twelve cookies. So then you say so how many cookies do i need to buy a Lear jet or something
well a lot of cookies right? So you gotta start small, one cookie at a time. So let's
say you know that $68.25, it cost you 92.25 for all of these ingredients if you spent
80 dollars on labour. and let's say you've figure I'm worth ten dollars and hour for
this and I'm going to pay myself ten dollar an hour, So if have to pay myself ten dollars
an hour because I own the company my cookie company, it probably wouldn't take me much
more to make 48 cookies then it would to make twelve cookies especially if you are using
a press or that many more ingredients. But if you sold 48 cookies that equals 96 dollars
chic ching at the cash register which means as soon as you sell 96 cookies you are actually
starting to make some money and paying yourself for it. So you are very successful at selling
cookies. Now what you really have to remember is whether you are making cookies or whatever
you're doing, whatever type of business you running, think of it as one cookie at a time.
don't set up a giant shop and set up three ovens or if you're into woodworking and you're
making chairs one chair that's all you want sell first. If you get orders for 5 chairs
then you think about how to do that 10 chairs 20 chairs 100 chairs whatever one cookie at
a time and you will be successful, so just say screw it just do it, Catch you on the
next one!