EV Profits

Thank you for all of the comments and questions on my last post, where I explained the 4-step process I go through for evaluating business opportunities, and mentioned the Incubator I’m starting to help people launch profitable business ideas. I decided to launch it because I realized that most people launch ideas that either won’t work and could have easily been predicted ahead of time, or ideas that may work, but even if successful won’t hit the desired profit. The Incubator was designed not only to make sure you have a profitable idea before starting, but to help you calculate the EV(expected value) of the idea, so you know what type of profit to expect. If the expected profit doesn’t match your desired income, you’ll know to launch something else instead, so that you don’t waste time and money on an idea that won’t help you reach your goals.

I would urge anyone who’s not familiar with EV to read my post on it: Millionaires Math. I can help you apply EV to business to make sure you’re pursuing a profitable idea.

Today I wanted to share a story explaining why it’s so important to calculate EV before pursuing, or passing on a business opportunity. I’ll talk about an idea I never would have launched if hadn’t gone through my process for calculating EV, which showed me the expected profit of the idea I almost passed on.

If you remember from the previous email, this is the 4-step process I use to evaluate business opportunities:

1. Do I have a valuable Idea?

2. Can I reach my market?

3. Due Diligence

4. What’s my EV?

Back when I was looking for product ideas to sell online, there was one product I was considering selling that was not offered in many stores.

I went through the first two steps of my process. I had a valuable idea that was easy to market.

But it was strange, it was barely offered online. So, why weren’t more people selling this?

I learned during the diligence phase that it was difficult to ship the product, and would often break. Many stores only sold locally due to this.

This seemed to be the only holdup. No one wanted to jump through any hoops to deal with shipping issues, so they all stayed out of the game. I didn’t necessarily feel like figuring out any shipping issues either, but I decided to calculate the EV to determine if it was a hoop worth jumping through.

The EV came out to over $1,500/month as a passive business. So, if I could solve the shipping issue, I’d expect to make $1,500+/month on autopilot.

It didn’t take as long as I thought to figure out a solution, and the manufacturer was actually the one who figured it out.

Shortly after that I was able to launch the store and start selling the product, drop-shipping direct from the supplier so I never had to deal with the shipping at all. After making passive income on it for about two years, I sold it in a small package for $68,000.

Without knowing the EV, I would have passed on that opportunity. Everyone else did.

Calculating the expected profits ahead of time let me know the shipping issue was worth figuring out. No one else grabbed that opportunity, even people already in the market, because they didn’t take time to calculate what solving a relatively small problem would have been worth to them.

Their thought process: “looks hard”

Person who understands EV: “looks profitable”

If you can learn to really understand EV, and practice applying it to business opportunities, it will make your decisions a lot easier, and your life a lot more profitable.

Maybe you grasp the concept of EV, but you still have fears that hold you back
from knowing whether you should launch an idea or not:

“What if I don’t know how to reach my market?”

“What if I don’t even have an idea?”

“What if I don’t know the one thing to focus on. My time is limited and there’s too much to do.”

Let’s go through each of these one by one.

“What if I don’t know how to reach my market?”

This is an issue a lot of people bring up. Ironically, those are often the people that have spent the LEAST amount of time making sure they have a valuable offering.

Marketing is very difficult if you don’t have a valuable offering.

Most people spend all their time convincing people they need to buy their shit, rather than creating something no one would need convincing to buy.

In short, marketing is made 100x harder by people who aren’t attempting to market something valuable.

Marketing is comically easy if you have something valuable relative to the market.

Since most people skip that step, marketing is difficult.

Most people who think they have a problem with marketing, often just have a problem with their idea.

If you actually have a valuable idea and are still struggling with marketing, you have a smaller problem than you think. Valuable ideas are relatively easy to market.

“What if I don’t even have an idea?”

That’s a common question. The reality is, you come across ideas on a daily basis, you might just not see them as potential business ideas yet.

No one has an idea problem. No one!

Many people are just afraid their ideas are bad, and won’t work.

I have bad ideas. Lots of them.

The great thing about business is, you only need one idea to be a good one. One idea that offers value and has an expected profit that matches your desired income. You have ideas every day. You probably unknowingly dismiss some good ones, and spend more time than you should thinking about the bad ones.

I still have lots of bad ideas. I just don’t spend much time on them.

In the first stage of the Incubator, I explain different ways to generate ideas, and how to differentiate good opportunities versus bad ones. Once you get used to doing it on a regular basis, it’s not overly difficult to generate new ideas, and find the ones worth exploring.

“What if I don’t know the one thing to focus on. My time is limited and there’s too much to do.”

This is another reason why I recommend people figure out the EV before launching a business. The way most people evaluate their ideas is to launch them and hope it makes money. So, they have to go through every aspect of starting/running a business and haven’t even figured out if they have anything worth pursuing yet.

Spending a little extra time on the front end making sure you have something that’s profitable enough to help you hit your goals, is a smarter way to do it.

The beauty with the 4-step process is, you only need to focus on one thing at a time. You don’t waste any unnecessary time. Most people are trying to figure out everything at the same time, for no reason at all, just because they don’t know exactly what it is they’re supposed to be trying to figure out.

With limited time, you don’t want to be spending it on things that aren’t valuable. If you have a job, or a family, or whatever it is that’s leaving you with limited extra time to pursue an opportunity, you need to use the time wisely by making sure you’re launching something that you expect will meet your profit goals.

You should only spend time launching an idea if you’ve taken your idea through the 4 steps, and are happy with the EV. That way, you’ll know the expected profits before launching so you only spend your time if it’s worth it to you. If it’s not, you save your time and money for the one that is.

In next email, I’m going to share a story about when I first started incorporating EV into my life, and what it allowed me to do.

Before I do, I’d love it if you shared your goal with me in the comments below. What is it you’re trying to achieve?