Hello Everyone!
In all previous articles written by me, I discussed about ways to make money using a website / blog.
There are many ways starting from advertising to affiliate marketing to service selling. However, while these ways provide some tools to increase revenue, these do not give decent profit in most cases. The money which websites generate is actually Revenue not Profit. It should be noted that even Huffington Post could not make profits yet.
Here is the relation between Profit and Revenues.
P = R – C
Where, P = Profit, R = Revenue and C = Cost.
The C component is quite important here. You created some website (Please note: Free websites do not support monetization techniques. A professionally looking .com OR .net seems a necessity for most of the cases)
Each website comes with a cost. This includes domain name registration, hosting fees etc. Let that be called Cw.
Also, you required electricity to keep the content up and running. Let that be called Ce.
You might have hired some website developer (OR learnt website development yourself) to make your website worth it. This is Cd
If you developed a new product, let that cost be Cn
If you purchased some product / tool as necessity (this include Website enhancement tools, affiliate marketing products, traffic generation services etc.) – then let us call it Cp.
We add another component: miscellaneous category (any cost which doesn’t fit above categories). That is Cm.
In simpler terms, you have
C = Cw + Ce + Cd + Cn + Cp + Cm
Advertizing doesn’t help you take back Cw + Ce part. Sorry but, that’s true.
Affiliate marketing does not help you recover Cw, Ce and Cd parts.
Service selling: Cw + Ce + Cp + Cm part
What about selling your own products?
Well, even that doesn’t make you profitable in short run (but helps perfectly in long run).
In order to minimize the costs, you need to take individual components and optimize them altogether. There is no 1 strategy to work but by analyzing these components individually, you can definitely create your own strategy.
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Finding an alternative with the most cost effective or highest achievable performance under the given constraints, by maximizing desired factors and minimizing undesired ones. In comparison, maximization means trying to attain the highest or maximum result or outcome without regard to cost or expense. Practice of optimization is restricted by the lack of full information, and the lack of time to evaluate what information is available (see bounded reality for details). In computer simulation (modeling) of business problems, optimization is achieved usually by using linear programming techniques of operations research.
The best way to increase your income as a small-business owner is by fattening up your profit margins. Some of the steps that can help you improve your bottom line may seem scary — but they shouldn’t. Rather than clinging to the safety of a pricing or sales strategy that may be slowly draining your resources, making a few changes can improve your bottom line. Try these five tips:
The first step to optimizing your profit is understanding it. It is a good idea to look at your gross profit margin often and break it down by clients and products or services. You can use this simple equation:
Talk to your vendors about pricing and find out if they have any special offers. There may be better pricing available for those who simply inquire. Be the squeaky wheel. When you buy new equipment, look not only at the purchase price but at the operating costs for competing models.
This can be a sticking point for small-business owners. If you have a service business, raising prices can feel personal and scary. But at the end of the day, pricing is one more piece of information about your business. Price is one way to convey the message that what your offerings are of higher quality or greater value than your competitors’.