A business model with only two numbers
from Derek Sivers podcast
Like most people, I had no idea what to charge. So I went to the local record store in Woodstock, where they had some local musicians’ CDs on the counter. I asked the woman at the store, “How does it work if I sell my CD here?” She said, “You set the selling price at whatever you want. We keep a flat $4 cut. And we pay you every week.” So I went home and wrote, on my new cdbaby.com website, “You set the selling price at whatever you want. We keep a flat $4 cut. And we pay you every week.” I figured if it worked for her, it was fine for me. Because it was taking me about forty-five minutes of work to add a new album to the site, I also had to charge $25 per album as compensation for my time. (Shows you how much I thought my time was worth in those days.) A few days later, I realized that $35 feels about the same as $25, so I bumped it up to $35 per album, which left me room to give discounts and still make a profit. And that’s it! Six years and $10 million later, those same two numbers were the sole source of income for the company: a $35 setup fee and a $4 cut per CD sold. A business plan should never take more than a few hours of work. Hopefully no more than a few minutes. The best plans start simple. A quick glance and common sense should tell you if the numbers will work. The rest are details.
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