You cannot operate with unknown concepts
What have we already talked about in this discussion about changing the mindset?
If you decide to google the topic “how to change your mindset”, in half of the articles you will find such advice: you need to change the language in which you speak and think.
A few examples with which I want to illustrate this point.
🔴 First story: “Total cost of ownership” (TCO)
About 15 years ago, when I was buying my first car on credit, there was total exuberance in the loan market. Especially for IT specialists, whose salaries were connected to the dollar or euro. I remember this year very well, because in a couple of months we ran out of parking spaces near our office center and I went to my boss with a request to give me some parking space. In response, he grumbled cheerfully that IT specialists had become overpaid 🙂
I also remember having some interesting conversations with my colleagues who, like me, were considering brand new cars on credit.
– Why don’t you buy a SUV right away? Our system administrator has bought one for himself, and he is totally happy. Loan repayment takes up half of the salary, so there is still $ 400 left?
And I did want an SUV for myself, as you understand 🙂 I’m a teamlead, I work in IT, I receive salary in dollars, that sort of thing. I didn’t want to consider a used car, although in general, as the first car, it could be quite a decent variant. Beyond used cars, there was a market of economy class passenger cars. Then some magic “configurations” appeared, and then appeared an “empty” SUV, often on the front wheel drive. All-wheel drive and climate control required paying another 3-4 thousand dollars and the payment on the loan exceeded some kind of magic barrier in my head. I took time out to think it over, and the next week another car showed up in the parking lot, which didn’t add to my peace of mind.
In one of the projects where I worked, there was a task to calculate the total cost of ownership of the system that we created, implemented and operated for the customer. Maybe we didn’t fully calculate the TCO for our customer, but the term itself, the very idea of the “total cost of ownership” hit my head very well. I opened an Excel-file, named the first line “Loan repayment” and put the figure $ 600 per month in front of it, as a kind of benchmark, which I was ready to accept to buy a car. And then I began to add lines to understand what else I needed to pay for during a year of owning a car. The lines appeared as if by magic.
- Car: $ 25,000 (loan for 6 years, 12% per annum, payment of about $ 600 per month)
- Winter tires set: $ 800-1000
- CASCO insurance (mandatory, as the is car on credit): 7%, since I had no driving experience – $ 1750
- Parking for a year (according to the loan agreement that I had in my hands, the car had to be kept in a guarded parking lot): $ 30 * 12 months = $ 360
- Gasoline (mileage wasn’t not large, but constant: 15 km one way * 2 (already 30 km) * 22 working days (660 km) + trips to the country house and just driving / about 1000 km per month or 12-15,000 km per year, which for the car I chose turned out another 150-200 liters, that is, another $150-200 at the cost of gasoline at that time
- Free technical service as a gift, and the first technical service was already $200.
Total: $ 3460 per year or $ 288 per month. Rounding up the figure to $ 300 a month, I was surprised to learn that $ 600 for the loan turned into $ 900 a month for the next 6 years. The cost of owning a car that I put my eye on in the showroom turned from $ 25,000 to 900 * 12 months * 6 years – $ 64,800, of which $ 21,600 was for servicing, ownership, insurance and gasoline. $ 900 per month is $ 10,800 per year. Yes, I don’t buy rubber every year, but TS30, TS60 and TS90 cost absolutely different money. And in 6 years I would drive about 90 thousand km.
Persistently driving away the figures of 10 thousand dollars and 60 thousand dollars, I talked with some guys from my team and several people, and we reviewed the cars they had chosen. Moreover, in one case, a person chose a new but simple car for $ 14,000, instead of a crossover for $ 27,000. Almost a double sum.
“Total cost of ownership” (TCO, total cost of ownership)
🔴 The second story: CAC (customer acquisition cost)
We have an IT audience + we do training and make speeches at a variety of events. Approximately once a month, there are people knocking on our doorstep who have decided to make a product or service that is somehow related to education. A surprising number of people just describe their idea and having received some opinion, they disappear. Well OK, let’s assume that we took part in the study of customers and their problems.
Some people go further, and if a conversation starts, sometimes they even send us business plans or rough estimates of their projects. And this, we must pay tribute, are often quite detailed plans for creating products or services: office rent, employee salaries, equipment, furniture, even coffee machines.
But what is often not in the plans is the cost of attracting users who will become customers of these products and services. The budget may contain some symbolic amount for advertising, but since there is no cost of attracting a client, it is impossible to calculate the economics of the project – how the project will make money after the first paid version appears. And without this, in turn, it is impossible to understand how and when the money that the investor gives to the project, will be paid off.
I’m not trying to make a joke on entrepreneurs who haven’t thought about advertising. It is difficult to foresee something whose existence you have no clue about.
Customer acquisition cost (CAC) is easy enough when your product has been launched and is being sold. This indicator is more difficult to calculate when you have only an idea in your head. Even experienced entrepreneurs stumble over this indicator when they say that “The product has not found its market”. Sometimes, it really fails to find the market. But sometimes behind these words there is an incorrect calculation of the cost of the service, when the service or product simply does not pay off due to the fact that CAS turns out to be several times higher than planned.
Please note that we have considered only 2 simple concepts that influence the decision to purchase something or determine the success of your chosen business model. These are the words used by those people with whom you will open your business tomorrow. These are the words that can finally make up the puzzle of the business model in your head.
You know this feeling, when everything seems to be fine, but something confuses you. As if you are missing something important. Maybe you just do not know the words you need to understand what exactly you are missing?
We promised to tell you what solution we came up with. We called this course, this system of step-by-step changes
👉 Business mindset upgrade program:
- Individual training using the “drip irrigation” method
- Program modules available on schedule
- Study at a convenient time, through a mobile application or your personal account on our website
- Every 2 weeks: a live Q&A session (a session of answers to questions)
- A year of changes is 50+ weeks of transformation and 50+ program modules
- Half an hour or an hour of your time once a week for step-by-step mastering the language in which business thinks
- $ 100 / month or $ 1000 if paid per year