A Simple Formula Could Make You Millions

Creating a business that becomes a cash cow may be difficult. However, there is a simple formula that will do the trick – Q + A X D = R. “Q” stands for Quality; “A” stands for Awareness; “D” stands for Distribution; “R” stands for Revenue – simple. Building a successful business is hard, and the chances of success are less than failure. I have been amazed how many entrepreneurs struggle to see the forest because they get caught up with the minutia of the individual leaves. Getting a business off the ground requires developing business plans, designing a product, obtaining financing, hiring, marketing, and everything else we do to get started. It is not easy to see the big picture when trying to start and run a business.

I had the opportunity to work with Jim Scharf, a Perdue, Saskatchewan farmer. He used the formula after inventing the E-Zee Wrap 1000. Jim came up with the idea of a plastic wrap dispenser that would fit underneath the kitchen cabinet. The Saskatchewan Research Council Plastics Division helped develop a product that was incredibly easy to use. Jim found manufacturers and used infomercials to sell and distribute his product. Jim Scharf made a fortune. He didn’t have to warehouse, manufacture, sell or ship. Jim focused on getting the best Quality, Awareness and Distribution and didn’t get bogged down trying to manage a supply chain.

Building a cash cow requires a focused set of activities that yield predictable and consistent results. I am a proponent of “keep it simple, stupid.” Unfortunately, simple is not easy, and this is where my formula comes in. “Simply” put, a Quality product with widespread Awareness and extensive Distribution equals Riches or exceptional Revenue. Quality, Awareness, and Distribution are intertwined. Each must be considered equal components of the cash cow, meaning Quality without Awareness will not support robust Distribution and Distribution is destroyed by poor Quality regardless of effective Awareness.

Quality is a uniquely superior product (or service) in the customer’s eyes that can deliver unique benefits: Product Differential Advantage. Product Differential Advantage includes superiority to meeting needs, higher quality, reduces costs, special features essential to the customer, solves a big problem, or is highly innovative. The greater the advantage, the better.

The essential ingredient of a Quality product is a clear product definition. If there is a Product Differential Advantage, we need to know to whom that matters. Narrowing the target market simplifies building a brand facilitating a niche marketing strategy, leading us to Awareness.

Once we determine where our product has the most significant advantage, that is, a high likelihood of high lead conversion to sales, we must communicate specifically to this group. Marketers tend to expand their message to a wide selection of potential buyers. This is a mistake. We must speak directly to the primary customer to build a widely understood brand to encapsulate the advantage. The shoulder market customer comes anyway because they want to identify with the product and the primary customer. For example, Porsche focuses its messaging on the cool guy or gal who can afford luxury and likes fast cars, and they also attract a lot of wannabes. This focused approach also determines where and how to get the message out. Targeting a niche market does not lend itself to expensive mass advertising. Knowing who you need to talk to and what you want to say allows us to pick the best publications; the best AdWords correctly; and the best social media profiles to get our message out to our target audience and their wannabes.

Distribution is how we scale our business. Suppose our product has a strong differential advantage, and we have effectively communicated with those where our advantage matters. In that case, we must have an efficient distribution system that can expand in lockstep with growing demand. Never in history has the entrepreneur had such robust systems to move products using Amazon and Shopify. Likewise, service products can achieve mass Distribution with just a website. We had to rely on chain stores or mail order to move our products or services in the past. Big chains were brutal on small businesses dictating terms, product placement, and exposure, demanding high margins, extended payment terms, and insisting on returning unsold goods. Distribution opportunities for small businesses today provide for greater control and increased margins.

Part of Distribution is scale. A business with a high-quality product (or service) with an effective Awareness campaign with efficient Distribution will fail if it cannot deliver. Peloton, the exercise equipment company, is a prime example of what happens when we can’t deliver. The company had manufacturing shortages and couldn’t keep up with demand, and there were safety issues with their treadmills. As a result, the once stock market darling lost 75% of its market value and struggled to become profitable.

We must remember that building a cash cow is a simple process but very difficult to execute. The method includes identifying opportunities and doing the situation analysis; setting objectives for design, testing, production, communication, Distribution; strategy formulation; development of action plans; implementation; and control, review, and evaluation. But remember, keep the big picture formula in mind and do not allow the process to be the objective.

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