A business model/'mɑdl/ with only two numbers
By Derek Sivers
Like most people, I had no idea what to charge for my service.
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/flæt/ $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/'ælbəm/ 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/bʌmpt/ 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 per album 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 /ɡlæns/ and common sense should tell you if the numbers will work. The rest are details.
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