Numerical Analysis

by Brian Simper

Close family members regularly tease me over my quietly simmering level of math geekiness. I did take a lot of math and physics in college and certain classes made them snicker naughtily when my class sported a name like "Discrete Math". Nor am I helping my cause by maintaining habits like using prime numbers for the number of seconds when cooking food in a microwave oven.

The simple math is this: If you get 10,000 people to each give you $100.00, you will be a millionaire. If you get 100,000 people to each give you $10.00 you will also be a millionaire. This has been the types of numbers that musicians look at when releasing an album, for example. Selling 100,000 copies of an album would be a great start for a new musician. Suppose you wanted to make your fortune selling gumballs at 25 cents each. You only have to sell four million to reach the goal of a million dollars.

Perhaps gumballs won't reassure a struggling entrepreneur. But knowing the numbers does provide a good sense of the scale of a project and how much work should be exerted selling each individual item.

This kind of calculation especially makes sense for marketing and sales goals in a small business and it is exactly the kind of numbers put into a properly sober business plan when choosing among business projects. Does your project have the potential to sell the numbers that will bring in this kind of revenue? Do the royalties from your product approach the one million dollar mark or even a more conservative, but comfortable amount?

From base calculations like these, the costs of marketing dollars per sale should be examined. Online advertising such as Google Adsense gives you tools for more accurately determining these costs if a product is marketed online.

A sales process may take time also. Car salesmen don't have to sell 100,000 cars although I am certain they would be delighted to do so. Would selling one car per day be possible? Does this rate allow them to reach the comfortable income level they are aiming towards?

At the very least, knowing the one million dollar numbers will help a business owner know when they don't have to sell a billion items to reach their goals. Instead, knowing these kinds of sales goals allow a business owner see what it will take to reach their own definition of success.