How to Make a Lot of Money from a Small Business

In the past, running a small business was highly risky, even when it is momentarily profitable; because it’s only a matter of time before someone with a lot of money comes along, buys everyone over and swallows up the small fishes. It was the era of mass production, hits and bestsellers. If you couldn’t play at the mass level as a business owner, your days are numbered.

Today, the rule of the game has shifted more than a little in favor of the small business. Today, our economy has shifted from a few mass markets to millions of small niche markets. Businesses are more able to remain small and highly profitable. Today, businesses can afford to stay small in size and big in the bank. Aspiring entrepreneurs need to understand this. And I want to share with you how a small business can make a lot of money today. Before we get to it, be sure to subscribe to After School Africa for a more insightful video like this.

The Business of the Long Tail

Imagine you stumble on T-shirts for sale on an eCommerce website with an inscription, “Vegans Born in July are Kings” and “I love my three-legged Dog” These are obviously special interest items that wouldn’t quite attract much attention. But the few people these items are made for will be willing to pay more for them.

What usually happens is that the company selling these T-shirts has hundreds of unique designs like this. They might not sell many or any of some designs, but put together, they may be selling thousands of shirts each month. This is the long tail business strategy. The example I just used maybe a bit too narrow, but you get the point.

The long tail, coined by Chris Anderson, author of “The Long Tail: Why the Future of Business Is Selling Less of More, is a business strategy to realize significant profits by selling low volumes of hard-to-find items to many customers, rather than the strategy of mass sales of popular items.

To make a lot of money from a small business, instead of creating products to sell to everyone in large volumes, focus on creating products that meet the needs of relatively small groups of people for a higher profit, then reach as many of these people as possible. Niche businesses can be as big as Uber, Airbnb, or as small as a company offering legal service for startups.

The point is that the consumers are shifting from mass-market buying to more niche buying. In fact, about 57% of Amazon sales are from customers buying niche products. So, instead of competing with large cooperation to appeal to everyone, as a small business, you have a higher chance of making a lot of profit when you appeal to a target audience.

Create at lower cost

The only way to make money in business is to make your revenue higher than your cost of doing business. The wider the margin, the more profit you make. The traditional business model requires the huge costs of production; from renting a large space, hiring a lot of employees, buying expensive equipment, and maintaining high recurring expenditure. As a smart business owner today, you can easily eliminate most of these costs and drop your production cost to the bare minimum.

For instance, if you are in the business of selling T-shirts, the traditional method is to rent large storage space, buy expensive equipment, print a large number of T-shirt designs, and hire a bunch of marketers. Alternatively, you can create the designs and upload the picture of the T-shirts on online marketplaces, and only print on demand from a vendor. With infinite shelf space, there is no limit to the variety of products you can have. And you don’t get to tie down capital from unsold items.

I’m part of a business that delivers IT solutions to higher institutions. Depending on the client, we often need to deploy different high-end hardware. For each project, we order the needed equipment, sometimes from China, from the money paid by the client. We avoid tying down capital in hardware and invest money where it is most urgently needed. This applies, even more, to digital products like software as a service, and other digital products. To make a lot of money from a small business, technology makes it easy to lower your cost of production.

Leverage digital distribution tools

When people think about digital media, their first instinct is a tool for fun and leisure. But what people don’t often think about is that people are money. Wherever people gather in numbers, there is money to be made. Digital technology has created an infinite ability and opportunity for businesses and professionals to reach a group of people with common interests. 

When a small business combines a perfect niche product, produced at low cost with a large target audience, it can make a lot of money. Reaching this target audience has always been a major challenge of niche products. But thanks to digital distribution tools like search engines, social media, eCommerce, and other digital media platforms, it has become much easier to reach a large number of people who will be interested in the right niche product.

These digital media tools have marketing built into it. For instance, by posting relevant articles on a blog consistently, following search engine optimization best-practices, you stand a chance of receiving thousands of targeted visitors from search engines; by uploading videos on YouTube, it stands a chance of reaching millions of viewers. And uploading your items on an online market-places exposes your product to potential buyers.

As I described earlier, the fact that you don’t need finished products to start selling is a huge business advantage. Depending on what you are offering, you can put your product or service out there, and only produce them on demand. Even more powerful is the fact that you can create a product once, like software, online courses, eBooks, and so on, and sell them to as many people as possible. And when you don’t have your own product, you can help other people sell their product through affiliate programs and earn commissions. The secret of making big money from a small business is to sell niche products produced at low cost to as many people as possible. Digital technology makes it possible to reach that many targeted customers.

Automate Your Marketing

One big advantage of low production and distribution cost is that it frees up time for businesses to focus on what actually brings money; marketing – or preferably, automated marketing. This is where you invest into developing, experimenting, analyzing and improving a marketing process until it proves favorable return on investment.

This is called the sales funnel. Through a free or paid distribution channel, you drive a continuous flow of online visitors through a sales process that filters out potential target customers from the rest.

For example, let’s assume you are selling an online training to help nurses earn more from their profession. You create a short downloadable material on How to Earn what you are worth as a Nurse. People will have to sign up with their email to download a copy. You have social media pages, and a blog where you share useful information about the nursing career. You also run search engine and social media ads to promote your pdf document. Not everyone landing on your digital property will be interested in getting your material. Those who are interested will subscribe. A tiny percentage who subscribe will end up becoming paying students in your training. The process of moving people from the first contact to the point of sale is your sales funnel. Once you have setup this automated marketing process, your job is to keep measuring your results to identify and improve on what’s working and eliminate what’s not working. Identify which channels are bringing in the most targeted audience and pay more attention to them. Keep adjusting until you have an optimized process that works. Then double down on what brings the most return on investment.

Today, people are just clicks away; which means that money is just clicks away. Your job is to get the right people through your sales funnel and keep improving the process until you are satisfied with the result.

One more thing to keep in mind

Building any business takes a lot of work and perseverance to succeed. In fact, although many small businesses are using different variations of this method to make a lot of money, there are no guarantees it is going to work for you. Any business with high possibility of success also has high possibility of failure.

But the principles I’ve mentioned in this video has worked for many small businesses including mine. The right niche product, produced at low cost, reaching the right set of people consistently, is a proven way a small business can make a lot of money.

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