How to make as much money as you want using unit economics math

Hey everyone, happy holidays. I’ve been seeing multiple posts of young entrepreneurs asking whether making a certain amount of money is possible. Let’s say $120K a year but it works with a million.

Most aspiring entrepreneurs don’t understand how to get there with unit economics. Here’s a simple way to do it.

First you have to value your time. This unit is what you have most of in the beginning but you can’t trade dollars for hours for less than hour target.

If you want to make $10K a month then divide that by 160 hours which is full time. That’s $62.5 an hour. That’s baseline.

Now double it because you’ll spend half your time marketing and selling. Now you have to make $125 an hour.

If you plan on being a solo service provider like a consultant or coach. You now have to figure out how good you need to be to get someone to pay you $125 an hour. Are you solving a problem worth that much?

(Hint: sell to rich people and save them time because they value their time at more than $125 an hour)

It doesn’t stop there. If you can get to $250 an hour then you can hire someone for $10K a month and basically make the same while they work. But now your 50% delivery time goes into management. You still have to sell.

But then you can multiply and the more employees you add, the more your own hourly revenue grows.

Remember: this is a very simple approach. There’s a lot more like COGs (cost of goods sold) but if you have the margin you can get there.

What about selling products? Productizing is where you make the leap from trading time for money and move to value for money.

Well, first you have to track your time. Let’s say you put an hour into making a product and distribution. You then have to ask yourself: “Will this make me $125 on the back end?”

Let’s say your product costs $100 in COGs, and it takes you an hour to sell one unit. Well then you need to charge at least $225. BTW this is why software scales easily because the COGs are always lower than hard goods.

Ask yourself does the product solve $225 worth of problems? You might not like the answer.

This means you must learn how to calculate COGs. ChatGPT can help but basically you calculate every fixed expense in your product.

Once again I’m being reductive. But as you calculate unit economics, you’ll be able to ask yourself the tough questions.

A lot of the time, aspiring entrepreneurs want to do business doing something that just won’t meet their financial goals. There’s are no solutions here, only trade offs between your passion and what makes the most money. Yes, there are exceptions but never bank on it.

Hope this helps. I use this method in every single business venture. Even when I do content for YouTube I have to ask whether a video is worth an hour of my time over the long run. One video will only make me a couple hundred bucks at most. Hence I try to spend less than 30 minutes hoping one goes viral and makes up for the losses.

I’ve done it with big ticket items as well where I calculate all my staff hours and COGs.

Once you do the math, you can take the emotion out of it.