The #1 Way To Increase Profits
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Summary
- Arbitrage is about taking advantage of price differences in different markets; you buy low in one market and sell high in another.
- This concept applies to all businesses; whether you're dealing with products, labor, or services, profitability is based on the arbitrage opportunity present.
- It's essential to understand the distinction between accounting and economic profits. Accounting profits are your revenues minus all costs, while economic profits consider opportunity costs – potential earnings from alternative uses of your resources.
- As an entrepreneur, I'm constantly evaluating which business opportunities offer the most significant arbitrage potential given my team's skills, resources, and talents.
- It's crucial to identify markets with high growth potential because they're likely to offer better arbitrage opportunities due to increasing demand.
- Evaluating what we could be the best in the world at helps narrow down the most promising arbitrage opportunities for our businesses.
- Whatever service or product we provide should not have its price dictated by the cost to us, but rather by what the market will bear.
- Successful businesses exploit information advantages and the large disparities between production costs and market value.
- We shouldn't feel ethically constrained by how much we mark up our products or services, as long as the market supports the prices we set.
- Finding the right arbitrage opportunities that align with our capabilities enables us to maximize long-term growth and profitability.
Video
How To Take Action
I would suggest starting by understanding arbitrage deeply. Think about how you can buy something low in one market and sell high in another. Look around you; there are often price differences waiting for you to capitalize on. Remember, it's not just about products. This applies to labor and services too.
Next, focus on distinguishing between accounting and economic profits. Remember, the real profit is what you have after considering the money you could've made doing something else with your resources. Think about your skills, the time you have, and how best to use them.
If I were you, I'd evaluate my current business or idea against potential arbitrage opportunities. Ask yourself, which of these can you be the best in the world at? Where are your talents and resources most valuable?
To identify high-value opportunities, look for markets with high growth potential. They often have more demand, meaning you can buy cheaper and sell for more.
Think about pricing too. Don't just set prices based on what it costs you. Instead, price based on what people are willing to pay. Sometimes, you'll make something for a little and sell it for a lot. That's okay as long as the market supports that price.
Last, align your findings with your capabilities. Choose the arbitrage opportunity that fits best with what you can do. This alignment will help you grow and be profitable in the long term.
So remember:
- Learn about arbitrage and find it around you.
- Choose opportunities where your resources and skills shine.
- Target growing markets for more significant arbitrage potential.
- Price based on market demand, not just cost.
- Align opportunities with your capabilities for long-term success.
By doing these things, you're positioning yourself to make the most of what you have. Good luck out there!
Quotes
"Arbitrage is where you buy in one market at one cost and then you sell in another market at another cost"
– Alex Hormozi
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"The extent to which you crush it will be dictated by how big the arbitrage is"
– Alex Hormozi
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"Every business fundamentally works this way"
– Alex Hormozi
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"Accounting profits are revenues minus all costs"
– Alex Hormozi
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"The price that you charge should never be in any way relation to what it costs you and only related to what the market will allow"
– Alex Hormozi
