Cost Accounting

The ideal business engages in high volume - high margin products or services. The reality is that it is typical for higher volume businesses to yield lower margins. The low volume - low margin spectrum is the worst case.

In recent years with the pressure of online music on audio CD sales, and after futile attempts to stop file sharing on the Internet, the recording industry has retrenched its position and is now embracing lower priced songs on the Internet (e.g. iTunes). After all, a lower price at any volume is better than no sales! This is an example of a high volume - high margin audio CD business succumbing to a lower margin return on its assets.

From the standpoint of an online venture wishing to engage in the sale of products and services, directly or through affiliate programs, the aspirations are the same: What are the high volume - high margin products and services?

A software business yields higher margin returns in comparison to a bricks and mortar business. How high the volume depends on the type of software. The coffee sales business is a high volume and high margin business but its net margin is lower than enterprise CRM (customer relationship management) software. With the movement of software to SaaS (software as a service) with the subscription services model, the high margin business yields recurring margins.

Consider the Amazon Associates program. Engaging in an Amazon affiliates program for hardcopy books is likely to be a lower margin opportunity than a SaaS affiliate program. This is perhaps an unfair comparison since it would make little sense to do online promotion and sale of a physical world product that can be purchased at Walmart. It does not matter what the volume is for that book - its price will be market pressured to a low level hence low margin.

eBooks are high margin products. Selling eBooks directly or through affiliate programs such as through ClickBank yields decent returns. Online information products are in general the highest margin yielding opportunities. The quality and value of the information along with the demand for such information are the other factors to consider.

Alicia Keys - Live American Idol 2010

Important Matter

If your traffic isn�t growing month after month, does it mean you�re doing something wrong? Most likely you aren�t doing enough things right. Again, making mistakes is not the issue. Missing opportunities is. - Steve Pavlina

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