MBA1327 Why Apple Is Still The Most Profitable Company In the World + Free Ride Friday!

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Alright, let's jump into today's episode. Heyo. Welcome to the Hundred Dollar MBA Show Practical Business lessons delivered on the daily with our daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of the $100M a complete business training and community online. And in today's lesson you will learn why Apple is still the most profitable business in the world. The key word here is profitable. This is how much money they make after all their expenses. Apple doesn't make the most revenue meaning how much it makes in sales, but their profit margins are the Largest, which makes them the most profitable business in the world and the most valuable business in the world, valued at over a trillion dollars. What makes them unique, why are they more profitable than other businesses? And most importantly, how can you adopt some of Apple's principles when it comes to profitability in your own business? These are simple principles that are universal that you can start implementing in your business and I highly recommend it. We're going to talk about how to prioritize profit, how pricing influences profitability, how to make sure your costs are under control so you're always making more money than you're actually spending, and how to take on Apple's philosophy in your day to day with your business. So much to cover. So let's get into it. Let's get down to business. A couple of things I want to point out just for accuracy. Apple is still the most profitable public business out there. In recent months, one of the Saudi Arabia oil companies that is mostly owned by the government there edged out Apple in terms of profitability. But they're not a typical business, so we're not going to count them because their business model and their product and being owned by the government is something that we really can't relate to with our small businesses. Apple, on the other hand, started out of a garage with minimal funding and grew to the most profitable business in the world and is valued at over a trillion dollars, like I mentioned. Well, how did that happen? Are they selling that many products? Well, their best selling product, the iPhone. And in fact, Apple sells less smartphones than their competitors. The number of units that are sold are less than Samsung and Huawei, but they're more profitable than them. You would think, oh, it's because they sell so many units. No, it's because they make more money on each unit. See, early on, Apple got into the game of profitability. They recognized that in order for them to have sustainable growth and be able to achieve the goals they wanted to internally, meaning hire the right people and have the right team and the right facilities and the right resources and externally please their shareholders, then they need to make sure they're making as much money as possible. You could say that Apple applies the profit first mentality. If you are familiar with Mike McCallit's book, Profit first, it's all about making sure you are profitable before anything else. So a simple example is if I was selling cupcakes, when I price my cupcakes, I gotta make sure the price not only covers all my expenses, my rent, the supplies, the labor, the time, my employees, but the profit Margin is significant. So I can be able to reinvest in the business. Many people don't price their product, they don't sell their product or their service at a high enough price to have that kind of leeway. Let me give you some numbers. So Apple in 2018, their revenue, how much money they actually brought in in sales, grew 16% and their total revenue was $265.5 billion. Now you might be saying, wow, that's a lot of money that they brought in from sales. But there are tons of companies that make money, make a lot of money like that, but their expenses are, are just as much or drastically higher. There are businesses out there that make billions in sale and are not profitable. I know that sounds crazy, but they are in that position. Or they make $50 billion in sales and their profitability is like $200 million. That's actually how much money they have left over after all their expenses and gets placed back into their bank account. So with Appleapple they made $265.5 billion in revenue. And after all their expenses, their profitability was $59.5 billion, nearly $60 billion in profit. Now I want you to think about that for a moment. That's how much money they made after all of Apple's expenses, the hundreds of thousands of employees, all the R and D, the technology, remember they're not just software, they're hardware. They have to buy the actual parts and the services and the companies from the different manufacturers, the cost for the Apple stores, maintenance, service, customer service, sales, marketing, There's a whole bunch of expenses and marketing dollars alone, you know. But after all of that, they still made nearly $60 billion and they put that right back in the bank. Now guess what happens now Apple has the liberty now that they're plus $60 billion after just one year. That's just their one year profits to up the ante and explore new things, explore a new product, explore a new marketing revenue or I should say marketing avenue. When you don't have that profit, it's hard for you to grow. It's hard for you to be able to stay ahead of your competition. So let's take a look at some of the principles that Apple does. Number one, Apple is known for being expensive. They are the most expensive option for the most part when it comes to their products and services. You want to buy a laptop and it's a lot cheaper to buy PC. When I buy a tablet, the iPad is probably the most expensive choice out there. Same thing with their phones and their Watches or smartwatches, we can go down the line. They are the most expensive option and they have chosen to be a luxury brand. Why? Because they really value profitability. It's hard for you to be profitable if you're competing on price. It's a race to the bottom. So I highly recommend you do not compete on price. You always compete on value. Apple wins because they have better products or highly competitive products. You know, maybe it's not so objective to say better, but the point here is they don't compete on price. Apple never runs a sale. There's never a sale on an, on a laptop or an iPhone. They never say, hey, 50% off, 20% off. Never. Okay? They have slight exceptions and that's just a standard discount that go to non for profit organizations and military and educators. I know that these are the kind of discounts they offer, but it's, I believe it's 10%, maybe it's less than that, it's 5%. And it's just kind of a standard thing they do to support military officials, people in education, people in nonprofit. But they don't have sales, they don't have discounts, they don't lower the value of their actual product with any price reduction. Why? Because again, profitability is key. So in your business, ask yourself what would happen if you removed all discounts, all discount codes, promos, everything. How much more profitable would you be? Do the math, run the numbers. A simple way to look at it is if you have a few coupons, 1, 15, 1's 21's 25, on average, 20%. You're giving away 20% of your sales, your actual revenue. You would make 20% more money if you didn't do any of these discounts. That's a significant jump in actual profitability and revenue. By having a more higher tiered pricing, it makes it easier for them to be profitable. It makes it easier for them to spend money on their expenses, on having a better product and having a better team. It's hard to grow when you're bored, right? So by having prices that don't cheapen them, this is very critical and you can do the same in your business. Number two, Apple does the essentials, right? So they don't have to spend a lot of money on quick iteration. What do I mean by that? When they roll out a product, let's say for an iPhone, they get the essentials, right? It's easy to use, it's fast, it's responsive, the camera's nice. Okay. That's why people want A a phone really takes great pictures. It looks nice, the quality is there and it's responsive. Right. Everything else is gravy. Everything else is a nitpicky. Right. So having that, they nail that. So people like, you know what, things work on a Mac, things work on an iPhone, things work on an iPad. So they actually fulfill the core need for the customer. When they do that, they have a stronghold on the market and they don't have the urgency to constantly innovate and change the product year after year. They. You look at the iPhone, it doesn't change much year after year. It really doesn't do a major overhaul until like maybe three, four, five years down the line. The iPhone xs, which is the latest one, is not very different really from the iPhone 7. Yeah, the screen is a little bit bigger and you know, it's a OLED instead of an LED screen. But the essentials are the same. The experience is not much different. When they make those jumps, they have the liberty of taking time. Right. They don't have to dump a whole lot of cash and as quickly as possible into R and D and to creating new products over and over and over. They can iterate slightly on the product that they have because it's such a solid product. So the takeaway here is get the essentials right. Make sure that your product, your service fulfills on the desired outcome of the customer. The customer signing up for your product to get something, make sure it delivers it fantastic. All the other stuff, the integrations, the nice to haves, the features, the pluses, the benefits, the that's good. You want to make sure you have some of those. But if you do the core competency, if you do the core thing that your product actually does, your service actually does really well, better than your competition. That's going to change the game. That's going to allow people to say, hey, if I want to get something done, if I want to get this actually working, I'm going to go with this product because it's tried and true. Yeah, it doesn't have this or that, but I really like the fact that I can rely on it. And this gives you the leeway to not have to iterate your company or iterate your product every year, every six months, number three. And this is really something that a lot of people struggle with and that's having a clear vision for the company. Apple has very clear guidelines for their business and for their actual employees. They don't react to every comment on social media. They don't react to every Little thing that any kind of user says, they have a clear plan. They know the essentials that they have to actually pull off to have a company and have these products sell. They nail them. They listen to feedback, but they are not hasty to let's implement this as soon as possible or everybody's going to be upset at us. No, they know why people buy. They know this is what they have to fulfill. They fulfill it and they work on trying to improve things. Apple takes its time to implement feedback properly, not just in a hasty fashion where they're like, let's just give them what they want. No, people don't really understand what they want. They may think they want that, but really they need something else. And it takes time for Apple to discover that and to actually implement it in their products and services. You have the liberty to do this, to take the time to implement feedback properly when you're profitable, when you are okay financially with your business, your business's stomach is, you know, full, so to speak. You know, you're not starving. And this is so important, taking on feedback, understanding what customers are saying, figuring out what the real root problem is and seeing if maybe what they're suggesting is not really what they want. Maybe it's something else. Maybe it is. But how are we going to implement it? How is it going to influence our company, our brand? Is it in line with our vision, aligned? What we're trying to pull off with this, with this product, is this actually becoming a different product or a different product line? These are all things Apple has a liberty to kind of think about and not rush to change things because they're trying to compete and, and make more money and make more sales.

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To wrap today's lesson. The three core principles of Apple's profitability is prioritizing profit, making sure that they're pricing their products and their services high enough because this is where you get the money. So not only covers your expenses, but it gives you the leeway to have money left over to take things to the next level. Number two, they focus on the essentials in terms of what the product does or the service does. What are people actually signing up for? What are they actually buying this for? What's the core outcome they're looking for? Nail that. Make sure it's perfect and it's done better than anybody else and you can really not worry about all the other features. They know that you do that well. They're gonna stick with you and hang with you and see you iterate in the long run. Number three, not reacting to feedback and spending a lot of money on trying to react to comments or feedback from customers. Take your time to listen to it, filter it, figure out how the best way to implement it and have a long term vision. And that way you don't waste money iterating over and over at the start when you're not starting your business yet or you're still in an MVP mode. Failing fast is fine because your costs are low. But when you're running your business and you're selling, changing your company, changing your product, changing your services so quickly like that costs a lot of money. So before you spend your money on changing your product, you you want to make sure you take the time to take on feedback and think about it and have a long term plan and implement so costs are manageable. Thank you so much for listening. Today's episode's not over though. It's Free Ride Friday. We got to see who won this week's Free Ride. Let's take a look. Who is today's Free Ride Friday winner? And the winner is. Debbie with a B. Debbie with a B. All the way from India. Debbie with a B says short, precise and filled with knowledge. Five stars. Been barely two months since I've been listening to the podcast and I've already seen a vast improvement in my knowledge. These ten minute sessions are perfect. I like them so much. I went all the way back in your earlier episodes. Thank you Debbie with a B. Your mission is to email me over at Omar at 100 MBA net so I can hook you up with the Free Ride to EZ course. If you want to win, just leave us a rating and review on itunes to enter our weekly random draw. Listen in on Friday to see if you won. That simple. And if you want to get access to all our past episodes, all you got to do is hit subscribe. By hitting subscribe, you subscribe to our feed and have access to over our 1300 lessons on business. Before I go, I want to leave you with this. A lot of us are scared to have higher prices than our competitors because we feel like we're not going to be chosen because people are going to go with a cheaper option. Well, it's all about value and you don't want somebody whose only concern is price. You want a customer that understands what they're getting. If you give perceived value on your website, in your store, and show them what they're getting for their money, it greatly outweighs the price. They will be happy to this is not something new. People are happy to pay money if they see the value. Your job is to show them the value. Businesses and brands like Louis Vuitton and Apple and Rolls Royce would not exist, right? So make sure you price according to profitability. Thank you so much for listening. I'll check you in Monday's episode. I'll see you then. Take care.

Is it time to reimagine your future? The right business skills may make a difference in your career. At Capella University, we offer a relevant education that's designed to focus on what you need to know in the business world. We'll teach professional skills to help you pursue your goals like business management, strategic planning, and effective communication, and you can apply these skills right away. A different future is closer than you think with Capella University. Learn more at Capella Eduardo.