Residual Income Definition – McDonalds Example
So I haven’t eaten at McDonald’s in a while. But I got my Filet-O-Fish combo with fries and of course, a drink. Now I spent about 5 bucks on this meal. And I’m thinking,”how does McDonalds make a fortune?”. They didn’t make a huge amount of money off of me dollar-wise. I’m thinking what they really do is sell a lot of small things for a little bit of money. Basically the money they are making off of each sale is pocket change. And they even have systems in place that allow a 15 or 16-year-old runs the store. So this is a really good example of how people can make a fortune off of pocket change when they have the right systems in place and they sell a whole lot of small products.
Residual Income Definition – Netflix Example
Wouldn’t it be great if you could offer an existing product or service higher in quality while also making it more convenient and less expensive?
Here’s an illustration that you may relate to that will explain the magnitude of what I’m talking about.
In the past, if you wanted to rent a movie, what would you do?
You would get in your car, drive to the video store, select your movie, rent it for $4.
And when you were done you would jump back in your car and return it.
There’s nothing wrong with this scenario and it built a multi-billion dollar industry.
Now a little over 10 years ago 2 guys got together and decided to start a company that would allow
someone to order their movies from a website.
The movies would then be shipped to the person’s home for less than a dollar each.
When you were done watching your movie you would simply drop it into the mail in the provided envelopes.
Pretty simple, convenient and a whole lot less expensive.
The result of this was a company called Netflix that today is renting today is 1.9 million DVDs per day.
Their profits last year were almost $100 million.
This was accomplished in a flat market with a DVD rental that was one quarter the price of that offered in the stores.
What can you do to make an existing product or service more convenient and less expensive?
