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Product to Profit Multiplier

By Sean M. Hugo, CPA

What is a profit multiplier?  There are many great examples of this strategy that you come in contact on almost a daily basis.  Company's such as Disney, Dreamworks, Michael Jordan, and Microsoft have perfected this strategy.

Take Disney as an example and think about their Toy Story product.  Can you name the various profit streams that have been generated from that one product?

Their is the revenue from movie ticket sales, DVD sales, toys, beach towels, lunch boxes, licensing fees and on and on.  Then they put the movie Toy Story One and Toy Story Two  in the "vault" where you can't buy it and wouldn't you know it they take the movie out of the vault as they are releasing Toy Story Three thus driving more sales of the first two movies and additional sales of merchandise. 

The profit multiplier can also be used to parlay the talents of individuals as well.  A perfect example of this is Michael Jordan.  The bulk of Michael Jordan's income did not come from his salary as a basketball player it came from endorsements.  He took his core asset his basketball career and turned it into a way to make even more money from merchandising, movies, and endorsements.     

To discuss how our company could take advantage of the profit multiplier strategy contact our office today.