The Warren Buffett of Mayfield High

"I don't give a f@#@ what anyone says Collective Buying Power is not a freaking fad" Bob Castle was reading the latest addition of The Bloomberg News. He was paying particular notice to the article about Groupon & Goldman Sachs. Apparently, the CEO of Goldman Sachs was in Chicago pitching the idea of an IPO (Initial Public Offering) to Groupon. Why would Castle think this is big news? What is Collective Buying Power?

Bob Castle's alter ego Rob Astle:> has been paying a lot of attention to Groupon & the CBP process.

A brief synopsis of Groupon & the Collective Buying Power Process.

Groupon was created in November 2008. It started out as a 'call to action' site called the Point.com. These kind of sites were designed to bring attention to certain civic duties that were being neglected. EX: If there was graffiti on a public wall and it needed to be painted..A website like The Point would enable many people to call for the graffiti to be painted. Thus enabling a (VOLUME) approach to a civic duty by the government. Basically, there are 'power in numbers'. The Point was having such good luck with this strategy, a decision was made to apply the process to businesses in their local market (Chicago).

The timing for Groupon could not have been better (November 2008). The recession was just starting, businesses were exploring new ways to promote their products & services. Groupon had everything ready to go.  The Groupon model was immensely successful in the initial target market, so they decided to open new portals, etc. etc. Groupon is now on the verge of becoming a 'behemoth' in the business world.

How do you make money using the Collective Buying Power process?

Groupon reportedly keeps up to 50% of all the revenue it generates. EX: I live in Las Vegas, one of my favorite bars in town was advertising a voucher on Groupon. They were offering a $50 voucher for $25. The deal lasted for 24 hours, and the bar sold 1320 vouchers. Do the math+++++

1320 (vouchers sold) * $25 (cost of a single voucher)= $33,000 (total revenue generated by deal)

Groupon uses an encrypted server, that means they collect all of the money up front. After the deal is complete, Groupon will keep its share (up to 50%) and distribute the remaining portion to the vendor. Do the math again++++

$33,000/2= $16,500 (Revenue entitled Groupon).

Remember! The $16,500 is just one deal, in one portal. Groupon offers a vast array of deals everyday through a number of  portals.

How would you start a Collective Buying Power site?

First & foremost..A website supporting the CBP process must be created. I have consulted with a number of quality web designers & architects. Long story short, the technology and maintenance of a CBP site is not that big of deal..Of course you have to have people who know what they are doing..HINT>>HINT..Lots of quality web people looking for work..

How much will it cost to create the site?

This is the question I get asked most often..The cost will revolve around the scenario, I have a number of different estimates..One set of professionals was quoting 40-50k plus a monthly maintenance fee. I have also  approached other 'would be' designers about a future equity stake versus a discount on up-front fees and maintenance. Creating the site will cost. How much ? It depends on the sort of people who get involved. 

Where should a CBP site start? What should be the initial target market?

Economically distressed places tend to produce economically distressed businesses. CBP is a tool that serves as an effective "recession buster" if done correctly. Living in Las Vegas, I see a mammoth amount of potential customers for the service. Remember CBP done correctly is all about (VOLUME). A number of new businesses and ideas are going to use the CBP process in the future. Calling CBP a big part of the new 'sub economy' is appropriate. I like the idea of starting a CBP site in Las Vegas. Lots of quality people are looking for a new idea, recruiting people to help with the process is very doable.

Community is the other side of this argument, if a CBP site can be directed at a strong community. The chances of it being successful will increase. EX: Everyone knows about Face Book. It was started by a 'college community' and just kept growing. Imagine a CBP site that targets a community of that nature. Students, alumni, surrounding areas. Two of the great things about a well functioning 'community? Commonality & Cooperation.

One last thing! There are 29 million small businesses in the United States (The government classifies any business with 500 employees or less as a small business). LOTS OF ROOM FOR THE CBP PROCESS..

My next post will describe some 'gorilla marketing' techniques..I am not the only guy who is thinking about this..ALL FEEDBACK IS WELCOME..The 'key word' is COLLECTIVE. Thanks Rob Astle

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