Monday, February 17, 2020

Most people don't know how hard it is to make money?

Recently I have been with a lot of people inside of companies that take for granted the revenue produced by the products/services the company produces. I have heard comments like "I don't care about the money" or "that is a lot of work"

Well, yea, making money is a lot of work! If it was easy then every one would start their own company and work 2 hours a week and be living on a private island. Looking at the high failure rates of new companies, it must be hard!

Let me break this down a bit. Lets say you have a small company that sells something for $1000. And for this example you make 30% so you earn $300 off the sale. And lets say you do it 10 times. So you make $3,000! Sounds like a great deal? Well, the above is Gross Margin. Lets really break down some of the other things that you must take into consideration
Business expenses (License and such)
Ordering expense
Cost of money
Your time.
Sending a bill
Overhead (Building, computers and more)

Then break this down even further. Of the 10 you ordered, one came in broken. So you have your time to pick it up, get it sent back to the manufacturer (Assuming that is not you) then getting a new one, maybe loaning them a unit during this time and now you have a used one you have to sell (More cost), lets not take into consideration your time, shipping and more. Most likely you have now eaten into the profit of at least three deals.

It is easy to overlook all the costs associated with delivering even the most simple solution. All of this multiplies at every turn.

Many try an make up with volume and this just multiplies your overhead many times.

Just remember how hard it is to make a margin and respect those who focus on this every day.