Re: What Profits?

John,

I agree that usually we can expect to see an average of only 5% profit...any
higher and the competition will be attracted. However, that doesn't mean
that we can't expect to see an occasional higher profit when we bring a new
product to market and there is no competition. If I develop a cure for
cancer, and can expect no competition for at least a year, then I will be
able to use that year to make better than 5% profit...and to generate "brand
name recognition". If I charge too much, then competition will be
attracted, and many consumers will jump ship for the cost savings (hence the
popularity of generic drugs vs name brand).

The problem with 5% profit is that in order to make a decent living, one
must have large volume business. I can't live on 5% of $500,000 (=$25,000).
I would need 5% on $1 million to make a decent living (and even then I would
be making less than I would as an Oracle programmer).

So, it is a combination of profit & volume that is important to success.
Low volume means a higher profit is required (and sometimes accepted in the
marketplace).

-Shaun
(on the road)

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