Net Profits

Re: Net Profits

"Working for others you sell your prime hours so you get get some
money to do what you want on your least productive hours."

Well, when you put it that way it sounds so depressing... working for
others that is. :)

Oh well, gotta eat.. or do I???

Can't wait to get this thing off the ground.

Jason

But Jason, with the calls, the research, the investigations into your
ideas...since it is what you want to do, have you not already started?

John





--- In spiers@yahoogroups.com, "John Spiers" wrote:
>
> Folks,
>
> By separate email I received a question on profits that I've been
trying to argue for a
> while...and I think I got it out... to wit:
>
> Yes...but about profits...they are what they are. Say you find
yourself earning 10% net profit
> on the sale of fabrics you design and wholesale. Now, 10% net
profit may mean you have 50%
> gross profit. So say you have your first year sales of US$20,000
and the fabric cost you
> $10,000. So your gross profit is $10,000 and your cost of sales is
$10,000 as well.
>
> With $10,000 paid to the chinese, you are also spending money on
the business...travel,
> subscribing to magazine, joining industry associations, meeting
with customsbrokers, sales
> agents, retailers, you visit fabric factories and study fabrics on
sale by others. You make
> phone calls and work on the computer, all about fabrics. You also
take some money from the
> income to cover personal expenses, and in USA accounting this is
called "pay."
>
> All this time, all the money you spend is spent doing things you
love. This money spent is
> called overhead, and lets say you spend $8000 on this activity.
Well then, with $20,000 in
> sales, 10,000 in cost of goods, and $8,000 in business expenses,
you have brought in
> $20,000 and paid out $18,000, with $2000 left over, or 10% net
profit.
>
> So keep in mind, when you work for others, you do what they want,
they pay you, and you
> use the money they pay you to go do what you want, with whatever
time may be left over
> after working for someone else.
>
> Self employed means you start the morning doing what you want to do
most, and you get
> paid for using your prime hours doing what you love. This is
importasnt to keep inmind.
> Working for others you sell your prime hours so you get get some
money to do what you
> want on your least productive hours.
>
> Now let's go back to the "net profit".Rarely do people working for
others ever save money. In
> fact, in USA we have what is called the "negative savings rate."
iIt is something like 1.5%,
> which means americans earn $100 and spend $101.50.
>
> Working for yourself, if you have a 10% net profit, after the end
of the year, you have
> company that is viable, and you've "saved" $2000.
>
> Next, let's say you are happy with this situation, but you want not
$20,000 next year in sales,
> but $40,000, with $4000 net profit.
>
> Well, then study your situation. You have have had 5000 people
look at your fabrics, and
> 4500 said "no thank you, price too high" and 500 say "yes, price is
right." The tempation will
> be to cut your prices to increase your sales. but as the book
points out, this is a mistake.
> REcall that at the small business level you have no "economies of
scale", and recall you HAVE
> made 10% net on the 500 people out of the 5000 who considered you
fabrics.
>
> Better strategy than cutting price is to find a new 5000 people to
offer, and additional 500
> people to buy. Say you are in Kota Kinabalu which has about a
million people and this is
> where you did your business the first year...well, you continue in
KK and to double your sales
> you also sell in Kuala Lumpur which is five times the size of KK.
Certainly you'll find another
> 5000 people who will view your products, and 500 who will buy In KL.
>
> So the trick here is find what works in the sense that it supports
you lifestyle, and do more of
> that... forget about any price cutting stragegies, and don't worry
about people who are NOT
> your customers at YOUR price...leave them for someone else.
>
> ***
>
> Whew... I've been meaning to say something like that for A long
time... does it make sense?
>
> John

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