Anybody get the email from DAYACOM?

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It's all about Supply and Demand. Limit the supply and increase the demand and you make more profits. There is a reason that only a few companies are able to offer the quality kits you enjoy making...

There is a difference between Mark Up and Profit Margin.

Typically, Mark Up is a percentage applied to a fixed cost to determine the selling price. Some industries refer to this as "cost plus" pricing.

Typically Profit Margin is a ratio of the "profit" that is in the selling price. A good rule of thumb to calculate your "Profit Margin" is: (selling price - cost)/Selling Price.

So:
A $1.00 item Marked Up 300% and you have a $4.00 selling price.
A ($4.00 selling price - $1.00 cost) = $3.00 /$4.00 selling price = 75% Margin... not 300%

Now remember, that "Profit Margin" is referred to more correctly as "Gross Margin" which means that you still have to deduct ALL of your associated costs of doing business from the "Gross Profit" to arrive at your "Net Profit."

You can see where the 75% Gross Margin can easily be reduced as low as single digit Net Margin when you factor out ALL the costs. For instance, a grocery chain store will "Gross" 30%-40% but the average retail grocery chain store will net less than 1%. How do they stay in business? VOLUME, VOLUME, VOLUME.

Labor can be roughly calculated as Salary (hourly too) x 1.45 to cover benefits, etc. So, you have to pay your $10.00/Hour employee $14.50 to cover their benefits and labor costs.

Then there are CPA's, Attorneys, Insurance of all kinds, advertising and marketing, debt service on loans, inventory costs, quarterly estimated taxes, payroll and payroll taxes, and on and on it goes... eating away at your "Gross Margin." Sounds like fun... let's all go into business for ourselves!!;) The little "business in the garage" cannot begin to compare to what it takes to run a real business on the scale of a CSUSA, nor should the "Garage Enterprise" compare their "perceived profits" with what they "perceive" a CSUSA is making.

Cash flow is the life blood of EVERY business. A successful business will find ways to preserve their cash. When you tie up money in inventory, you have less cash to operate your business. Many, many "successful" businesses have failed because they had too little cash flow.

In dealing with overseas suppliers, it is typical to use an SLOC (standby letter of credit) so you do not have to tie up your cash for 90-180 days. Not every business can get an SLOC.

As for businesses making unseemly profits, what about Insurance Corporations? They are some of the single largest "Institutional Investors" (buying stocks in blocks of 100,000 shares or greater) on Wall Street... using the "profits" from your premiums. Remember that the next time your rates go up for some petty reason.

The next time you get your "FREE glossy four color CSUSA catalog delivered to your door" to peruse while sitting on the porcelain throne, remember that it was brought to you by a company that spent some of their "Gross Profits" to provide you some reading materials.:D
 
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Very well said Dave. Also, any time the product has lots of variations of colors or finishes, you can be assured the public will want a different ratio that you planned for. You're stuck with a lot of colors or variations that nobody wants and run out of the popular ones. You have to throw more money at the issue to get it right. It's all about catching back up to $ zero. I used to do that a lot, and I've changed some of my business practices this time around.
 
Originally posted by btboone

Very well said Dave. Also, any time the product has lots of variations of colors or finishes, you can be assured the public will want a different ratio that you planned for. You're stuck with a lot of colors or variations that nobody wants and run out of the popular ones. You have to throw more money at the issue to get it right. It's all about catching back up to $ zero. I used to do that a lot, and I've changed some of my business practices this time around.

Bruce,

There is also the value of the long-term relationship between CSUSA and their over-seas supplier. Their combined volume with this supplier will dwarf any group buy. You can rest assured that CSUSA is watching this closely and contacting the manufacturer to make sure they know where they stand. CSUSA has not been in business for 25 years by standing by and "letting business happen."

Then you have the Robinson-Patman Act of 1936 which enforces anti-pricing discrimination. In a nutshell, any distributor that buys in volume, is entitled to the same pricing offered to any other distributor, provided they purchase at the same volume bracket. This creates a separation between the big dogs and the wanna-be's. The big dogs can always buy at the most preferred bracket pricing because they can buy at the required volume. The wanna-be's get around this with buying co-ops that buy at the higher volume requirements and then split up the shipments AFTER they are delivered.

There is a lot involved in this proposed venture and can be a challenge for the faint of heart.;)
 
Lots of good points for both sides. I have been on both sides of the coin, as an owner of the business and as an end user.

As for the owner, I learned a long time ago that the profit is made on the purchase not on the sale. The better I was able negotiate the price the higher my profit would be.

As for the end user, I am looking for the lowest price without sacraficing quality and service.

Bottom line, I want to save as much as possible on an item when I purchase it. I may be happy with the supplier I am using but if a better price comes along I am obligated (as a good business man) to investigate it. That is why this type of discussion is so important.

Happy Turning
 
Hello guys,

This is a very good thread on Dayacom. I have begun dealing with dayacom directly and have already started to receive my shipments. Hopefully this will help all of you considering lowering your costs.

Shipping on two pallets weighing 750kg costs me 1500.00 just to Hawaii.
Customs comes out to be about 6% of total invoice. (my last invoice was for 20k.)
Then there are fowarding agent fees totaling 400.00
Wire transfer fees for wiring money to them.

I have begun to sell dayacom's kits at a price that is very affordable while at the same time covering my costs of bringing them in. My main business is to make the pens. So I am trying to pass on the savings to others that are interested in the kits I bring in.

Please let me know if you all have any questions. I will continue to post more kits on my website as well as in the forums here.

Aaron Lau
 
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