Is it possible to sell for less than you paid and still make a profit?

At first, it might seem impossible to sell something for less than you bought it for and still make a profit but if you really understand pricing and expenses, it most certainly is possible.

An example would be a book I purchased recently through Amazon.com. I found the listing for the book and then looked at the options for buying a used copy of the book. There was a copy listed for $0.01 and when I looked at the reviews of the seller (used books frequently are sold on Amazon.com through independent book stores) they were almost all positive. I went ahead with the purchase and paid the $3.99 for standard shipping for a total of $4.00 This shipping price is standard for sellers on Amazon.com so it’s not a case of them charging an exorbitant fee for shipping. I received the book five days after ordering (including the weekend) and the book was in excellent shape. When I went to the sellers web site, I found that they would buy this same book, in the same condition for $0.25 and pay for shipping to them.

The key is to look at all costs to see how they are able to do this. When they purchase books, it’s an automated system where you go to their web site, enter the ISBN number and it lets you know how much they are willing to pay for that book and also how many copies they will buy. There is a minimum of $10 they will pay so in most cases, you would be sending them multiple books. All the seller has to do is put the books in a box and print out the shipping slip and drop the box off at the post office. The shipping slip takes care of the postage and once the books arrive the company evaluates the books to make sure they are in acceptable condition and then sends payment.

When they make a sale (mainly through amazon.com), they ship the book via USPS media mail which costs them $2.74 plus the cost of the shipping material which is around $0.07 based on the quantities they are most likely buying. Including the cost of the label and ink, total shipping cost is around $2.85. They buy the book for $0.25 for a total cost of around $3.20 and make a sale for $4.

You might wonder if it’s really worth doing this for a profit of around $0.80 but then I looked and found that in the past year, they have received over 18000 reviews on amazon.com so they made at least that number of sales (and most are for more then $0.01) and I’m sure it’s many more than that because that is just the people who bought from them and then did a review and I’m sure there are many more who didn’t bother with the review.

While there are other fixed costs in this (the cost of the warehouse, the cost of the web site etc) most of these costs aren’t affected by one more book or one more sale. The key to this type of a business is for them to truly understand all costs involved in transactions in both directions and to automate as much as possible. It wouldn’t work if they had to look up the price manually and give a quote over the phone because the cost in terms of time would be too high. If the shipping labels had to be hand done, it would cost too much so the more they can automate, the less they can charge (assuming they have enough business to cover the costs of the automation in the long run)

Other examples of selling for selling an item for less than it costs would be razors. The actual razor frequently costs more to manufacture than they sell it for. However, the profit comes from selling the razor blades so they can afford to sell for less than cost knowing that future purchases will make up for the it. Another example is video games. The video game systems frequently cost more to manufacture than they are sold for but the profit comes from the software (the games) that are sold as a follow up.

The question for you is whether you truly understand the costs in your business? Can you break things down to the point where you know where your profit truly is coming from as well as where your losses are coming from?

Too many people ignore the numbers because it’s not the “glamorous” part of the business but while not glamorous, it’s vital to the success of your business

Have a great day!

Lawrence

Half Full PPT

A week or so ago, I wrote a post about Looking for Ways to Fail (http://www.lawrencefine.com/blog/2009/02/looking-for-ways-to-fail/)

After writing that, I decided to discuss this in a presentation I was making and from there, decided to elaborate on it in a power point presentation.

Hope you enjoy

Lawrence

Prepare

When people see a well run event, they frequently think how easy it is to put on such a thing. The organizer usually seems calm, things are going smoothly and people think “I can do this”.

On the other hand, when people see an organizer running around barking orders, seeming to do ten things at once, they think “wow, that person is really working hard, they deserve whatever they are getting for running this”.

The reality is, the person whose event is running smoothly and remains calm probably put in tens, or hundreds or thousands of hours prior to the event to make sure things run that way while the person running around during the event, didn’t prepare as well prior to the event.

A friend of mine runs tournaments for a living. She is extremely organized, professional and the events she runs are generally good experiences for the participants and good fundraisers for the non profit organization she works for. Inevitably, people complain, after the fact, because they feel she is over compensated and the tournaments could be run as effectively, or more effectively by volunteers which would result in more funds for the organization. The reason they think this is they see the 2-4 days worth or work she does during the event and don’t see the hundreds of hours she does in advance to make sure everything is planned for in advance. They see the big sponsors for the tournaments but don’t remember that these sponsors weren’t involved before she got involved. The sad thing is, if she were less organized, which would result in worse experience for the participants, people might respect her work more because they would see her running around during the event, giving the appearance of doing more. Instead, she does most of these things in advance and people don’t see, or appreciate the preparation.

When I see a convention or seminar that is well run, I look at the people running the event and realize that what I see is usually just the tip of the iceberg of what it really took to get that event organized and run properly. Too many people look to find the faults rather than looking to see how well run everything is. No one can anticipate everything that might happen during an event and they can’t even plan for everything they do anticipate but the people who plan well will run a better event than the person who doesn’t plan as well but might give the impression of doing more during the event.

It is better to panic before the event and remain calm during the event than to be calm prior to the event and panic during.

Have a great day!

Lawrence

Problem Solving 101

Problem Solving 101

1. Admit there is a problem
2. Accept you want to do something to fix the problem
3. Define the problem
4. Create alternative solutions
5. Establish criteria for selection the solution
6. Choose the solution
7. Plan how you will implement this solution
8. Execute the solution
9. Reassess the situation

The process of problem solving is actually quite simple. The problem is, if you skip some steps, chances are you wont be as successful as you should be

Have a great day!

Lawrence

Managing Email

If you are like me, you receive a LOT of email. In my case, I receive hundreds of emails each day (not counting Spam) and if I’m not careful, it can get a bit overwhelming.

Some people believe in checking email once or twice a day and have the belief checking it more often interferes with the rest of the work. However, others (like myself) are dependent upon email as a primary means of communication and see the emails as they come in.

Without a doubt, one of the best things I purchased was a second monitor for my desk. This allows me to have whatever I’m working on display in one monitor while my email is displayed on the other monitor. At any given time I can glance over at my email and see if something came in that needs to be dealt with immediately. This way, I can see the email, make a quick determination of whether it needs to be addressed right away and if needed read it and reply without ever losing site of what I was working on.

The second part of managing email is the use of folders (or in gmail, labels). When I see peoples email programs (whether it’s Outlook, Eudora, AOL, or one of the webmail programs) and see hundreds or even thousands of emails in their inbox, I just assume they are extremely disorganized and most likely not dealing with things the way they should.

The way I manage my inbox is I think of my inbox as my “to do” list. When the email first comes in, I will scan it to determine if it needs to be dealt with right away. As soon as I deal with it (which might mean read it, reply to it, do some other action) I will file it in a folder. Everything that is filed has been dealt with and is now being stored for future reference (I save almost all emails just in case I need to refer to them in the future). This means that every email in my inbox still needs something to be done. I might have replied to them but am waiting for a further explanation before acting upon the email or it might be something that just needs to be read but every email in my inbox needs some type of action.

Each day, before I end work, I will scan my inbox to see which of these items need to be followed up on immediately. If I have an email that I’m awaiting a reply to, if I have been waiting an extended period of time, I will resend the request. If I’m waiting for any type of action before dealing with an email, if the wait is longer than expected, I’m going to see what needs to be done to speed up the process.

At any given time I might have 100 emails in my inbox but if I notice that number starts to grow, I will spend additional time clearing them out. This might mean spending one evening catching up on reading emails or it might mean replying to emails that aren’t time sensitive (keeping in mind there is a difference between an email not being time sensitive and one that is being ignored and just because something doesn’t have to be replied to right away doesn’t mean it should be ignored completely).

Keeping control of my inbox is just as important to me as any other “to do” list. It’s something that must be done on a daily basis and if ignored, is something that will be virtually impossible to get back under control.

If you find this post helpful, please share with others and encourage them to subscribe at http://lawrencefine.com/blog/subscribe/

Have a great day!

Lawrence

Names

If you ask people to make a list of the words they like to hear the most, and if they are honest, at the top of the list will be their name. People love to hear their name.

Around 10 years ago, I read an article about a very successful cross country coach. When asked the secrets to his success, he mentioned a few different things but one of the big things he mentioned was how he made sure to call every person on his team by their name each day in training. When I read that I thought “that isn’t a big deal, I’m sure I do that when I’m coaching soccer”. Then I started to pay attention and noticed that I was using the star players names every day. I was also calling the “trouble makers” by their name every day. However, I wasn’t calling the rest of the players by their names.

It’s so easy to take people for granted and just assume they are going to continue to do their job each day and not give them the recognition they need and deserve. When I realized I wasn’t giving proper recognition to all of the players on the teams I was coaching, I started to make a conscious effort to call each player by their name each day and also to make some form of personal contact. It could be by providing a coaching tip or simply saying hello and asking them how they were doing.

How many opportunities do you have to call someone by their name and choose not to? It can be something as simple as instead of saying “hello how are you doing?” saying “hello Chris, how are you doing?”

A good example of this being done well would be a hotel I stayed at a year ago. I took a cab to the hotel and there was a security gate at the front. They asked my name and I told them my name and that I was checking in to the hotel. When the cab pulled up to the front door, the doorman said “hello Mr,. Fine, how are you today?”. When I went to the front desk, before I could say anything, the lady said “hello Mr, Fine I hope your trip here was a good one…” I was well aware that the only reason they knew my name was because they were called by the security guard but it made a huge impression on me.

How many opportunities have you lost because you didn’t bother to call someone by their name? How many future opportunities will you lose?

Remember, people love to hear their name. Give them what they want (especially since it doesn’t cost you anything) and see how much more you can get back.

If you enjoy these posts, please encourage others to subscribe by going to http://lawrencefine.com/blog/subscribe/

Have a great day!

Lawrence