As many have said, I’d rather be lucky than good.
Hmmmm. Many issues above. I won’t hit 'em all, but here’s a few:
- The word “profit” and the word “margin” mean the same thing. There are two types, gross and net. net proft=net margin and gross profit=net margin. By definition.
- Gross margin is the profit on the item you’re selling, only including raw materials and manufacturing costs. i.e. if you build something for $1 and sell it for $5, your gross margin is $4/$5= 80%.
- Net margin is the profit on a bunch of items you sell, when you include the costs for R&D and other costs beyond just the manufacturing costs. I.e. if you build 1,000 widgets, each for $1 (total operation cost=$1,000), sell each for $5 (total revenue=$5,000), and spend an additional $3,000 in thier initial development and support, your net margin is $1,000/$5,000 = 20%.
- Markup is how much something is marked up. i.e. you build it for $1 and sell it for $5, you’ve marked it up $4 = 400%
- Minerals, gas, oil, etc. are far from “free”. There is extensive manufacturing and R&D costs. So both their gross margins and net margins are far from 100%.
- If you’re a sole proprietor in a pure service business (i.e. you sell your labor and nothing else) such as a hooker, there really is no concept of margin, as your costs are $0. However, if you’re a pimp who owns a hooking business, and charges for a hookers time, and then pays the hooker, there is a cost and a revenue and a margin. But that’s different. Same thing for a lawyer: the concept only makes sense as part of a law firm, not for an individual lawyer.
- I doubt ethernet cables are typically at 850% markup. There are always exceptions, if a store owner comes across a great deal buying out a company that went out of business or such. But in general, computer hardware margins are much thinner.
grrrr
net profit=net margin and gross profit=gross margin.
if you build 1,000 widgets, each for $1 (total manufacturing cost=$1,000), …
If you’re a sole proprietor (…), there really is no concept of margin, as your materials and manufacturing costs are $0.
Sorry
Do you have Any idea how many tons of rock you have to move to get one diamond?
Well…neither do I, but I bet it’s a lot! After all, if they were just lying around on the ground they wouldn’t be worth so much, would they? And they’re formed by intense pressure, so that means digging deep.
But in support of your point, my sister is into gemology, and she showed me some articles that talked about how diamonds are not quite as rare as we think (still rare tho), but that the DeBeers company artificially inflates prices by constricting the flow of diamonds into the market, thus raising their margins. I guess it’s a gamble somewhat on their part. You can sell fewer stones at high markups or many stones at lower ones. They’re gambling that keeping the prices high will prevent dilution of the market.
So far, I think they’re winning.
We had a thread like this once before.
I’ll repeat my submissions:
- Greeting cards
- Wrapping paper
- Saline solution
By definition, yes, but at least in my business experience, people usually just say “margin” and mean gross margin. Margin is usually used in reference to sales. I haven’t heard “net margin” since college.
Actually, you could look at this the opposite way. Your raw material is your life, i.e. you are selling your life, and time is pretty much priceless with zero opportunity to recover, so in a way you’re losing. But, to refute my own point, we all pretty much run such a business every day, 'cause that’s what any job is, selling your time. And it can’t be a losing proposition if everybody does it, eh?
- I doubt ethernet cables are typically at 850% markup. There are always exceptions, if a store owner comes across a great deal buying out a company that went out of business or such. But in general, computer hardware margins are much thinner. **
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I agree, but also it’s like somebody else said, maybe that store doesn’t sell a lot of ethernet cables, but has just enough demand to justify stocking them. So, they pass the cost of stocking a slow-mover on to you, betting that you’ll be in enough of a hurry or not know enough to get it somewhere else cheaper. If this is the case, they probably still just break even on the item itself, but win by making you think of them as “one-stop shopping” and they get your repeat business. I know this has to be the case with some of the more obscure items that Best Buy carries, adapters and such. I can get them online for a fraction of BB’s price, but I can run to BB at lunch and get my machine running today. Plus, I can’t go in that fucking place without buying a game or a CD or something.
I guess if you’re talking about gross profits, based strictly on the cost of the raw materials, it would have to be computer software. There are speciality programs out there that cost tens of thousands of dollars of dollars, but are stamped on CDs for less than a penny. Of course, like I said, I’m talking about gross profits and not taking the money paid to the programmers, marketing specialists, etc., into account.
Still, I’d think it probably ranks way up there in net profits, too. After all, look who the richest man in the world is…
At the Northern Cape diamond fields in South Africa, which are the richest known diamond fields in the world, they produce seven to forty carats of diamonds for every hundred tons of ore they process.
I was going to nominate writer… consider how much King makes for his latest piece of crap, compared to the amount of electricity his computer used while he wrote it.
Then neutron star mentioned computer programmer. Even better.
My read on the OP was about gross margins, but I do have some numbers on net profit for what it’s worth.
Here are the top ten company categories based on return on revenues in 1996’s Fortune 500 list (sorry, 1996 is all I have)
Pharmaceuticals 17.1%
Commercial Banks 13.9%
Electronics, Semiconductors 10.8%
Diversified Financials 10.6%
Utilities, Gas and Electric 9.6%
Railroads 9.2%
Scientific, Photo, Control Equip. 9.1%
Telecommunications 9.1%
Metal Products 8.9%
Computer Software 8.8%
And here are the top 12 Companies from the same list:
W.R. Grace 54.3% (wow!)
Microsoft 25.3%
Intel 24.7%
Berkshire Hathaway 23.7%
Cisco 22.3%
Schering-Plough 21.4%
Eli Lilly 20.7%
Gannett 20.2%
Merck 19.6%
First Bank System 19.3%
Bristol-Myers Squibb 18.9%
Coca-Cola 18.8%
“Family function” generally means about 15 minutes to order, and a drop-off delivery.
“Wedding” generally means a couple of initial hours working with Bride and Mom, or Bride and Fiancee or Bride and The Whole World at Large, Including Great Aunt Fanny, who wants to pay for the flowers so SHE gets a gardenia corsage… Then you have PRECISE color matching, item matching, changes (Tillie and the twins ARE coming, so we need another cousin corsage, and two more flower girl baskets) and deletions (Grandpa refuses to come if Great Aunt Fanny’s coming).
The flowers MUST be exactly as prescribed (You can go from an Attache’ pink rose to a Prive’ pink rose for a family function, but you can’t for a wedding, as the Prive’ is slightly less blue-based than the Attache’ and it won’t match the bridesmaids gowns) and you have to book extra EVERYTHING for the wedding to cover the last minute stupids. (Hi!! Florist Lady?? We forgot about flowers for the cake. Just a simple cake, let me give you the cake lady’s number. Five hours of phone tag and 7 calls later, the cake lady wants $50 of flowers, and the florist has to negotiate that with Bride or whoever is paying.)
I won’t even discuss the extra amount of handwork that specific corasges versus generic corsages can take. I can make you a $15 corsage. I can make you a $35 corsage. Which do you want? OK, so you book my time to look at pictures and match fabrics…
That’s where the cost difference comes in. Details. Labor.
You wanna pick up 3 centerpieces and 4 corsages 4 boutonnieres? Prices are the same. You want me to book the flowers for a major production, deal with the hassles, do the set-up, pin on the corsages, decorate the church, haul the candelabra, the flowers from church to reception AND come back to pick up rental items? Prices go up.
And if you book option one, do not expect option two. You WILL, though, and we know that. We’ve been doing this for decades.
As someone who has just parted with two of Her Majesty’s British pounds for a birthday card, I think I have a good idea.
I was wondering if anyone was going to mention this…It has to be software. And not just Microsoft, but all software companies. Think about little applications for PDA’s- A private programmer can spend a few weeks developing a program and from then on it is just Copy > Send with no more costs than the Internet connection, webpage and a few other misc. expenses.
-Tcat