5/1 Ratio
In the usual 5/1 ratio; the item that sells for $5.00 means it was purchased for $1.00. The $5.00 is broken up….
$1.00 for a new item.
$1.00 in case prices rise.
$1.00 for salaries.
$1.00 for utilities.
$1.00 profit.
Putting it into practice; these chairs cost the business about $20 each. By the 5/1 the chairs should be sold for $100 each.
A few of the chairs have sold, but most are still there 30 days later. The price is now dropped to $90. A few sell. The price is then dropped to $80.
Getting those chairs out of the door is the key feature. The price can drop to $40 and the business would not lose money.
Not losing money, not having dead money is the focus.
Great tips everyone should read about.
It is basic business that many people don’t realise.