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On Thursday, August 17, 2017 at 2:22:28 PM UTC-4, Mr. Luddite wrote:
On 8/17/2017 11:06 AM, wrote:
On Thu, 17 Aug 2017 07:00:06 -0400, "Mr. Luddite"
wrote:

On 8/17/2017 1:03 AM, wrote:
On Wed, 16 Aug 2017 21:49:09 -0400, "Mr. Luddite"
wrote:

On 8/16/2017 9:02 PM, wrote:
On Wed, 16 Aug 2017 15:34:43 -0400, Keyser Soze
wrote:

What part is wrong? BTW that is not a libertarian issue at all but I
know it is your go to brain fart

Your belief that advertising does not lower prices for products and
services.

How does that work?
I add a large line to my expense column and somehow I can lower prices
and still make a profit.
It is clear you never actually looked at a P&L statement or owned a
business. Ads may generate more business but it is still a cost of
doing business that gets passed on to the customer.

That's not always the case Greg. Advertising can simply be to increase
market share ... or simply compete for business in the first place.

The idea that all business costs are "passed on" to the customer is
simply not true.

Who pays them? If you are not covering your expenses with your revenue
you are on the fast track to bankruptcy court. (or you are the
government)

If you are profitable with your existing business, some of those profits
can be re-invested in advertising to increase your market share. In
some businesses margins may have to be cut simply to get a contract to
begin with. Yes, if you can't cover your overall cost of doing
business long term you will eventually go bankrupt but the point I am
making is that costs are not necessary "passed on" to the customer as
you keep repeating. It depends on the type of business. If I had tried
to increase my margins in order to pay for start up costs, advertising
and other non-direct expenses, the number of contracts I received would
have suffered. It's called competition and in my business it was
primarily evaluated on technical responsiveness to the RFQ, price and
delivery schedule. In time reputation also became a major factor.

In the early days I took some contracts at break-even just to get the
company recognized, "in the door" and eligible for future contracts. I
didn't always break even either. One hick-up in the project and I'd
lose money. You have to have a long-term plan and goal although I don't
believe in formal one or five year "business plans". They are for
investors, not the business owner or person who is actually running the
company.

I never borrowed money or even had a bank line. I learned that lesson
from watching another person try to build a company using "other
people's money". He ended up in bankruptcy and investors and vendors
got hurt. All growth in my company was organic with the exception of
one person who wanted "in" badly and bought himself a 10 percent equity
position. He was a tremendous asset, holding two Phd's in physics and
helped get the company a lot of exposure. Otherwise, I relied on
technical competence, delivering what was promised and earning repeat
business. Growth, margins and the rest took care of themselves.

I've often thought about businesses and what I believe to be some of the
mistakes people make. My experience isn't typical, for sure, and it was
not the management of a fully mature, on-going, typical business where
the scorecard are the P&L statements or quarterly returns. If I made
some money on a project I invested it into the company's growth. I
never paid myself a big fat salary. My goal was always to create
something of eventual value to someone else and it paid off.

Eventually all of that cost was passed on to the customer. You just
had enough "bank" to eat it during your start up.

I don't know how you figure that but so be it. In the business I was in
you didn't have the luxury of passing on any and all costs other than
maybe increasing prices somewhat annually or so. Some projects we made
a nice profit. Others not so much.

I think it's because of the type of business you had... you weren't making thousands of the same gadget for consumer use, you were bidding on commercial projects via RFPs (if I understand correctly what you've previously described).

The company I work for operates in a similar manner. We build a "standard" product that is used by various industries and organizations, but nearly without exception this kind of stuff is purchased by competitive RFP/RFQ. We have a standard price for the hardware and software that can be discounted in certain cases (like when selling through a dealer), but the only wiggle room is in professional services and NRE (non-recurring engineering). Of course the prices are set to make a profit, and there have been a couple of small increases over the past few years to cover rising costs. In some cases we elect to discount the bid in order to win the business, always mindful that we need to keep the payroll and bills paid and the doors open. We used to give away support for free, but in recent years we've had to go to a yearly maintenance fee for support. It cost a lot to feed an engineering staff of ~75 people. The end product is mostly software now. Our advertising costs are mainly trade shows and a website, with occasional ads and sponsorship in trade magazines. The cost of running the business and providing a profit to the owners is built into the price of the goods.

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