The principle is the same regardless of the industry. You spread your risks by having a variety of customers who are in diverse markets. So if any one segment of the market crashes you can rely on the other customers to survive.
Works well if the problem is industry specific, say if aerospace takes a down turn but consumer spending is still strong.
Diversity doesn’t help much if it is like the current general economic crash, although if you are lucky you will have a customer that does well in down turns.
Thanks for the reply, Snowman. Any idea on what is an acceptable profit margin so that the long term I'd still make money. Obviously the more the better, but I'm trying to figure out what kind of deal I walk away from based on the credit rating.
One of the markets that's good right now is web conferencing. I was lucky enough to be in it right now... It's been doing a lot more business now that the market is down and people aren't wanting to pay as much for travel.
A picture is worth a thousand words but it takes 3,000 times the disk space. ~Author Unknown
I am not sure what your business model is, so I have no idea what the acceptable returns would be.
Your pricing model should be value driven not margin driven. If your costs are higher than your competitors your customer will not pay a higher price (unless you offer more value). Conversely if your costs are lower than your competitors, you want to reap a higher margin while giving the customer competitive value.
Your need to look at competitive pricing, evaluate how you stack up and make a judgement of how the customer will rate your offing vs others. If you are new to the market you will have to discount to build a customer base.
Once you know what your customer is willing to pay (market price or less) you can evaluate your costs and figure out your margin. If it is poor, you get out of the business. If it is great, you might expand. But either way your costs have virtually nothing to do with the price the customer is willing to pay except as the costs drive the competitive market place.
Basically, I talked with a recruiter who works for a company that only offers permanent placements. So, he's kinda frustrated that he has to pass up on the contract and contract-to-hire positions he learns about through his contacts. So, he needs a company to front that part of the business and we split the profits.
I'l have some loose control over this, but he'll really be driving the business more so to speak. I've set up some processes and tools to use so that I can start maintaining a contact list, etc., but other than providing money and kicking some contacts his way, I'm pretty much leaving it up to him. I do plan to screen the candidates technically to protect the brand (as much as this can, anyhow). Eventually, I'd like to hire someone in house and perhaps have him head up this division, but that's getting way ahead of myself.
This kind of makes me more like a financier, so I'm trying to determine the default rates for people who use contractors. Obviously, I'll learn more about the individual clients as I go along, but I'm trying to figure out if there's a 5% profit margin and the default rate is 7%, then over time, I'll lose 2% rather than make 5%. I'm trying to figure out where to draw the line for each credit rating on whether I accept the deal or head for the hills.
Maybe I am looking at this wrong, but it seemed to make sense.
A picture is worth a thousand words but it takes 3,000 times the disk space. ~Author Unknown
if there's a 5% profit margin and the default rate is 7%, then over time, I'll lose 2% rather than make 5%
I am afraid I don't understand your math. As I see it you make 5% regardless. You may give up a potential 2%, but you don't lose anything.
The only time you might say you were losing money would be if you had an alternative investment that would make more. For example if you could put the money in bonds at 9%, you would be losing 4% by investing it for a 5% return. If the bonds were tax free, you might even be losing 5 or 6% after taxes. But absent an alternative investment, the return is what it is.
If you are trying to determine the customary margin for an industry, I suggest you do some research using the industry SIC code. There are statistics published for each industry. But use caution in applying them. The numbers may have been generated using a statistically insignificant number of samples or perhaps generated for companies that fall in that SIC, but have no real relation to your situation. And they are by definition several years out of date.
The questions you need to ask yourself are; Am I satisfied with this return relative to the risk involved and could I get a better return using the money in a different way?
thanx for taking interest in my question. Please suggest me some sites where I can submit my software with some gains..... And is the EULA predefined during the time of creating the setup for the software? Or will I have to submit the entire Solution to the software dealers without creating any EULA or setup?
I think you should have your EULA all set before you approach anyone so that you do not give up your rights to the reseller at all. I would look at this discussion group that talks about making a business of selling software.
I've been writing VST plugins for the past year or so. I have three on the market. My problem seems to be underpricing my plugins. Their quality, I dare say, is as good as plugins costing several times more. I priced my first plugin low deliberately to get my door into the market, but now I've seemed to have painted myself into a corner. I really need to raise my prices to make a decent profit.
My current thinking is that by setting a moderately high price for a product you are making a claim. That claim being that this product is of high quality and is worth the price. This is a form of advertising. That is to say the higher price with its implicit claim will get you attention.
Having confidence in the quality of my work, I want to make sure I bump up the price of my next plugin. I want to improve previous plugins and raise their price when I release updated versions.
Any thoughts on this? How do you decide what to charge for your products?
You should charge what you deem necessary for your products to keep you happy and running a smooth business. Yes you can price very high and someone else may design a similar product but that is the risk you run. I would raise your product pricing and then market your product more. The more sales the less you need to price high in order to keep running. Just a thought.
You certainly can raise the price. Don't worry, those who already have it at the lower price will value it more. Those who don't have it won't even know. Put a disclaimer on your site that you can raise the price at any time and have no control over other websites that might show it for less.
Hi Leslie! First of all, I would suggest doing a research on what others are charging for a similar product. This way you'd know the competition. You wouldn't want to lose potential customers because your product was priced too high. Someone may be really interested in your product and may even know yours is better than others, but the cost is stopping them from making a move. In the end, that would be a loss of sale for you.
I'm a member of another business forum. Some of the members there offer their products at varying rates. Maybe you can do the same. For example, for the first 25 people you can offer them the lowest rate you are willing to sell your product for. After 25 people, raise it up $10 or $20 more. And then after those 25 people, raise it up another $10 or $20. Etc...etc...
Or you can even just say the first 50 people to make a purchase will get it for $50. After 50 people have made a purchase, the rate will go up to $100 or whatever the full price may be. This way the first 50 people will think they're getting a 50% discount.
Sometimes people get pushed to make the purchase immediately in fear that if they wait any longer, they'll have to pay even more. And some people just love getting good deals.
I totally agree on pricing. The lower you price your service the less valued it will be by your customers. I can't speak for plugins, but this advice should apply to pretty much anything. Just raise the price in the next version. If you overprice it, nobody will buy and you'll know fairly quickly. Then you can always lower it until you find a happy medium.
I've tested this out in two industries... legal and web.
There is also a book with checking out (kind of obscure) by an author named Gary Cone called "Price Doesn't Count," in which Mr. Cone argues that if there are objections to a sale, price is rarely the issue.
hello everybody i have some questions and curiosity about this field can any one help me with these specific things:-
1.i want to launch my own web company which interacts in field of social networking like facebook,fanbox, orkut etc. How could i do this? what kind of web server i need to manage the load of database processing?
2.How could i earn with this kind of web companies does my server pays me or i need to make some other ways ,pls define?
3.How do i promote the site to international level ,well i can manage it on national level i have contacts for advertisement any idea for that????
4.Which kind of web server i need prefer and what kind of future problems can be assumed on planning and launching of a web site?
[sarcasm] oh yeah, count me in as a partner, if it's that simple! [/sarcasm]
just having no clue at all, let others do the work, not doing any real research at all, just asking stupid questions and then cash in the big money? Dream on, buddy, life's not goin' to work like that. Else, I would be as rich as Bill by now.
gotten your attention with the subject line? well you won't find much about these topics here.
Don't buy a magazine subscription, don't search the Business forum, just visit our Lounge, it is flooded business-wise.
Maybe they can move that kind of srious stuff over here, so we again can find the jokes and stories, and the daily CCC; and mock the programming questions which now are just inundated.
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