That way we can decide whether you are gouging us or making a FAIR profit? What if that were mandatory? Would you go out of business rather than open your books to the public? I know it would never happen but wouldn't it be loverly if transparency were the basis of all transactions from government to the private sector? Complete transparency? Or would society crumble because transparency is the last thing anyone wants to provide?
The biggest reason they don't is because it gives a heads-up to the competition. If you ask a business owner privately, he or she might tell you, but nobody worth his or her economic salt would do so publicly. There are other reasons, too--like how one defines silly terms like 'fair.' To some, a five percent markup would be outrageous even though products are usually improved or developed, and businesses expanded, using the very same profit.
And yes, I would close my business if the government told me how to run it. That's the primary reason why I never considered going into business at the outset--and yes, I've had a few juicy opportunities.
It's a simple formula: the more government you have, the less incentive there is to start a business and employ people. It's your choice. If you want a healthy economy with an equally robust middle class, get/keep the government out of the way. If you want Venezuela 2.0, just keep harping for more government.
As for transparency....ROFL! We were SUPPOSED to get the most transparent government in U.S. history with the election of Obama. What we got was anything but. From a strictly philosophical perspective, sure, transparency would be wonderful, but you're NEVER gonna get it from those who rule over you.
I sell my services and I would be fine doing that. I would do that today, but do you know what the problem is? The problem is that it will not be believed. The dollar they gives me is split so many ways and goes to so many places that to describe it ends up sounding as fiction. Have you seen the chart where they show how much of your petrol dollar goes to profit for the gas station? It is too hard to believe. For me, I take a loss on occasion, to keep reputation. I know that customers cannot stand knowing that, they have a need to think that I cannot possibly be sacrificing anything for them. If I produced a paper showing accurately that I had taken a loss in doing business with them they would take it as a personal attack. I am sure this question is inspired by the epipen issue and I suspect if that business is transparent it would show they profited from the pen but took loses elsewhere which helped people and it would be seen as putting the blame on the people who were helped. There is no win for the business in transparency but if there is open competition then gouging is hard.
You claim to be a retired accountant, for Pete's sake. You already know that COGS is an annual report requirement for publicly traded companies. Look up the annual report.
As a businesss owner I can tell you No I would never tell my customer how much my mark up is....
It is not anyones business but mine and the governments. It would also drive small businesses out, they need more of a mark up than larger business because they do not have the volume of customers that larger businesses do.
Some of the answers saying amounts like 5%...ha. I can tell you if a small business tried to survive on 5% they would go out of business quick. 5% would not even pay my rent on my business let alone anything else. You seriously want me to spend $1 to make nickel....I don't think so, that is not even worth me getting out of bed for.
As a business owner I have to pay my bills. However I have more business than I can handle praise God. So I give 10% of my business to God which just means that I will not charge much or it's free for low income and homeless people. Then I tithe on everything first before I pay my bills so God will bless my business and the gospel will go out. My plans are to get some grants so I can hire people with different cultural backgrounds to give free services to those who don't speak English. But I don't drive a Mercedes or care about material things just being pleasing to God, and helping people who have it hard. When we have a 501C3 we have to be transparent to the public.
The average consumer has no clue what it costs to sell something. The overhead alone can kill you so exposing your costs doesn't educate anyone about anything. Time, money and experience all factor in. Not to mention insurance against idiots who consume and think they know it all and bitch and complain when they don't even know what they are talking about. Trust me, you don't want to run a business much less freely spread around your business expenditures to the clueless public.
Business doesn't owe you transparency. Business owes you a product for a price upon which you and it/he/she agrees, and which is safe and competent for the purpose that product was produced.
How about just letting the free market and competition set pricing? (Yes, I know, J.P. Morgan said competition was "harmful"; and it was, to his profits.) We don't seem to have either these days.
Different businesses have different methods of pricing. Particularly when it comes to small businesses and service businesses, it is not as cut and dried as a corporate manufacturing business and a COGS statement.
Some businesses, like large construction firms, may have to spread their costs over a period of years for large projects. Despite their best estimates, they may have cost increases or incur unusual expenses in year two that will affect what their profit actually ends up being. So their "up-front transparency" would not accurately reflect the actual profit realized.
It is also difficult to convey things such as experience, skill, talent, trustworthiness or other intangibles on an itemized list with a dollar figure next to them. If a service company is bidding a job, you may get only a total price figure as an estimate. Say you get two or three estimates, and check references. Let's say Joe's bid was $5,000 and he had good references and Jim's bid was $4,500 and his references were okay. But say there was the type of transparency you desire and you get your itemized breakdown of the bids. Joe has figured the job will take three days and the materials cost him $2,000, so you see you are paying $1,000/day labor + profit. Jim's bid also lists materials of $2,000 and he has figured five days @ $500/day. You are probably going to wonder why Joe's daily charge is twice that of Jim's, that would be the first thing to jump out at you looking at the breakdowns. Very likely it is because he has greater experience and skill than Jim, and can get the job done more quickly, which is usually beneficial to both his customers and himself. That experience, skill and speed are intangible costs that are difficult to quantify in a breakdown. But they are well worth an extra 11% for the job. Still, a lot of people would get stuck on that difference in the daily charge.
And that example is itself a gross over simplification because those two contractors are going to have overhead and insurance and such that are fixed yearly costs. How much of those fixed costs are actually applicable to each job is not factually known until the end of the year, because it depends on how much work they had during the year.
Clearly I am ignorant about what it takes from a business owner standpoint. I know from an in-house accountant's view what profit is necessary to keep a business going. I can give you an example from McDonald's. Their markups on drinks is over the moon ! That is where they make tons of profit. The syrup they use per drink costs a tiny bit and they charge a lot for them. Now markups on the meat products? Not so much. They depend on volume for that. That's why you have so many bargains food-wise. What they break even on for the food sold they more than make up for on those drinks. Thank you for your thoughtful answer m2c. I know you won't tell me what profit margin you work with but if
you could give me a ballpark figure of what you think is worth your time and fair to me I'd appreciate it. Thank you! :)
((hugs)) You sound to me like a very fine person Carazaa. Bless you and I know God does. Thank you for your very thoughtful and inspiring reply! :)
Hello Rosie:
Those numbers aren't gonna do you any good.. What if I have LOW, VERY LOW, cost of goods sold, but my product SUCKS??? What if I'm making a FORTUNE, and you LOVE my product???
excon
