As the first step of new business let us make some business-case calculations.
These calculations may be used as an example and for you information only. This is a schema, which can be filled out with actual data for your specific calculation of recoupement. We took average rates, as for example the rent of 1 sq m in a megapolis with 12 millions population and in a smaller city with 12 thousands population will essentially differ. Certainly sales volumes as well.
Activity of the INKSYSTEM Representative Office (RO) consists of direct and internet retail sales of INKSYSTEM products, as well as warranty and post-warranty service. All the INKSYSTEM products are delivered for the INKSYSTEM RO at the "Price С" of the Price-list.
Initial data
Commodity:
The first recommended order of filled CISS and consumable inks for the most popular western models of printers for $4,000 consists of the following:
About 80 items of filled with ink CISS for average price of $37,5 per item; About 35 liter of inks for average price of $28,5 per liter. Initial arrangement costs: • Showcase 1item = $200 • Computer 1item = $400 • Printer Epson P50 1item = $220 • Computer table 1item = $80 • Chair 1item = $20 Approximate cost makes = $920
Rent of 10 sq m * 50$ / sq m monthly. = $500 Utility payments = $50 Total cost:
Break-even point calculations (under the circumstance of on-the-spot availability of the products):
The total income from sales of the recommended order in retail prices make $7,500 and brings $3,500 total net profit or 85% profitability
The average retail price of a CISS for a popular printer model filled with ink makes $72,5 ($35 net profit per item); The average retail price of INKSYSTEM ink makes about $51,5 per liter ($23 net profit per liter)
If 1st month (4 weeks) break-even point pursued:
$1930 (costs of the 1st month) $1930 / 4 weeks = $482,5 (costs per week) $482,5 / $35 = 13,8 (items per week) or 13,8 * 4 = 55 (items of CISS per calculated period of 1 month)
If 3rd month (12 weeks) break-even point pursued:
$1930 (costs of the 1st month) + $1100 (costs of the next 2 months) = $3030 (total costs) $3030 / 12weeks = $252,5 (costs per week) $252,5 / $35 = 7,2 (items per week) or 7,2 * 12 = 87 (items of CISS per calculated period of 6 months)
If 6th month (24 weeks) break-even point pursued:
$1930 (costs of the 1st month) + $2750 (costs of the next 5 months) = $4680 (total costs) $4680 / 24weeks = $195 (costs per week) $195 / $35 = 5,6 (items per week) or 5,6 * 24 = 135 (items of CISS per calculated period of 6 months)
After-recoupement period:
$550 / 4weeks = $137,5 (cost per week) $137,5 / $35 = 4 (items per week)
Description. These calculations mean that if you intend to recoupe your initial cost in first three months, you need to sell 7-8 items or more items weekly. If you want your recoupment period to last for 6 month, you have to sell 6 items weekly or more, but you have also to remember that your commodity investment will increase as you need to sell more then 135 items in this case, and the efficiency of the business will significantly decrease. But you can also persue the first month recoupment objective. To reach this efficiency you need to sell more then 14 items weekly. Our best practiсe of a Representative Office is more than 30 per one week of internet and direct sales. In the next weeks after reaching the break-even point you need to sell just more then 4 items to cover your monthly cost.
Pay your attention, that the calculation above is just an example and the mentioned costs will be lower in 80 per cent of cases (e.g. if you bring your own PC, table and chair, or if you already have your real shop)