Quote:
Originally Posted by pornguy
If you own a business that makes window scrapers. Each one costs you. 13$ to make TOTAL cost. Including plastic shipping packaging, and employees. But you sell them for 26 dollars. HOW CAN THERE BE A CASH FLOW ISSUE???? WHY WOULD YOU NEED A LOAN???
If you make a product and sell it at less than what it costs you to make you dont deserve a load and you dont deserve to be in business.
|
I don't think anyone gave an example of selling a product for less than its cost.
Let's say you are selling window scrapers and making a small profit of $200,000/year.
You decide one day to make the pilgrimmage to Benton, Arkansas to pitch your product to Wal Mart. You meet with their their buyer and they say "Hey, no problem. We'll take 400,000 of them but we can only pay you $19. We need them in 60 days". Pretty sure you know what to do next. Go to the bank!
This is a more extreme example of the general problem. If you are growing faster than your profit margins you are going to need to finance your manufacturing/inventory purchases.