Wednesday, March 8, 2017

12 to 60: Building a profitable perfume business, a few bottles at a time

    The biggest mistake the perfume beginner can make is to produce too many bottles, far too many!. Look at it this way: the only bottles that make money are the ones you sell . The cost of each bottle you produce but don't sell subtracts profit.

    So if you produce 100 bottles of perfume at a cost of $5.50 per bottle and you sell 20 of them at $30 each, to calculate your profit you must now deduct the cost of the bottles you sold -- $110 (20 x $5.50 = $110) -- plus the cost of the 80 bottles you did not sell -- $440 (80 x $5.50 = $440). So your profit is just $50 -- ($600 - $110 - $440 = $50).

    But if you have made only the 20 bottles you sold, your profit would have been $490 -- ($600 - $110 = $490). Realistically, particularly at the beginning, you can't judge how many bottles you will sell but suppose you had produced two dozen (24) bottles. Now the cost of your unsold bottles would have been just $22 -- (4 x $5.50 = $22) -- and your profit would have been $486 -- ($600 - $110 - $22 = $486). That's a whole lot better than $50.

    It is an almost universal mistake of the first time perfume entrepreneur, producing too many bottles so too many go unsold. Look at the case here for two dozen (24) bottles: an impressive 400% profit from $132 invested. That's good business.

    Yes, it may seem small but with that profit you can expand. You can build, using the same strategy over and over again, gradually increasing your production without overproducing. Perfume is a business, not a casino. Don't become a gambler.

Cost effective small batch production     
    To make this strategy work profitably you'll need vendors who will sell you the components you need in small quantities. You'll find some help with this in my next message.

-- Phil Goutell

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