Money

Margins, profit, and just doing a good job

With a long supply chain, nearly everyone’s a middleman. Everyone’s trying to make a profit and justify their contribution to the final value.

What can happen though, is that the profit margins compound to the point where at the end, the total price looks more like 50% profit margin (throughout the supply chain) or even more.

I think there’s two options here:

  1. Try and own the entire supply chain. Then you have the ability to reduce the retail price by 10% (a massive undercut) but still retain (say) 80% of the overall profit.

  2. Stand at the end of the supply chain, and do such a good job you never have to do fix-up work. Charge people for the work you do on their project, and don’t ask them to cover the projects where you blow-out the budget.

Realistically, a benevolent monopoly is unlikely to occur. So if we wan’t to make an impact on affordability, our opportunity is to jump in and just do it properly.

As the saying goes: if a job’s worth doing, it’s worth doing well. Let’s not twist this into: Any job’s worth doing if it maximises profit.