To run a western business in China and be successful is not an easy task. Kudos to those businesses that survive for years and years. May you continue to prosper.
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To run a western business in China and be successful is not an easy task. Kudos to those businesses that survive for years and years. May you continue to prosper.
Here is a rule of thumb for a catering business: Do a complete careful analysis of each menu item. The menu price must be at least 4 times the cost of the food.
Be sure to estimate costs for the half leaf of lettuce. mustard, ketchup and mayo. They teach this in culinary schools. You can price the meals higher but never lower.
Depending on location, investment in fixtures, you might find 4X insufficient.
@Alien: We all know you mean hat anybody in particular is into serious greed" but you still imply, without any idea of margins, and don't think "we're producing dollar millionaires" as if selling a few 20 yuan beers in a bar magically turns into a million dollars. (BTW you'd need to sell about half a million beers to make a million bucks margin before expenses.)
@ Geezer: don't understand your last post.
Perhaps the rule of thumb you mentioned makes sense, I wouldn't know, but if it does, why does it?
Nobody's is going to become a dollar millionaire running a restaurant in Kunming!
To small scale.
It is a rule of thumb, a working assumption useful for estimating prices. It is a starting point.
Another is: the fully burdened cost, materials+labor+overhead, of a manufactured product must be less than 25% of the retail sales price.
These "work" because experienced Capitalists who understand the relationships of costs, expenses, margins and pricing use them to maximize their exploitation (Profit) and pay the workers. Note workers get paid before any profit (exploitation) is possible.
@ Geezer: I agree about what you say about experienced capitalists. And your rules of thumb, I'll accept, probably 'work' for that reason. But as you say, they are a starting point - but surely they vary with the cost of 'labor' and other factors, and anyway the maximation of profit isn't the only goal? People I know who have run small businesses often become attached to the product of their businesses, the way they choose to produce it, as well as the profit they make from it (which does, you'll agree, have to do with the difference between profit and wages, not just something that comes after wages are paid) and to the environment (including the social environment, which obviously involves employees, as well as customers) they have created, and I wouldn't be too interested in frequenting a business where this was not the case. Seems to me this probably applies to most or all of the small Western-run places in Kunming that I know about, which do not strike me as mere 'money machines'.
@ Peter: I don't think I know of any Westerners here who feel seriously desperate, except perhaps when they first arrive and are unfamiliar with a lot of things here.
"anyway the maximation of profit isn't the only goal?"
Is this a question?
"(which does, you'll agree, have to do with the difference between profit and wages, not just something that comes after wages are paid)" No, I do not agree.
Profit is the residual AFTER all costs, wages, expenses, taxes and other stuff has been paid.
The social construct which concerns you is not a primary concern of the Capitalist, in either a small or large business. The customers are created by providing goods or services to others at a price they voluntarily are willingly pay. Employees voluntarily agree to provide labor, knowledge and skills in return for compensation.
It matters to no one but you what the social dynamics of a business are. Given you "know nothing about costs & profits in small businesses in KM or anywhere else," which can be objectively measured, using money, evoking vague environment issues, especially social environment, is like defining up.
The term "money machines" comes to your mind not mine.
Running a business takes work, commitment and skill. Profit is necessary to allow the business to continue.
@ Geezer: OK, interesting discussion, but I think we might continue it elsewhere (another thread, if anybody's interested) as we're both getting away from my original query. Anyway, your disagreement with me about profit and wages - think I was mistaken as far as the AMOUNT of profit is concerned, although not about the RATE of profit (i.e., percentage of intake that is profit).
Answer to your question: yes, I meant to ask a question.
Seems to me your question: "Western-run places in KM too expensive?" has two connotations: 1) One would find Western-run places expensive relative to one's financial situation, or, 2) Westerners run places and price their goods and services excessively high.
In the first case, that maybe true for some patrons but not others. If the prices are too high for you, you can trade elsewhere. Either way, the Westerner is not responsible for your social situation.
In the second case, if the Westerner prices his goods or services excessively high, the business will be short lived.
I like one of Sal's burgers and am happy to pay the price and consider it reasonable. O'Reilly's also has a burger I liked but it was a vertical monstrosity difficult to eat so I considered it over priced.
"(T)oo expensive" is pretty subjective and can be taken as a criticism. Given your remarkable concern for excessive profits, even though you have no idea as to cost/expense/profit relationships, made by merchants, I took your question to be a prologue to a discussion you wish to have about the unfairness of prices you have a choice to pay or avoid.
Grow up. The merchant sets his prices and customers voluntarily accept them and pay, or, go elsewhere. That my friend is your choice as well. Of course, you can always whine and bitch if you wish.