After our animated weekly meeting, Huey Yei intrigued me with a company that he has been eyeing for a long while, and which got me thinking and inspired this post.
Suppose you are an entrepreneur who wants to sell paper – how will you do so? What are the kind of margins you might expect? What other considerations might you have?
Suppose you sell your paper in the form of tissue paper, perhaps the selling price might be 1 cent per piece, $0.01, and your Gross Profit Margin (GPM) might be 30%. Yes, I’m being generous here. There are businesses that are very successful in producing and selling these; the most successful arguably being Kimberly Clark. Elsewhere, there are similar local variants in Asia Pacific.
Suppose you sell your paper in the form of a book, a heavily weighted one at that, full of knowledge, wit and humour, Poor Charlie’s Almanack, the selling price is USD65, and your GPM might be higher at 42%, I’m guesstimating here. The author earns a royalty while the publisher earns money for manufacturing and distributing the books. Clearly, there were successful businesses even as the market is facing disruptions from digital sources.
Suppose you somehow got the authorities to issue you a license to “promote hope” and “sell dreams”, all while having a business tagline of “serving our society”. Now, we are talking about serious profits here. The selling price varies but your GPM might be close to 99%, and you don’t even need to advertise your business. Clearly there are ethical issues here for a hot debate.
Suppose you are a highly talented artist and you painted a masterpiece worth millions. Now, your GPM% might be close to 99% too. And you get to contribute to humanity’s history!
So which business would you choose? And why? Do share with us your perspectives. 😊 _/|\_
The one we were looking at is a combination of D & C, but without the debatable ethical issues. i.e. masterpieces worth a fair bit and yet having people fervently queuing up to buy them (like the above picture)! We think their GPM is higher than 90%!