A fun exercise in any business is to measure the expense against your net profit to sales ratio.
For every $100,000 in sales/revenue at an auto dealership, the store will net profit on average $3,000 so their net to sales ratio is 3%. This is an example of a business with thin margins (hence being extremely cautious to expenses).
Let’s assume this business (CPC) is extremely profitable and is 15% net to sales ratio. Not gross profit. Net profit to sales/revenue.
Take the expense $75,000 / divided by their net to sales ratio .15 (15%) = $500,000
It will take $500,000 in sales (revenue) to absorb a $75,000 net expense.
That would be 100 $5,000 custom CPC sets to absorb the expense of a $75,000 die.
Understood. At the same time my sense (correct someone if I’m wrong) is that these dies last a very long time.
Aren’t some of the dies used at
CPC hand-me-downs from predecessors?
So if it’s $75K for something which will still work when the business is passed on to the *next* owners, and maybe the owners after that, you’re looking at more like $5,000 per year or even less.
And an expense which can be recouped when the owner(s) sell, if they have grown the business. Not to mention depreciation per above.
I don’t believe the person I referred to consider buying
CPC ever took the tour, and so I never heard any particulars. But I assumed the purchased would be many, many multiples of $75K.
My own experience is more with buying and selling houses, which I’ve done three times. I’ve never bought a house that didn’t need $75K in improvements at *least*.
With two houses I bought, lived in, renovated and eventually sold, both in great condition the buyers put as much into renovation as they paid for the house. And both could still turn a profit if they sold now.
I also don’t know if the buyer is looking to get private equity-level returns, or if this is a labor of love. Either way, I hope the new owner(s) maintain
CPC’s existing high standards while also not feeling hidebound to do everything the same way as prior stewards. I’d think there is a lot of room for both continuity and change.
Lastly, per
@Gunnar ’s observation, I don’t know that new products would necessarily cut into existing orders, as opposed to generating new revenue. In my own case, I am unlikely to commission a full new set on the old model. But I very well might be a more regular shopper if there were some quick and easy off-the-shelf options which I could customize myself after purchase. (I have at times bought small batches of blanks, but these then need milling. That would be a lot better than buying Key Wests for murder.)
