Sridhar Vembu on Monday shared pointers for aspiring entrepreneurs and for those who "simply want to understand business."
The Zoho CEO posted a tweet about "the connection between cost of materials vs final customer price in a variety of areas (toys, furniture, restaurants)."
"This is the Real School of Business. Study!" he tweeted.If you are an aspiring entrepreneur or simply want to understand business, study this thread that discusses the connection between cost of materials vs final customer price in a variety of areas (toys, furniture, restaurants...)
This is the Real School of Business. Study!
— Sridhar Vembu (@svembu) May 23, 2022Related stories
Vembu shared a tweet by Molson Hart, founder and CEO of US toy company Viahart in which Hart talks about the pricing rules of different industry and the difference between the making costs of products and its final price.
"What is the pricing rule of thumb for your industry? In housewares/toys, $10 in the store means their cost was about $4," Hart tweeted. "How about restaurant, convenience, grocery, factory, contractor, etc? What’s the average relationship between material cost and final price?"
What is the pricing rule of thumb for your industry?
In housewares/toys, $10 in the store means their cost was about $4.
How about restaurant, convenience, grocery, factory, contractor, etc?
What’s the average relationship between material cost and final price?
— Molson Hart (@Molson_Hart) May 22, 2022
Hart's tweet drew some interesting responses from people across different industries. Twitter user Brett Bohannon said, "Wine in restaurants is essentially the first glass of wine pays for the bottle."
Carpenter Brendan Jenner commented, "In construction £100 spent on site means we charged the customer about £98." Another Twitter user Dylan Wiedman added, "My brother is a restaurant executive. He says the food cost target is 22 per cent of the bill."
Pitching in, Sridhar Vembu said, "If you can durably and sustainably (I define it as: profitable without debt) achieve a much lower markup than the norm in an industry, you have a business plan!"
"Thinking hard about why the costs are so high in a sector will teach you something. That's how I learn," the Zoho CEO added.
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