The other day I was craving a filet O’fish from McDonald’s like crazy. As I stood in line awaiting my now “sustainable” fish sandwich I, of course, started thinking about profit margins, I mean who wouldn’t? McDonald’s has many products lines, they sell fish sandwiches, burgers, fries, shakes etc. and each has their own profit margins. However, I bet you are unaware of one of the nicest profit margins they have, it’s on their soda.
How is that possible when any size soda can be purchased at McDonald’s for a $1? Welp, it’s because their cost of buying the carbonated water and syrup is minimal.
So, how does that help you my musician friend, well let’s move this example into your world.
You sell T-shirts, right? Of course, you do, and I have a closet full of them. If you are somewhat savvy you know that merchandise is a prominent revenue stream for newbie bands and musicians as well as major bands such as Metallica. Now it needs to be said that I am the proud owner of a Metallica sweatshirt that I purchased at Rock in Rio for the whopping price tag of $125.00. In my defense, it was raining and freezing in Vegas and you pay the price when you try to be cute vs. warm.
However, Metallica is coming to Vegas in November, and I’m sure they will have other stuff I can buy also overpriced and also a must-have. But I digress…
Let’s run through a quick example.
Let’s assume you buy T-shirts for your band and they cost you $4 each. As a side note, it will be hard for you to get a quality T-shirt for that low of a price unless you buy in great quantities, but we’ll go with it. Now you sell said T-shirt for $20.00 to adoring fans like me. You have just made $16 on that T-shirt with a profit margin on that item of 80%. Not too shabby.
Now let’s look at some other examples.
Let’s say you decide to sell bottle openers. You buy the bottle openers for $1.25 and then sell them to an adoring fan like me for $10. On said bottle opener you have just made $8.75 with a profit margin of 87.5%. See what we did there? We sold a different item, sold it for less than what we sell our T-shirts for and INCREASED our profit margin, we actually made MORE money per item on the bottle opener.
Let’s do this once more with bandanas. Let’s say you purchase a bandana for $1.75 and sell it to an adoring fan like me for $10. Out of that, you pocket $8.25 with a profit margin of 82.5%. Regardless of the bottle opener or the bandana either item increased your profit margin by slightly diversifying your band’s swag line.
It should also be noted that often with smaller items they can be easier to ship and not cost as much in postage.
Also, I am aware that contractual obligations sometimes limit the swag you can sell, but my point is still valid.
If you have questions or want to tell me how great I am, hit me up on twitter @melrocksmoney or email me at firstname.lastname@example.org