S.E.C. Real Estate Observer

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Buy virtually anything at a “20% to 80% discount”???

Looking for a creative idea for a business client? Try this techno-twist on an old formula:

Through a new and innovative software technology developed called: “Market Maker,” your business can now use its services or products as a median to purchase other services and products they would ordinarily pay cash for. The bottom line is huge discount purchasing power for the company!

Here’s how it works using a restaurant as an example. You can plug in your own numbers to see the savings that can be obtained in your particular business.

For the purpose of this example, lets assume that the restaurant is usually operating on a 10% profit margin. If this particular restaurant were in the market to complete a $10,000 remodel on its kitchen, it would normally have to pay $10,000 in cash from its cash reserves or go the bank and get a loan. In order to create $10,000 in profits to pay for the remodel, the restaurant would need to gross $100,000 to generate the $10,000 needed to pay for the remodel ($100,000 x 10% = $10,000 profits).

Now we will assume that the restaurant is not running at 100% occupancy. In other words, they have a few empty tables every night therefore; they have extra capacity available to sell. Let’s further assume that the actual cash cost of serving the food and drinks is about 30%. Remember, the owner still has the help, facility, heat, lights, salaries and other expenses to be paid regardless of a full house or not. In other words, the incremental costs are already paid for regardless of a full house or empty tables

If the owner would consider a trade of restaurant credit for the $10,000 remodel instead of paying cash, we’ll go through the resulting benefits below:

1. The restaurant owner does not need to sell $100,000 in food and beverage to get to the $10,000 profits necessary for the remodel.

2. The restaurant owner merely needs to honor up to $10,000 in future business over the course of the next 12 months or so.

3. Most of the customers will be new. They are there because they have bartered their goods and services in lieu of spending cash. Thus, creating a lot of new business.

4. The restaurant ends up with the $10,000 kitchen remodel for a cash investment of only $3,000 ($10,000 in meals & drinks x 30% cost = $3,000 cash). A $7,000 cash savings!

TEST: Is it sometimes better to trade than pay cash? Yes ____ No ____

For the correct answer to the above test, give me a call…