What a Markup!

May 19, 2014

I had the expensive privilege of going to Chicago for the weekend. I have been before several times – it is a fun and beautiful city! I think I had tourist sucker written all over me though with the places I went and things I did. I often found myself saying they sure do make a lot of money off of this!

I went up the Willis tower and onto the sky deck (formally the Sears tower), visited the amazing Shedd Aquarium, took the water taxi, and perhaps the largest mark-up of all, shopped and ate at the American Girl Doll store! Each of these places charged a lot more for their product and entertainment then I am used to spending here in the Toledo area. I cannot say I was completely surprised by it, but it certainly seemed like they were doing a lot more than just covering their costs! I think they had a pretty healthy profit margin.

I wonder though, is it as healthy as it could be? Are they making so much money and doing so well that they really do not always verify the accuracy of their true costs? I’ve seen many times where companies say we are making money so it can’t be that bad. When in reality they are also bleeding money that is completely unnecessary. The good could be better, which also means in times of bad, better decisions can be made. I have too often seen businesses that were flourishing go out of business as a result of bad costing information.

There almost certainly always comes a time when things are slow and spending from the outside is diminished. The ONLY way to survive those times is to have good costing information and be able to make good real time decisions. Plus it certainly does not hurt to have a good cash reserve. The best cash reserve you could have possibly had, not the one you just ended up with, because you determined you had enough.

Are you a cash cow? Are things going well? If so, great! Congratulations! Just make sure you still know your true costs and you are making great decisions, not just mediocre ones.

Categories: Cost Accounting