Passing the Cost to the Consumer from a Business Owner's Perspective

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posted on May, 11 2014 @ 12:45 PM
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I have owned three businesses in my life, I came out of all of them with more than I put in. There has been a good deal of talk both here and in the media on many topics revolving around how businesses operate. I thought I would share my perspective and observations from some personal experiences.

All three of my businesses were involved in dealing with the public daily. I have experienced the ups and downs of being an owner/operator entrepreneur. I have worked close to a year without a day off. Made money and lost money and made it back again. I have met many people and had the privilege of serving them and receiving payment from them for what I sold. In the end I sold all of them and walked away without debt and with a profit.

I had two restaurants and a retail establishment dealing in home goods and accessories. I employed anywhere from 20-25 people at each location and hundreds over the 15 years total that I was in business with all of them. I have dealt with suppliers, manufactures, state and federal agencies (including the dreaded Internal Revenue Service), attorneys and partners. All of these interactions, along with the daily operation of each business lead me to one conclusion in regards similarity of operation; each business was a 'pass through'.

By that I mean we had our fixed charges: rent, utilities, payroll, insurance, supplies, etc. and anytime these increased each had to be absorbed by the business until a point was reached where I felt my time and effort was not worth the reward and the newly incurred costs had to be 'passed through' to the end user. You.

I am certain you have all seen this happen before. You go to your favorite family restaurant (maybe it was even mine) and the price of a pizza has gone from $9.00 to $9.99. You ask 'why'? Let me show you.

    I receive a notice from my landlord; your Common Area Maintenance charges have gone up due to the heavy snowfall this past winter, please remit $X thousand dollars.

    I receive a notice from my insurance; 'Due to escalating costs associated with insuring establishments with liquor licenses please see revised calendar year 20XX policy with adjusted premiums. Please remit $X thousand dollars.'

    I receive an invoice from a supplier; 'Please be advised that effective X 1st that all products will be increasing 4%, additionally the fuel surcharge of 2% is still in place on all orders shipped by our vehicles. Thank you.'

    I get a knock on the office door, it is one of the kitchen staff. 'I have been here X years and I was wondering if I could get a raise from X to Y?'. If the person merited this I would oblige and thank them. If not I would explain and detail the expectations to earn such increase.

    I receive a notice from the State of New Jersey. 'Dear proprietor, pursuant to NJ Tax Code xxxx.xx the new Corporate Business Tax will be effective commencing on January 1st on next year. Please remit $800 prior to that point to prevent revocation of your corporate tax certificate.' (For those uneducated in the legal shakedown that is New Jersey taxes this is basically a tax for owning a business so they can tax you on your real income.)

    I receive a bill. 'Dear Mr. X, Public Service Electric and Gas has seen increasing costs to natural gas infrastructure, due to this, rates per therm will go from X to X+2 effective next month. Thank you for your understanding.'

    Etcetera, ad nauseum.


All of these increases are ultimately paid by one person. You, the consumer. The government raises taxes? You pay the increase. Insurance rates go up? You pay the increase. Minimum wages go up? You pay the increase. Energy demand and prices go up? You pay the increase.

I did not go into business to become a charity. I went into business to make money. Did it always happen regularly? Not at first and sometimes not in the middle as well, but all in all I did well and I am not ashamed of that fact. I employed many good people, some of whom I still keep in contact with. A few of which now have their own business and asked me for advice on managing the same. I was happy to oblige them.

That advice was rather pointed. Enjoy what you do. Be better than your competition. And make sure your are profitable because no one else is going to help you (nor should they). My philosophy on business is simple; you should be able to keep as much as possible and you should not expect to be bailed out by anyone as that is not their problem. The risk and the reward both need top be present, and that is what motivated me and I am sure motivates other entrepreneurs.

Stop and think next time you hear some talking head or politician saying 'we should tax this company X' or 'businesses should be paying Y' because in the end they are not going to pay a penny of it, you are.

 




posted on May, 11 2014 @ 01:04 PM
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I owned a business for over twenty years. I was a residential builder. I still have the license and business but have not been able to work for the last ten years.

Most people do not understand the life of a small business owner. The workers go home after eight or ten hours but the owner has much to do yet. There is a lot of record keeping and estimating and billing to do. Supplies need to be ordered. Walking into an already built business with a lot of cash makes it a little easier, but you do not gain value like you do with building it. Also, there is already a customer base when buying a ready made business, but sometimes the customers leave when the present owner leaves. One bad employee can alienate the community also and they go somewhere else for the service.

Good thread OP. Most people do not understand that small businesses do not get rich most times. They create jobs for people. They aren't the best jobs and sometimes can't afford benefit packages to employees but that is the way it is. If you got the cost of your product too high, people would go somewhere else for the services you provide. Wages have to be even to what it is in the local area. Also, if you pay someone higher wages, they better actually produce for you. No slackers allowed. Otherwise the people who work well get jealous if the new idiot gets paid the same as themselves when they know nothing about how things work yet. There has to be room to climb the ladder.

All costs get passed on to the customer, making sure you can give your customers reasonably priced service will help your success. Taxing a small business should be done on the money that is taken out of the business by the owner for personal use. Taxing businesses is just taxing the customers of the business. On top of that, someone has to get paid to process this tax and also profit margins need to be there. So double the amount and that is what the consumer pays.
edit on 11-5-2014 by rickymouse because: (no reason given)



posted on May, 11 2014 @ 01:07 PM
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Ah, never mind
edit on thSun, 11 May 2014 13:08:28 -0500America/Chicago520142880 by Sremmos80 because: (no reason given)



posted on May, 11 2014 @ 01:10 PM
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Thank you for this insider's pov.
It does help.
I can appreciate the dilemma, and the responsibilities that come with owning and operating business(es). The only sticking point is that as a consumer (not a businessperson), the cost of taxes, insurance, utilities, fuel, food, transportation, etc. go up for us, too...
but we can't just 'raise our prices' by insisting on a raise to make up for it.

You are a reasonable person, and you worked hard, and put a lot of effort into your success. Not all of us want to take on that level of responsibility/risk - nor can all of us afford to.

I'm all for cottage industry - and have earned a few $$$$ myself working as a bespoke seamstress. So, what are we to do when the market dries up, our wages/salaries stay stagnant, yet the prices soar??



posted on May, 11 2014 @ 01:12 PM
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originally posted by: Sremmos80
Seems more like a rant, but ok.


Not at all. I enjoyed my time as a business owner.

It seems that most your examples are over head, well outside of the employee asking for a raise.

Is it the consumers job to pay the over head?? Isn't that part of owning the business? Paying taxes and so forth?


The point is there is no difference between fixed charges and additional expenses incurred when operating a business. When it is no longer profitable, you, the consumer, pays all of them.


Isn't owning a business about providing a good service to people and if you make some money off of that then cool?


Make 'some' money? No, I did not go into business and work 60-70 hour weeks to make 'some' money. If that is your prerogative that is fine with me.



So force the customer to pay for everything so you can make money?
That is why everyone is made a corporations these days IMO


Why would I run a business as a charity?


edit on 11-5-2014 by AugustusMasonicus because: networkdude has no beer



posted on May, 11 2014 @ 01:17 PM
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a reply to: rickymouse


There is a lot of record keeping and estimating and billing to do. Supplies need to be ordered.

This is how I spend my days - taking care of running the Buildings and Grounds which I "own"...or rather "Occupy." (ha).

My husband goes to work, and comes home after 8 or 9 hours. Is my work done? No.
I manage the pets, the yard, the inventory, the accounts payable, the budgeting, the cleaning/cooking/laundry/maintenance (or hiring when I can't do it myself), the 'business duties' like dealing with "the dreaded IRS", car registration, scheduling vehicle upkeep, and all the other "Domestic Engineer and Executive Housekeeping" requirements.

When the kids were small, there was even more to do.
Never underestimate the value of a full-time homemaker/stay-at-home parent. It's work. My husband appreciates it, and we are above water fortunately...

but we can't just 'raise our prices.'

Shouldn't we also be able to 'make it' by playing by the rules for non-business owners?

When our homes plummet in value, or crap neighbors move into foreclosed homes and ruin the peace and quiet, we can't do much about it.

I see both sides, I really do.
We're all frustrated. And in the end, something's gonna have to give.

edit on 5/11/2014 by BuzzyWigs because: (no reason given)



posted on May, 11 2014 @ 01:19 PM
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originally posted by: BuzzyWigs
Thank you for this insider's pov.
It does help.
I can appreciate the dilemma, and the responsibilities that come with owning and operating business(es). The only sticking point is that as a consumer (not a businessperson), the cost of taxes, insurance, utilities, fuel, food, transportation, etc. go up for us, too...
but we can't just 'raise our prices' by insisting on a raise to make up for it.


To a degree I empathize with that position. However since I have gotten out of the business ownership world back in 2008 each job I have had came with annual increases, merit/bonus pay and additional benefits.

You and I have spoken privately about jobs and such and I truly believe that there are good opportunities out there for qualified, reliable, hardworking people because in my experiences, both as an owner and employee, there are a lot of lazy slugs in the workforce who are not worth a damn.

You are a reasonable person, and you worked hard, and put a lot of effort into your success. Not all of us want to take on that level of responsibility/risk - nor can all of us afford to.


I am the first person to tell people that it is not for everyone. It has its rewards and its risks and you have to hold the right mentality to be successful. In the end it does give you an entirely different perspective on how the markets operate.

I'm all for cottage industry - and have earned a few $$$$ myself working as a bespoke seamstress. So, what are we to do when the market dries up, our wages/salaries stay stagnant, yet the prices soar??


I have run into the same circumstances. My approach was to try and be consistently good all the time, treat your customers as a privilege and out maneuver the competition. It did not always work but it worked most of the time which is why I did well over the long run.


edit on 11-5-2014 by AugustusMasonicus because: networkdude has no beer



posted on May, 11 2014 @ 01:27 PM
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Quick with the reply, as you can see I edited my post.

I said this should be a rant because you are clearly targeting those that want to raise taxes on businesses.
You are ranting about what that means for a owner. Not that you didn't enjoy it.




So force the customer to pay for everything so you can make money? That is why everyone is made a corporations these days IMO - See more at: www.abovetopsecret.com...

I think this was me, and not sure what happened in that second sentence

It should read "that is why every one hates corp these days.
Privatize the profits, socialize the loses



posted on May, 11 2014 @ 01:27 PM
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originally posted by: rickymouse
All costs get passed on to the customer, making sure you can give your customers reasonably priced service will help your success.


As a former business owner you obviously understand that these increases always go to the consumer. When a business can not make a profit on its current price structure (assuming the product is viable) they are left with two options; close the business or raise prices.


Taxing a small business should be done on the money that is taken out of the business by the owner for personal use. Taxing businesses is just taxing the customers of the business.


I have always said that, business never pay taxes. Never. You do.



posted on May, 11 2014 @ 01:29 PM
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If its an expense then its a "pass through" the only reason for a business not to pass through any cost of doing business is competition and what the market will bear.

I get dumbfounded by those who think this works any other way.



posted on May, 11 2014 @ 01:30 PM
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originally posted by: Sremmos80
I said this should be a rant because you are clearly targeting those that want to raise taxes on businesses.
You are ranting about what that means for a owner. Not that you didn't enjoy it.


You are missing the premise of the Original Post completely. Businesses do not pay taxes, you, the end user, pay the increases in business operations whether it is taxes or other incurred expenses.

It should read "that is why every one hates corp these days.
Privatize the profits, socialize the loses


The risk of doing business is just that, a risk to be borne by the entrepreneur and not the public. I am completely against corporate bailouts. It was not available to me (and I would not have taken it) and it should not be available to others. You screw up your business? Oh, well, not my problem.



posted on May, 11 2014 @ 01:32 PM
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originally posted by: Phoenix
If its an expense then its a "pass through" the only reason for a business not to pass through any cost of doing business is competition and what the market will bear.

I get dumbfounded by those who think this works any other way.


Precisely, you cannot squeeze every cost onto the consumer due to market concerns but eventually they are the ones footing the bill on increases. This is just simple market economics.


edit on 11-5-2014 by AugustusMasonicus because: networkdude has no beer



posted on May, 11 2014 @ 01:38 PM
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a reply to: AugustusMasonicus

No I am not missing it.
You are saying that the customer should keep the doors open by paying for every increase in cost it takes to run your business while you rack in the profit.

I am not sure why you keep bringing up bail outs....Are you implying that those companies continued to eat the cost of additional charges by not passing on the cost to the customer??



posted on May, 11 2014 @ 01:41 PM
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I was also an entrepreneur, business owner, but diversified quite nicely. I was able to keep some businesses afloat by the profits I made from other projects and didn't have to raise prices to my retail customers. My businesses consisted of manufacturing, marketing and retailing and my favorite one was a guide and outfitter flyfishing service.

And as previously mentioned all expenses are factored into the price of the ultimate product or service; but even at that some of my businesses failed miserably due to either my inexperience or factors I couldn't control.

Semi retired now after selling my businesses to my employees and Now a union man in a growth industry...Livin the dream!!
edit on 11-5-2014 by olaru12 because: (no reason given)



posted on May, 11 2014 @ 01:41 PM
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originally posted by: Sremmos80
You are saying that the customer should keep the doors open by paying for every increase in cost it takes to run your business while you rack in the profit.


The customer pays the increases whether the business is booming or not. I did not go into business to make dirt salaries, I did it because there was a chance to make money. This is why the majority of people go into business, they like what they do and there is a chance to be profitable doing it.

I am not sure why you keep bringing up bail outs....Are you implying that those companies continued to eat the cost of additional charges by not passing on the cost to the customer??


No, they circumvented the risk/reward process while still passing through the costs of doing business. They made it on both ends which is despicable.



posted on May, 11 2014 @ 01:44 PM
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originally posted by: olaru12
I was able to keep some businesses afloat by the profits I made from other projects and didn't have to raise prices to my retail customers.


This still resulted in the offset profits being generated by the other business being paid by the end user. There is no escape from the paradigm, the money has to come from somewhere. We are not the Federal Reserve where I can float some bonds and use the proceeds to pay PSE&G when the utility bill comes.



posted on May, 11 2014 @ 01:49 PM
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a reply to: AugustusMasonicus

I learned that most go into business to provide a service that you love, and the money is a bonus.
But I guess those days are gone, screw everyone else, I need to make MY money !!!!

Especially in the restaurant biz. Spent my high school years working in our towns main place to eat.
The guy was not in it for the money, he was in it for the love of running a restaurant and providing food and a great service to the customers.


Oh so the bailouts are irrelevant, since this about passing the cost to the customer, not circumventing the risk/reward process right?

IMO passing the cost on to the customer is a bail out.. a small one, but still a bail out
They are now bailing you out of losing any profit.



posted on May, 11 2014 @ 01:53 PM
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originally posted by: Sremmos80
a reply to: AugustusMasonicus

I learned that most go into business to provide a service that you love, and the money is a bonus.
But I guess those days are gone, screw everyone else, I need to make MY money !!!!





Very true....

I really never opened a business motivated strictly by profit. There are still plenty of biz owners out there that just love the puzzle of being successful and the competition. It can be brutal at times but that's just part of deal.
edit on 11-5-2014 by olaru12 because: (no reason given)


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posted on May, 11 2014 @ 01:59 PM
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originally posted by: Sremmos80
I learned that most go into business to provide a service that you love, and the money is a bonus.


Really? What fantasy planet is that? The enjoyment and money are the driving factors. I do not know of any business owner who wants to work long hours for little reward.

But I guess those days are gone, screw everyone else, I need to make MY money !!!!


Those days never existed. The real world is not some hippie commune or Smurf village where everyone is in it for the other guy. You get into business because you have the chance to make money while doing what you like.

Especially in the restaurant biz. Spent my high school years working in our towns main place to eat.
The guy was not in it for the money, he was in it for the love of running a restaurant and providing food and a great service to the customers.


Really? He share the books with you? You do the accounting there? This is nothing but anecdotal irrelevance.

Oh so the bailouts are irrelevant, since this about passing the cost to the customer, not circumventing the risk/reward process right?


Not irrelevant at all as the businesses bailed out were still passing costs to the consumer and still got the added benefit of a bailout for their mismanagement. You should not be able to circumvent the process and have the tax payer foot your bill.

IMO passing the cost on to the customer is a bail out.. a small one, but still a bail out
They are now bailing you out of losing any profit.


Your rather naïve understanding of how a business functions in the real world is not allowing you to see that cost is always borne by the consumer. Whether they be tax increase, pay increase, product increases, etc.

How do you operate a business with ever-increasing costs without passing them on? Do you just eat them? Not pay the bills? Maybe you can explain how this model of yours can function in a real world situation.



posted on May, 11 2014 @ 02:00 PM
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a reply to: AugustusMasonicus


Why would I run a business as a charity?

Because there are people who need charity. 501c3 organizations (non-profit, for those unfamiliar with US terminology) do what they do to help other people who need help...and they love being helpers.

There will ALWAYS be people who need help. And fewer and fewer want to contribute to helping them.
I see it as a societal necessity.
Just my opinion, however. There a millions of disenfranchised, underprivileged people (including children) that need help.
So, I guess it's fair to call me a "bleeding heart" - but I can't just disconnect from what I feel so deeply in my soul and my bones - so, oh well, I'm a bleeding heart (and wear it on my sleeve).

I just recently learned that a family member is going to intern for Koch Bros. this summer, and to be honest, it makes me sick. But I won't tell my family that. It would push me further into 'fringe territory' -- the crazy person on the edge of the fold. "She's an idiot, but she's our idiot."

Hmm. Oh well. C'est la vie.
edit on 5/11/2014 by BuzzyWigs because: (no reason given)





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