Stone the crows, gentlemen,
Cost of goods ain't just cost of labour. There's cost of materials (e.g. have you looked at the costs of really good wood recently), overhead loading (e.g. the smiling gent in a suit who minds the shop and takes your order, but doesn't work on the bench), bricks and mortar (you did say you wanted work done in a London factory. Someone has to keep the roof from leaking on the parts boxes), cost of capital tied up in all the above (just take a look at the wood inventories at some of the makers to say nothing of labour paid before goods are sold),taxes and fees, insurance and all manner of other things specific to the industry. I've run companies where we targetted G&A-which includes all salaries-of 16% of selling price and others in which that climbed to 40. I've never worked in a sector where the number went over 50% unless we were heading for bankruptcy, although there are undoubtedly some. If you want to estimate just how much Purdey's pays to Richemont each time you buy a gun, it's a lot longer calculation than just 700 times an average bench rate. However, if they were making truly exhorbitant profits, they probably wouldn't have been acquired, or would have been acquired at a big enough premium to make the news, in which case, everyone would be buying a gunmaker and we'd be seeing gunmaker-based funds.
Last edited by leo toralballa; 05/01/08 06:56 PM.
