Why profit percent is not what it's cracked up to be
Have you ever heard the saying, “You don’t take profit to the bank, you take money?” Elementary school sponsors often make the mistake of focusing too much on receiving a higher profit percent.
Many won’t consider working with a school fundraising company unless they receive 50% of the gross sales. In some cases, competing companies have had to go even higher to get the business.
But are schools making a sacrifice to get a higher profit? The short answer is yes. If the first question you ask a company is, “What is the percent profit we are getting?” then you may not be seeing the entire picture.
So what we’re getting at is, is it really possible to take more money to the bank with a lower profit percentage? Here are 3 different scenarios to consider. As you’ll see, it’s not as straight-forward as you might think.
1. Offer more Targeted Merchandise to Customers
Consider the following scenario:
Gift item brochure at 50%:
- People are tired of the same gift item brochure every year.
- You know that lots of nearby schools are also selling this type of brochure.
- The pricing seems a little high and you've received complaints about value.
Frozen food brochure at 40%:
- You have heard people actually suggest frozen food.
- People find consumable products useful.
- Frozen food may have a higher perceived value.
By better meeting the needs of your customers, you end up raising more money because more people will buy.
2. Sell more with a Better Prize Program
A company offers you a choice between a traditional prize program at 50% profit and a more exciting prize program at 40%. Which program raises more money?
Traditional prize program at 50%:
- Your older students have seen this type of prize program before and are not that excited about it.
- Your students figure out that it's much harder to win the better prizes.
- Your parents can go to the dollar store and buy a similar quality prize.
More exciting prize program at 40%:
- Your students are excited about the chance to participate in something new and different.
- They're offered better prizes for selling fewer items which encourages them to sell more.
- More students are excited to sell, so participation increases.
- Your parents seem more interested in it as well.
A better prize program gets more students to sell additional items. Thus, your gross sales will increase.
3. Having a Stronger Fundraising Coordinator
A weaker coordinator at 50% profit:
- Doesn’t promote their sale that much.
- Doesn’t believe that additional incentives will make that much of a difference.
- Allows negativity and barriers to affect them.
- Doesn't delegate to others.
A stronger coordinator at 40% profit:
- Reminds students to sell every day.
- Sees value in incorporating additional incentives to further boost sales.
- Has established a sales goal.
- Realizes the importance of getting parents, teachers and staff involved.
- Knows they can't do it all themselves.
- They're problem solvers.
- They've successfully established and promoted their purpose.
The most important aspect to experiencing a successful sale is good leadership at the top. People tend to follow a good leader.
Asking for a higher fundraiser profit without considering other important factors is like purchasing a cheap car with no upgrades. It was once said that 'a fast nickel beats a slow dime!’