Detroit – an example of a poor business model at Businesses For Sale Orlando

Detroit – an example of a poor business model

Published by admin on Nov 12th, 2007 in Buying and Selling A Biz with No Comments

Sorry- had to rant this morning. Mrs Pelosi today is ringing the alarm bells of ‘emergency in detroit’…wants another rescue packet……for all you prospective business owners a hard look at detroit and the auto industry is a microcosm of how not to run a business……the leaders in washington love to blame the executive compensation packets and the need to go green (via retooling)….they throw out numbers…never percentages of revenue (that is THE metric to look at by the way) Executive compensation is less thatn 1% of the wages…contrast that with the cost of labor and pensions running at 39% and you see the delta…here is the nut…..there is only so much in the pie…..assume the cost of gods was a tolerable 25% and the other expenses (rent, legal, electric, advertising etc etc was all wrapped up in about a norm of less than 40%…..add it all up and you get a loss of -3%……sales doesnt solve the problem, marketing doesnt solve the problem….it is a systemic issue with an inability of the leadership and followers to recognize that they are boiling frogs….detroit will die and there is nothing anyone can do about it…the road to this was written decades ago….escalation of wages and a never ending regulatory push made the model unsustainable…..this is the same crap you see on main street……

you dont solve your problems through sales….you solve it through margin
you need scaleability in cost structure…both to grow and shrink and sometimes you must shrink to go
you need to recognize the unintended consequences of actions…both in the short and the long term
there are no sacred cows…and the cure is often worse than the disease

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Detroit – an example of a poor business model

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