Page 108 - 100 Great Business Ideas: From Leading Companies Around the World (100 Great Ideas)

In practice

• For this idea to work for your company, the incremental revenue

generated by additional units must be less than the cost of
producing them.

• Administrative costs should be low so they do not use up the

increased profits from the scheme.

• If there is a high degree of price elasticity in your market, the

lower upfront purchasing costs negotiated through revenue
sharing should be used to lower prices, to stimulate demand.

• Use sharp negotiating skills when deciding how much revenue

to share with the supplier. If production costs are low, a supplier
may accept a lower revenue share than you anticipate.

• Employ reliable market research to gauge consumer demand

when deciding how many units to purchase, following a revenue-
sharing agreement. The new lower price can make it tempting
to over-purchase.

100 GREAT BUSINESS IDEAS • 101