You cannot build a restaurant business without caring about serving good food to customers. You cannot run a successful boutique if you don’t care about making your customers look good. The only way to achieve sustained long-term success is to care deeply about the right things.
A business exists because there is an unmet need. Serving this unmet need efficiently while providing a superior customer experience is the bedrock of a business. Both efficiency and experience are critical parts of the equation. To provide a fantastic customer experience, you must care deeply about the customer and their needs. The ability to spot opportunities and milk them are critical traits for an entrepreneur. But your long-term success will depend on how much you care about the customer.
Simply thinking of a business as a transaction and optimising for margins will bring you short-term success. However, you will always live under the fear of being disrupted by someone who can undercut your margins.
Similarly, thinking of a business as a constant set of KPIs to be tracked and achieved will not bring you long-term success. VC-funded startups place an inordinate emphasis on growth. Metrics like M-O-M and Q-O-Q growth are tracked religiously. It is nearly impossible to reach and maintain sustainable growth rates when there is constant pressure for growth at all costs.
All entrepreneurs worry about their business. In the short run, worrying causes us to care for the wrong things. Worrying about your next fundraise makes you care more about vanity metrics and how your business looks in the eyes of the investor. Their short-term concern drives them to make short-term choices, whereas caring for your customers and adding value to them will help you build a long-lasting business.
In short, care deeply about the right things, and you will worry less about many things.
This month, I got my hands on a copy of Amp it up by Frank Slootman, the CEO of Snowflake. The book is a follow up to his LinkedIn post with the same title. It was one of those articles, I shared with my team as soon as I read it. Based on the book, I created a small manifesto for high-performance teams in the modern workplace.
Raise the bar
How you do anything is how you do everything. Whether you are building a product or cleaning your desk, do it to the best of your abilities. Hold yourself to the highest standards and take pride in your work.
The easiest way to get an item checked off your list is to lower the standard. This gets easier especially for tasks where there is no supervision.
There is a famous story about how Steve Jobs, the founder of Apple got his first lesson on raising the bar and caring deeply about ones work. Jobs was once helping his father build a fence around their family home in Mountain View. While working, his father, Paul shared a piece of advice with Jobs: “You’ve got to make the back of the fence, that nobody will see, just as good looking as the front of the fence, even though nobody will see it, you will know, and that will show that you’re dedicated to making something perfect.”
There is a simple question you can ask to help your team raise the bar in everything they do. Whenever someone presents you with a proposal, note, feature etc ask them what they think instead of telling them what you think. If It is nothing short of ‘100% love it’ then everyone knows the bar is not being met.
Align everyone
For a boat to reach its destination, everyone should row in the same direction. This happens when everyone in the team is aligned with the same goals and vision. In misaligned teams, people start rowing in all directions. They will invent new personal metrics, side quests and optimise for those.
The easiest way to align everyone to the mission is to set OKRs at the start of a quarter. This is even better if the OKR setting is undertaken as a company-wide activity and not just at the leadership level.
Sharpen your focus
“Priority” should ideally only be used as a singular word. The moment you have many priorities, you actually have none.
There are 24 hours in a day and there is only so much you can do in this time. A team that tries to do everything they can think about or get their hands on will probably do none of it exceptionally well. If you want to raise the bar, sharpen your focus and work on fewer things at a time. Constantly re-evaluate your priorities and when a new task pops up, ask about the consequences of not doing it.
Have the same focus and clarity while you communicate the priorities to your team. Distil things down to their essentials and be crystal clear. Vagueness has a tendency to multiply as it moves down the org tree.
Pick up the pace
Parkinson’s Law states that work expands so as to fill the time available for its completion.
Leaders in an organisation set the pace. When someone tells you they will get back by next week, ask them, why not tomorrow? This is a mindset change and once it happens the team gets an infusion of energy and urgency. Top performers crave such a culture. Every now and then, apply pressure to move things along.
In the modern workplace, the fastest way to fall behind is to stand still. Things change on a daily basis. Just take a look at the tools, systems and processes you are using today compared to two years back. There is a simple test to check whether you are falling behind. Ask yourself, “am I doing the same things I was doing a year back at work”. If the answer is yes, then you are falling behind
Learn, constantly reinvent yourself and move forward in both work and life.
If you have ever built a team, this thought would have crossed your mind at least once.
Most teams have that one superstar – a bar raiser who excels in her work and sets standards for the whole team. The rest fall somewhere in the spectrum between excellent to average. How you wish you could fill your team with Superstars. Well, building a team is filled with compromises – budgets, timelines and more often than not you end up with people who are excellent in some aspects while just average in others. Is there a way for you to make them go from average to excellent in all aspects? Can excellence be taught? Is it something that comes naturally? Can you find some common principles for having an excellence mindset?
Here are some of the common traits I came across people with an Excellence Mindset.
Care Deeply
People with an excellence mindset care deeply about their work. In fact, they care deeply about everything they do. Even, when no one is watching. There is a famous paragraph in Walter Issacson’s biography of Steve Jobs.
‘You gotta make the back of the fence — that nobody will see — just as good looking as the front of the fence. Even though nobody will see it, you will know, and that will show that you’re dedicated to making something perfect.’ Paul Jobs to his son, Steve Jobs.
Apple Mac Pro Internals. Apple is known for creating beautiful products. Their beauty also extends to the internal parts of the product which rarely few customers ever see.
Think Different
Thinking and acting like everyone else is the shortest path to mediocrity. Whenever you come across a problem, here are a few questions to force yourself to think different.
Can I fundamentally rethink this? First Principles thinking
What can I do to make this better?
Think backwards. Think about the end goal and chart a path back to your starting point.
Remove components. Strip down everything and rebuild
The Sextant SM31 Shaver (1962). When the Sextant SM31 shaver hit the markets, it was unlike any other shavers that came before it.
Push Limits
When you have an excellence mindset you try to push the limits in everything you do. Even things as simple as optimising your daily schedule by 1%. Here are a few questions you can ask yourself to keep pushing the limits
Can we improve this? Even if it is just by 1%?
Can we improve this even if no one will notice the difference
Evolution of Dyson Digital Motor. The latest Dyson Digital Motor is half the size of its predecessor and twice the efficiency
Attention to Detail
Measure twice, cut once
Perhaps the hardest but the most trainable quality in Excellence Mindset is ‘Attention to Detail’. Attention to Detail simply translates to being more precise in your work and being less shoddy. You can get 90% of the way there by simply checking your work once before sending it across. If you are a writer, careless mistakes, typos, grammatical errors, alignment issues are some of the most basic things you can catch in one round of revisions.
Consistency
80% of success is just showing up
We all have come across one-hit-wonders and people whose performance fluctuates between highs and lows. To be truly excellent, you need to be able to repeat your performance every single time. If anything it needs to become better each time.
There is a quote by Woody Allen that says “80% of success is just showing up”. Consistently showing up every day. following through on plans and making progress every day are the easiest ways to cultivate an excellence mindset.
Deep Expertise & Range
Excellence cannot be achieved by dabbling in things. It requires time, patience, effort and the will to go in-depth to gain deep expertise in an area. Expertise cannot be created over weeks or months, It takes years of work, one day at a time. Often people with deep expertise in an area gain it at the expense of something else. You must have come across lone geniuses and solo warriors who are really good at one thing but basically suck at everything else. If you really want to cultivate an excellence mindset it will serve you well to gain exposure to things outside your area of expertise. It is when you develop this sort of a range that you can truly push the limits of your expertise by bringing in newer perspectives to your area of expertise.
Cricket is one sport that I have enjoyed watching and playing growing up. The game has undergone many changes in the past few decades, some good and some bad. While it has 42 written Laws and a 1000 nuances, at its core, it is simply about putting bat to ball. These are some of the lessons I picked up from this game which has helped me in both life and business.
Patience – It isn’t over until the last ball is bowled
Cricket is a sport that requires a lot of patience. The longest format of the game is played over 5 days. It teaches you the value of patience and staying in the game till the last ball. Playing and watching the game over so many years has taught me to be patient and play the long game in life.
Momentum
Momentum is significant in sports. You will not be able to see it in the score sheet at the end of the day, but momentum can swing a game in your favour or against you very quickly. In life, too, you can use momentum to your advantage to seize the day. Something as simple as getting the small items checked off your To-Do list at the start of the day can give you a lot of momentum to take on the more daunting tasks.
Knowing your blind spots
In Cricket, a good batsman is always aware of where his off stump is. It allows him to leave deliveries that he shouldn’t be poking at. A parallel to this in life is knowing your risk appetite when it comes to decisions regarding your finances or career.
Respect the conditions
First day, first session on the swinging pitches of England, you don’t go out thinking about smashing every ball to the boundary. You wait it out. You leave balls in the 4th stump line and bide your time till the ball gets old. Once you have survived the morning session, then you start scoring. Tired bowlers and an old ball will give you plenty of opportunities to score runs. In business, market conditions can throw you off your growth trajectory. It doesn’t help if you stay stubborn and try to outspend and buy growth during these times. You have to respect the conditions, cut costs and wait it out sometimes for the condition to improve. Survival is key.
Mindset is everything
Test matches are played session by session. Each session gives you a chance to start fresh. If you lose a session and carry over the impact to the next, you are sure to lose that session as well. Getting into the right mindset – a positive frame of mind at the start of each session is important to get back in the game. In business, you might have a tough few days or months or a quarter. However, if you let that affect the company’s overall morale, you will soon descend into a tailspin. The key for you as a leader is to get your team in the right mindset no matter how horrible things have gone previously.
Nothing beats match practice
Whenever a team tours a country, they play practice matches with the local teams as part of their preparation. One such match played is worth watching 1000 hours of footage of opposition bowling and strategising through the night. Nothing beats match practice. Similarly, you can read all the books and theorise as much as you want in life, but actually rolling up your sleeves and doing the work will give you a better perspective.
Challenge status quo
Cricket has a Decision Review System where if you feel that the umpire is wrong, you can challenge their decision. If you are right, the umpire’s decision gets overturned. Just because a decision comes from a figure of authority doesn’t mean that it can’t be challenged. In fact, encouraging a culture of dissent and questioning in your teams can help you build a stronger team.
Horses for courses
Cricket has 3 established formats. The 5-day game or the Test, the 50 over game or the One Day International and the 20 over game or the T20. All these formats demand a certain set of skills from the players. There are very few players in international cricket who play across all three formats. Many teams even have different captains across formats. A horses for courses policy is at play here. When we build teams, we tend to hire people who think along similar lines. While this ensures that there are hardly any conflicts within the team, this might not be the best way to build a team that delivers results. You need to onboard people who bring something different to the table and add to the team’s strengths rather than filling it with people who all think and act the same way.
Fortune favours the brave
Outside edges that fly over the slip cordon are a common sight during the slog overs. This happens when a batter goes hard at a ball with full conviction but fails to middle it. Half measures and indecision can cause more pain in life and business than being wrong. Sometimes it is essential to make a decision and throw the kitchen sink at it rather than doubting yourself.
After all, it is just a game.
When you are out on the field, you play hard. You give your everything, but once the last ball is bowled, you must move on from the game and not carry the baggage with you. When all is said and done, it is just a game.
If you enjoyed reading this article, here is a similar article on my learnings
Over the last 12 years, I have worked with hundreds of people. Here are some of the top traits I have seen in people that are true professionals.
Tenets of professionalism
Professionals take ownership of their work. Whether they are serving their notice period in an organisation or just starting out they take complete ownership of their work.
Professionals have a clear definition of ‘Done’. Even in multi-team tasks, they don’t sit back once their part is done. They ensure that teams down the line don’t drop the ball
Professionals believe in how you do anything is how you do everything. Not everything you do at work will be seen by others. However, a true professional does everything with the same diligence no matter how big or small the task.
Professionals have a razor-sharp focus on attention to detail. Lack of time, bandwidth etc are never reasons for a professional to do shoddy work. They check and recheck everything they work on for the smallest of errors. As a result their work never requires someone else to do a QC before release.
Professionals don’t leave a mess behind. Like a Masterchef who doesn’t leave behind a dirty kitchen or a developer who writes readable, well-commented code, a true professional always delivers tip-top work without leaving a mess behind.
Professionals are punctual. They set reasonable deadlines and always stick to them. They don’t forget appointments or give last-minute excuses.
Professionals are consistent. Professionalism is not an option. It is not a choice where you can pick the dates or tasks to be a professional at.
Professionals don’t whine and crib. They are solution seekers. They solve problems and don’t complain about what is wrong with the rest of the world.
Professionals take initiative. They don’t wait for others to roll out the red carpet. Above all, they fix issues they come across even if it is outside their circle of concern.
Professionals love what they do and Inspire others with their work.
Professionals are technically sound and know the nuts and bolts of their discipline. They are always working on their craft and becoming better each day.
Professionals are transparent in their dealings. They never hide information, mislead or use information asymmetry as a source of power.
Professionals are respectful and humble irrespective of whether they are dealing with people above or below them in the reporting structure.
If you are interested in similar articles, here is one I wrote a while back on ‘Learning from my life’
Ruchir Sharma, in his book ‘The 10 Rules of Successful Nations’, talks about ‘bad billionaires’ and ‘good billionaires’. Bad billionaires owe their wealth to rent-seeking industries like minerals, petroleum, real estate etc. Good billionaires owe their wealth to innovative industries that boost productivity and improve the overall quality of life. Technology, e-commerce, manufacturing are some examples of this. I have covered more on this topic in my article on India and The 10 Rules of Successful Nations.
What happens when a so-called ‘good industry’ starts to become rent-seeking?
…the profits of companies like Alibaba and Tencent come more from rents than from actual value added — that they’re simply squatting on unproductive digital land, by exploiting first-mover advantage to capture strong network effects, or that the IP system is biased to favor these companies, or something like that. There are certainly those in America who believe that Facebook and Google produce little of value relative to the profit they rake in…
This monopolistic tendency is definitely worth pondering. Industries and companies that start with the promise of solving inefficiencies, saving time and money and improving productivity also fall into the same traps of rent-seeking industries. This crushes existing competition and prevents new entrants from breaking through, thus stifling overall innovation and growth. Even worse, it leads to more intervention by the government in the form of regulations. This further increases the cost of compliance for new entrants.
This is a 5-minute read on Business Valuation for Start-Up Founders looking to understand the basic mechanism behind valuation.
Basics of Business Valuation
There are 3 common approaches for valuing a business
Cost Approach – What is the cost to build a factory or what is the cost to build a new factory in place of an old one
Market Approach – Compare with the valuation of listed companies in similar space or based on a private deal that has happened recently
Discounted Cash Flow – Value derived by projecting the cash flows of a business into the future and getting the Present Value of these future cashflows
In any valuation exercise, a registered valuer will use at least 3 methods, assign weightage to the value attained through each method and arrive at a Fair Value.
In India, a valuation certificate can be issued only by a SEBI registered Category 1 Merchant Banker. Earlier this could be issued by Chartered Accountants as well but not anymore. Charges for the same can run from a lakh to even up to 15 lakhs depending on the size of your business and the valuation firm.
Before we get into the 3 most commonly used methods of valuation, we need to understand what a Valuation Multiple is.
Business Valuation Multiples
Valuation multiples are broadly of two types – Enterprise Value Multiples and Equity Value Multiples. If you are running a business, there are two common ways for you to raise money for it. You can either sell shares in your company to an investor or you can take a loan or debt from a bank. If you use both these methods to raise money there will be a certain portion of business owned by the Equity Investors and another portion owned by the Debt Investors. This means that at any point in time the total value of your business or the Enterprise Value is a sum of the Equity Value + Debt Value.
Enterprise Value = Net Debt + Equity Value
So, back to valuation multiples now. Common Enterprise Value (EV) multiples are EV/EBITDA, EV/Revenue, EV/EBIT. Common Equity Value (P) multiples are P/E, P/B, P/CF. To keep things simple we will look at EV/EBITDA and EV/Revenue multiples only for now.
You can go to Google Finance and Yahoo Finance to find out the values for these multiples for few companies to get a general sense of things.
Business Valuation Methods
Like we discussed earlier, a registered valuer will use at least 3 methods in the valuation exercise to arrive at the Fair Value of a business. The most commonly used methods are
Comparable Companies Method
Comparable Transactions Method or Precedent Transactions Method
Discounted Cash Flow or DCF Method
Comparable Companies Method
If you were to value an e-commerce company you would choose companies like Amazon, eBay, Easy, Alibaba, etc as Comparable Companies. The valuation multiples for these companies are readily available online. We can calculate the Median of these values to arrive at the final multiples to be used for calculation.
For eg: If the median EV/Revenue multiple of the comparable companies is 6.5x and the Revenue for your business in the year where you turn profitable is Rs. 1,00,00,000. Then the EV = 10000000 * 6.5 = Rs. 6,50,00,000. Once you have the EV, you can subtract the net debt to arrive at the Equity Value of the business.
Of course, this is simplifying things a little too much. To the multiple, we will have to apply various discount factors like a Small Company Discount as your business is much smaller compared to Amazon, a Lack of Marketability Discount etc.
Comparable Transactions Method
Now, let’s look at the Comparable Transactions Method. In this case we look at the various Private Deals that have happened in the industry and find out the valuation multiples at which those transactions happened. The math remains the same as above. Although it sounds pretty simple it is incredibly difficult to find private deals data that are relevant to your business.
Discounted Cash Flow (DCF) Method
Lastly we have the Discounted Cash Flow method. Unlike the other two methods here we use the financial projections of the business and hence arrive at the Intrinsic Value of the business. Financials projections are usually made out to around 5 years from current financial year and for each of the 5 years you arrive at the Free Cash Flow to the Firm. From these yearly Free Cash Flows (FCF) you calculate the Present Enterprise Value by assigning a discount factor to each years FCF.
For eg: If a Company X has FCF for Year 1 till 5 as Rs. 100, 200, 300, 400, 500, to calculate the Present Enterprise Value, we have to first find out the Discounting Factor for each of the years from Year 1 to 5. The formula for Discount Factor is
Discount Factor = 1/(1+Discount Rate)^Time Period
Discount Rate is essentially equal to the Weighted Average Cost of Capital or WACC and the formula for WACC is
WACC = (Cost of Equity * % Equity) + (Cost of Debt * (1 – Tax Rate) * % Debt)
Risk Free Rate, Beta, Equity Risk Premium, Avg. Yield on Debt are values that change from country to country and Industry to Industry. So based on this data you can calculate your WACC and subsequently your Discount Rate and Discount Factor.
Once you calculate Discount Factor * FCF for each of the 5 years, you can sum up these to arrive at the Enterprise Value
Now you subtract the Net Debt from the Enterprise Value to find out the Equity Value
Equity Value = Enterprise Value – Net Debt
Now to find out the value of a single share you use the following formula
Value per share = Equity Value / Total No. of Shares
Fair Value
Once you have the Equity Value calculated with the three methods, you can assign weightage to the value obtained from each of the methods and arrive at a Fair Value of the Company.
Further Reading on Business Valuation
As I mentioned in the intro this is a basic 5 minute read on the vast topic of Business Valuation. If you want resources which can help you get a deeper understanding on the topic you can take a look at the following
If you are looking to get into the details of calculation with proper numbers and all the above video will be helpful
If you are looking to understand how an expert in Valuation thinks, the above Talk by Prof. Aswath Damodaran will be helpful
If you really want to get your hands dirty then you can probably take the course on Business Valuation by the CFI Institute and maybe even get a certification. This is what I did.
Gross Margins, Net Margins, Profit Margins, Operating Margins are few of the terms thrown around when we talk about the profitability of a business. What do they mean? Why are they important? In this post, I will try to cover these in very simple terms. If you are a start up founder looking to understand these terms then read on.
The Donut Business Margins
Let’s say you are running a donut business. To build a sustainable business you need to make profits. To make profits you need to know all your expenses and price the product appropriately. So what are the expenses involved in running a donut business?
There is the cost of ingredients needed to make donuts like flour, sugar et. Let’s call these the ‘Cost of Goods Sold’
Then there is the expense of operating a store like rent, employee salary, electricity bill etc. Let’s call these the ‘Operating Expense’
What else? Well, if you had taken a loan out to set up this business, then there is the Interest you have to pay out for that. There is also the tax that you have to pay to the the government. Let’s club these under ‘Interest and Taxes’.
Now let’s say in a month you buy ingredients worth Rs. 1000 to make 100 donuts. This means your Cost of Goods Sold = Rs. 1000.
Your rental, employee salary, electricity bill etc. comes around to Rs. 500 a month. So, Operating Expenses = Rs. 500.
The interest and tax expenses comes out to around Rs. 100 per month. So, Interest and Taxes = Rs. 100.
Adding all these expenses your monthly expense comes out to around Rs. 1600. So, by selling the 1000 donuts you need to make a minimum of Rs. 1600 or Rs. 1.6 per donut. At Rs. 1.6 a donut you are essentially at break even or no profit, no loss.
Now if you want to expand your business you need more money. You can raise this money by getting a bank loan, approaching an investor or by raising the price of your donuts. So, if you were to raise the prices of donut by Rs. 0.4 you would now be selling donuts at Rs. 2.
Revenue
Rs. 2000
Rs. 2 / donut * 1000 donuts
Cost of Goods Sold (COGS)
Rs. 1000
Cost of ingredients
Gross Profit
Rs. 1000
Revenue – COGS
Operating Expenses
Rs. 500
Rent, Salary etc
Operating Profit
Rs. 500
Gross Profit – Operating Expenses
Interest & Taxes
Rs. 100
Net Profit
Rs. 400
Operating Profit – Interest & Taxes
Calculating Margins
Once you have the above values you can calculate the margins with the following formulas
Gross Margin = (Gross Profit/Revenue) x 100%
Operating Margin = (Operating Profit/Revenue) x 100%
Net Profit Margin = (Net Profit/Revenue) x 100%
From the above calculations we can understand that higher gross margins ensure that you have more money left to spend on sales, marketing, rentals and employee salaries after paying for the raw materials cost. But not all industries work on high gross margins. Industries dealing with physical goods usually have low gross margins as it involves a higher Cost of Goods component. Industries dealing with digital goods, financial services etc have higher gross margins as there is 0 or very low Cost of Goods component.
Business Moats
So naturally for low gross margin businesses the key lies in volumes and the size of transactions. Slight variations in any of the two can send these businesses to a tail spin. Low gross margin business that survive for a long period of time usually develops a defensive moat around them. These can be
Network Effect Moats – eg: Any social media network becomes more useful as more and more of your friends join it. This is the moat that Facebook, Twitter etc take advantage of
Cost Moats – eg: Switching Costs – If your company has been using Amazon Web Services there is cost involved in moving to Microsoft Azure or Google Cloud
Cultural Moats – eg: Brands like Patagonia, Starbucks etc have huge brand value which makes it difficult to beat these brands
Resource Moats – eg: Pharmaceutical companies like Pfizer own many IPs, patents etc which makes it difficult for upstarts to compete with them
In über competitive spaces companies are willing to work on negative margins as long as they can raise external funding and drive out the competition in the area. Post that they can raise their prices to become profitable. Most of the heavily funded start ups deploy this strategy as this is the easiest to implement. So in the donut example, if some one was selling donuts for Rs. 1.2 you will obviously have to sell it at 1.2 or lower to compete provided that the donuts are of the same standards. Who will blink first depends on who has the deepest pockets.
Recently came across a deck on the Resilience of Costco, I have tried summarising my learnings on the same below
Gross Margin vs Membership Fees – How Costco Makes Money
Financial data Costco
Costco is the second-largest retailer in the world by sales volume – 149B USD.
Costco doesn’t make much money on the 149B product sales. Their gross margins are in the 11% range. Instead, it makes money out of the 60$/yr membership which totals to around 3.3B that goes directly to the bottom line. Costco has 50M members and 27% of US household are cardholders. 75% of the bottom line or Net Income is from membership sales. The renewal rate of membership is around 87%.
Paid Membership Growth of Costco
The Costco Flywheel
It is this membership fees that allows Costco to lower the cost of the products it sells thus initiating a flywheel. Lower Costs > More Memberships > More Sales > More Leverage on Suppliers > Lower Costs
"For every dollar we save, we give 0.90$ to the customer"
Key aspects of Costco Operations
Limited selection – 4,000 SKU vs 120k of Walmart and 600M of Amz. Most products have just one choice
This means they are the largest customer of their suppliers and hence enjoy better prices
Efficient employees as there is less reordering, figuring out suppliers, tracking orders from suppliers etc – leads to the highest rev/emp and profit/emp
Surprisingly lesser choices mean less cognitive load for customers and thus keeps them happy and confident in their selection
High quality
By selling only high-quality items you can eliminate the need to advertise
You can also reduce the returns
Bulk Sizes
Bulk sizes end up making customers spend more
It makes it difficult to steal stuff. Costco has a 0.2% of rev theft rate annually
Custom Packaging – display-readypallets shipped directly from the supplier
Saves cost
Saves employee time spent sorting and organising stuff
Warehouses
No backrooms. Every square inch of space is used to sell and earn revenue
Labour
Wages of 22$/hr compared to 15/hr for Amz and 14/hr for Wmt
Annual employee turn over rate of 5% compared to 59% for the industry thus saving on hiring, training and replacement costs
Good employees with longer tenures provide better customer service
Inventory turn over time in Costco is around 26 days. If you consider Net60 payment term for vendors, then essentially the vendors finance the whole operations
