“Will that be all?” Shane asked nervously after agreeing to the second condition that Ben and Leo put forward, as in his opinion there wasn’t much more that he could agree to.
All the other terms in their contract were already favorable for Leo and it made no sense for Leo to ask for anything more.
For a moment, Leo looked towards Ben raising his shoulders slightly as if to indicate that he was pretty happy with the deal overall, to which Ben also replied with a nod.
Both of them seemed to be satisfied with the overall deal and were ready to sign it, however, before signing it, Ben decided to put forward one last condition.
“Yes, we are satisfied with everything, however, there’s one small line I’d like to change and that will be it…” Ben said, as he pointed towards the sheet of paper that Shane had drawn up and pointed towards a particular line.
“Profits will be split 50-50 after deduction of operation costs.
I want this line to be changed to, profit will be split 50-50 before factoring in operation costs” Ben said, as he decided to push his luck and go for securing maximum profits, however, this time Shane declined immediately.
“Umm, Sir Ben, that’s not possible….” Shane said, as his words caused Ben to immediately raise an eyebrow.
“Why?” Asked Ben, as Shane brought out a piece of paper and began breaking down the cost of a product for Ben.
” Sir, it’s not possible because I’d lose money if I pay profits like that.
Say I manage to sell a product for 100 gold coins at my store.
For me to sell a product at 100 gold coins, I must purchase it for 40 gold coins or less, so let’s say its manufacturing cost is 40 gold coins.
This way the net profit is 60 gold coins, in which case you get 30 gold and I get 30, if we split the profits as you suggested…”Shane began, as Ben nodded in understanding.
“However, this method doesn’t factor in business costs that I incur, such as paying a fee to transport that product from your factory to my stores Empire wide.
Paying the rent for the storefront.
Paying employee salaries… etc.
Also, there is often damage while handling products at the stores, there is damage while transportation and I end up paying for it all.
Overall, after adding the cost of damage, the cost of transportation and other business expenses, I need to pay another 20-25 gold coins to sell that 100 coins product, which leaves only 5-10 coins for me in earnings if we split the profits as you suggested.
Considering the product sold for 100 coins and I make 5 coins from it, that’s a 5% profit margin, which is too low considering the risk I’m taking.
If anything goes bad, or an entire batch of products goes bust, then I make no money from it or even lose money.
However, if we consider 40 gold coins as the manufacturing cost, then add 20 gold coins to it as operating expense and then split the profits, you will get 20 gold coins and I will also get 20, which will be a healthy profit margin for me to run this as a viable business.
I am already paying for the raw materials and I’m taking up the responsibility for sales.
If you look at it from fair eyes Sir Ben, it’s already me taking all the risks and I cannot yield any more” Shane explained, as the inner businessman inside him came out with a roar.
Ben nodded immediately in understanding when Shane broke down the costs for him this way, as he never thought about the expenses a merchant needed to incur while selling a product.
In his mind, the cost related to selling a product was linear.
There was only the manufacturing cost and sale price, however, only today did he realize that there were many other expenses involved with running a business.
*Cough*
“Very well, I was just testing you…. It’s indeed unreasonable for us to ask you to split profits without factoring the operating costs” Ben said, trying to hide his embarrassment as Shane felt extremely relieved to hear these words.
“So are we ready to sign the deal?” Shane asked excitedly, as Leo nodded in agreement.
“Excellent…. Let my lawyers quickly draft the final document and we shall sign it–” Shane said, as his staff immediately scrambled to draft the new agreement.
For a business giant such as the White Tiger Group, this was the most lucrative contract they had ever drafted as usually the profit split between them and any merchant trying to sell goods through their channel was a 70-30 split in their favor, however, not only was this deal a 50-50, but they also gave a lot of concessions to the Mount Faulkner Trading Company.
Once the contract was typed up, it was presented to Leo for review and only after he was satisfied with every word within that contract, did Leo sign it.
“Congratulations on securing such a lucrative deal Mr.Leo, cheers to a fruitful future” Shane said happily once Leo finally signed the contract, as Leo happily replied with cheers and clicked his glass against Shane’s.
For a while, the two discussed the specifics of the deal where Shane informed Leo that he would provide him with the 2.5 million gold coins retainer fee by tomorrow morning before he departed for the Eastern Duchy and that he will also arrange for construction workers that will help build his factories within a week.
With this their business was concluded and the Mount Faulkner Trading Company was joined by the hip with White Tiger Group for the better or for worse.