http://www.youtube.com/watch?feature=player_detailpage&v=RR7kRXWQo2I#t=957sDid Ashton major in fuzzy math? I can't figure out the math here. First he says that the average restaurants makes $70,000 gross profit (his words). But only 3% of that is net profits. The credit cards charge 3.6% of the gross sales, cutting into that profit. With Dwolla, the restaurants can now double their profits.
Watch the video (timestamped) to see if you can make heads or tails of what's he's trying to relay.
~Bruno~
Makes sense to me.
$70,000 gross profits = 3% means that total revenue for the average restaurant would be $70,000/3% = ~$2.3M. And if they could chop 3.6% of expenses due to no longer using credit cards, then their total gross profits would rise to 6.6% of ~$2.3M, or $152,000. Hence, they could double their profits if they could get rid of those pesky CC fees.
Does your equation take into consideration that Ashton was talking about $70,000 gross profit per
MONTH (not year)?
~Bruno~
Doesn't really matter what timeframe is being talked about. $70,000 profit is 3% of $2.3M revenue per month or per year or per decade or per day. It's the same calculation regardless.
The point I was trying to make early on was that Ashton misspoke. The $70,000 is gross sales, not gross profit. Then he mentions the term net profits. He and his investment team is investing in companies, but gets the three basic terms confused: gross; net; profit. During the interview at that point, I was watching Ben's reaction, and it looked like he at least knew the difference. He probably opted to not correct Ashton for he may be able to use his assumed lack of basic accounting to his (Ben) advantage down the road.
Do the Dwolla comes to mind.
Also, the average restaurant does not gross $2.3M in sales per month or year.
~Bruno~
