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To have a business that does more than just sustain itself, the invester needs somewhere between 35% and 50% margin average, depending on the business. Some businesses work on higher margins, lower than 35% and you need very high volume and low shrinkage to cover your fixed costs.
This is not to make a profit, this is to cover your fixed costs and just break even.
Consider things like shipping. when I had my company I had a graduated scale on shipping. You pay all (or part) of the shipping up to 5 items, over 5 I will cover the cost of shipping...depending on the value and margin some places want thousands of items before they will cover shipping. I had one supplier that never covered shipping, but he had great prices too...
So, let's say shipping is $20. The item shipped is $500, and the retailer will sell (on average) one of them month, but may sell 3 a month, or none...at what point would you purchase 5 at a time to just get free shipping? How many would you keep in stock so you would always have one available for sale?
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