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I really like this analysis as well - can I ask where the "standard advice" comes from? And if it's from an MBA, what school? I haven't seen this kind of quantified strategizing taught before; I've been winging it and would love to pick up some formal knowledge if it exists.

Every industry has a financial fingerprint, if you will. If you are the manufacturer of a consumer product you look at your supply chain for your cost structure and your channels of distribution for your profit structure. Both affect your business dynamically and managing them is one of the toughest things an entrepreneur has to do.

In consumer goods it is not too uncommon to have multiple layers in the distribution channel between you and the ultimate consumer of your product? This is part of the "fingerprint" I spoke about. For example, you might have a representative take 7%, distributor take 35% and retailer 25% off list. So, yes, the manufacturer never sees list price pouring into its bank account.

Financial folks outhouse with lots of business experience are familiar with the supply chain and distribution channel fingerprints across a number of business types. Armed with this data you can certainly do some quick back-of-the-napkin calculations to understand the basics of a proposed venture.

Bankers for decades have put together private companies financials from loan applications and generated "standard" financial ratios which function as "fingerprints" for an industry. Part of getting a commercial loan is having your companies financials compared to others from your industry, if your numbers are out of step from the industry when you ask for a loan questions will be asked.


I'm not sure which part you are calling advice, but the terms are all accounting 101. The approach to scaling a new product is also very basic. If you are three years into an undergraduate business degree in any University you should know most of this.

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