100 Great Business Ideas: From Leading Companies Around the World (100 Great Ideas)

100 GREAT BUSINESS IDEAS • 101

In practice

• For this idea to work for your company, the incremental revenue
  generated by additional units must be less than the cost of
  producing them.


• Administrative costs should be low so they do not use up the
  increased profi ts from the scheme.


• If there is a high degree of price elasticity in your market, the
  lower upfront purchasing costs negotiated through revenue
  sharing should be used to lower prices, to stimulate demand.


• Use sharp negotiating skills when deciding how much revenue
  to share with the supplier. If production costs are low, a supplier
  may accept a lower revenue share than you anticipate.


• Employ reliable market research to gauge consumer demand
  when deciding how many units to purchase, following a revenue-
  sharing agreement. The new lower price can make it tempting
  to over-purchase.