No. of Recommendations: 7
Think about a retailer with (say) a 10% margin on their sales after all expenses are paid (cost of goods, building rent, salaries, utilities, et cetera). They may have a million dollars in sales, but after all expenses they have $100,000 in profit.

Let's say there's some rising expense that comes to 1% of all sales. Yes, it sounds trivial, but in this case, 1% of sales turns out to be 10% of profits, as they pay the expense not only on profits, but all sales. So they wind up paying $10,000.

This "puny" 1% expense takes 10% of their income.

I find that implausible. Let's look at a loss in a different business, say shop lifting in the retail industry, which generally speaking is close to 1% of sales. That loss has not devastated the retail industry. Instead retailers minimize the loss where they can, and pass the rest of the expense onto consumers. If they can't do that they will have a short and unhappy business career.

That said, the insurance costs for my business are about 3.5% of my gross. I find it hard to believe doctors are being destroyed by paying 1%. Boo hoo.

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