Guidelines for Acceptable Direct Selling Expenses (1,202 words)

The selling-expense-to-sales ratio is a critical factor contributing to the profitability of any catalog company. If the ratio is too high, a cataloger will lose money, guaranteed! If the ratio is too low, the cataloger is probably under prospecting. A high ratio is the exact reason why a start-up cataloger cannot be profitable. Too much money has to be spent renting names and developing a housefile of proven mail order catalog buyers. Start-ups will spend more than 50 percent out of every dollar of sales to acquire a new buyer. There is a cost to growing a housefile. Most catalogers cannot prospect above the incremental break-even point defined as: net sales less cost-of-goods less direct selling expenses less direct order processing costs.