Cost of BBX also known as leveraging

What is cost of a BBX Pound?

The cost of a BBX Pound is the sterling cost for a BBX client to complete a sale and a purchase on BBX. It is the sum of the variable cost plus the BBX sales success fee. Measured as a percentage and/or pennies in the pound.

Cost of BBX = (Variable Cost + Sales Success Fee) / Sale Amount

Why is it important for BBX clients to understand their cost of BBX?

It enables BBX clients to make an intelligent purchasing decision when deciding to spend BBX. A BBX client who understands their BBX pound can increase their spend on a particular service such as Marketing and Advertising with little or no impact to their cash budget. Or a BBX client might purchase something they otherwise wouldn’t normally because price held them back.

What are variable costs?

Variable costs differ from fixed costs such as rent, rates and wages, which tend to remain the same regardless of production output. In short the variable cost is the rise in cost for serving a new customer without taking on more staff or moving to larger premises.

Examples for the following are:

• Restaurant – the wholesale cost of the food and drink.
• Retailer – the wholesale cost of the goods in the shop.
• Professional services such as trainers, lawyers, accountants etc – nothing in many cases otherwise a minimal cost such as paper or fuel.
• Printer – the wholesale cost of the paper and ink.

Let us work out the cost of BBX using a restaurant who has a gold account (10% cash fee). They are selling a steak and chips meal for £20. What would be the variable costs in this case? The wholesale cost of the steak might be £4 plus £1 for the chips and sides. Total variable cost of £5 otherwise 25%. The sales success fee for BBX bringing this new customer would be £2 (10% of the £20). Bringing the total cost for serving the £20 meal to £7 otherwise 35%. For every £1 BBX money earned and spent would cost the restaurateur 35p. The flip side is that the restaurateur has a cash saving of 65% when spending BBX.

Example: Over a period of a month the Restaurateur has had 50 new customers spending on average £20 BBX each. Total earned = £1,000 BBX. The cost to do this was £350 which includes the food and BBX fee. The restaurateur decides they need a new website and has received a cash quote outside of BBX for a £1,000. How much cash comes out of the bank if the restaurateur decides to pay the web developer by bank transfer? £1,000 right?

In this case the restaurateur finds a web developer in the BBX community who can develop the website for a £1,000 BBX.

Question. How much cash comes out of the restaurateur’s bank account when they earn and pay the £1,000 BBX?

Answer. £350 for the wholesale food and BBX fee.

Question. What has been the Net cash saving by spending BBX?

Answer. £650 sterling.

In fact the restaurateur could spend £2,000 BBX on a new website and have online bookings, SEO etc and the cost of BBX would be £700, still saving £300 sterling. This is a form of leveraging.

Need further explanation or you would like to know how to implement in your business? Call your account manager on 0333 400 2014 or request a call back below.