It was a real-life lesson in profit margins as well as the spending habits of target consumers — their fellow college students.
On Dec. 11, students from the Entrepreneurship class summarized the incomes and expenditures of their semester projects. At the start of the semester groups chose five new products to sell at the Cardinal Corner, a small not-for-profit retail shop located in the basement of the Toner Student Center. Their choices included a vintage-style Saint Mary’s College shirt, stress footballs, stocking hats, tote bags and cancer awareness shirts.
Their goal was simple: Make money.
This semester, the cohort not only broke even on their inventory investment of $2,000, but Michael Ratajczyk, assistant professor of business, also announced that this semester’s cohort also broke records in both revenue generated and profit margin from their products. The Cardinal Corner brought in over $2,300 in revenue and had a profit margin over 40 percent, breaking records by over $1,000 and 800 basis points of margin.
The students were assessed based upon two commonly used financial metrics within industry: GMROI and Inventory Turns. GMROI stands for Gross Margin Return on Inventory and is used to study cash flow performance. It is commonly used to protect companies from spending too much cash on a particular product. Inventory Turns is a metric that reports how many times per year a product would sell out if it was sold throughout the year.
The team that won the Inventory Turns performance was “Team Hats,” which sold a red, black, and white stocking cap. Their “turns” score was 10.4, which means that the hats would sell out 10 times per year. Ratajczyk explains that a score of 10 is highly desired by any business because it essentially means a business is selling out of all its inventory every five weeks. Team members included Michael Burfeind, Ron Enrooth, Jakub Koziuk, Jen Tobroxen and Jamal Arnold.
The team that won the GMROI performance was “Team Shoot Pass Cure Shirts,” which sold a stylish pink shirt that brings awareness to breast cancer. Their GMROI score was 0.43, which means that for every $1 of cash invested in inventory, the team not only earned back that dollar, but also earned an additional 43 cents. Team members included Sarah Mills, Lucas Kubic, Otto Holzer, Cody Sprague and Tyler Krysiak.
“I am very pleased with the results of this semester and I am proud of the students. They worked hard,” Ratajczyk said. “The students learned firsthand how difficult it can be to start a business and break even. They not only broke even, but did so by breaking sales and profit records with style.”
Jennifer Tobroxen of “Team Hats” said, “It was a great hands-on experience in learning about what types of target markets buy what kinds of products. I enjoyed the opportunities that the Cardinal Corner gave me as a business major.”
Funds from this semester will be donated to the First-Generation Initiative at Saint Mary’s.