On Shark Tank, it’s all about profits. You may have invented the greatest vacuum cleaner in the universe, but if it costs you $300 to make and you’re selling it for $299, that’s a problem. That’s why the Sharks’ favorite question — when they see something they like — is “how much does it cost you to make?” That’s when the entrepreneur responds: “right now we’re making them for X and selling them for Y.” Next usually Mark Cuban or Lori Greiner asks a question to confirm the cost: “So X is your landed cost?” What does that landed mean, in that instance?
Landed cost means the entire cost of getting the product into a position to sell it. The landed cost of goods is not just the cost of goods themselves, but also the cost of transportation to get the goods to where they will be sold. The landed cost may also include a combination of packaging, duties, taxes, insurance, currency conversion, customs and handling fees. Landed cost is important because profits are finely calculated. Say you make a delicious iced tea product in New Jersey and it costs you 18 cents per bottle prepared with a label. If your selling price is 50 cents per bottle, each bottle of tea will generate a 32 cent profit. But what if your customers are all in Florida, where your iced tea happens to be the most popular brand among retirees. Transportation, taxes, insurance and other costs — all part of the landed cost of the item — could mean your 18 cent iced tea really costs 25 cents to deliver, landed. That means your profit is now 25 cents per bottle of iced tea instead of 32 cents — a big difference. The term “landed cost” comes from the literal notion of seeing the product landed where it needs to be in order to be sold. New episodes of Shark Tank (Season 9) air Sundays at 9pm and 10pm on ABC. [Related: 27 Favorite Shark Tank Products — New List]