Disappointing profit margins

[cyberdog]

Hi,

I have setup a new business making / repairing computers. I have setup some trade accounts with a number of large distribution companies, so, as I thought, I could get parts at a substantial discounted price.

When I looked at the trade prices I was very disappointed to find out that I was only saving a few pence, compared to the retail prices.

How am I supposed to make a profit on selling or repairing hardware???

[fastfences]

Hi Cyber,
To me, the obvious is to change suppliers, or at least ask them why their prices are so closely related to retail. Quite often a 'trade' price is only 5 to 10% disc. Aren't you making money on your labour from repairs? That should be your prime source of income; any parts profit should be regarded solely as 'cream.'
Cheers, Nigel

[WelshPixels]

Hi Cyber

Have tried the suppliers in the Computer Trade Only (CTO) magazine. You should find some bargains in there.

Here is a thought, all the guys I know that have set themselves up doing computer repairs and who have survived longer than a year have all been specialised in some field or another (printers, laptops, servers etc). As you said general PC repairs have a very thin margin to play with.

I have also noticed that my more qualified (Microsoft etc) repairer mates tend to get away with charging more for their services.

Hope that plants a few thoughts.

[multilingual]

Hi Cyber

Don't take this the wrong way, but it would have made more sense to do research on this before setting out in business.

:(

You have put yourself in an awkward position now because you either have to increase your prices (not a good idea so early in your business life) or reduce costs by sourcing cheaper suppliers.

If you have trouble finding cheaper suppliers and the market won't stand for a price increase then the business is a bit of a non starter I am afraid. :?

As an idea, You could always give the customer an an itemised bill with parts and labour separate, and then show them your own purchase prices to highlight the fact that you don't make anything on the parts.

Customers may like your transparant, open approach and you are still quids in on the labour. Use it to your advantage as a USP.

Just a thought.

JB

[cyberdog]

Hi Cyber,
Aren't you making money on your labour from repairs?
Cheers, Nigel
Hi,
Well at the moment I am only doing jobs for work colleagues. So I have not been adding any labour to the bill.
I know what you are going to say, there are no friends were business is concerned, but I am just finding my way around at the moment. However you are right if I was to add labour I would indeed make some profit.

Having said that, i still thought prices on a trade account would have been a lot cheaper.

[fastfences]

Perhaps even set up an 'affiliate' link with Joy Division of this forum - that will be certain to give you a massive influx of business!
cheers, Nigel

[cyberdog]

Hi Cyber

Don't take this the wrong way, but it would have made more sense to do research on this before setting out in business.

:(

JB

Hi,
I like your way of thinking. Also I should have pointed out that the legitimate business is a side line to my full time job. But thanks I have taken on board what you have said.

[Jayne]

Hi,

Have you thought of second hand parts, buy old PC's and strip them down :D

Not sure if you can do that with computers, but works for a car fixer I know :D

Jayne

[JoyDivision]

One of my side lines businesses will be Network Installations and I am using the web to market it, by having automatic quote systems which get products from a database customers can get a total none obligation quote.

I found some times customers don't like having to phone people when they have no idea of the price. With regard to prices I have a very small markup on the products I sell if any, the profit will come from charging my clients an installation fee.

I don't tend to make a living from it though, its just somthing to help the cash flow on my web development business.

Jayne I used to do a bit of that, but the margins are fin. When I was 13/14 I used to the richest kid in my class by far as I had a business selling used PCs in loot. I built them up and wrote a nice user interface to replace the dos shell and made a huge profit on them. Sadly there is no money in PCs.

In fact I have a fully working PIII 733 stuck in my house which is a perfectly good computer with XP Pro, CD RE-Writer but its worthless.

I have found some of the cheapest places for computer parts to be Microdirect and Aria. Most larger computer shops in Manchester tend to have the cheapest computer part prices in Manchester becuase of fierce competition. The Bowlers computer market in Traffrod Park is the largest in Europe and one of the largest in the world.

My two areas of expertise is web development and building/repairing PCs but I found there is little money in PCs now.

You need to sell the benefit and build into your marketing that old PCs can still very useful if a little money was spent on upgrading them.

The problem is too many mis-informed people through out perfectly good PCs just becuase it dosn't have a TV card or somthing stupid.

[Agri-Hire]

Joy

This Network Installations sideline business of yours sounds quite interesting. Will it supplement the income of the Web Design business that is in itself a subsidiary of your internet media company, which is a sub-division of the Joy Division Web-marketing programme that was incorporated as a VAT registered LTD liability offshore company with the help of your family (who are very succesful business people) and is ultimately just a tax write off for your main business which seems to concentrate it's activities in sitting on it's arse and doing nothing?

Just checking :P

Andy

[JoyDivision]

I will be a sole trader at first with the hope of being limited within the first year if its worth while. I suppoe I prefer to see it as two different brands under the same business. Both will have different websites and different trading names but I won't try and hide the links. For income tax purposes they will be run as if it was one company.

[JustOneUK]

How am I supposed to make a profit on selling or repairing hardware???

You don't. That is why Bill Gates didn't choose that route.

Offer your customers support for software AND hardware.
book eveyone's system for a quarterly update and clean up, and sell the hardware on the side, including offering paper and ink cartridges.

There is no real money in repairs, only beer money. Computers are rapidly becoming disposable items.

are you microsoft certfied?

[Steve Roberts]

Hmm, seems to me that you went into the venture without much preparation.

Profit is everything! I think you need to get a pen, paper and calculator and then do some sums!

[thegateways]

I think if you add value on your service you can be able to gain overall profit.

[daveashton]

1: why are you replacing 2nd hard parts with new? Your job is to fix the PC only

2: Why not offer software support. There is v small money in break fix (40-60 per PC per year is standard on an 8/8)

3: If you have to buy parts in hurts you fix time. Sell up and offer 4/4 and have the parts. Remember if the company has 5 PC's you can still have 4 at standard fix an 4/4 for the MD's

4: The S in SME's like bundles so what about things like a bundle of services include not just break fix but upgrade work.