Adding a mark up on price?

[Mr Gas Fires]

A quick one for the financially astute!

A small part of my business services that I offer is installation of gas cookers and gas hobs. Usually, the customer has already bought their replacement (sometimes even one that will fit!) and I get a call to just carry out installation. These jobs are very small, often awkward but handy when things are quiet and I see it as a service I offer.

As such, I don't have a trade supplier of hobs or cookers, they are available all over the internet at low cost and it's not a market I can see any worth in trying to compete in. However, I have a customer who wants a replacement gas hob and is adamant that they don't want to buy it independently and want me to suppy as well as fit.

The obvious thing to do is ask them what they want, what kind of quality/budget they are looking at and then just buy it for them and add on a margin or mark up for my time and resources. Or add some charged time for going through the motions. There realty isnt anywhere I can think of where I would get 'trade discount' on this type of product and I can't be doing it foc.

Any suggestions on the correct thing to do here? I try to be as fair as I can to customers but obviously need to make money on what I do. All my other products (gas fires/fireplaces etc) I obtain through trade suppliers in the normal way.

Would be interested in opinions, ta.

 

[Ashley_Price]

The obvious thing to do is ask them what they want, what kind of quality/budget they are looking at and then just buy it for them and add on a margin or mark up for my time and resources. Or add some charged time for going through the motions.

Do exactly as you have said, but give them the total price upfront before you go and buy.

So, if the cooker is £600 and you want to charge £200 for your time, just put that the total cost for the cooker, and for you services is £800.

At the end of the day, not every customer wants the cheapest price. Some will pay more just to have it all done for them. Why do you think people pay a lot of money for an accountant to do their tax returns for them, when it would be far cheaper for them to do it themselves?

 

[GraemeL]

Remember that it will be you who is liable for any faults in the next few years! Dont be afraid to add on a profit to the product cost.

 

[Alan]

My first thoughts would be don't do it, because of that Graeme says, you become the retailer and as such carry loads of liability.

If you must, add a decent margin on top say 40% plus an allowance for your time.

 

[Mr Gas Fires]

Thanks All....

I think I might just have to be honest and say that I can't supply and they'll have to buy their own..... for the sake of the £20-30 I'll be able to realistically add on it's not worth the potential for hassle.

I aporeciate your time and thoughts, many thanks.

 

[Root 66 Woodshop]

Sorry, but you're wrong... you can put on as much as you want Mr G.

You have been asked to source a product, as Ashley has stated, stick £200 quid on it for your time and effort, fair enough it may have only been 10 minutes on the T'interweb but whether people like it or not, time is money.

You can quite easily justify the cost by also informing the customer that within the additional £200 is their first annual gas check free or no additional charge and a 24 hour service (if you already offer them out at a contractual price of [X] rather than your normal call out fee.

If you give the right service and customer care you will get the job.

 

[Root 66 Woodshop]

As an example and going off slightly...

I know of a chap who had his own engineering firm. He sold it a couple of years back now but anywho...

He was approached by another company and asked if he could make a number of cogs and wheels specifically for a product that hadn't been manufactured for 50 years, he didn't want the job but because he knew the guy gave him a rough estimate... the order was based upon 300 every quarter and he quoted them £80.000 per quarter.

The cost of material and making the wheels and cogs worked out cost at £5000 and would take just 2 weeks to make the full 300.

So, for a chap that's due to retire and didn't want the order in the first place he doubled his cost price then tripled the price and was about to give his quote to the guy when in conversation the chap mentioned that he'd just been quoted £75,000 + VAT for the job and he thought that was a bit too cheap for these bespoke cogs and wheels... so he said well my quote was £80,000 + VAT so he's a bit cheaper than me...

the company decided to go with the £80k + VAT as they thought that by paying that little bit extra they would get a better deal...

He didn't want the order due to him wanting to retire and didn't have a successor to the business - he ended up doing his 2 weeks every quarter to make these things and retired at 70 instead of at 65 - only because it was easy money coming in and he didn't have to do any other work inbetween.

The only reason that his costs where considerably cheaper initially was because he had the "old" gear to build the cogs and didn't need to have any additional manufacturing costs... but as the saying goes... people will pay a higher premium if they believe they're getting a better deal... to be fair, his work was spot on and they never had a fault.

 

[whobiggs]

It is an interesting question and one that is also relevant to me as a cycle repairer which has been the basis for many debates over the years. Some internet shops buy in huge volume and sell at less than trade price and many shops refuse to fit parts bought elsewhere. but there is always future trade to consider ie the customer may be impressed with your work and return in future plus tell others about how good you are so it is not straight forward. Why not approach some suppliers and see if you can get 10 or 20% discount which you can add on yourself? 10% off £600 ie £60 plus fitting charges is better than a slap in the face and maybe you can negotiate a better discount after a few jobs?