[Towertalk] Buying nuts and bolts - Rationalized gouging

[K7LXC@aol.com]

In a message dated 4/25/02 7:05:24 AM Pacific Daylight Time, kq2m@mags.net 
writes:

> Great question Steve - I can't say what the costs of a given company (other
>  than mine) are, but I can tell you that I personally don't believe in
>  "nickel and diming" people.

    In some circles, "nickel and diming" is called making a profit. 
>  
>  I would suggest to any business owner that they figure out what all their
>  expenses are, salaries, packing materials, cost of materials, cost of
>  inventory, insurance, telephone, etc. etc., and then figure out their
>  desired profit margin, and mark up their product/service prices 
accordingly.
>  And then ONLY add the actual shipping costs, sales tax, etc.

    Sure - in an ideal world that'd be great. Unfortunately most businesses 
don't know because they're typically fighting the daily battles trying to 
take care of their customers. While cost accounting is admittedly necessary, 
for many businesses it's a luxury.
>  
>  As a general rule, I don't bill for something unless there is enough time
>  and effort expended to make the actual time spent billing, a neglible
>  expense.  So, for example, if a client or a non-client who is sincerely
>  interested in what I do calls me up and spends 20 minutes on the phone with
>  me, I don't bill - I consider it an investment in my business.
>  
>  If I have to spend $15 on overnight mail to get something of value to a
>  client or potential client right away, I do it without hesitation.  I eat
>  the cost.  $15 is trivial compared to the goodwill and future business any
>  good relationship can generate.
>  
    FB. You are in the service industry - not retail. Your market is also 
people who can AFFORD your services and don't balk at the $100 or $200 an 
hour you charge.

    You charge for your labor which basically has no "cost" so it's mostly 
profit. It's totally different when you start having to buy inventory for 
resale and then you have to make a profit based on selling it in a highly 
competitive and low margined market. 

    I'm talking about ham radio retail which has such thin margins that 90% 
of the dealers are just getting by. How many ham radio retailers have closed 
in the last several years? Better still, how many NEW ones have opened up? No 
one in their right mind would be a ham radio retailer. The third largest ham 
radio retailer in the country has overhead of 14%; his typical gross profit 
these days is around 13%.

    And it's just not the ham radio market - all you have to do is drive down 
the street and you'll see dozens and dozens of businesses in the same boat. 
Some close - some get by - and some actually make a profit. It's definitely 
not something for the weak-hearted.

    Bob, do you have any employees in your companies? Just curious. I'll 
surmise that it's much easier for you to pay for them than your average low 
profit retail business. 

    The ham radio market is comprised primarily of people who are genetically 
predisposed to NOT spending ANY money. That's why you see them bitch about 
spending more than 57 cents for a 57 cent item when mail ordered. You and I 
both know that a typical ham will spend a couple of gallons of gas driving an 
hour or two to save 5 cents a foot on RG-8. (I apologize to those of you who 
are really great customers and who realize that you get what you pay for but 
you all know what I mean.)

>  I work longer hours to make it possible.  Sometimes I get nothing out of 
it,
>  more often than not, it helps build a good relationship and encourages new
>  people to work with me.  Favorable word-of-mouth "advertising" by clients
>  happy with me has meant more financial success to my businesses than
>  charging for everything.  Likewise, I make it a point to do business with
>  and  actively support people and companies who give generously of their 
time
>  to me (and don't charge "handling") - even if their prices are higher.  
They
>  are worth it!

    I agree but we're not talking about some intangible "goodwill" or 
marketing here - we're talking about where the "rubber meets the road" of day 
in and day out retail sales in a competitive and low margined market. 
>  
>  People want to do business with those they like and trust and who treat 
them
>  well.  People shun those who treat them poorly and attempt to gouge them.

    We all do! And the ham radio market is small enough that word of mouth is 
really important. 
>  
>  Back to your original question - maybe a compromise - like charging $2 for
>  one $0.57 part and offering 10 for $8.00,  and eating the rest of the cost,
>  is a good compromise.

    So who needs 10 of them? That's another price gouge IMO. Two bucks? Wadda 
ya nuts? Then the retailer REALLY IS ripping you off - especially after 
you've called 2-3 of their competitors to price compare and their prices are 
57 cents. 

    Bob, stick to the lucrative high end financial consulting business that 
you're good at. 95% of the ham radio retailers are doing it because they love 
the hobby - not because they felt they could make a lot of money at it. 

Cheers,
Steve     K7LXC
Champion Radio Products
TOWER TECH