[Towertalk] Buying nuts and bolts - Rationalized gouging

[Robert Shohet]

>     In some circles, "nickel and diming" is called making a profit.

If people have to resort to this to make money, then there is something
wrong and a lot that they can improve in their business.  Running a business
is a lot like operating a contest.  You can give three people the same
conditions to operate and your will get three conpletely different results
depending on initiative, personality, efficiency, forsesight, creativity,
ingenuity and many other things.

> >  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.

It's not a luxury, it's a necessity, ESPECIALLY if conditions are
challenging.

>     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.

That is the biggest MYTH of all!  If people balk at $2 you don't think they
balk at bigger numbers?
HARRUMMPH!  I often joke that if people could figure out how to anaesthetize
themselves and stay awake at the same time, they would do their surgery to
try and save money!

Besides Steve, didn't you know that almost everyone is an investment genius?
:-)

>     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%.

Interesting that you mention that.  My labor certainly does have cost and
the tens of thousands of dollars that I spent on my professional education
AFTER graduating from college, as well as the annual continuing education
fees and other profeccional courses, not to mention the hundreds and
hundreds of hours involved, certainly DOES have a cost!

I would also add that a lot of my work involves concepts and ideas that I
share with others for which I am NOT paid.  They are often unique and come
from a result of my experience, expertise, continuing ed and so on.  They
have great value.  Sometimes an unscrupulous person will take them and
implement them elsewhere, so someone else (who has done nothing) gets paid
for using my idea and I receive nothing.  There is a real cost there.  The
same as if you marched into a warehouse and stole things on a truck!

While most anyone skilled or unskilled can open a widget store and compete,
you can't do what I do without investing thousands of hours of TIME - at the
expense of sales and other things plus lots of other costs measured in
thousands of dollars.  As far as margins, with companies trying to bleed my
industry dry and fees (my costs) going through the roof, many of the people
I know who used to make a comfortable living, have gone out of business and
some have gone broke (no different from retail).

My industry has lost thousands of people in the last few years and fewer
still are even attempting to go into the field.  No wonder!

Our competitive environment is tough on everyone.  Only a small percentage
of retailers or consultants have it easy.  Most of the rest struggle.

>     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.

I agree!  It is very tough out there - for almost everyone.

>     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.

I work with outside consultants on some things and do EVERYTHING else
myself.  I learned long ago that finding the right people and training them
was almost impossible and not cost-effective or time-effective.  I watched
the disasters that many of my colleagues suffered through had and vowed not
to make the same mistake.  I decided to stay small and nimble, which is the
best strategy in a challenging environment.

>     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.)

Of course!  But then you can see how dumb this "strategy" is when they waste
more in gas (not even including time and other expenses) to save a few
pennies when in fact they are wasting money overall.  If they don't value
their own time and energy how can they possibly value anyone else's?
I stopped working with this type of person long ago.   Unfortunately there
are lots more of these people than there are appreciative people.

I have often said that the best education in this world is to open a
business of your own.  Most people would fail miserably, but they would
likely learn much more in the failure process than they would in years of
working for a company.  They would also gain an appreciation for what is
involved in doing everything yourself and taking responsibility for
everything yourself.  They would also become much more appreciative of what
is involved in being a service provider or retailer.

>     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.

The "goodwill" and "marketing" is a long-term strategy that makes any
business more successful than it otherwise would be, and often is the
difference between success and failure, ESPECIALLY when the economic cndx
are marginal.  But it requires faith, hard-work, flexibility and a long-term
committment.   If the Airlines ever figure this out and stop making a
habitual practice out of treating people like dirt because they can
(short-term strategy) , they might discover that people might fly on them
more often and are willing to pay more for better service and courtesy
(long-term strategy).

> >  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.

Exactly! - it's pretty easy to see who is trusted and who is not and who
will prosper or suffer as a result.

  > >  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.

Except it is not 57 cents after you include the handling charge.  It never
was!  Let's face it, some people are just not very rational or sensible how
they shop or do other things.  There is no "one size fits all", but people
do pay attention.  I would rather buy a few extra and have them on hand when
I need them than have to go through the whole process again the next time.
Besides, what decent contest station doesn't look like a small retail store
with all the parts and other crap required?   :-)

>     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.

Which is exactly why I do what I do, because I love it, not for the money.

73 and GL

Bob KQ2M