How much should one/businesses profit from building a system?

[iceliquid]

Let's say I'm going to build a system, specialized for a particular person and it costs me $1000 for the system (including shipping, hardware, taxes).

What are computer stores' general profit margin. I'm inquiring because I'm planning to open a little "shop" at home cuz I enjoy building computers and I know of a real niche market that could possibly use it. It's not high volume at all, maybe 1 computer every 2 months if I'm lucky.

Just gives me an excuse to build the latest computers
So I'm kinda looking to see if the profit margin would be worth my time.

I really appreciate your comments and insights.

 

[Yzzim]

it depends on how long your warranty is gonna be for

we have a 3 year warranty at the local computer store where I worked and we made 30% on the computers. 10% of that was put away in a "warranty" account in case something went wrong with the computer.

 

[Soybomb]

I don't think 20-30% is unfair at all. How old are you? Strongly consider how often you'll have to do tech support work on these....the voice of experience speaks strongly

 

[iceliquid]

Yzzim, great idea about putting 10% aside for the warrenty contingencies. Does the warrenty cover parts and labor? Or just parts since I'm a small specialize shop.

Soybomb, funny you asked. Just turned 25, 3 days ago Oh yeah, another thing I didn't think of which is crucial, tech support. How much does one charge for tech support? Can you guys share some of your experiences in this area.

My clientele will be pretty high net worth and with intelligence, at least I hope, so that should be a bonus.

 

[Soybomb]

*chuckle* Charge? My good boy when you build a computer for someone they're going to want to be able to contact you at their convenience for any problem. If you say you only support the hardware and no software, they're going to have a software problem and blame your hardware. You're getting yourself into alot I"m 19 and have built say 10 computers in teh last year or so. The only true problem i've had is an elderly lady. But trust me she has been a huge pain in the ass At this point I"ll only built for business customers and no private individuals.

 

[iceliquid]

Soybomb, that's my main concern. When I build a system, I know it works flawlessly before it leaves the door. I would suspect having business clients to be better because I think they generally realize that computers are not perfect and the interaction between numerous software will not always be smooth as silk.

Are business clients more willing to pay for support because they realize it's the nature of business? Or something else?

 

[divinemartyr]

iceliquid

Businesses are willing to pay quite a bit more for their computer hardware because they want good service over good prices. My roommate works as a network administrator for a local advertising agency, and whenever his purchases are made his last concern is price. He will pay a premium for Dell systems for the on-site 3 years parts and labor warranty, and will also pay more on components from CDW for their ability to free overnight ship replacement parts while old ones are cross-shipped by their customers. Businesses will always pay retail or better for products, for excellent service. If it costs you $1000, you could easily sell it for $1600 to a business.

dm

 

[Yzzim]

<< Does the warrenty cover parts and labor? >>



The warranty covers any defective parts and labor to put those parts in the computer. If the customer wants something else put in the computer (ex: CDRW) then that is extra. The warranty does not cover a software problem. So if the customer gets a virus or blows up Windows they have to pay for that. Make sure you have that posted somewhere and it's in the warranty.



<< How much does one charge for tech support? >>



I charged $60/hour to work on someone's computer. When someone called on the phone I'd always give them free tech support and if it was too hard to handle over the phone I'd have them bring it in. The minimum I charged was $30 no matter how easy the solution was. A virus would always cost $60 even though they were usually the easiest to solve (stick in McAfee, run the software, uninstall when done).

 

[Dameon]

Yes, business clients understand you are providing a service. If you make it clear that said service is FEE based, you can have better luck. I looked into doing this, but the liabilities incurred are ridiculous unless you go large scale quickly. I still have the business name registered with local County Tax Assessor's office.

Unless you are very very selective about your clientel, you will have a difficult time getting what you want out of this venture.
-Profits in the industry are very slim.
-Software adds alot to the total cost. (piracy will get you nailed fast these days)
- People want a complete system, monitor, printer and scanner for under $1000. Very few people want systems over that cost these days. Unless you have a secret pocket of somewhat technologically gifted people (not tweaker geeks) who have good money, and are willing to give the little guy a chance instead of relying on the tried-and-true names like Dell, I don't see this going where you want to.

For example... you sell Joe User a pre-configured system. He proceeds to do all of his normal work on it, but like most users doesn't back up his files. One day, Joe's hard drive craps out. He calls you, you take a look at the system and confirm that yes, the hard drive is crapped out and setup an RMA with Quantum / IBM / Maxtor. THe drive will be there in 3-4 days. Joe blows a gasket when you call to tell him this. He wants a new drive WITH all of his data on it... TOMORROW, or he's taking you to court. Joe forgot to mention when you originally spoke that he's a lawyer.

Unless you can make enough out of this to hire an attorney for this kind of B.S., I personally can't reccomend doing it. There are too many sue-happy people out there these days that take their stupidity out on companies.

I'm not trying to rain on your idea, I wanted to about 3-4 years ago now, and the industry has become oversaturated and people too grabby. Desktop customers by nature are annoying and whiny about everything, and grasp only your mistakes, never their own.

I keep having to find new places to get hardware here in Austin. I've watched four die in the years I've been here.

Way Too Cheap, ChipsMart, CompUPlus, Computer Renaissance

Browse through the Hot Deals forum, see how eager many people are to take advantage of mis-pricings then yell bait and switch. These are fellow AT Forum people. There are much worse, and much more clueless people out there.

 

[iceliquid]

Great comments and ideas all around!




<< So if the customer gets a virus or blows up Windows they have to pay for that. Make sure you have that posted somewhere and it's in the warranty. >>




Good suggestion. The fine print will be crucial.
In regards to charging tech support, does one prorate it if it only took me 1/2 hr or some other method? I've heard of (using your rate example Yzzim) charging a full hours worth of work for the first hour regardless of how long it took and prorate every 15 minutes after the initial hour.




<< If you make it clear that said service is FEE based, you can have better luck. >>




Excellent, thank you. Do you feel putting &quot;As is&quot; clause into the contract would alleviate most if not all of the legal issues? I wouldn't mind sacraficing some profits for the added security.

 

[Soybomb]

Also remember, your reputation is going to mean alot. So if you have s really strict warrenty that only covers dead hardware, etc, you customer may understand, but when they can't get the software to work and you wont help, you're not going to be spoken highly of. Sometime if you want to carr ya good name you have to take extra steps like I've done walking this lady through aol use. She ordered a scanner, but didn't know how to use it. I had to teacher her. I can go on but you get the point. A business is definately much more understanding that you're provifing functional hardware and guarentee it to be so for 90 days etc. (I recommend you make it clear that after X number of days, you may provide free service but the warrenty will be through the manufacturer if you're concerned with dealys in replacements or shipping costs 2 years from now.)

 

[Yzzim]

You could charge a minimum of whatever you want, but when the customer calls up and says &quot;I'd like you to install some memory for me, how much would that cost?&quot; and you say &quot;we charge a minimum of 1 hour service, so that'd be $60.&quot; Then they're like &quot;WTF, you bastard, the memory only cost me $50!!!&quot; So, you lost that customer.

That's just an example, but I think you get what I'm saying



<< and prorate every 15 minutes after the initial hour. >>



Once you start working on a computer you aren't gonna keep an eye on the clock. I'd say billing in increments of 30 minutes would be the best since there's not much math to it. Plus after $60 some people get pissy unless you're working on a Packard Bell


All of this is IMHO, your mileage may vary.

 

[Yzzim]

<< (I recommend you make it clear that after X number of days, you may provide free service but the warrenty will be through the manufacturer if you're concerned with dealys in replacements or shipping costs 2 years from now.) >>



That's a very good point. Make sure that it's visable to people if you're gonna be in a B&amp;M store as well.

 

[Namuna]

From my own experience, I've learned...

- Be as UPFRONT AND SPECIFIC as possible (about what you will and won't do and charges). If you set expectations and groundrules from the get go, even if it's uncomfortable to do so, it WILL be better for you in the long run!

- Try to stay with the professional clientelle if possible. People using the machines for work are AFRAID to screw anything up so they'll keep the fiddle-faddleing to a minimum, BUT people using the machine for home want to 'experiment' and play games and load ANY and EVERY thing they find or get.

- $60pr/hour is very reasonable (remember Unlce Sam is going to be RAPING you for a good part of it). ANY time you have to leave your house to travel ANYWHERE you SHOULD charge the 1 hour minimum. 2 reasons, 1; because you're making the effort and therefore deserve the compensation, 2; Knowing they're going to DEFINITELY be charged if you come out, they'll want to be sure and ONLY have you come out when ABSOLUTELY necessary.

Alright, I could go on...But I don't want to overwhelm here.

 

[burnedout]

Good advice Dameon:

Yes, I watched Chipsmart and Way2Cheap go down also. Chipsmart advertised some super low-budget computers in the Austin American Statesman every Saturday. In reality, the one's advertised were with super low grade parts. VX-Pro motherboards, the infamous JTS harddrives and additional low quality parts.

iceliquid: If you can land corporate accounts with service contracts, that could take you to another level. But otherwise stay away from individuals, if possible. The tech support problems can be a hassle.

The desktop market is very saturated nowadays. About 4 years ago, I made lot's of cash when I was near an Army base. I could build the computers in my apartment, sell them at a 30 percent margin, take their old computer on trade and resell that... in parts on the bay. There is still some profit today, although the real money was made before the large scale proliferation of e-tailers literally giving new parts away. It's tightening up some because of the dot-bomb. The real money is in services. Software configuration. On-site repair.

One idea you might throw around is &quot;white box&quot; servers and workstations. Insure they are both Win2K and Linux compatible. Dual CPU configurations sell.

I would open my own shop. I have the startup capital. But there is so much competiton around here in Austin that it would be a struggle to survive.

 

[hans007]

15% i'd say. compusa type places their margin is in that range. Plus they rape for 3 year warranties.

 

[iceliquid]

Thanks everyone for their input, its much appreciated. I'm going to give this more thought and it seems that the wiser thing is work for a established company that has already set up these standards. Thanks again all!

 

[Dan]

iceliquid: I've built up a nice little &quot;cottage industry&quot; by helping fellow employees. The outfit I work for has approximately 350 employees and I've become known throughout the company as a computer &quot;guru.&quot; (There's something to be said for shameless self-promotion.) I even built a system for a guy in the MIS department!

When it comes to building new systems I have one policy I try to maintain: I never build for someone getting their first computer. I always refer those folks to Dell, Gateway, Micron, etc. In fact, I'm happy to help configure a system and even participate in a conference call to help them order it. I do it for free and it's amazing how many referrals I get because of that practice. (Of course, I also get calls to help the person learn how to use his new Dell. I charge for that.)

 

[iceliquid]

Good idea Dan. I'll see if I can develop a small clientele here at school for general support

 

[Demon-Xanth]

I've done some work for people in the past, usually I stick around with the tweaker crowd and have built up a few people that I parts swap with (ie: I need a socket-5 MB and a guy with a Socket-5 MB needs a netcard and COAST module)

Only once have I had someone that I don't know pay me to do service, and I almost didn't do it because of the liabilities involved (they were a friend of a friend). If a screwdriver slips and shorts out someone's MB while you were doing a simple RAM install, who is going to pay for the board?

Edit: typo

 

[Dan]

Demon-Xanth: Good point. The fact is, in a case like that, I would pay for the board. (My screw up, my responsibility.) So, someone who is going to do some &quot;free-lancing&quot; in this area must:

1. be good;
2. be confident in their abilities
3. have a health credit line somewhere.

Finally, you have to know when to say &quot;no,&quot; i.e., decline jobs and/or projects. For example, I turned down an opportunity to build two work stations last week. I could foresee a potential for problems down the road and I just didn't want to go there.