Am I being greedy??

[rydods]

My biggest customer, by far, orders pan formed translucent faces from us. We don't make them, we measure, layout the design and a local supplier/fabricator makes them and my customer picks them up from the supplier directly.
So there's not a lot of work on our part. Is a 10% markup on something like this being greedy?

 

[Christian @ 2CT Media]

No, it's not enough. You are taking the risk, you are handling the money, you are on the hook for taxes.

Seriously, in business if you aren't making at least a 30% markup (not margin) you are working for free or paying to do the work.

 

[Gino]

Heck no.

 

[gabagoo]

Hopefully the company making them is giving you some form of discount over what someone off the street pays.

 

[rydods]

I usually markup 30% and never hear a thing but every so often on larger orders over 10,000, particularly on this last order, the owner steps in and wants to know what they are going to cost. I mark up 30% and he says I'm way out of line with my pricing and they're going to start using someone else if I don't get it down.
On this last order, they priced it out at a direct company they had used in the past, from another state and their price was $4000 less than what my cost was. I told my customer that I can't even compete with that. They said they'll most likely have to use this other company if that's the case but if I want to go back to my supplier and try to see if they can come down on their pricing, they'd check back with us next time they have an order.

 

[Christian @ 2CT Media]

Move on, I know it's hard but that is a relationship that WILL fail. What they are telling you is they don't value you and the metric they care about most is Cost. You know you don't produce it so logically you can't compete with producers, if you have no added value to them they will search out a lower cost supplier.

Long story short, I have a client that we ended up stopping working with this year. They were 70% of our income for the last 9 years, but they didn't value us. They are now struggling to find a supplier that would do all that we did and we have since replaced them with valuable clients who value us. Now when they call, we put them at the back of the queue and charge them 3x as much.... They aren't happy, but we are.

 

[rjssigns]

When the client starts dictating price it's already over. I've been there and wasted more time trying to get better pricing than the client was worth. Best scenario is your client gets banged by their new vendor and comes back with their tail between their legs.

 

[Gino]

I would venture to say someone is not comparing apples to apples. Something is very wrong. Ask to see their spec sheet from the other company and make sure it's all the same. You don't need the prices, but the actual specs they'll be supplying.

 

[Reveal1]

Your mistake was letting them know who is supplying the faces and having them pick up. I agree with the others except I would look at 35% plus for markup. I have a similar arrangement with a local fabricator for cabinets and faces, but pick up and deliver the product ourselves. So as far as the customer is concerned they could be coming from anywhere which is fine with me because it keeps the focus on the value I add to the transaction. Businesses understand the concept of distribution and markup so sometimes it's the 'tapes' playing in our head that are the biggest problem in getting a reasonable markup.

 

[rydods]

All very good points thanks! They are 50% of our business. The owner is over 90 yrs old and very old school mentality. His Grandson is in charge of orders most of the time. He actually called me while I was pricing this order out for his grandfather and bit my head off for not placing the order right away. He said he doesn't care about pinching pennies like is grandfather. He wants things done when he asks. These situations aren't worth 100% markup most days.
Thanks again for the input. You all have a lot of useful insight and I will definitely use it going forward with this customer.

 

[unclebun]

If they are ordering 10,000 printed pan faces from you, it would be worth asking your supplier if you are getting their best price for a huge quantity like that.

 

[shoresigns]

I'd say 30% markup (23% margin) is an absolute minimum when you're dealing with a job that's straightforward and simple, with a vendor you know and trust. Anything else has more risk involved and should be between 50–100% markup (33–50% margin). The more complexity a job has, the more the costs will change during the job, and you can't always re-quote.

There's a reason people often comment on here that they typically double the cost on outsourced jobs. If you've done this for a long time, you know that there are endless possibilities of things that could go wrong on a given job, and some risks can only be managed by increasing your markup.

(EDITED TO INCLUDE BOTH MARKUP AND MARGIN FOR THOSE WHO DON'T UNDERSTAND THE DIFFERENCE)

 

[Jean Shimp]

All very good points thanks! They are 50% of our business. The owner is over 90 yrs old and very old school mentality. His Grandson is in charge of orders most of the time. He actually called me while I was pricing this order out for his grandfather and bit my head off for not placing the order right away. He said he doesn't care about pinching pennies like is grandfather. He wants things done when he asks. These situations aren't worth 100% markup most days.

Who is running the business there anyway, the grandson of the older man? Seems like this could be a headache as you are caught in the middle. They need to decide on what their priorities are so you can serve them accordingly.

 

[Reveal1]

I'd say 30% is an absolute minimum when you're dealing with a job that's straightforward and simple, with a vendor you know and trust. Anything else has more risk involved and should be between 50–100%. The more complexity a job has, the more the costs will change during the job, and you can't always re-quote.

There's a reason people often comment on here that they typically double the cost on outsourced jobs. If you've done this for a long time, you know that there are endless possibilities of things that could go wrong on a given job, and some risks can only be managed by increasing your markup.

Just a note - I started business life with a large print firm that taught us to think in terms of Gross Margin not markup. So correcting my previous comment we shoot for minimum 35% GROSS MARGIN on this type of job which is much more profit than 35% markup. Any business should focus on GM and not markup as it tells you what % of your sales is profit.

 

[OhioSigns]

I markup 100% on pan faces from my wholesalers plus permit acquisition, installation and artwork. A 35% markup is not allowing for any mistakes and you are taking all of the risk. Maybe if they were ordering a ton of signage or was a really good customer I would consider giving a discount but for the typical customer that is just ordering one or two faces for their business it is going to be 100% markup. Even when you order products from Gemini, if you sell the products for catalog price your markup is ~66.7%.

 

[shoresigns]

Just a note - I started business life with a large print firm that taught us to think in terms of Gross Margin not markup. So correcting my previous comment we shoot for minimum 35% GROSS MARGIN on this type of job which is much more profit than 35% markup. Any business should focus on GM and not markup as it tells you what % of your sales is profit.

Yes, a 35% margin (54% markup) sounds more sensible than the 35% markup (26% margin) you indicated earlier.

 

[Z SIGNS]

There is no such thing as being "greedy" I usually double or triple what something costs me.If they go for it I make some money.

 

[rossmosh]

50% = 2x your cost. 40% = 1.66x your cost. 30% = 1.43x your cost.

Just so we're all on the same page.

And yes, I wouldn't go with less than a 30% markup. No point in being in business if you aren't going to make money.

 

[ddarlak]

wow, just wow.

i would say with all the kindness i can, you are not being greedy, but rather stupid.

10% is not running a business, 10% is counting the days until you work for someone else again.

come closer to 100%, seriously, double the cost. not even joking...

 

[TimToad]

All very good points thanks! They are 50% of our business. The owner is over 90 yrs old and very old school mentality. His Grandson is in charge of orders most of the time. He actually called me while I was pricing this order out for his grandfather and bit my head off for not placing the order right away. He said he doesn't care about pinching pennies like is grandfather. He wants things done when he asks. These situations aren't worth 100% markup most days.
Thanks again for the input. You all have a lot of useful insight and I will definitely use it going forward with this customer.

Hopefully, this little scare is a good lesson about having such a huge portion of your revenue based on one client and one with which so little room for maneuverability and added value on your part is involved.

This relationship has reduced yourself to an order taker and money exchanger at the whim of this client who now knows everything they need to do to pull the carpet out from under you at any time. Your company's dependency on this one client is precarious at best.

I managed a graphics department for a good sized trade show/exhibit company for about five years and about 70% of our revenue came from Nike and a tech company named Tektronix. Nike was as demanding, particular and spontaneous as a client could be AND took 180 days to pay. Great money, steady work, really interesting, fun projects shipped all over the world but our employer was constantly chasing the money stream to maintain cash flow. We'd often be thrust into projects on a day or two notice that triggered 60 hour weeks for over a month at a time but most being quoted at normal delivery timetables. Nike dangles their work over the open mouths of any vendor they think will bite and it is never a super advantageous arrangement for the vendor. Wal-Mart has made itself into the world's largest retailer doing the same thing.

Without adding any real value or labor to the transactions including even delivering the faces to them, there is little or no incentive to use you unless the wholesale price you receive is so low enough below what they can get them for retail including your markup.

That is not a sustainable business model moving forward.