Product markup

[MSL]

I recently got an account on a wholesale locksmith site.

I was curious would you say its better business to simply charge for labor and resell the parts at cost? I imagine that if I were to say upfront that I sell my parts at cost it would help the customer to think they're getting a better deal. Or is that lost income from the sold locksets a bad idea?

[billdeserthills]

My Dad taught me that the way prices work is like this. The manufacturer creates the product and builds it & they double their money when they sell the lock to their distributor, who doubles his money when he sells to the retailer. You are the retailer and are just as deserving to double your money. I don't know about you, but I have many thousands of $$$$ in stock. Some of it is 25 years old and the stuff in my van must be carefully wrapped otherwise the finish will rub off, before I even get the chance to sell it. You are tasked with having the inventory your customer wants in their homes & business, and as mentioned the hardware you sell must look as new as it did when it rolled off the assembly line. Accepting less than double your money is doing yourself a disservice. If you wish to play as a handyman, and make less money, which I believe cheapens our industry, you are free to do so. Remember though, most times the consumer knows that my products cost more--Those consumers wishing to save money buy the locks they want for less online or at the home center Before I arrive and have me install them. My install rates are slightly higher when someone else's hardware is installed. My rekey rates are also reduced by 1/2 on the hardware I sell.

Thing is I used to call 8-10 of my competitors every year to check their prices, I quit doing that 15 years ago, when I realized that I don't really care what they charge, as long as I make my living, which I do.

I think you are better off taking the loss on your labor, than selling your hardware for less. You have an almost unlimited amount of labor to sell, in your lifetime. I personally won't work for cheap skate clients. If my client doesn't think what I bring to the table is valuable, that is their loss, not mine.

[2octops]

Every part we sell (even if it's just a screw or a washer) gets a normal mark up of 100%-150% of our cost to replace our inventory plus the shipping.

Why would you invest your money in stock and not mark it up for a profit? That's losing money to me. You invest in the inventory and gamble on how long it will take to move it. That's like investing in any other market that has zero profit return on investment. Inventory mark up makes for a huge part of a business revenue.

[1mrchristopher]

The short answer: Yes, it's a bad idea.

To be clearer though, I should give some explanation. I am operating under the assumption that you are in this to make money, enough money to make it worth having a business. If you sit down and calculate your total overhead (miscellaneous supplies, tools, vehicle maintenance, fuel, etc. etc. etc.) you will quickly determine that you are going to have to charge an unreasonable labor rate in order to make up for selling your merchandize at cost.

My personal advise is this: Don't install grade 3 hardware if at all possible. You make more money selling grade 2, and there are plenty of reasonably priced (not smartkey) grade 2 options available. Also, when you explain the difference to your customers, and the reason you don't like using grade 3 hardware, and what the few extra dollars can buy, they will probably be pleased.

In all honesty, most people are expecting to pay more for their hardware when they go to a locksmith, because they are expecting better than what they can get at a big box store. If your labor is a little bit lower, I'd think that would be what caught their attention.

[victorylocksmith]

The short answer: Yes, it's a bad idea.

To be clearer though, I should give some explanation. I am operating under the assumption that you are in this to make money, enough money to make it worth having a business. If you sit down and calculate your total overhead (miscellaneous supplies, tools, vehicle maintenance, fuel, etc. etc. etc.) you will quickly determine that you are going to have to charge an unreasonable labor rate in order to make up for selling your merchandize at cost.

My personal advise is this: Don't install grade 3 hardware if at all possible. You make more money selling grade 2, and there are plenty of reasonably priced (not smartkey) grade 2 options available. Also, when you explain the difference to your customers, and the reason you don't like using grade 3 hardware, and what the few extra dollars can buy, they will probably be pleased.

In all honesty, most people are expecting to pay more for their hardware when they go to a locksmith, because they are expecting better than what they can get at a big box store. If your labor is a little bit lower, I'd think that would be what caught their attention.

What if we sell grade 3 but charge them the amount of double what it costs us for a grade 2? Then we give them the spiel about it being a locksmith supply only item so it is special?

[GWiens2001]

If you sell them grade 3, you will be back to repair the hardware, and the customers will be upset that you sold them something that broke so quickly.

Gordon

[MSL]

Thanks for the input guys.

[billdeserthills]

I stock grade 2 & 3 because I have some very cheap clients. I also try to stock & sell the import tylo style locks instead of the real kwikset tylo because the prices are lower. I will warn you that the latches often provided with the grade 3 import locks are complete junk. In order to stop having to come back I usually put in a kwikset latch when I install the import tylo lock. Years ago I stocked up on LSDA grade 3 locksets. The latches began to fail within the first week of use. I finally wound up boxing all of the knobs back up & insisting on a return. I have found that if you feel the need to use cheaper locks, at least use grade 2 on most import knobs & levers. As far as the deadbolts go, I don't have a problem selling grade 3 import locks, but I always stock a better deadbolt alongside that, which is a schlage B500 series. I always offer to install the grade 2 first, if a client doesn't like the cost I will show them the grade 3 and then it is up to them.

[globallockytoo]

My Dad taught me that the way prices work is like this. The manufacturer creates the product and builds it & they double their money when they sell the lock to their distributor, who doubles his money when he sells to the retailer. You are the retailer and are just as deserving to double your money. I don't know about you, but I have many thousands of $$$$ in stock. Some of it is 25 years old and the stuff in my van must be carefully wrapped otherwise the finish will rub off, before I even get the chance to sell it. You are tasked with having the inventory your customer wants in their homes & business, and as mentioned the hardware you sell must look as new as it did when it rolled off the assembly line. Accepting less than double your money is doing yourself a disservice. If you wish to play as a handyman, and make less money, which I believe cheapens our industry, you are free to do so. Remember though, most times the consumer knows that my products cost more--Those consumers wishing to save money buy the locks they want for less online or at the home center Before I arrive and have me install them. My install rates are slightly higher when someone else's hardware is installed. My rekey rates are also reduced by 1/2 on the hardware I sell.

Thing is I used to call 8-10 of my competitors every year to check their prices, I quit doing that 15 years ago, when I realized that I don't really care what they charge, as long as I make my living, which I do.

I think you are better off taking the loss on your labor, than selling your hardware for less. You have an almost unlimited amount of labor to sell, in your lifetime. I personally won't work for cheap skate clients. If my client doesn't think what I bring to the table is valuable, that is their loss, not mine.

Business 101. Hard and fast rules. NEVER reduce your labor price. You can mark down product to cost if you need to discount something, but if you reduce your labor, you are saying that you are not worth your normal rates.
Thats BS! If you pay your employees $25/hr and you charge less to the client than your normal hourly rate, would you also pay your employees less? No. Labor is a fixed cost that cannot change, no matter what. Product, on the other hand can be discounted as much as you want.

[billdeserthills]

Thank globallockytoo, for the business lesson. I never took any business classes so it's a wonder I have done as well as I have. In my earliest thoughts about business I do recall thinking that I had completed all the schooling I needed after finishing 3rd grade. I still think I was mostly correct tho, as I really hated school. Going to the school of hard knocks with my Dad wasn't much more fun, but at least I did find that more entertaining & informative.

[cledry]

When we quote a job, bearing in mind 90% is commercial work we will:

Never discount labour rates. We have labour rates for lock work, electronics work and safe work all charged at different rates. Some customers don't like to pay a service call charge so they pay the same amount but it is written as labour and they are fine with it.

We have a varying markup. Some items you can't really go 100%, such as Master padlocks, but some items like our import line of levers and door closers we can safely go more than 100%. It balances out to 100% near enough.

Some customers can buy wholesale like we can but don't like the bother. So we mark them up less. A Kaba E-plex for example we only mark up $100 to this customer because we know they know the wholesale price, because they can buy wholesale and because they buy 2 a week on average.

The other rule we have is that you cannot compete on price with HD on the stuff they sell, but we can sell the stuff they don't offer for a bit more.

[globallockytoo]

@cledry

is a quote (quotation) in writing?

Is an estimate verbal?

What do you consider the difference between a quote and an estimate?

(excuse me for changing the subject)

[billdeserthills]

I always put an estimate in writing and as far as a verbal quote goes I never go back on my word, which has cost me money in the past. In fact just the other day a client wanted two Baldwin privacy bolts installed and I did not realize that the outside trim is not included in the cost of the privacy hardware. I did not bother mentioning that the job cost me $30+ to include the two outer trim plates
and next time you can bet that I will remember, but for now my screw-up is not the client's business.

[MSL]

And I'm sure you biting the bullet for $30 today helps you keep a client happy who will hire you again and you'll make up that loss with the next job for them.

[billdeserthills]

And I'm sure you biting the bullet for $30 today helps you keep a client happy who will hire you again and you'll make up that loss with the next job for them.

Thing is they were happy with my work. I did not mention to them that their hardware cost more than they paid for it. This was a second job anyhow, I was there a couple of weeks ago and their bill exceeded $200 that day, so I felt like I did OK, all told.