Some business questions

[Foundry]

I'm not entirely sure where to post this as I have only just discovered this site. Recently I have started a computer building business with a partner. Now, it is important to note we are both adults (no wide-eyed dreams of millions of dollars falling in) and my partner has successfully started a $100,000 dollar a year truck washing company already.

A lot of research was done and it is quite clear that competing with lower end units from big names like best buy and dell is impossible. It seems, though, that they do not beat us by such a margin that people won't pay the little extra to have our expertise and the extra things we offer.

We charge 150 in labor for a full pc and 100 for an upgrade. Buying a full pc from us enables a 50 dollar discount for your next charge (buy a computer from us and 5 years later you can upgrade from us for cheap; thus, doubling your pc's lifespan). with that 150 we spend quality time researching the greatest deals from all places on the web and/or in store, we build the rig by hand, we offer follow up support, we offer a customizable price point (if one price is too expensive we can swap out certain, unnecessary specs for cheaper ones) as well as finishing touches that no other company offers (for example we chrome tube all of our wiring, displayed through glass cases). We also offer a tech support via our email.

I am curious as to how this sounds to an online customer as it has done quite well in person. No loans or any capital has been expended thus far so feel free to be as brutal as possible.

 

[Foundry]

well just incase someone does actually respond im gonna update this a bit. Instead we are negotiating a somewhat unique business plan. our pcs are currently 1/3rd of the cost of any moderately powerful pc (with more power). For example, through our wholesalers we are currently building an 8 gigabyte, 500 hard drive laptop model for 650. Our website will be up soon as well as adopting a new domain for our website. I will keep this site updated as I was actually recommended to these forums by a friend of mine.

Its not seeming like this was the right place to go though, this has been up for a while and i'v gotten larger responses on game forum sites.

 

[Guest]

I have my own computer business and make most of my money fixing computers and selling used ones that customer's give me. How do you compete with the $299 Acer (Windows 7, 4 GB, 1TB) that Wal-Mart sells and will do everything the average user needs?

 

[psychokineticnz]

I have previously owned 3 IT companies (2 where merged into bigger companies and 1 is still going strong)
Where I found the best dollar was in servicing and support via fixed Support contracts.
- Clients had their Monthly IT servicing at a fixed rate (we did it per workstation/laptop and per server) and then offered a reduced hourly rate (and SLA's) for other work, for being on service contract with us.

What this meant is we were able to budget our income moving forward and as we visited our clients every month, we got a lot of additional sales from being there at the right time so to speak.

Not sure how this would go with home users, but if you targeted small/medium business's you could offer a special discount on your desktops/laptops if they opted into a service contact with you.

I'm of the belief that long-term there ins't much to be made in pushing hardware anymore, it's all about the service. (and contracts)

note: banks like the fact you have fixed monthly contracts too, as it's reassuring for them to see an established income for your business moving forward - makes getting business finance easier.

All the best in your venture, I'm of the opinion - Give it a go!

 

[Foundry]

Hello again. I'm glad to see so many responses here. Actually its not that hard to beat out Wall-mart with a little legwork. You have to understand and do all of the research possible, not just within computer science but business in general. Do you understand how Wall-mart offers that build?

Before you guess, it is not bulk buying. Bulk buying only attributes to a minimal savings per build actually. Most of the "saving" comes from backdoor dealing as well as covering through other services. Wall-mart buys the cheapest parts on the market, regardless of typical life-span and they have many deals with other software companies resulting in an increased amount of "shovel-ware".

Our cheapest build is under two hundred dollars; however, I usually attempt to convince my customers to spend a bit more for a longer lasting computer. We don't charge any percentages so it doesn't matter to us weather you spend two thousand dollars or three hundred. I actually had a customer that came to us after buying a Wall-mart deal similar to what you posted there. Six months down the road she was coming to us for a new, custom, computer. Although we offered to fix it for her she insisted she wanted something from us, ground up.

There are millions to be made in hardware, more than in IT actually. I encourage everyone to research the market heavily and for up-coming businesses to make connections with advertisement, photo, and website design companies.

We were extremely lucky by having many C.E.O connections and (once our new website is live) will be offering a sort of "web" for other businesses to help them make these connections to photographers, website designers, commercial advertisement companies, and computers as well as other connections involving sponsorships.

It all comes down to innovation and having the appropriate wholesalers. I can't, for obvious reasons, give away all of our secrets and innovative ideas (what exactly we do that sets us in our own category I will post our new website here, which will have all of those details on it) but what I can do is stress how much having a great wholesale computer parts company saves money as well as stress how important it is to be innovative. We set ourselves apart with innovations that other companies either just don't or can't do. Innovation is more important than undercutting strategies.

Innovation is the key to business in this era. Attempting price competitions will only net you a minimal amount of money and leave you playing a losing game. In fact it is near suicidal to do so with established companies right off the bat. Once you have grown and have done the work to obtain sponsorships and wholesalers it is increasingly easier. The reason is Wall-mart has a lot more to pay for to make each computer build worth it than a smaller company.

In conclusion I will leave by revealing a little of my research. Store fronts are a decaying relic for businesses like this. Which is a good thing. Studies have shown that companies with a professional website lose no sales due to having no store front; yet, store fronts that do not have a good looking website instantly lose credibility and do lose sales from a half-hazard website. There are other, more inventive, ways to support IT as well as computer repair than needing a store front.

 

[Saga Lout]

I have previously owned 3 IT companies (2 where merged into bigger companies and 1 is still going strong)
Where I found the best dollar was in servicing and support via fixed Support contracts.

I agree that there is money in that part of the trade but not for me, sadly. As a one-man-band, I can't enter into contracts because I have no successor when I croak or backup if I fall ill - I can't even make a profit on parts because I have to pass the invoice to the customer as their guarantee so they see the exact price paid.

I'm not complaining, just pointing out the realities of life in case anyone thinks it's easy to do this for a living. T do it properly, one has to employ staff - a big no-go area in the UK with legislation as it is.

When you're 64, you just don't want to have to work double hours when a woman you pay to do the job wants a year off to have a child or the man you pay wants time off to be with his new child. Soon, they'll want paid leave for the ruddy conception. I'll be a happy one-man-band 'til I screw down the lid on my own coffin.

Definitely go for it - it's the best job in the world because every day is different and you'll never stop learning it.

 

[Foundry]

I am unsure of the legislation in place in the UK. However, if you live in the U.S. you do not have to pass on an invoice of exactly how much you paid through your wholesalers to sell to a customer. In fact, I have never heard of such an absurd idea. Telling customers where you paid for your parts in general is considered bad form not to mention how much you paid.

All that matters is the final price and being honest about what the customer is getting for that price. Even honesty has its wholes with corporate sales. Wall-mart saves a lot of money by making cheap, in-house, motherboards and hard drives. Their motherboards don't go through any testing process and are just as likely to fail than to last for any amount of time.

Best-buy is guilty of that as well. It's a way to cut costs even further. There are plenty of creative ways to compete if you are willing to do the work. Building a laptop is actually very cheap if you know where to buy.

It is ignorance to sit back and think that corporations can sell their units for so low only because they have deeper pockets and can buy more at a time. In fact, it is more stupid to buy computers (and especially computer parts) in bulk. Pushing last years technology because you bought 1,000 of them doesn't fly too well. Best buy only buys their computers in stacks of 20 per each store. All together best buy saves about 50 to 100 bucks in total by bulk buying.

The real savings comes from outsourcing and cheap manufacturing of both, the actual computer as well as the parts. In fact, the saving accrued from bulk buying is negated due to the huge overhead cost of running a corporation with as many employees and stores with their own insurance policies. If you don't care about quality then you will save close to 75% of each computers total cost.

You can spend 800 dollars for a DDR2, 3 gigabytes of RAM, 300 gigabytes of hard drive space, and a single core processor. Or you can spend 50 dollars for it. Both of these are complete rip-offs. On the one hand your spending too much for the statistics themselves, on the other hand your spending too much for the quality of the parts. Either way you are wasting your money.

To say that there is no business in hardware would be turning a blind eye to the multi-billion dollar companies already established that do just that.


You can be far more lazy with IT sales though. In order to start seeing real ($100,000+) income from hardware sales you must continuously work at spreading your word as well as holding contests and other events while also sponsoring sales and unique offerings.

 

[Saga Lout]

Telling customers where you paid for your parts in general is considered bad form not to mention how much you paid.

It's all quite simple really and not bad form at all. Legislation in Europe says products are guaranteed and the proof of purchase, particularly the date, is on the invoice if no separate guarantee is provided. In my opinion and experience it would be bad form to produce a supplier's invoice showing the real price is actually half of what I'm charging. I would be seen as profiteering and wouldn't see much repeat business.

Make your money on the labour by charging adequately for your skills and there's no need to hike up parts prices beyond their actual cost and any carriage charges.

 

[Guest]

Wall-mart saves a lot of money by making cheap, in-house, motherboards and hard drives. Their motherboards don't go through any testing process and are just as likely to fail than to last for any amount of time.

Best-buy is guilty of that as well. It's a way to cut costs even further. There are plenty of creative ways to compete if you are willing to do the work. Building a laptop is actually very cheap if you know where to buy.

What planet are you living on? Wal-Mart (Wal-Mart, not Wall-Mart) and Best Buy sell computer from name brand manufacturers (ie: HP, Dell, Acer) who use components from their own suppliers. Contact me in 5 years and let me know how much money you made selling your own brand of computers.

 

[Foundry]

We are saying close to the same thing Grumpy9117. Except the chain is quite a bit shorter then what you think. HP and Dell specialize in creating computer shells (primarily, they have some other stuff made in house as well). Generally their cases will be purchased from them but the "guts" of the computer can be purchased from other, less quality, manufacturers. Even HP and Dell themselves cut costs in quality in favor of affordability.
It is a common misconception that computers are one brand only. No company makes every part of a computer. One computer is usually the product of three or four companies combined. However, because the shell is the most notable HP and Dell often get the credit.
Wal-mart does buy many of their shells from HP and Dell but their motherboards, hard drives, RAM card, and other hard ware is usually either in house (to avoid higher cost) or from less known manufacturers with a focus on a low overhead. The hard ware inside a computer rarely receives any scrutiny unless it fails (which Wal-mart stuff often does) due to the fact that the mainstream market is literally oblivious to even the well known manufacturers of internal computer hard ware.
I can contact you now and let you know our revenue, but that would be unnecessary. Our computers look and play better and harder for less then half the price of any competition. We sell custom jobs for cheaper then factory computers. With that, in our area, we could sell without labeling any brands at all much less our own. We usually get our shells from more quality manufacturers (Antec is very popular right now). HP and Dell are great if you want a bulk purchase but they throw very little funding into their actual process in comparison.
Alienware also made billions peddling and selling their own brand but that is besides the point. Wal-Mart does not just buy whole units from HP or Dell (although these companies do offer whole units). It is cheaper for them to, instead, make a few choice parts in house with low funding. The shells are still purchased from HP and Dell due to their excellent bulk sales; however, the motherboards (most notably) and hard drives (usually) are not.
So yes, the cases are made by these established brands (unless you establish your own brand of shells) but it is often far more of a grey area who is the manufacturer of a computers internal hard ware. Just because you buy a computer from Best Buy with the name "Dell" on the front does not mean that Dell created every peace of equipment in the shell, just the shell itself is branded. Through a lot of hard work and partnerships we make quite a bit of money already without major commercial advertisement.
I apologize, you are right. It is Wal-Mart and not Wall-Mart. Let me also correct you, I believe you meant to say "...and Best Buy sell computers from name brand manufacturers..." and not "...and Best Buy sell computer from name brand manufacturers...". Both of these corrections are wastes of time as we both know what and who we were talking about. It is important to represent a company accurately though and so I am sorry for my misspelling.