Pianotech

And the fact that you might be called back for some minor reason at no charge. Occasionally a part is defective and needs replacing. Typically I do not charge for minor stuff like that. Paid for by the markup. 

Of course you can come up against someone else who tries to undercut you in this arena. I've no answer for that. 

Peter Grey Piano Doctor 

Hello Jim,

I regret not being able to contribute a little bit earlier but it's been (and still is a busy week).

First, markup and Gross profit margin (GPM ) are 2 different things. They are different ways for determining the amount of gross profit from the selling cost of an item. Worth looking into but probably more than we can go into here since this will probably run long.

Second, we need to consider the amount of labor we charge for installing, applying, or otherwise providing an object (since we're talking about items.) That's usually what we're charging for the direct cost of installing the item but you can cover the other expenses in this category as long as you're aware of them. 

Third, there are a number of direct costs that are attributable to a specific item (or group of items). I'm going to switch over at this point and just say "system" since we're talking about the specific case of a Dampp-Chaser system.:

• Shipping
• Time directly attributable to that job that isn't necessarily direct labor. 
  • selling the item
  • advising on the item
  • teaching how to use the system
  • ordering the system
  • receiving the system
  • loading up the system
  • Paying for the system
• The value of your money over time if you maintain inventory
• Training in how to install the system. 
• Recycling/disposing the packing the materials

Then there are indirect costs that accrue every minute that you're working:

• Overhead
  • Paying yourself and/or your assistants (office, shop, etc.)
  • Insurance
  • Utilities
  • Retirement
  • etc.
• Tax on your profit from the sale of the item
• What Norm Neblett used to call the EI factor (the Eat-it factor - those things that you forget to cover or that you fail to consider on a job. In other words, if the client isn't paying for it, the manufacturer isn't paying for it (in a warranty situation), or your boss doesn't pay for it (if you're an employee of someone else) - then you eat the loss and it doesn't taste very good.)

So, I figure my billable time in units of 6 minutes (.1 hour) for simplicity of calculation. If it takes me 6 minutes to order an item, 6 minutes to receive an item (check the packing slip, unpack from the other items in the shipment, etc.) at least 6 minutes to enter the invoice and pay the invoice (actually my office assistant does that part but I have to pay her as well), 12 minutes to explain the use of the system after I finish the installation - then we have .5 hours where I could have been doing something else to make money. So, I need to make at least that much profit off the sale in unrealized direct labor. Then, I need to keep the lights on, pay myself, account for the fact that I have had to charge enough in labor to cover the cost of the trip, pay personal expenses (like insurance, my paycheck, plan for retirement) and cover the cost of replacing tools as they are used up (screwdrivers, rechargeable batteries, etc.). 

Hopefully, after all of this I am able to derive some net profit that then goes back into growing my business, expanding my skills & offerings, paying off my debts, making sure that I have sufficient funds to meet my financial commitments (including paying myself!)

So, depending on how your business is set up and what kind of overhead expenses (including taxes) that you face in your state and locality, the percentage needed to meet the minimum considerations can vary.

Your time is valuable and you're providing a valuable service and convenience along with your expertise. Now you don't have to spend so much time that you lose money due to losing all of your time to figuring out how much something costs - as long as you're aware of those costs and make sure that you're covering them. And we haven't even gotten into the value of your inventory in an inflationary environment. 

If a cap of 10% markup is specified then it's worth looking at the definition of the "cost of the item" since there may be more than just the wholesale price of an item. Honestly, most of us would lose money at a 10% markup if it doesn't even include shipping. 

Another consideration, if we want this trade to continue into the future, the older techs among us have to establish and maintain prices that can support the young technician coming into the trade. If we don't then we'll be the last generation and fade away as the costs keep rising and the margins shrink. 

Just a few quick thoughts from a business perspective. If you'd like to pian up a little more along these lines, we've tackled some of these issues (while scrupulously avoiding any issues regarding anything that could run afoul of the antitrust laws) in our Atlanta chapter meetings. 

Also, don't make me think about the cost of writing this since I have to get back to writing a couple of action rebuild estimates. <grin>

I hope this helps a little.

Best regards,

Allan

Alan,

A.K.A. "hidden overhead"

Thank you!

Peter Grey Piano Doctor 

Hello Jim,

I regret not being able to contribute a little bit earlier but it's been (and still is a busy week).

First, markup and Gross profit margin (GPM ) are 2 different things. They are different ways for determining the amount of gross profit from the selling cost of an item. Worth looking into but probably more than we can go into here since this will probably run long.

Second, we need to consider the amount of labor we charge for installing, applying, or otherwise providing an object (since we're talking about items.) That's usually what we're charging for the direct cost of installing the item but you can cover the other expenses in this category as long as you're aware of them. 

Third, there are a number of direct costs that are attributable to a specific item (or group of items). I'm going to switch over at this point and just say "system" since we're talking about the specific case of a Dampp-Chaser system.:

• Shipping
• Time directly attributable to that job that isn't necessarily direct labor. 
  • selling the item
  • advising on the item
  • teaching how to use the system
  • ordering the system
  • receiving the system
  • loading up the system
  • Paying for the system
• The value of your money over time if you maintain inventory
• Training in how to install the system. 
• Recycling/disposing the packing the materials

Then there are indirect costs that accrue every minute that you're working:

• Overhead
  • Paying yourself and/or your assistants (office, shop, etc.)
  • Insurance
  • Utilities
  • Retirement
  • etc.
• Tax on your profit from the sale of the item
• What Norm Neblett used to call the EI factor (the Eat-it factor - those things that you forget to cover or that you fail to consider on a job. In other words, if the client isn't paying for it, the manufacturer isn't paying for it (in a warranty situation), or your boss doesn't pay for it (if you're an employee of someone else) - then you eat the loss and it doesn't taste very good.)

So, I figure my billable time in units of 6 minutes (.1 hour) for simplicity of calculation. If it takes me 6 minutes to order an item, 6 minutes to receive an item (check the packing slip, unpack from the other items in the shipment, etc.) at least 6 minutes to enter the invoice and pay the invoice (actually my office assistant does that part but I have to pay her as well), 12 minutes to explain the use of the system after I finish the installation - then we have .5 hours where I could have been doing something else to make money. So, I need to make at least that much profit off the sale in unrealized direct labor. Then, I need to keep the lights on, pay myself, account for the fact that I have had to charge enough in labor to cover the cost of the trip, pay personal expenses (like insurance, my paycheck, plan for retirement) and cover the cost of replacing tools as they are used up (screwdrivers, rechargeable batteries, etc.). 

Hopefully, after all of this I am able to derive some net profit that then goes back into growing my business, expanding my skills & offerings, paying off my debts, making sure that I have sufficient funds to meet my financial commitments (including paying myself!)

So, depending on how your business is set up and what kind of overhead expenses (including taxes) that you face in your state and locality, the percentage needed to meet the minimum considerations can vary.

Your time is valuable and you're providing a valuable service and convenience along with your expertise. Now you don't have to spend so much time that you lose money due to losing all of your time to figuring out how much something costs - as long as you're aware of those costs and make sure that you're covering them. And we haven't even gotten into the value of your inventory in an inflationary environment. 

If a cap of 10% markup is specified then it's worth looking at the definition of the "cost of the item" since there may be more than just the wholesale price of an item. Honestly, most of us would lose money at a 10% markup if it doesn't even include shipping. 

Another consideration, if we want this trade to continue into the future, the older techs among us have to establish and maintain prices that can support the young technician coming into the trade. If we don't then we'll be the last generation and fade away as the costs keep rising and the margins shrink. 

Just a few quick thoughts from a business perspective. If you'd like to pian up a little more along these lines, we've tackled some of these issues (while scrupulously avoiding any issues regarding anything that could run afoul of the antitrust laws) in our Atlanta chapter meetings. 

Also, don't make me think about the cost of writing this since I have to get back to writing a couple of action rebuild estimates. <grin>

I hope this helps a little.

Best regards,

Allan

Hello Jim,

I regret not being able to contribute a little bit earlier but it's been (and still is a busy week).

First, markup and Gross profit margin (GPM ) are 2 different things. They are different ways for determining the amount of gross profit from the selling cost of an item. Worth looking into but probably more than we can go into here since this will probably run long.

Second, we need to consider the amount of labor we charge for installing, applying, or otherwise providing an object (since we're talking about items.) That's usually what we're charging for the direct cost of installing the item but you can cover the other expenses in this category as long as you're aware of them. 

Third, there are a number of direct costs that are attributable to a specific item (or group of items). I'm going to switch over at this point and just say "system" since we're talking about the specific case of a Dampp-Chaser system.:

• Shipping
• Time directly attributable to that job that isn't necessarily direct labor. 
  • selling the item
  • advising on the item
  • teaching how to use the system
  • ordering the system
  • receiving the system
  • loading up the system
  • Paying for the system
• The value of your money over time if you maintain inventory
• Training in how to install the system. 
• Recycling/disposing the packing the materials

Then there are indirect costs that accrue every minute that you're working:

• Overhead
  • Paying yourself and/or your assistants (office, shop, etc.)
  • Insurance
  • Utilities
  • Retirement
  • etc.
• Tax on your profit from the sale of the item
• What Norm Neblett used to call the EI factor (the Eat-it factor - those things that you forget to cover or that you fail to consider on a job. In other words, if the client isn't paying for it, the manufacturer isn't paying for it (in a warranty situation), or your boss doesn't pay for it (if you're an employee of someone else) - then you eat the loss and it doesn't taste very good.)

So, I figure my billable time in units of 6 minutes (.1 hour) for simplicity of calculation. If it takes me 6 minutes to order an item, 6 minutes to receive an item (check the packing slip, unpack from the other items in the shipment, etc.) at least 6 minutes to enter the invoice and pay the invoice (actually my office assistant does that part but I have to pay her as well), 12 minutes to explain the use of the system after I finish the installation - then we have .5 hours where I could have been doing something else to make money. So, I need to make at least that much profit off the sale in unrealized direct labor. Then, I need to keep the lights on, pay myself, account for the fact that I have had to charge enough in labor to cover the cost of the trip, pay personal expenses (like insurance, my paycheck, plan for retirement) and cover the cost of replacing tools as they are used up (screwdrivers, rechargeable batteries, etc.). 

Hopefully, after all of this I am able to derive some net profit that then goes back into growing my business, expanding my skills & offerings, paying off my debts, making sure that I have sufficient funds to meet my financial commitments (including paying myself!)

So, depending on how your business is set up and what kind of overhead expenses (including taxes) that you face in your state and locality, the percentage needed to meet the minimum considerations can vary.

Your time is valuable and you're providing a valuable service and convenience along with your expertise. Now you don't have to spend so much time that you lose money due to losing all of your time to figuring out how much something costs - as long as you're aware of those costs and make sure that you're covering them. And we haven't even gotten into the value of your inventory in an inflationary environment. 

If a cap of 10% markup is specified then it's worth looking at the definition of the "cost of the item" since there may be more than just the wholesale price of an item. Honestly, most of us would lose money at a 10% markup if it doesn't even include shipping. 

Another consideration, if we want this trade to continue into the future, the older techs among us have to establish and maintain prices that can support the young technician coming into the trade. If we don't then we'll be the last generation and fade away as the costs keep rising and the margins shrink. 

Just a few quick thoughts from a business perspective. If you'd like to pian up a little more along these lines, we've tackled some of these issues (while scrupulously avoiding any issues regarding anything that could run afoul of the antitrust laws) in our Atlanta chapter meetings. 

Also, don't make me think about the cost of writing this since I have to get back to writing a couple of action rebuild estimates. <grin>

I hope this helps a little.

Best regards,

Allan