Question:
Before I attended your Designing for Dollars workshop, I ordered a dining table for a client and only marked it up 10% to stay competitive.
To make a long story short, the table was defective and I spent many hours trying to correct the situation for the client. After the vendor sent a third table with a huge gash in it, and refused to do anything more, I paid to have the damage repaired so that my client would be happy.
The time I spent on this problem was far more costly than the repair bill.
So my question is…
Is a 25% purchasing fee enough to cover what can happen?
In the case of the defective table, 25% wouldn’t have covered it.
If I tell clients that I cannot take care of these problems and they have to work it out with the showroom if something goes wrong, I feel like I am abandoning them.
Should I charge additional time in situations like this? Or just suck it up as a business owner?
Or how about this?
Plan A: I charge 100% mark up on all purchases and I cover all product liability and warranties.
Plan B: I charge a 25% purchasing fee which covers my time to write the purchase order, order the product and arrange freight and delivery. If anything goes wrong the client will handle it personally or pay me hourly to resolve it.
Plan C: I do the design and the client does all the paper work, ordering and holds the product responsibility.
I would really appreciate your advice.
Answer:
I feel your pain…
There is nothing worse than getting caught between a client that you want to please and a vendor who is not standing behind their product.
Having said that, you must look at this in the big picture – from business owner view. That is, if you average out all the hours spent on product that you sell, the dollars will work out. My experience tells me that you will win more often than you lose.
As far as your plan options go:
Plan A is great, except it is hard to sell product at 100% markup these days.
Plan B is doable and probably the best with a little adjustment.
I think it would be hard to justify a purchasing fee without taking any responsibility for the outcome of the product. As a solution, you certainly could set a limit on the number of “fix the problem” hours you are willing to spend, and after that your hourly rate will apply.
Plan C can work as well. Just design the space, write the specifications and have the client do the purchasing. Be careful to charge adequately for your design – you will have to write very complete specifications in order to get this plan to work.
