Here’s another way… - Posted by Eric C
Posted by Eric C on July 08, 2001 at 23:55:02:
Long ago I was an Apple Computer Dealer. Not just a dealer, but one of the very first! And after that, I sold IBMs, Compaqs, etc. I also built computers when the margins were tight.
Nothing has changed much in the computer business even after all these years. Oh, the hardware is faster for some things(even if my new Intel based P4 Windoz machine does take forever to boot)and the software is a little more sophisticated (bloated), but overall it’s still the same game.
For the little guy it’s “belly to belly”, one sale at a time unless he gets really unlucky and ends up building systems for the local school district, or hospital, or…
Write this down: if you don’t have a (big)profit in each one, then it doesn’t help you to sell a bunch of them. You can’t make it up in volume. Do your math.
Here’s the major problem with personal (or small business) computer sales – your customers will want support. They will want warranties. They will, in the end, be unreasonable and want more than they are willing to pay you for. (which is why the larger companies now charge for service)
On the other hand, if you really are going to go this route, try talking to your local consumer credit folks such as Beneficial (Household Finance) NorWest, Blazer, or whoever you have in your area.
The person in charge of this office is usually under some form of a quota and has to bring in (buy) a large amount of paper (financed sales agreements) each month; typically that amount can be $500K or so. If they are unable to reach their goals, the company will replace that person with someone who is able to do so.
Get your facts straight. Run your numbers. Let them provide the financing for your customers. Or you can provide it and then sell it to them. (there are benefits to both)
Your customer gets financing for the long term. You get paid in cash today.
There will be some issues you have to work out, but these folks are usually easy to work with. They handle their own collections. You may be required to have a reserve account to start with, but that’s nothing you can’t handle.
People are people. They sometimes don’t make their house payment, or their car payment. Think they will put their computer payment first? I don’t think so.
Keep yourself out of the line of fire. This is not a high margin business anymore ( I use to net about $3K per system).
If you have questions, just ask.
PS - when times were really tough, we would sell systems to doctors and other professionals, but with a twist. One physician group would finance another’s computer systems. The financing was sold to their pension plans. Neither group would dare default, because they each held the “paper” for the other.
And by the way, we got paid cash for the systems - no discounts. We also got paid a premium for providing these “investments” to their pension plans. Nice.
In the long run, forget the equipment. No matter how much you may like the business there are far better opportunities out there. Take care.