What percentage of the total job cost should I charge if I am just a consultant and not making any profit on the electronics?

Question

This is new territory for me as I will not be making any profit on the actual hardware or installation, but I have done all the research and leg work for a new install at a school.  The hardware will cover Smartboards, VOIP system, bells and clocks, rack servers and several dozen systems.  I will also be over seeing on a macro level the installation of the site.  My though is to charge a flat rate based on the overall out lay of the money.  In my business I would normally charge a mark up of 15-50% depending on the types of equipment, and then an hourly installation charge.  What the school will ultimately pays have been negotiated by me, at a discount of near my cost.  And while I am only going to charge a fraction of what may come to be suggested, as this is for a private church school, I would like to know what is though out there to be a good percentage as I may see it I can utilize this business model in other applications.

Answer 1

This is a "Time and Materials" business model.  It is used when you basically provide a planning/coordinating/installing service and obtain commercially-available parts.

 

When supplying parts for a project, you invest money until you are paid (so, there is a cash flow issue), you have to store the parts, ship/receive them, return faulty parts, etc., so there is a time delay.  And, you have to dispose of the old parts.  The standard mark-up for this is usually pretty low because it doesn't require much risk or much skill.

 

The "consulting" portion of the work can be routine or extremely valuable.  It usually varies with the market (what others are charging for similar services), with the guarantees that you offer (like "money-back"), with the reputation/quality of your work, and with the schedule and reliability of your service.  For example, I get my car repaired at a very high quality service station that has a spare parts warehouse and can get almost any part within a day, has certified mechanics, responds quickly and courteously to any questions or complaints, and has sometimes done small repairs when I just drove in without an appointment (they know me by name).  I pay more for all of that.

 

You should know that the maintenance (even when covered by warrantee) and software support and training (on-going) and add-ons and upgrades to any computer-based system is usually far more than the initial cost of the equipment (did you not notice that the cost of ink is exceeding the cost of printers?).  So, to ensure the success of the project and the future of your business (you may get "blamed" even if it is someone else's maintenance problem), take as least as much time to plan maintenance/training/upgrades as you did to analyze/plan the initial installation.

 

Finally, record keeping is a bigger problem than equipment failure.  If you can't compute costs to extreme detail, you won't be in business very long (unless you have large savings to spend while trying).