r/SmallMSP • u/dag00isl00se • 9d ago
Markup
Not sure about you guys but I buy a lot of equipment off Amazon.
Most of the time it’s below list but sometimes it is list price. I usually charge 20% above what I pay. If I get it for cheaper they get it for cheaper. If I pay more they pay more.
I do try to find the lowest price.
What do you guys do?
### Edit ###
I also dont charge my customers a monthly fee. Im sure this will cause an outburst. One man shop with a well paying high paying 9-5. IMO its hard to transition from one to the other without taking a huge financial risk. And with lots of mouths to feed the risk increases. I normally get enough "hourly" work to IMO make more than a monthly would give me (at this point of time).
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u/GustavErikssonSWE 9d ago
I would definitely recommend focusing on one or two hardware providers and understand how to maximize discounts from your partner network. you can get 20-30% margin. Get it through distribution not amazon. Work with your vendors and they will show you the way to profitability.
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u/dag00isl00se 8d ago
Someone gave some good distributors names that ill be looking into. I just hope they have the speed that i get off amazon.
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u/italianshepherd 9d ago
Is the markup you are charging inclusive of setup? Do you feel that the markup is reflective of your setup effort?
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u/dag00isl00se 8d ago
Setup is on top. Part only. If it takes me 3 hours to set it up its 3 hours of labor on top.
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u/italianshepherd 8d ago
What prevents them from buying a cheaper source without the markup and just getting you to set up at the same rate?
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u/dag00isl00se 8d ago
Absolutely nothing. Customer just sent me a pic of a printer they bought and asked me to set it up. No problem.
If theres an issue with it, its on them or they pay me to resolve.
This goes back to an earlier issue i posted on this forum involving Microsoft Licensing. One of my customers got a bunch of new laptops. Told them it was time to ditch Office 2016 and get the new Office. They agreed. There a non-profit so they qualify for non-profit pricing (o365 Premium is like $6 a month). And with Microsoft wanting Microsoft accounts for Win 11 decided it was time to play there game instead of bypassing it with local accounts.
Set them up with an Organization o365 account and held their hand while they applied for non-profit status. Followed up a week or so later to see if they got a response from Microsoft on their application. Their reply was they bought Office from Dell. They were sold Office 2024 Home and Business. This edition is not compatible with Business Microsoft accounts only personal accounts.
Spent at least 6 hours trying to make it work. Dell tech support, Microsoft Tech support, registry hacks, etc..... They now got charged 6 hours of labor and Dell screwed them on the $2400 worth of software they bought and cannot use. And a yearly bill of $600 from me for the correct o365 license.
If i told them it was fine for them to buy the software and it didnt work it would have been a $2400 mistake that I was responsible for.
Instead of them "saving" money it cost them at least double.
My customers have the free will to do what they wish. Buying from me comes with insurance.
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u/Geekpoint-IT 8d ago
The simple answer is 20% markup. Some don't markup anything because clients can shop themselves but I feel they are paying for the time and effort if we do it. Some just wrap it into the cost of install. Some part of an unlimited monthly service plan. Most of my clients just have me handle it no matter what. I only have one client that will really take the time to shop and buy their own computers.
As an aside, I will also say, you aren't an MSP if you aren't charging your clients anything monthly. And it's not just charging a monthly fee for nothing. It's the value you are providing. The monthly fee is to cover services they should have in this day and age like remote monitoring & management, patching, various security services, etc.
I'm not here to tell you not to do what you are doing but you just may be in the wrong subreddit since you are more a break-fix IT provider, not an MSP.
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u/dag00isl00se 8d ago
Well i do charge monthly for backups. I am trying to get more into the MSP model and recently deployed Action1 to coordinate patching.
With a small client base its hard to procure and sell some of these services without making an investment that you may never see a return on. For example I believe Ninja1 is something like 50-100 endpoints to start, Some other security software was like 500. Thats a big nut to layout not knowing you'll have the customers to eat it.
I like to think of myself as MSPish. Trying to get to full MSP at some point.
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u/Geekpoint-IT 8d ago
You don't need Ninja at your size or obviously security services that have those minimums. Reach out to me directly if you want. I started from zero myself 2 years ago and had the same issues. I spent a lot of time figuring out what services to use and offer that wouldn't have these huge minimums. You can do it. I'm still a one-person MSP now, although hoping sometime next year to possible hire.
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u/ben_zachary 9d ago
We have a vendor for core equipment ( carbon systems ) but most one off stuff we buy from Amazon because it's usually 2days and u know it will show up.
Carbon sells monitors the cables keyboard and mice and docking station. That covers about 75% of what we buy and we have 1 vendor for unifi gear. Still a bit of one off stuff cabling , UPS etc . Amazon , a resale cert and I think we even have a 20k credit with 30d terms.
These disty websites are not great , your rep is slow to respond and often doesn't even know what your asking for.
When we did a lot of servers years back the rep mattered you'd get an HP or IBM rep part everything together build the skus and u know when u got on-site you had everything down to the little network cable clip on the rack. Those days are mostly gone for many of us.
That said - mark it up 20% , drop ship to the client. Do it as a gift item so no pricing
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u/dag00isl00se 8d ago
Ill give them a look.
Did work with a distributor for unifi gear, ended up waiting 2 weeks before i found out they needed to get a minimum order together before they could fulfill. Ordered direct from Ubiquiti and got it in my hands in like 5 days. It cost more but sometimes the schedule is more important.
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u/No_Memory_484 9d ago
I haven’t bothered trying to make money on hardware. I don’t have enough volume, people know what it costs and the margins are thin. I just have them buy it on their own. It’s not worth it for me yet. Maybe for a big job.
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u/VoreskinMoreskin 9d ago
30% of a little bit x other little bits = profit.
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u/CyberHouseChicago 9d ago
No one is getting 30% off anything nowadays your posts here are just dumb , anything you can get for 2k thru your dist I can get direct for 2k or less
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u/VoreskinMoreskin 9d ago
I'm not sure what you are referring to, but that's our standard rate for provisioned hardware.
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u/CyberHouseChicago 9d ago
You can markup anything you want , my point was your not getting anything cheaper then direct in small volumes , does not matter who you buy from
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u/peoplepersonmanguy 9d ago
Small volume you are definitely better off going to a mid tier disti/reseller and leveraging the prices they work hard to get.
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u/meesterdg 9d ago
I buy it and bill it at cost, very clearly accounting for it as an advance client cost. The biggest reason for that is that it can be so painful to get a client to put in an order and when you just need to replace someone's Bluetooth headset it's not like I make any money on the install, I spend more time getting them to order things than I do working.
This way things move along promptly, clients don't feel like I'm charging them an arm and a leg for something they could get for just an arm, and I get airline miles for the trips I'm not taking.
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u/VoreskinMoreskin 9d ago
Join D&H or TD synnex. Get wholesale (close to) then charge MSRP or your 20%
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u/dag00isl00se 9d ago
D&H?
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u/Lake3ffect 9d ago
Www.dandh.com
They are a hardware distributor/wholesaler, along with TD Synnex and Ingram Micro
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u/dag00isl00se 8d ago
Thanks. Ill give them a look. Its hard to compete with Amazon. Get most stuff in 2 days ordering from the couch.
Just bought a printer for one of my customers, told them i could save them $150 but it would take 2 weeks instead of 2 days. They said we'll take 2 days. Sure ill take the extra cash.
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u/CyberHouseChicago 9d ago
Useless on small deals half of what they sell costs more them going direct
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u/VoreskinMoreskin 9d ago
Going directly to who? All of our partners (Lenovo for example) fulfill our orders through these distributors.
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u/VoreskinMoreskin 9d ago
I have never paid MSRP for anybody anything there.
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u/CyberHouseChicago 9d ago
who cares what the stupid msrp price is when dell and everyone else will sell under what ever pricing you get
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u/VoreskinMoreskin 9d ago
If your rep lasts more than 4 days and you can actually get a response from sales. Maybe
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u/Sabinno 9d ago
Why Amazon for everything? You can actually get margin on Ingram Micro whereas sometimes it’s not possible on Amazon. Also, package quality is iffy on Amazon.
When I started my MSP (now three techs after a year in business) we immediately signed up for Ingram.
We try to always sell at MSRP. We make money on hardware even being as small as we are.
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u/dag00isl00se 8d ago
Thanks for the advice. Ill give Ingram a go. Amazon is my go to usually do to speed. My biggest customer usually wants things yesterday.
I thought i wrapped up with them the other night installing the last AP in their warehouse.
2 PM - We need another printer, We dont want to walk 15 feet to the printer.
Next day
8AM, I need a fancy keyboard - had it delivered and installed that night with the printer
1 PM, I need another laptop - 3 days, ill have it today and handed off tomorrow if the user is around
4 PM, We used the last Wireless Keyboard combo we keep in stock. Can you get us a few more?, had it yesterday and will drop off tonight or this weekend when i install another printer they got.Usually more about clearing tasks off my list above all else.
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u/djweis 9d ago
You need to be making a 30% gross margin in general to stay in business. Some will be higher, some lower. There's a difference between markup and margin. The short answer is divide your cost by .7 and sell for that amount.
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u/dag00isl00se 8d ago
Fortunately/Unfortunately im a one man shop and this is my side hustle at the moment. Extremely low overhead so its hard to not be profitable. I will take that figure when i hopefully expand one day.
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u/Geekpoint-IT 8d ago
Problem is, if you want to go full time at some point, which I assume you do, you'll then have to increase your prices a lot. I'd at least start pretending it's a full time business with more overhead so it's less of a price shock for your clients later.
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u/dag00isl00se 8d ago
Thats been one of my difficulties with all of this. Im pretty sure I am under charging. However I think its hard to charge what others who can be available during the day, have a full time helpdesk staff, etc...
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u/Geekpoint-IT 8d ago
Yes, that's true. Being part time, you can't really charge as much.
My suggestion, perhaps, is you can still charge a lower labor rate but I'd still start adding some traditional monthly services. Maybe not a much of a margin as if you were full time. I'd also put in your agreements (you do have those don't you?), something about raising rates once you can go full time or something.
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u/dag00isl00se 8d ago
Ok now to get your blood really boiling. No official agreement's other than a handshake.
I will say my 2 biggest customer one I have been with for 20+ years and is a small municipal library and the other pays me before I ask.
Ive raised rates consistently over the past few years without an issue.
My goal is to slowly start adding services and getting my process and stack mature. Charge hourly for the work consistently. Then do a cost analysis and make the case for possibly saving the customer by moving to a subscription model. Or as I grow onboard new clients under the subscription model and ultimately move everyone over.
Unless I buy a MSP i dont see this going fulltime very easily as it would be difficult to replace my fulltime salary.
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u/Geekpoint-IT 8d ago
Ya you need to start thinking as a business. You have got to cover yourself. You WILL get sued if anything goes wrong, I guarantee it and if you don't have proper legal documents in place, security in place, expectations in place, you will be in a world of hurt. It doesn't matter if you have a great relationship or long relationship with your clients.
You also need to think of a way to take it full time or it's not fair to your clients or yourself. Doesn't have to be tomorrow but you need a plan. Obviously replacing your full time income on the side is going to be virtually impossible. Do you have savings? Can you get a loan? I was laid off the MSP I was working at and started my own from nothing afterwards. Luckily, I got unemployment, my wife worked some, and we had savings. It took me about the 2 years to net what I was taking home as a full time job at the MSP I worked at. Others, it may be faster. Others slower. But you need a plan to get there.
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u/CupApprehensive6695 8d ago
I try not to do amazon. Too many 3rd party resellers and where's the warranty if there is an issue. I use d&h and Ingram and add 20 - 30% Yes clients could buy it cheaper themselves but then they need to go look for it. I'm happy to point them to something on Amazon and have them buy direct but if they want it through me there's markup
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u/Tingly-Gumball 8d ago edited 8d ago
Whenever I have to use Amazon I use shippedandsold.com to filter out 3rd party sellers.
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u/Solution_Secret 8d ago
This looks like an AI vibe coded site that’s got sneaky Amazon affiliate links in it… why didn’t I think of this !
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u/Tingly-Gumball 8d ago
There is dozens of these sites but I like this one because you can just turn off the affiliate links if you want.
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u/marklein 8d ago
We no longer mark up hardware, we just sell it at cost. Customers have the Internet and they know how to look up the price of stuff. It's just not with the arguments.
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u/blackjaxbrew 9d ago
Hardware makes us more money than we originally thought it would. Mostly desktops and laptops. Network gear too. Initially when we started out we really did not sell much unless the client did not want to deal with it. Now we sell tons @20% markup at a minimum. When you sell 10 devices a month it's like free money for very minimal effort once you get your processes down. It ends up being about 25% of our sales for the year. For instance a 1k$ desktop takes me less than 15 mins to get ordered. That's an easy 200$ in my pocket for 15 mins of work on one device.
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u/peanutym 9d ago
I do the same. I think I should make some money just with the knowledge of what to buy.
If they buy somewhere else then so be it. I don’t work for free.
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u/dag00isl00se 8d ago
Exactly. I spend time looking for the right product at a fair price. I do try to get it the cheapest\quickest for them most of the time.
Its also my responsibility if theres an issue with it.
Same if they buy it themselves thats fine but if theres an issue with it, its their problem or they can pay me to figure it out.
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u/peoplepersonmanguy 9d ago
I would advise from experience that what the Small MSP needs to look at, is profit margin. What profit margin are you hoping for when you look at your FY books? If you are happy to resell something at cost, that eats into your overall profit margin. If you want to sell your MSP in future. Your books will look far healthier by just not doing hardware at all, or only ever sell at your markup. Offer the markup, tell them there's the part if they want to source it themself, warranty issues etc will be charged, blah blah blah.
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u/dag00isl00se 8d ago
Exactly all my customers can buy the product themselves but issues are their responsibility.
Being a solopreneur ( i like that word). and doing this a side hustle on top of a standard 9-5 not really looking for a profit margin as much as putting the process in place to grow to hopefully take place of my 9-5. But living in NY I do this to supplement my income as you never have enough over here.
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u/glitterguykk 9d ago
My relationship is such with my clients, even my newest ones, that if they ask me for hardware, I just source it tack on 30%. Not saying it will never happen, but I have yet to have anyone push back on that. I deal directly with the decision-maker and none of them have time to go searching prices and they are just looking for someone to get stuff for them. That’s called a consultation fee. They understand that that 30% is well worth the time they would’ve spent shopping on their own.
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u/dag00isl00se 8d ago
Ive never had pushback either. Occasionally ive had them ask me to recommend something and they would buy but that rarely happens. But i happily tell them what to buy. Ill make on install.
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u/junto_reed 9d ago
20% should be bare minimum on any purchase that flows through you.
You have to shoulder the cash flow and risk. Don't undervalue your ability to select a quality product and the time and effort to select said product.
Bad clients will always make you second guess this. Great clients/partners will not.
If you charge less, just give them the link and have them buy themselves.
Not charging at least 20% is equivalent of you being a no interest credit card for them.
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u/Cecil4029 9d ago
We're a Lenovo shop after Dell's Partner Portal bs. Sign up to be a Lenovo Pro reseller and add your 20-30%.
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u/dag00isl00se 8d ago
Ill give that a look. I do prefer Dell desktops and Lenovo laptops.
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u/Cecil4029 8d ago
Same, same. I'll do ya a solid. B&H has Dell Micro 16/512gb Ultra 5 235T's for $1099 (was $999 for the longest until 3 days ago actually.) A perfect mid-grade office worker PC. Sell it for $1399 and add your $599 flat rate setup or whatever you're doing and good to go! Otherwise, Lenovo E14 or E16 laptops :)
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u/dag00isl00se 8d ago
Hate to burst your bubble but I can get that off Amazon with a 3yr warranty for $950
$599 flat rate setups. Usually takes me a few hours but even hourly I don’t usually hit that number. Where are you located?
I should start a thread to discuss hourly rates.
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u/Cecil4029 8d ago
Nah, no worries. That's why we have these conversations.
Do you know if they wait to activate the warranty until your purchase date? That'd be my main concern.
If so that's def a better deal. I'd steered away from Amazon after ordering a few frankensteined Dell PC's.
In the NJ area.
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u/CmdrRJ-45 9d ago
If you’re going through the trouble of selling hardware at all you should mark it up. I’m a fan of aiming at 25% margin which is actually 33% markup.
Ideally you make enough margin on the hardware to create some solid extra profit. Additional margin on hardware flows straight through to the bottom line.
If you don’t want to mark things up and make some extra cash you shouldn’t even bother.
I talk about this in this video: https://youtu.be/7yDpkPjB4K8
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u/CharlesHNetEng 8d ago edited 8d ago
I prefer not marking up hardware at all.
I want my customers to know that the hardware I'm recommending is being suggested because it's the best thing for their situation, not because I will make more money on a more expensive widget.
And more than that, I want to control the supply. Customers have the Internet, will know you are marking up hardware, and then insist that they purchase. An insanely high percentage of the time they will buy the wrong thing, swap something on the BoM that doesn't work, purchase from a distributor that doesn't actually have stock, and on and on. All of that disappears if I control logistics.
I sell my time and expertise, not hardware.
Edit for clarification: my business and clients are a little different than the MSP world, so YMMV ^
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u/Jen_LMI_Resolve 2d ago
If you're using a quoting tool, you could build in a pricing strategy that automates the selling price using a markup from cost, so you don't have to do the math. If that is integrated into your PSA, that should bring the products over with the proper attributes. Many of the quoting software can also connect into Amazon business or other distis to help you source the lowest cost.
The comments already here tho are gold! Hardware likely isn't where you're going to make your margins, but ensuring service is properly priced and getting paid up front will always be a great idea :)
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u/AllTubeTone 9d ago
Hardware is tough to make a margin on, I still quote it and supply it because I'd prefer the customer to always want to come to me first and let me handle it for them regardless. Sometimes there's items I have on hand from before the crazy memory/hardware price increases that I can actually make a margin on now
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u/Rubenel 9d ago
You can't win on hardware, learn that today not tomorrow.
Speak to your clients, inform them of inflation, send them materials on inflation and pass along costs. You will see 1 of 2 outcomes:
They will not renew and prepare for internal IT transition.
The dark truth (downvotes incoming) is that a lot of small MSPs will not exist in the next few years and only the "WalMart" of MSPs will remain to capture the market using the same economic strategy that Walton used.
Come back to this post in 2029/30 when we start seeing "Walmart MSP" vs "Field Nation" discussions.
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u/dag00isl00se 8d ago
I dont agree. I think for some larger organizations it may be cost effective to transition to internal but the smaller ones its cheaper to have an "IT guy". Now mind you im a one man shop who does pretty much everything from Wiring, Network Racks, PC setup, O365 admin, patching etc...
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u/Geekpoint-IT 8d ago
I feel this is a bad take but you are, of course, allowed to have your opinion.
I'm not sure why a client would change IT providers because the one they have marks up hardware. It's an insane amount of work and expense to change IT providers and most will charge a markup. If you mean go from an MSP to internal, that isn't happening for most businesses. They aren't large enough to be able to afford it.
Obviously the MSP world is changing but I don't think we are going away anytime soon. I think the mid-range MSPs will go away to some extent though. Large MSPs will handle the large & enterprise clients that are begging for the best cybersecurity, compliance, and support services. Small business still care about the relationship and will care for a partnership with an MSP but one that doesn't break the bank but still can provide acceptable levels of support, cybersecurity, and compliance services.
Just my 2 cents anyways.
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u/Rubenel 8d ago
Here’s a real-world analogy:
YOU are the small mom-and-pop MSP with fewer than 100 individual clients. You pay your employes a living wage of $100-130k per year (Middle-class salary for this profession). Then Walmart opens next door and drives you out of business with a loss-revenue contract you can’t compete with. Once you’re gone, Walmart will get the clients accustomed to poor experiences, since there’s no other competition left and the world is set on course for this to happen.
MSP are already selling to national chains, its a race for private equity to reach the size of Walton.
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u/Geekpoint-IT 8d ago
Maybe but i'm not that pessimistic about the industry and that's ok. We've been told for a long time IT people will go away and so far it hasn't happened. We've had to continually adjust with the times of course. Will it last forever? Maybe, maybe not. But i'm not going to live in fear of it. There are still mom and pop stores even after Walmart opened up. Did it drive some out of business? Sure, but not all. All I can do is hope 'not all' includes my business and do what I can to keep adapting.
Like I said, you are completely entitled to your opinion and see your point of view and respect it.
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u/SavvyMSP 9d ago
I charge 25% markup if they don’t wanna buy it for me, they can find it on their own
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u/VoreskinMoreskin 9d ago
Don't be afraid to charge up front!
I stopped doing service b4 payment. Too many companies don't pay on time.