Based Business Model
famously asked by a client "How much profit should I make?"
an Accountant replied "As much as you can!"
was all very well but did not answer the real underlying question
which of course is governed by market forces and the uniqueness of
the product / service being offered. Much has been written about the
hiatus price levels associated with new products with higher profit
levels while demand is strong. But what about everyday mundane
products that we all need and take for granted?
everyday products are supplied by a multitude of manufacturers each
claiming superior or slightly different advantages over rivals that
do much the same job. Branded goods tend to retain greater value
especially in the world of fashion and consumer durables. However, in
the business to business world harsh reality takes hold as corporate
buyers are all looking to increase their bottom line company profits.
reader will already have grasped the message expressed by Oscar
Wilde all those years ago where the lowest price does not necessarily
mean the greatest value. IBM latched onto this theme in the early
days of the Personal Computer by saying to prospective customers that "No
one got fired for buying an IBM computer". This may not be
the case anymore.
banking system has a great deal to do with the success of business
and in the case of business to business enterprises likely to be
watching their client accounts with marked interest. A Director of
our business looked into the attitude of Banks towards assessing
their clients and found that in the market sector of business
machines and services they expected to see a ratio of about 45% gross
profit against turnover. (Any business with a borrowing requirement
needs to keep this very much in mind!)
Ontime Systems Limited has no borrowing needs and can be, therefore,
a little more flexible in attitude toward gross profit. Never the
less this benchmark is probably a good guide as to best business practice.
Ontime Systems we have developed a model whereby we assess the
profit required from each item of equipment and service against the
time it takes us to progress any order or add extra value. We pretty
much know our overhead costs and how many labour hours we have
available to do business. Thereby, we know how much profit we need to
achieve per hour to cover these and the capital investment returns
necessary to sustain the business.
smaller consumable items like ink ribbons attract a larger mark-up
simply because a small easy order like this will take about 15-20
minutes to process whereas larger items may be reduced from their
list price because our involvement cost is less than the recommended
margin. Multiple order are also discounted for the same reasons and
customers using this web site should enquire about these
arrangements. (We operate special e-mail linked pages for special
orders that attract better discounts.)
we become involved in site installation we again apply this model
for costing. The administration costs are deducted from a project's
likely profitability and the remaining margin is used to contribute
to the installation and support labour costs. This does not
necessarily mean we are cheaper than other suppliers just that we
have a secure basis on which to do business.
make no apology for writing at this length as we believe discerning
customers will value knowing about our business philosophy and gain
greater confidence in placing their business with us. In return we
will look after them diligently and hope to help them and their own
business enterprises succeed.