How to Start a Computer Business
Copyright 2010 by Morris Rosenthal
All Rights Reserved
Pricing and Selling a PC
You've sold your first PC to your mother's friend Doris, and then find out that whether you order it assembled or in pieces, there's not going to be any profit because you included Windows XP in the price but forgot to add in the cost. This drives you to ignore the top two tiers of distribution and go straight to the small importers with the aggressive pricing. You know the stuff is good because it says so on the fax. By using PriceWatch.com and going with the most aggressive pricing for each part, you figure you can scrape out a fifty dollar profit. You order an ATX case, keyboard and mouse from one place; a motherboard, CPU, RAM, hard drive and OEM Windows XP from a second place; and a floppy drive, video adapter, CD-ROM, modem, monitor and soundcard from a third place. Even the guy on the other coast promises you'll have the stuff within a week. The next day, the ATX case and power supply show up with the keyboard and mouse, and the UPS gal wants a check for $80. "What's this?" you say. "The parts cost was $71." The UPS gal explains that the shipping cost was $5 and the COD tag allowing you to pay with company check cost $4. You pay and go back to your spreadsheet to see where this is heading. Three days later, the motherboard, CPU, hard drive and Windows show up from the middle of the country by Fed-X. You feel pretty good until you look at the invoice, which shows your credit card was billed for $355. Wait a minute, the parts total was $321. The bottom of the invoice shows a $29 item for 2nd day shipping, and another $5 for handling and insurance. You call the supplier, who reminds you that you wanted it by Thursday, and that he did tell you he was waiting for a shipment of RAM to arrive Tuesday morning. Well, at least you can give yourself credit that you bought the motherboard, CPU and RAM from a single vendor. Doing otherwise before your really know your vendors is pretty risky.
After assembling the parts that have arrived, you settle in to wait for the package from the other coast. It shows up after a week with a COD tag for exactly what you thought you were paying! Great! You pay, unpack the stuff to finish building your first PC and find the modem is missing. You read the invoice and see that the modem was "backordered" and the COD amount didn't include it. You run to the phone and call the vendor, who tells you, "Don't worry, it went out three days ago." "Call me next time before you backorder something on me," you yell at the voice. After you hang up, the voice says "Jerk." Three days later, the $29 modem shows up with a COD tag for $38. Hey, he did have to handle it separately, and the $4 for the COD is a constant. It's not the modem you ordered, but at this point, Doris is calling every day (she pre-paid), so you swallow a total of $81 ($9 + $34 + $29 +$9) in shipping, handling and insurance costs. You begin to see where ordering everything from one nearby vendor, preferably with net terms (non-COD) or a credit card, makes more sense than parting the thing out all over creation.
You put all the paperwork in a file folder labeled "Doris" and file it. This is really a critical step. Nobody will take defective stuff back without paperwork, unless you have a real good relationship and can get the salesman to look it up on their computer system for you. You finish putting the PC together, load Windows XP, and everything is great. You load all the driver CDs for the video, modem, and sound card (you forgot to include speakers in the price), and Windows XP now takes twice as long to boot. Par for the course. The monitor gives off an odor like burning plastic on an ocean breeze, but you figure that will clear up. You run Scan Disk a couple times, wonder what a 24 hour burn-in really means, and if you should spend a hundred dollars on some testing software. Unless you have money to burn, don't bother. Just leave the thing turned on over night and check that it still works in the morning. It's a decent test, and you're doing a lot more than most guys I've known.
You put the PC in the car, and drive it to the customer's home. If you were Gateway or Dell, you could leave it on the doorstep, ring the doorbell and run, but you aren't. You take the PC out of the box and plug everything together. Your customer turns it on, the Microsoft flag appears, so you leave your homemade business card and go home relieved that you only lost around $31 selling your first PC. You use a hobby knife to cut up the boxes that Doris didn't want and you put them out for recycling day. The foam peanuts you save, believing that eventually they'll come in handy- good luck. The next morning the phone rings, your first tech support call. Doris bought an inkjet printer at Staples (they had it cheaper than any price you could find) and it doesn't work - Staples tells her it sounds like a computer problem. You warn your mother's dearest and oldest friend that if it's not a computer problem, you'll have to charge her your $50 field service rate, and she agrees. You arrive at her house, and immediately see that she's trying to use old typewriter paper in the printer and the paper isn't heavy enough for the feeder, producing all sorts of jams and "printer not ready or not connected" errors. Since you only spend two minutes in the house and it's such a silly problem, you can't bring yourself to charge her.
Being the clever sort, you cut a deal with your local Internet Service Provider (ISP) where they promise to pay you $100 at the end of the year for each new customer you deliver to them. You call your customer, talk her out of going with AOL or Compuserve, which her son in Dallas has told her to get, and you drive out and create a dial-up-networking connection to her new ISP. You set her up with Internet Explorer and Outlook Express, spend two or three hours teaching her how to use e-mail and buy junk on E-Bay. Then you go home satisfied that you're now making the $35 to $50 an hour you always knew you were worth, even if you won't get it for twelve months.
Unfortunately, when her son visits for Christmas, he convinces her that she can save big bucks by signing a multi-year deal with a national provider, and your $100 miraculously vanishes. Adding insult to injury, the day after New Year's she calls you to say the modem isn't working anymore. On hearing that she has moved to AOL, you spend a half-hour on the phone angrily explaining that it's probably a software problem, and that you'll have to charge that elusive $50 field rate if you come out. She agrees, and you show up to find that the modem really did die.
You go home, pull out the "Doris" folder, call the vendor, who gives you an RMA (Return Merchandise Authorization) number and tells you he'll ship a replacement. You breathe a sigh of relief that the vendor is still in business, since you haven't talked to him in three months, and then send off the modem. After a week, you call, and he explains that he has to ship it back to his supplier, but they turn stuff around really fast, and you should have the replacement within two weeks. You give up and call your local importer and buy another $29 modem, paying with a credit card. It comes the next day and you install it. Doris is pretty upset at having been offline for a week, and suggests that maybe you've bitten off more than you can chew in "your little computer business." Two months later, her original modem arrives in a beat up package from some place you never heard of with a note saying they tested it fully and it worked for them. You put it in your own PC to test it and immediately smell smoke. Welcome to the PC business.
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