How Can Your Business Profitably Sell $1,000 HP Hardware?
11 October 2017 | NORM MCCONKEY
A common issue that I hear from every dealership today is that there is no profit selling desktop HP hardware. It’s not true, you can sell it all day long and make your dealership as much as you do with a larger A3 device. Let’s jump into the math.
The model I’ve chosen here is an HP M577 DW Color MFP.
Here’s the cost on CDW’s website
It’s regularly $899, but if you are HP authorized, it has a $150 manufacturer’s rebate. I’m going to guess that your cost is around $700 from distribution, so effectively, with the rebate it’s about $550. Therefore, to sell at the same cost as CDW, you’d make about $200 profit on this device.
That’s not a lot. But wait, there’s more!
Would you not also quote them for at least one set of cartridges for the device, seeing as the starter cartridges will last about a week? Of course! Here’s where HP is now your friend. A set of four of those supplies would cost $300 each, so add another $1,200 to the price. That also nets you another $200 in gross margin. You are now up to a $2,500 sale and $400 in gross margin.
This is the most important part of the sale. You need the customer to see you as the source for supplies. Every month (on average) they will need one $300 supply. Over the course of three years, this adds (36 months x $300) an incredible $10,800 in revenue and $1800 in gross margin.
What about installation? Do you offer that service? Also setting up a device on the network, installing drivers, and making sure it’s running perfectly? How much do you charge for that? For a device with five employees connected, pin code printing and network installation—I think that’s a $200 service. It should cost you $100 in labor, so there is another $100 in profit.
What about the disposal fee for an old device? Does CDW take care of that? Nope. So unless they want their office looking like an elephant graveyard, someone needs to cart the old device away. You can (and should!) charge for that. You’ve got a truck there anyway. What other technical stuff do they have that could be taken away? Laptops, displays? Old phones? Now, would they like a certificate of data destruction with that, or are they satisfied there is no personally identifiable information, or customer details? Hmm, I thought so. Can we charge an additional $50 per device for removal, and $100 for the safe destruction of hard disks?
What about a service plan? Should they buy HP’s 3-year, next day service option? It’s another $700. You’d make another $200 on that SKU. Or, you could simply tell them they don’t need that, but your break-fix service is $200 minimum per service call, plus parts. Either way, you win.
Let’s summarize the revenue and gross margin opportunity. One that started with an $899 desktop MFP, that could not generate margin.
One additional point: whoever said you need to match online resellers? Some customers will always want the lowest cost product, but are they your customers? You have made a business of finding customers that pay for the value of a recognized name, superior service, and a local business.
Selling $1,000 hardware is profitable. It may not be as profitable as A3 sales, but that’s OK. Continue to sell larger A3 hardware where you can. The $1,000 hardware has a place:
1. In smaller businesses (4-5 employees)
2. In workgroup settings
3. In place of existing A4 desktop single function hardware
This is not a face-to-face sell.
This sales model can be done online with a quote engine. That process looks like this:
Your outside sales team will look at this model and try to convert it into an A3 sale—because that is the only way for them to make a commission they want. If you allow that to happen, they will likely lose a lot more than they can win. As the saying goes, if you only have a hammer, everything looks like a nail.
An inside sales rep will not only sell many of these devices, by mining your current client list for sales, they can also help you branch out and sell other technology like laptops, displays, supplies, and services.
Imagine how much money a $100/day employee doing this could earn your company? They have a ready-made customer list to sell/quote to. If you have 500 customers, could they sell two printers per week? It’s almost impossible not to! That would create an additional $1.25 million in revenue and $125K in margin.
Do you still think you can’t make money selling HP hardware? Let’s get started.
About the Author
Norm McConkey has been involved in the print, imaging, and software/tech business since 1993. Holding executive level positions in a number of emerging technology firms, he founded PrintFleet in 2003, and Tangent MTW in 2009. A founding member of the MPSA, an award winning author and presenter, Norm has spoken at various industry events around the world including the Lyra Imaging Symposium, Photizo confernece, ITEX Tradeshow, Regional BTA conferences, Remax Europe, and World Expo. He has been contracted to consult and build go to market and sales training programs with several OEM manufacturers such as Canon USA, and HP, and distributors such as Parts Now and Supplies Network, as well Resellers including Office Depot. Norm’s current project, MPSToolbox (www.mpstoolbox.com), is a software platform which helps technology dealers develop and maintain e-commerce websites.