Don't Fall Into the Markup Trap

Years ago I found a printer in New Jersey who marked up outside purchases (like brokered items), but only after he spent days finding the lowest possible price. Then, he in turn, marked the purchases up by 2 to 1. Good markup, but bad income.

For instance he would find a perfect solution for $1,000 and mark it up to $2,000. But he was afraid the customer wouldn’t buy it for that, so he spent—on average—three more days finding a better price point with another vendor.

Say after three days he found one for $500. Problem is he marked that up 2 to 1 and sold it for $1,000. So what did he get for his time? He reduced his income from $1,000 ($1,000 x 2 - $1,000 cost) to $500 ($500 x 2 - $500 cost). Oh, yes. He never had time to get things done.

So, he could either take the original find and present it to the customer, and thus make $1,000, or he could spend the three days, but sell it for the original $2,000 and make $1,500 ($2,000 - $500 cost).

This is an oversimplification, but I’m sure you get the point. He did. He stopped spending all the time, presented the customer with the original find. He made more money and had more time to do important things.

Make sure you don’t fall into this markup trap.