A question to everyone but mainly Buisness owners.

[LowBuckX]

Me and a friend where talking and the question "Is it fair for an employer to make a large profit when selling to an employee" came up... SO>> What is a fair profit percentage wise to make off of the people busting their butt to make you more money? Of coarse no one exspects a free ride in this senario

[LowBuckX]

The original question bettween me and my friend was aimed at a small "Parts manufacturing" buisness. My friend has been there for years and knows everyone in the offices so he knows what things cost. He inquired about a part that costsw the company $87 to make from start to finish all costs added in.... The company sells this part for $800 :rolleyes: His company told him he can have one for $650 thats sick and he is a bit sad over the whole thing..

[MrQuick]

wait...does that $87 include:
health care for workers?
401K?
Insurance cost?
transportation cost?
Lease cost?
State tax?
City taxes?
Equiptment?
R&D?
the bosses Benz?
the bosses wifes bling?
the bosses kids college?


Well, he can always quit and pay the $800? LOL

I kid, I kid but 20% over cost is usually the employee perk.

[LowBuckX]

wait...does that $87 include:
health care for workers?
401K?
Insurance cost?
transportation cost?
Lease cost?
State tax?
City taxes?
Equiptment?
R&D?
the bosses Benz?
the bosses wifes bling?
the bosses kids college?


Well, he can always quit and pay the $800? LOL

I kid, I kid but 20% over cost is usually the employee perk.


What part of everything dont you understand......... I kid also

[shmoov69]

It all depends on all the factors involved IMO.
What True said
Is the company selling out of each and every one they make? Ie, how much is the company "loosing" in actual sales?
What is the "employee" going to do with it? Sell it for profit or use it?
Has other "employees" abused the privlidge in the past?
Is the owner an ass?
Is the company gracious and giving in other aspects?
Is the "employee" an ass? Good or bad employee? Dependable, etc...?

Me, I will sell materials to my employees at my cost, and usually "carry" it, but that is no labor (since they are the labor!). But, I am prolly not a good example of what to do since I loan the guys money all the time at no intrest, forever, and sometimes don't get it back! LOL
But there are other factors other than just money IMO.

[Jim Nilsen]

I take it that you never scrap any of them? Do you know the maintenace man or the maintenance supervisor? The guy who scraps the trash? All of the places I have ever worked would let you take a return or a reject that could be repaired at your time and expense for free. When buying they usually went cost + whatever the + they wanted,10% to 25% is usually the normal amount.

Without knowing what the part really is it makes it hard to put a value on it to begin with. I have been sent to the machine shop many times to make a part of a machine because of the ridiculous price of a retainer or bracket that doesn't have squat for materials into it.Original replacement parts can sometimes be engineered to keep failing and I will gladly make one that is more improved than order one.

The list that was already given has all the roads covered so it is up to you to decide if they are being greedy,protective,insecure and uncaring or not.

[Tony_SS]

Jimmy, I will gladly pay you Tuesday for a hamburger today!

[LowBuckX]

It all depends on all the factors involved IMO.
What True said
Is the company selling out of each and every one they make? yes Ie, how much is the company "loosing" in actual sales?
What is the "employee" going to do with it? Sell it for profit or use it? He was going to use it..
Has other "employees" abused the privlidge in the past? He is the only employee interested in the part as he is the only one who is a car guy in the shop
Is the owner an ass? Yes he/they are
Is the company gracious and giving in other aspects? No
Is the "employee" an ass? Good or bad employee? Dependable, etc...? He designed the part and the tooling to make it... I want to leave that out because that places him higher than most of us in a shop pecking order



Answed in red

[Damn True]

That last bit matters not a whit. Anything he designs and/or engineers is the intellectual property of the employer, not the employee.

[LowBuckX]

sure but wouldnt you want to keep a valuable employee happy.. I never said he wanted a cut of the profit just a part for his car that he was more than willing to pay for... He has that part now but it was purchaced from a compeditor for a cheaper price than his employer offered

[Tony_SS]

The boss owner very well could have the 'everyone is replaceable' attitude. If that is the case, he should start looking to make some other shop owner rich instead of this guy.

[andrewb70]

One performance company that I used to work for sold parts to employees at the lowest discounted level that was available. In other words, the price that big distributors paid. Another performance company that I worked for offer parts to employees for 10% over "standard cost," which is the cost of the part that is listed in the accounting system.

Andrew

[ITLBTU]

If he were one of our employees, we would sell him the material at cost, and let him use our equipment on his own time to build it. You have to remember that there is a lot more involved in costing something out than just materials. Your buddy might have designed the part, but he was paid to do that. How much time was spent in design? How many times did parts get thrown away because it wasn't perfect? How much does all of the equipment cost to produce the part? How much is the shop rent/payments? Not to mention the cost of all of the employees benefits etc...

[shmoov69]

Well, to me it appears that there are two reasons it is the way it is.

1. They are selling out of each part they make. So therefore the company would be "loosing" only $150 instead of "loosing" $713. Which either way, THE COMPANY IS LOOSING MONEY.
2. The owners are an ass(s). Nuff said.

Tony, LOL my estimator always says that to me. Kinda shows your age! LOL

[RudeJester.s10]

Ive always done cost + 10%, and freight if its a special order item.

[bobbaganoosh]

If he design the part/tooling why can't he make one for himself? Buy the material & knock one outduring lunch or after hours (or even somewhere else). Or as stated before find a scrapped one & repair it.

[Damn True]

If he design the part/tooling why can't he make one for himself? Buy the material & knock one outduring lunch or after hours (or even somewhere else). Or as stated before find a scrapped one & repair it.

Because the product and it's design are the intellectual property of his employer. To do so would be stealing.

[WS6]

It depends on the size of the company I feel. Say you worked for a huge company like Andrew did. If that's the case, expect the company to sell it for a small profit simply because if every employee wanted one, they would be selling a lot at no profit. If the company is a small operation of say 10-20 people, he should get it for cost, especially if he is the one who basically created this part that is bringing lots of money into the company. Think of it as a small bonus. I think your friend has a right to feel betrayed/peeved/let down or whatever if the company truly is making nearly 1000% profit on this one item. Something tells me though, that he doesn't have the true cost figure correct.

[406 Q-ship]

Where I am we get the stuff at the same price as the good accounts, sad part is on high volume parts it is still cheaper to go to one of the big mail order houses.

I bet the $87 is the direct costs per unit and not the indirect like Health, taxes, and overhead of the building. Unless this company makes only one thing some of those cost are hard to seperate.

[LowBuckX]

I think it has something to do with the owners Hummer H1 ,Viper ,2 z06 and a Zr1 Vette, a a bunch of muscle cars... But I could be wrong

[Bill Howell]

I think it has something to do with the owners Hummer H1 ,Viper ,2 z06 and a Zr1 Vette, a a bunch of muscle cars... But I could be wrong

That list has nothing to do with anything other than the fact that the owner has figured out a way to sell his product for almost 10X what it cost to produce. Good for him. That and maybe a bit of jealousy on some of his employee's part.

If it were my company, I would probably sell it to an employee for about 1/2 of retail, but it is hard to say without knowing the whole story here or what the part is. I venture to say that $87 doesn't cover all the cost, period. If he has office staff, R&D time, etc, etc, all that has to be figured into the cost. Someone has to pay all that expense too.

[Steve1968LS2]

Here's the deal. If a person thinks the "boss" makes too much then they should quit and start their own company. Unless the boss is smarter than the employee in which case the boss is actually doing the employee a favor by giving them employment.

This is assuming the boss is paying a fair wage. If not then quit and find a boss willing to pay a fair wage. It's called the market.

Also the employee is assuming NO risk in the business. The owner (boss) had to put up huge amounts of capitol and if there's a turn and things go to hell HE is the one that will suffer the most. The employee will only have to go find a new job. He takes the risk, he puts up the capitol, he deserves the profit he makes.

Now in regards to selling product to employees. I personally feel it's in a companies best interest to sell product to thier workers at the lowest price they can (ie. cost). This moves inventory, creates happy workers, and (depending on the product) gets more of it into the marketplace. There's really no downside for the company so long as the employee doesn't abuse the privilage (buying stuff and selling it on ebay, buying excessive amounts for friends, etc)

Nonetheless, an employer is under no obligation to give discounts. But it is the smart thing to do.

Moral of the story: Work for a smart boss. ;)

[Mike Holleman]

The original question bettween me and my friend was aimed at a small "Parts manufacturing" buisness. My friend has been there for years and knows everyone in the offices so he knows what things cost. He inquired about a part that costsw the company $87 to make from start to finish all costs added in.... The company sells this part for $800 :rolleyes: His company told him he can have one for $650 thats sick and he is a bit sad over the whole thing..

My policy is I sell any product my company sells to an employee at 10% above cost. I also pay my company the same for anything I recieve. If I have my techs work on my equipment, I pay the same labor rate that anyone else pays. My company finances and my personal finances are two seperate things. I expect an employee to respect that and not to help themselves to product. You lead by example. A company owner should not be expecting to profit from his employees need for product nor should an employee take advantage of such an exchange except for personal use. Having said all this I have experienced my people buying for "personal use" and selling for profit. This leaves a real bad taste in the mouth.
Mike Holleman

[LowBuckX]

boy I feel a rip in the force for just asking lol

[WS6]

don't be, it's an honest question. You just have to be careful to make sure jealousy or any other negative emotion is not clouding your judgment. Ultimately, the boss could be a total dill weed and maybe unjust in expecting your friend to pay $650 for a part that costs $87. I still suspect, the part costs a lot more than $87 to produce. The automotive after market is very tight and I'm not seeing anyone selling a product for 10x what it truly costs to produce. Competition sees to it that that does not happen too often. Has your friend asked the boss if he could get a much better price on the part or maybe make one for himself after hours? A lot of bosses for small companies will gladly help a good employee out in instances like this because it's smart to have happy employees like Steve said.

[Bill Howell]

boy I feel a rip in the force for just asking lol

I agree with Trey. No need for you to feel ripped, but you did ask what we thought and I think there has been a good exchange here. The one thing about the internet, don't ask if you don't want to know and don't expect everyone to agree with you 100%. Remember only you and your friend have all the information, the rest of us are filling in the blanks, and maybe not with the same/true answers.
However, sometimes if you are too close to a situation, it is hard not to have your emotions play into a situation where the rest of us can answer your questions more objectively.

[shmoov69]

Good answer, good answer!!! I like the way you think! I'm going to keep an eye on you from now on! LOL!
Can I get political here!?!?! LOL! You are leaving it too open......:seizure:


Here's the deal. If a person thinks the "boss" makes too much then they should quit and start their own company. Unless the boss is smarter than the employee in which case the boss is actually doing the employee a favor by giving them employment.

This is assuming the boss is paying a fair wage. If not then quit and find a boss willing to pay a fair wage. It's called the market.

Also the employee is assuming NO risk in the business. The owner (boss) had to put up huge amounts of capitol and if there's a turn and things go to hell HE is the one that will suffer the most. The employee will only have to go find a new job. He takes the risk, he puts up the capitol, he deserves the profit he makes.

Now in regards to selling product to employees. I personally feel it's in a companies best interest to sell product to thier workers at the lowest price they can (ie. cost). This moves inventory, creates happy workers, and (depending on the product) gets more of it into the marketplace. There's really no downside for the company so long as the employee doesn't abuse the privilage (buying stuff and selling it on ebay, buying excessive amounts for friends, etc)

Nonetheless, an employer is under no obligation to give discounts. But it is the smart thing to do.

Moral of the story: Work for a smart boss. ;)

[bret]

If an employee has their own hotrod that they will be using our suspension parts on I will typically give them the parts at no charge, especially if we have some used or scratched up units. This accomplishes several things...employee loyalty, enthusiasm, and knowledge, and generates yet another demo vehicle with our product on it. With this, it is understood that they must install it themselves [so they understand more about our product and business] and that if they sell their car within a year, I want to recover at least my dead cost from that component. Its a very grey area but in 13 years I have yet to have anyone [including me]disappointed with this arrangement. Out of 45 employees here at Air Ride we have 19 with our air suspension on their cars. Another note: In every case [so far] we have made some [usually minor] revision to our product as a result of the feedback that we have gotten from the employee.

I struggle with a manufacturer that is really making nearly 800% profit on a component. This would seem to leave a large opportunity for competitors to duplicate for a significant savings to the market. Obviously proprietary products and processes can affect that position...but not for long.