How to Avoid Selling Parts and Still Make Money

While most of us have our greatest margins on service, product sales can be a nice side income. I hate carrying inventory, but that doesn’t mean I can’t make money suggesting products. I have a few strategies I’ve developed over the years to make money and not worry about selling parts.

Why I Hate Inventory

When I went full-time doing computer repair, I bought a small box of inventory to keep around with me. I still have most of it. It’s a history lesson in interfaces of the past. Things like an ATX power supply, a ps/2 keyboard and a PCI modem will probably never sell. I’m stuck with that inventory probably forever. The most expensive item I have is a 250 GB IDE laptop hard drive that I paid $70 for around eight years ago.  This problem is often referred to as spoilage, and Bryce already covered this problem.

Those examples are funny and won’t break the bank. With other companies I’ve worked with, the problems are more serious. When a customer orders a product from you, even if everyone is acting in good faith, problems develop. The two common problems I see are bankruptcy and death. These two events make it near impossible to get payment on the items ordered. You’re stuck with it if you can’t sell it. I’ve seen some companies not make payroll due to one big order that they couldn’t collect on.

Your Responsibility To The Client

Even after the client pays for the part, you still have some responsibility to the client. If they buy it from you, no matter who made it, they expect you to support it. If they buy a name brand computer from you, they want you to support it, not the manufacturer. That creates a potentially adversarial relationship.

When parts fail, they’ll count on your for support. That expectation doesn’t just include things covered under warranty. but questionable problems like computers being dropped or water damaged. You’re the one who needs to explain to a client why a part isn’t covered. Customers don’t always take the news well. After the sale, you’re in the position of being the “bad guy” by not helping them for free after the sale.

While the margins can be hefty on some parts, problems after the sale can eat into your billable hours. In the worst case scenario, you lose a valuable customer. That short term profit can negate a long term relationship. Think about your own behavior. When you buy a toaster, you first try to return it to the store you bought it from. Only after they refuse do you go to the manufacturer for repair.

Unlike a toaster, a computer can still function according to specs, but not work right according to the client. They might think the computer got a virus so you should return it. Or the internet is too slow. Or Windows doesn’t like their legacy software. You get the idea. If you sell the system, you are the first point of contact. That has to figure into your costs and profit margin.

A Better Idea: Affiliate and Commission Programs

Since I hate inventory, we carry very few parts. The only thing we regularly stock is laptop hard drives, since they so commonly fail. Otherwise, we help clients buy things and make money off the sale. Bryce accurately pointed out that if you want to sell product, you should use a B 2 B distributor. To get the best service from them, you’ll need to resell a moderate volume of product. If you’re small operation, you won’t make that much money. Clients could balk at higher prices or delays in orders. This again puts you in an adversarial relationship with the customer, much like someone trying to return a toaster.

Instead, use consumer focused distribution channels to obtain your product. If a client needs memory, go ahead and order it from Amazon. The secret is to have an affiliate account and give the client the affiliate link to order the product themselves. They get the pricing they want and you still make a percentage of the sale (usually 3-5%).

When the client orders from Amazon, Amazon takes on all the customer service issues. They handle any problems with the product along with returns. You get paid for providing the link and the services to install the product the client order.

You can extend this way beyond Amazon. Companies like Commission Junction (now CJ Affiliate)  and Performance Horizon let you create a link that a customer can use to give you a commission from major online stores. You’ll need to apply to the program and some programs are hard to get approval for, especially Apple. In those cases, you can use consumer sites like Ebates and FatWallet to earn some commission. I already put my affiliate code in those two links.

With consumer sites, you won’t be able to give a customer a link. Instead, I stay logged into those sites on my laptop and shop computer. I let customers order right there. I get a percent of the sale and the customer doesn’t pay any extra.

Some companies will offer you an affiliate or commision program directly. For example, I’m a member of Backblaze’s program. Every time a client uses my link to buy a Backblaze backup, I get a small comission. I also sell Backblaze directly to the client with a 25% markup. The same is true for DriveSavers. They’ll give you a commission and a discount to the customer.

When in doubt, contact the sales department and ask if they know of a commission program. The manufacturers want to increase sales and know customers trust us to make recommendations. If there isn’t a formal program, a sales rep might give you special treatment if you send the company sales leads. They might pay you, but even if they don’t, your clients might be able to get better discounts on service. You come out looking like a hero doing that for your clients. It solidifies your relationship with them.

The Beauty of Staying Independent: More Billable Hours

When I order products for a customer, I have to solve any problems the client has with the products. I’m not legally required to, but of course customers expect it. If the item fails within the warranty period, the client wants me to issue the RMA and deal with the hassles. That cuts into my time inventory. When they order the product from Amazon or directly from the manufacturer, they are the ones that have to deal with warranty issues. If they choose not to, they can pay us to do so. Instead of warranty problems eating into our profits, warranty issues now increase profits.

One thing you want to avoid is customers buying direct without your assistance. When a customer buys parts or products from a big-box retailer, they’ll be upsold on service. Electronics and office supply stores offer “free tune-ups” or “installation support.” A savvy salesperson might give away these services to get the sale. Now you’ve lost a customer. If the customer is buying anything computer related, you need to be part of the sales process. You can’t always sell it directly, but you can give them a link to someplace online to buy it. You may not make money off the sale, but you’ve protected your service income.

This type of approach won’t work for every business. In particular, if you have a retail location, customers expect you to have inventory and help with problems. If you’re a break-and-fix shop, or even an MSP, consider balancing the profits of selling product versus the hassles. You might find this approach still makes you money while limiting your risks.

Written by Dave Greenbaum