computer building help 3

[xSBDx]

Let me first state that i am not trying to sell anyone a computer. I have just started making computers and thought it would be interesting if i could make money off making them and selling. I see custom computers all over ebay and places like that, and i said if dell could do it why can't I. If you any advice about this and how to get cash flow going to start some kind of thing like this please let me know!!!!!


SBD
"silent but deadly"

 

[stduc]

You've answered your own question. Build one and put it on eBay!

 

[Steve88]

Make sure you research what your building and what is out there to buy.

For instance, Look at a pc with the same spec you want to build. Cost up what you can buy the parts for. Add in your time costs and you should have a pretty good idea how much you can sell for. If your doing it by post then you have to add in additional p&p costs etc. Also consider what sort of aftersales your going to provide etc etc. If someone buys a computer from you and it goes wrong and your not providing support your sales will soon dry up as word spreads like wildfire on places like ebay etc

Also something to consider is what makes your product different to all the others...you'll be supprised how many people will look at special one offs etc.

It's not easy you need to have a good supplier for your parts and one that is reliable. They are hard to find.

Good luck.

 

[xSBDx]

thanks guys that was all very helpful

 

[kmcferrin]

I don't know how it works in other countries, but in most parts of the USA you can register with your city to get a vendor's license. This is usually a small fee ($100 or less), and with that license you can order PC hardware for resale from distributors. This has two main advantages:

1. If you buy the hardware for resale, you do not have to pay sales tax on it.

2. If you buy the hardware from a distributor you can get a lower price on the components than if you bought them at retail (even from the cheaper retail outlets).

3. You may be able to take advantage of specials offerred to resellers only through distributors like buy one get one free, deep discounts for volume purchases, combo deals, etc.

Now the downside of being a PC reseller:

1. You are competing against companies like Dell, HP, Gateway, etc. They can offer a lot more functionality or performance at the same price point as you because they can buy components in bulk and have very efficient manufacturing/assembly processes.

2. Unless you have a special hook, niche market, or feature, then you will largely be competing with others based on price until you develop a good name for yourself. And since you're in this to make money, trying to compete with the big boys on price is going to make it hard to remain profitable. Which leads to number 3.

3. Profit margins in the PC industry are razor thin and support costs are high, even for the big companies that buy in bulk. The gross profit margin on a complete system is usually 10% or less. If you can sell extended warranties or more specialized (and profitable) hardware with the system, then that gets higher. But if you make $50 off of a $500 sale, then figure in your time and expenses you may decide that it isn't worth the effort. Especially if you have to spend any time at all supporting it the product post-sale.

In the example above let's assume that it takes you 1 hour to assemble, install, and configure the $500 PC (that's optimistic). Let's also say it costs you $450 in components. Your gross profit is $50. Let's say that you spend another $10 in overhead (it costs money to ship the components to you, post the auction or pay for a web host or whatever. All of that effort has netted you $40 for an hours work. Not bad.

But then the user receives the PC and has a problem, and you spend and hour on the phone with them fixing the issue. Now your pay has dropped to about $20 an hour. What if there is a problem where the mainboard dies and needs to be replaced? The customer ships it back to you (at their cost), but you have to get a replacement or repaired mainboard from the manufacturer, for which you will likely pay for shipping that mainboard back to the manufacturer, then shipping the repaired PC back to the customer. And by this point you will have probably spent at least 3 hours working on the PC, and your initial $40 profit has dwindled to $10-$15 (if you're lucky). Now you're making less than minimum wage.

And of course this is all multiplied if you manage to stay in business long enough to start dealing in volume. Because instead of selling 25 PCs a week (which you could probably do on your own), you are selling 50 PCs a week and need to hire someone to help you build, configure, and ship them. And while you might be able to get by if you don't take a paycheck during a slow week (or a particularly costly week), you can't get away with not paying employees. And then there's extra costs associataed with having employees, even if you don't offer benefits (mainly employer's taxes).

Based on past experience, I will say that it is very difficult to do a PC business this way. There are some people who can be successful at it, but I think that most people who try it for awhile end up giving it up within a couple of years. It used to be a lot easier 7-10 years ago before the boom in computer sales (back when Dell and Gateway were small operations just making a name for themselves). Computer magazines were filled with literally hundreds of companies selling systems, but as the market became more commoditized the average price of a new PC dropped from $2500 to $600, and most of those companies went under or were bought up by the bigger players that are still here today.

 

[jlockley]

I love to build computers. (If you knew me, you'd be amazed). But I don't know if I could do a business in it. For one thing groups like Dell are offering such cheap options, that are up against advertising budgets you couldn't even dream of. For another new computers often need a fix here and a tweak there. How do you do this over ebay? We all know how often the modem blows in two days or..., oh well, never mind.

I think if you are tinker toy/Lego inclined you might do better to go into a repair at your place mode than build and send. Good Luck.

But they are so pleasantly modular, n'est ce pas?

 

[edfair]

I've been it the business from the times the clones first became available and made a good living building in competition with IBM for small businesses.
Did some of the reseller bit with a distributor but the profit margins kept shrinking as more distributors developed more resellers.
I can't compete with the Dells, etc on a price basis unless I am willing to price my services at $5 per hour or less. I also can't compete with the family run computer stores that have all sorts of tieins to Taiwan where they can get the parts cheaper than I can. or from local distributors where they can buy in larger quantities for price breaks.

You probably can make a good living from the service end as mentioned. You still will pay more for parts but you can charge less for labor because you don't have to support a storefront. And if you get a niche market you probably won't have to battle the competition on price.

Ed Fair
Give the wrong symptoms, get the wrong solutions.

 

[xSBDx]

Thanks everybody for all the information. This was a real eye opener for me.

 

[mainegeek]

I concur with what Edfair has said. I use to build alot of clones as well. I had to go to computer shows in order to get the components that I needed. I would get there early and pay $10 for the VIP pass so I could get in earlier and then run around and get what I needed. I would buy from the same 3 vendors each time because they gave me a descent price break.I would buy all the drives from one,mobo's,ram and cpu's from another and cases,monitors and peripherals from the other. Then race home and test the parts so I could get any DOA's back to the show for exchange before the show closed or wait a week and drive 100 miles to do it at the next show. It was a hassle but the profit margin was pretty descent back then. I rarely build anymore, maybe 4 or 5 a year. The big PC mfg have made it impossible to turn a profit on builds and in some cases even upgrades are not cost effective. It is amazing that you can now buy a complete system for about the same price as what a multi-media kit cost 10 years ago.I now only do PC and Laptop repairs/upgrades,home networking and the occasional data recovery. I know about some of the hassles that are involved with building and selling locally. I can only imagine the hassles of building and selling on e-bay, especially after the UPS guy has had your build on his truck to "kick around" for a week.

 

[kmcferrin]

Just to reiterate and agree with the others, service is where it's at. There are companies like Geek Squad who are charging exhorbitant prices for routine services. For example:

$129 to install a hard drive, memory module, or piece of software.

$129 to add a device to an existing network (takes about 2 minutes if you're really slow).

$229 to move all of your data from your old PC to your new one (most of the work here is running Windows "File and Settings Transfer Wizard" and then waiting for it to finish.)

$159 for one hour of "basic" training.

$229 for OS service (if you OS has crashed or is running slow)

Now if you can start stacking things like:

A customer has a sluggish PC. You go onsite to troubleshoot a performance problem ($229 for OS service), determining the problem is that it needs additional memory. So you also sell them a 512MB memory module and install it for them ($89 for hardware plus $129 for installation). That's $447 for an hours worth of work, plus a part that cost you $40 and mileage. Heck, you could even give them a $50 discount for buying multiple services and still make a killing on that.

 

[BaudKarma]

Service has its own set of hidden problems and back-end costs, but I definitely agree you've got a better chance of making a business out of that then from budget PC building. If I was going to try to make a living from building computers, I'd try to go high end. Build custom gaming PCs with high end components, unique case mods, that sort of thing. Build them to order for people who have too much money and are willing to pay a premium for something unique.

But reading kmcferrins price list reminds me of the few months I spent working at CompUSA in the mid 90's, and some of the prices we charged. $49 for a virus scan/clean (put the floppy disk in the drive, turn on the machine, come back when it's done). Software installation was $10.00 PER FLOPPY. That's right, it cost you $10.00 for me to eject a floppy and put in the next one. Microsoft Office came on 13 floppies, as I recall.