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When you start out, regardless of your markup, parts will be a lose for you. Think of it as an investment in the future that will pay off well down the road a year or two. The actual costs of parts is higher than the selling price you pay so if you are ordering as you need items, your costs will be higher than that $1 you charge for the diode that was listed as $0.03 from the supplier.
The expensive part is lost productivity. Your time is your main asset so if it is not generating labor income, it is decreasing your income potential by a lot when you take 30 minutes assembling an order, pay for shipping, the lost time waiting for it to arrive that requires you to reassemble, partially, the unit for storage, the wasted time disassembling when it arrives, the wasted time getting back up to speed about what had been done or detected during the first work on it, assuming warranty risk if the part fails, and many more dents to your income.
After a while you will find a pattern of parts that are used regularly and invest in more than needed so next the following repairs will be profitable and faster because the item is in stock.
Get into the habit of seeing the customer as an excuse to build inventory in a methodical way, over the long haul. Need a diode, buy 10 minimum. Charge a 10 x price to the customer .A more expensive part like a reverb pan, double the price, buy two if you need one. The customer pays a portion of the investment of future stock. Over a year or two you will discover that parts inventory is the biggest profit center you have, because you have built up ready stock, your bench time becomes more effective, it takes less total time to do the repair since all your work is directed to what the customer thinks he is paying for....your labor. If you told him you were charging $60/hour to diagnosis and correct the problem he would have no objection but if you added $30 for that hunting down the part and ordering it, he would be outraged. So the key to profitability is to maximize repair effectiveness, by increasing billable time and decreasing the housekeeping tasks like parts ordering, warranty claim forms, cleaning supply, bookkeeping. Do those things but structure your business so they impact your bench time the least. For example hire a retired bookkeeper to come in a few hours each week to enter the data into your accounting system. Your input is just keeping the records in a manageable form, like all parts invoices in one box, completed workorders in another, every sales receipt in another. The bookkeeper can do those tasks in about 1/10 the time you can so you are way ahead paying for that and you staying on the bench. That way, what was a loss to you, becomes a profitable enhancement to your business. Paying $15/hour to enter the week's data, for 1-2 hours, earns you 3-5 hours ($180-$300)of billable bench time that you would not have if you tried to "save" the $15-30 by doing it yourself.
Sustained profit comes more from those little improvements to efficiency more than what you charge. I thought it was fun honing systems that improved efficiency so everything was easier, faster and more productive. For $20 years I charged $65/hour, and later a flat rate when my competitors were needing to charge $100/hour to make any profit. My income steadily increased over time, despite the cost of living had risen a great deal over the same period. If a repair needed parts we did not have, I considered that a management error and paid the penalty of lost productivity as sort of a fine.
Over years, a larger shop can easily accumulate well over $100,000 in parts, and some of those parts become more valuable with time when they are no longer available.
If you have the intent of growing to be a larger shop, with employees, set up systems that can expand without major changes or disruptions to work when you outgrow them. I suggest small one man operations to specialize, find a narrow niche that will have a distinct parts and equipment need, a focused market and less competition and not be a generalist. Doing everything that comes in the door is a major impediment to profits since you never can be as efficient in repairs, or have the needed parts, or be as well known as the expert compared to you becoming known as THE expert in some narrow niche where your time and parts will be more specialized. With the internet now making finding the customers who need an expert is easier and easier for high specialization, and more difficult for generalists. Focus on some model or brand that is practical to ship to you. When I had my large shop, we had a number of specialties where we had large stock, and unmatched expertise such as digital tape decks, where we did more ADAT repairs than anyone else in the world including the factory. We charged 1/2 what others charged yet surely had higher profits, because no repair took over an hour or had to be shelved waiting for parts. A friend went from being a generalists and starving for years to specializing in 2 brands of German microphones and has a 1 year waiting line at a flat labor rate of $500. He closes for a month every year and travels the world, and spends less time working and more time living now that he is highly specialized. There are lots of niches that could be pursued.
So plan your little business now, when you have time and mistakes are cheap. Later on, mistakes are not so cheap. Decide what your goal is and plan accordingly. If it is to stay a part hobby, avoid entanglements that bog you down, like taking in items you really are not efficient in repairing, both you and the customer can lose because the additional time and frustration
required to repair something you are not fully up on is not fun, a major goal of a hobby.
Have fun, regardless if it is hobby or for a living. If you are not having fun, the profits do not make up for the loss in happiness and well being.
The expensive part is lost productivity. Your time is your main asset so if it is not generating labor income, it is decreasing your income potential by a lot when you take 30 minutes assembling an order, pay for shipping, the lost time waiting for it to arrive that requires you to reassemble, partially, the unit for storage, the wasted time disassembling when it arrives, the wasted time getting back up to speed about what had been done or detected during the first work on it, assuming warranty risk if the part fails, and many more dents to your income.
After a while you will find a pattern of parts that are used regularly and invest in more than needed so next the following repairs will be profitable and faster because the item is in stock.
Get into the habit of seeing the customer as an excuse to build inventory in a methodical way, over the long haul. Need a diode, buy 10 minimum. Charge a 10 x price to the customer .A more expensive part like a reverb pan, double the price, buy two if you need one. The customer pays a portion of the investment of future stock. Over a year or two you will discover that parts inventory is the biggest profit center you have, because you have built up ready stock, your bench time becomes more effective, it takes less total time to do the repair since all your work is directed to what the customer thinks he is paying for....your labor. If you told him you were charging $60/hour to diagnosis and correct the problem he would have no objection but if you added $30 for that hunting down the part and ordering it, he would be outraged. So the key to profitability is to maximize repair effectiveness, by increasing billable time and decreasing the housekeeping tasks like parts ordering, warranty claim forms, cleaning supply, bookkeeping. Do those things but structure your business so they impact your bench time the least. For example hire a retired bookkeeper to come in a few hours each week to enter the data into your accounting system. Your input is just keeping the records in a manageable form, like all parts invoices in one box, completed workorders in another, every sales receipt in another. The bookkeeper can do those tasks in about 1/10 the time you can so you are way ahead paying for that and you staying on the bench. That way, what was a loss to you, becomes a profitable enhancement to your business. Paying $15/hour to enter the week's data, for 1-2 hours, earns you 3-5 hours ($180-$300)of billable bench time that you would not have if you tried to "save" the $15-30 by doing it yourself.
Sustained profit comes more from those little improvements to efficiency more than what you charge. I thought it was fun honing systems that improved efficiency so everything was easier, faster and more productive. For $20 years I charged $65/hour, and later a flat rate when my competitors were needing to charge $100/hour to make any profit. My income steadily increased over time, despite the cost of living had risen a great deal over the same period. If a repair needed parts we did not have, I considered that a management error and paid the penalty of lost productivity as sort of a fine.
Over years, a larger shop can easily accumulate well over $100,000 in parts, and some of those parts become more valuable with time when they are no longer available.
If you have the intent of growing to be a larger shop, with employees, set up systems that can expand without major changes or disruptions to work when you outgrow them. I suggest small one man operations to specialize, find a narrow niche that will have a distinct parts and equipment need, a focused market and less competition and not be a generalist. Doing everything that comes in the door is a major impediment to profits since you never can be as efficient in repairs, or have the needed parts, or be as well known as the expert compared to you becoming known as THE expert in some narrow niche where your time and parts will be more specialized. With the internet now making finding the customers who need an expert is easier and easier for high specialization, and more difficult for generalists. Focus on some model or brand that is practical to ship to you. When I had my large shop, we had a number of specialties where we had large stock, and unmatched expertise such as digital tape decks, where we did more ADAT repairs than anyone else in the world including the factory. We charged 1/2 what others charged yet surely had higher profits, because no repair took over an hour or had to be shelved waiting for parts. A friend went from being a generalists and starving for years to specializing in 2 brands of German microphones and has a 1 year waiting line at a flat labor rate of $500. He closes for a month every year and travels the world, and spends less time working and more time living now that he is highly specialized. There are lots of niches that could be pursued.
So plan your little business now, when you have time and mistakes are cheap. Later on, mistakes are not so cheap. Decide what your goal is and plan accordingly. If it is to stay a part hobby, avoid entanglements that bog you down, like taking in items you really are not efficient in repairing, both you and the customer can lose because the additional time and frustration
required to repair something you are not fully up on is not fun, a major goal of a hobby.
Have fun, regardless if it is hobby or for a living. If you are not having fun, the profits do not make up for the loss in happiness and well being.
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