What is a good profit margin for a new business with no customers (contracting)?

[steppinthrax]

So I'm bidding on a contracts, mainly supply contracts.

I'm bidding on a supply contract of about 13 different workers safety materials (eyewear, hard hats, glasses, vest (various sizes, flashlights). Total of 300 individuals items of 13 types. Overall the total costs is around $5,200. I added roughly $5.00 to $10.00 to each item making the total costs around $7,500 for everything. Overall we are looking at only a $2000 profit for this. There are two factors I'm thinking.

1. As a new business I don't really have any established distributors or resellers I'm working with. So I'm hunting around for the cheapest buy. Yet my price may be a bit higher than larger companies that can get better pricing.

2. Given "Number 1", I'm trying to keep my profit low, yet I don't want to keep it too low to "be taken advantage of", what is a healthy number that will kinda be like "in the middle"?

Thanks

[VincentBookkeeping]

Unless you have funds to burn through to run your business, you need to take your total operating costs per month or year (assuming this one contract will be the only contract you get this month to carry your business through) and divide your total operating costs according to get a base line number to keep your business afloat.

Example 1
$8,000.00 Operating expense per month
$2,000.00 Gross profit on Contract
-$6,000.00 Monthly Loss

Example 2
$1,000.00 Operating expense per month
$2,000.00 Gross profit on Contract
$1,000.00 Monthly Profit

[nealrm]

A good profit margin is between 2 and 500%, depending on the market and type of business. Right now you can make about 5-8% in the market at low risk. So I wouldn't go much lower than that.

[steppinthrax]

Unless you have funds to burn through to run your business, you need to take your total operating costs per month or year (assuming this one contract will be the only contract you get this month to carry your business through) and divide your total operating costs according to get a base line number to keep your business afloat.

Example 1
$8,000.00 Operating expense per month
$2,000.00 Gross profit on Contract
-$6,000.00 Monthly Loss

Example 2
$1,000.00 Operating expense per month
$2,000.00 Gross profit on Contract
$1,000.00 Monthly Profit

Yeah, I'm running this out of my house. As far as expenses, very minimal, almost nothing. Getting started. I"m bidding on whatever contracts I can from all different states. So if I don't get the contract I don't get it.

[steppinthrax]

A good profit margin is between 2 and 500%, depending on the market and type of business. Right now you can make about 5-8% in the market at low risk. So I wouldn't go much lower than that.

So 5% of the sale is around 260 dollars or so. That's piss money. LOL Not even worth it.

[nealrm]

So 5% of the sale is around 260 dollars or so. That's piss money. LOL Not even worth it.

Yep. You are selling items that companies can order off the internet and get free second day delivery. Hardhats sell for $11, unless you can buy them for a buck each, you aren't going to be able to get $5-$10 extra.

The items you mentioned are high volume low profit items. You make have to sell a bunch of them to make any money.

[steppinthrax]

Yep. You are selling items that companies can order off the internet and get free second day delivery. Hardhats sell for $11, unless you can buy them for a buck each, you aren't going to be able to get $5-$10 extra.

The items you mentioned are high volume low profit items. You make have to sell a bunch of them to make any money.

These are gov customers. I don't believe they have a flexibility to order items like that. They must go through purchasing. If what you are saying is correct, then I'm way off. But I'm not sure.....

[Fulcrum]

Distributors are buying thousands (if not tens of thousands) at a time of these items. This drives down the price per unit that they pay and their price could easily be reduced by 50% of what a low volume sale might be.

[steppinthrax]

Distributors are buying thousands (if not tens of thousands) at a time of these items. This drives down the price per unit that they pay and their price could easily be reduced by 50% of what a low volume sale might be.

I did some back searching through closed quotes (in the past). I found (examples) price quotes from companies that seemed to price items (similar) to what I would price it at. Like I did a "fantasy quote", searched for the item, find the lowest price. My price in one case was cheaper than what they charged the gov.

I understand that some huge distributor can outprice me (hands-down). However, these are "crumbs" I don't think a huge distributor will be after these crumbs.