Pricing question

[fabricguru]

We are a small shop that buys supplies wholesale and uses them in production. Once in a while we are limited in the minimum amount we can purchase. Example: We needed 15 square feet of leather, but the leather was not sold in less than a full hide, about 47 sf. (The customer chose the leather.) We now have extra leather, which might or might not be chosen by a subsequent customer.

Meanwhile, the bill is about $313, while the customer really only should be held to 15 sf times the cost per sf. However, that would not even cover our cost of this hide.

In situations like these, do people charge for more than the amount used, or raise the per foot cost, or simply hope we'll sell the rest of the leather? The last option could take a while.

I'm making up the invoice today so prompt replies are appreciated!

[Spider]

That is one of the problems in charging time and material (T&M) for producing work. Under T&M, you should charge the client for the whole amount of the leather you purchased and hand to him the unused leather. It would have been wise to contact the customer before making the purchase and let him know and agree to the cost involved.

Best (and far more professional) is to quote the customer before doing the work. In your quotation, you would include the whole amount of the leather purchased, but then you would not have been obliged to hand the remaining material to the customer.

[fabricguru]

Yes, that's what we do with all other fabric types. We are able to manage yardages very closely. Thanks for the help.

[huggytree]

i run into this issue once in a while too!

a customer needs a certain type of piping and i doubt ill ever use it again...i charge for the whole roll, but at a reduced markup.....if i use it again someday i can make some extra profit...if not it sits in my shop taking up space...if you dont charge the full amount your losing money....this price should have been given the customer before the job was started...

how much $$ are we talking here??? your not doubling the bill after the fact are you?

you need to develop a policy on those rare leathers....never do anything at a loss or hope to sell the rest of the hide someday....just charge more for those rare items...you could give the customer the left over piece and let them figure out how to sell them....or you could sell it yourself on Ebay/Craigs list for 1/4 price to unload it....dont stockpile 100's of leathers that you'll never use

[fabricguru]

This was an unusual situation, admittedly, where the customer was in a hurry. And, most of the time we can buy half-hides. Anyway, he used about $225 worth of a hide that cost $313. I suppose I could offer the remainder for sale... ??

[huggytree]

so then your going to lose money? and be stuck with a hide youll never use?

next time charge the customer for the whole hide and give him the extra material..its his to figure out how to sell

worst case scenario i break even, but i never lose money.....and by breaking even i mean i still make my wages, just no profit

[fabricguru]

If the customer has to buy the whole hide at retail price, he might cancel the project. Well, I posted these questions b/c I knew I needed ideas from others. I think I'll make sure I don't lose on this hide, and next time advise the customer that with that much extra, he might want to choose a different hide that's available in smaller sizes. Thanks!

[KristineS]

I think you just give the customer a choice. Explain that you can use the material he/she requested, but it will cost more and here's why. Present options that could do the same thing and maybe be more cost effective. Let the customer make the choice. Unless they're a really good, high dollar customer that you know will be spending a lot more with you, I would try to be accommodating, but not at the expense of your wallet.

[huggytree]

If the customer has to buy the whole hide at retail price, he might cancel the project. Well, I posted these questions b/c I knew I needed ideas from others. I think I'll make sure I don't lose on this hide, and next time advise the customer that with that much extra, he might want to choose a different hide that's available in smaller sizes. Thanks!

if your going to lose money or break even because he chose that hide its business you can afford to lose...

all expenses get passed along to the customer...paying for a hide you cant use is an expense that you should eat