most small business's cant buy in big enough 'bulk' to get a better price...they are typically stuck being higher priced than larger companies because of this
I charge more and have a higher profit margin than most of my large competitors....i offer the quality/service the large guys cant
i reduce my costs by working efficiently and having patterns on how i do things
i also try to reduce the parts i need to carry....i find parts that can be used for multiple purposes....i probably stock 10% less parts than most of my competition
on large projects i ask my suppliers for discounts on parts/fixtures......all i typically get is 2%....sometimes i keep it and sometimes i pass it onto the customer...depends on how squeezed i am
bottom line: small business doesnt need to compete on price(and shouldnt)----cost reduction isnt as necessary
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