Thread: Why Are We So Mercilessly Skinned?

Just as a matter of interest, I wonder if you know where the items are made?

Originally Posted by Avery

Just as a matter of interest, I wonder if you know where the items are made?

Yep, made in Taiwan. We're closer than Canada and way closer than the UK so there's no reason why the freight should be an issue.

Postage is always a killer for us though. The Americans have ridiculously high postage rates.

TT

Originally Posted by Twisted Tenon

Postage is always a killer for us though. The Americans have ridiculously high postage rates.

TT

Not as high as ours or the Canadians though.

That's why overseas retailers and manufactures call Australia "Treasure Island" look at DVDs, iTunes, Foxtel etc. and tools!!


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I don't know a retailer who works on much less than 100% mark up. I had that very conversation with one this afternoon and he reckons if anyone works on less they are mad.

Chris from that 100% mark up they have to cover rent, business expenses, wages, etc and then something called profit. Otherwise why be in business?

Originally Posted by Big Shed

Not as high as ours or the Canadians though.

Fair point. I forget it works both ways.

TT

Maybe they aren't high enough!

I had a conversation with a new customer this arvo. She enquired, since I was so ridiculously busy, why I don't hire a person or 3 to help.

Bad idea. Very very bad idea.

Besides the wages, holiday pay, 17 forms of reason to not turn up, super, taxes, extra paperwork, new and additional insurances, termination/retrenchment provisions, government forms, bigger studio, taxes, taxes and more taxes and god knows what else..... What a nightmare.

I would seriously like to know if anyone here runs a working woodshop and what the additional overhead that is needed to cover above the basic salary. I'd recon it would be astronomical.

I said it elsewhere recently here too.... To buy a house, just how many cars/toasters/refrigerators are needed to be sold compared to Canada? I'd recon it would be 5x or 8x ....

Something has to break. We don't MAKE anything here anymore and from what I read our mining sales have fallen off a stupendous cliff too.

Originally Posted by george mavridis

Chris from that 100% mark up they have to cover rent, business expenses, wages, etc and then something called profit. Otherwise why be in business?

I am more aware than most of the overheads and back end costs as I have been there and done that and likely doing it again shortly but I still think it is excessive from my experience. Every step makes a 100% mark up, it does not take a brain surgeon to work out that the retail customer is copping it in the neck. The end retailer is no better off than the customer in reality.

Originally Posted by Evanism

I would seriously like to know if anyone here runs a working woodshop and what the additional overhead that is needed to cover above the basic salary. I'd recon it would be astronomical.

I operated a small business about for 10 years, which I stopped about nine years ago. It was not a woodshop but I think the figures would be pretty much the same. I did light landscaping and concrete garden edging.

My "rule of thumb" calculation for hiring an employee for $20 an hour: he actually costs you $40 per hour in reality - sick leave, annual leave, superannuation, workers comp contributions, factor in the cost of training, the cost of your own time in calculating wages, working as an unpaid tax collector for the government - it all adds up.

Then there is their reliability once you are spending that much money supporting their lifestyle. You get some 20-year old who has never had a job before and the money goes to their head and they wipe themself out so badly over the weekend that they are physically incapable of getting a shovelful of cement in a concrete mixer on Monday morning. It can be heartbreaking.

As to the markup on product, I used to buy 40kg bags of cement for $10 each, then sell them for around $100 each - with a few extras like sand. water and labor added. Certainly not a 10 X markup in reality. Especially when you look at how much it cost you to advertise your services so that you could be in a position to be one of the providers that the customer even considered to get a quote from.

So there you are out there, working your ring off to run a business, paying your taxes, creating jobs for others who in turn pay their taxes, investing the meagre profits to support yourself in retirement, and being taxed on the interest on your retirement savings, and all the time knowing that you will never receive a government pension like all the dole bludgers you have supported all your working life will. Instead you dont get anything, and continue to be taxed in retirement and continuing to support those who won't help themselves.

Cheers

Doug

Originally Posted by Evanism

Maybe they aren't high enough!

I would seriously like to know if anyone here runs a working woodshop and what the additional overhead that is needed to cover above the basic salary. I'd recon it would be astronomical.

.

From memory, the rule of thumb regarding employing someone is that they should be producing 4X the value of what they are paid to get to breakeven point.

There was an article in one of the trade publications that explained mark up.

It went something like this.

There are 2080 available hours for work per year.
Then we subtract:
Vacation, 80 hours
Transportation t/f job site, 1 hour each way,500 hour
Weekly administrative meetings (Job assignments, task planning, etc.) 1 hour per week or 50 hours
Holidays, 11 days or 88 hours
Training administrative (Laws) or skills, 3 weeks per year or 120 hours
Miscellaneous tail chasing, material purchase, tool acquisition, etc. or trip to Bunnings, 3 hours per week or 150 hours.

This leaves 1092 working hours per year.

If an employee is paid $20 per hour, their chargeable rate has to be $38 per hour just to break even to this point.

It gets worse. The employment tax (Social Security in the US) 7.62%, $3170
There are other employment taxes that vary by state in the US.
Health care and dental care about $650 per month or $7800 per year. We do not have a national health care plan.
Retirement savings 50% match of employee contribution of 6% or $1250. These savings are not taxed until withdrawal.

All this brings the employee cost of a bit more than $49 per hour.

And then, a tool allowance, a petty cash allowance for the miscellaneous stuff and a company vehicle. While these are optional costs they are almost universal employer covered costs in the remodeling industry. What do we add? Another $11 an hour? Now we are at $60 an hour. The vehicle cost may be split across about 6 employees. (Six passenger pickup truck) The lead or foreman probably has their own vehicle and may cover 3 or 4 jobs.

If the remodeler doesn't want to work just for fun, there has to be a profit mark up. The number is usually 30% plus another 20% to cover office/phones/accounting/business insurance/workman's compensation insurance all generally included in overhead plus all those FUBAR jobs that weren't bid correctly. (It's a military term) So the $20 per hour actual salary becomes $90 so that the owner of the business can live a normal life. Most remodelers will round this up to an even $100 per hour when costing out a job.

As for the original question I think it is because the manufacturers are taking Australia for a ride. The resellers are beholden by and large to the importer who is appointed by the manufacturer and the importer are told what they will pay and hence what the wholesale price is.

Some adventurous retails do import themselves but not for name brands since there are no restrictive practices laws to prevent the manufacturer from charging effectively what they want. So if you want name brand products buy form overseas.

Of course the model being used by many companies selling over the internet means that their overhead can be lower so they can manage with lower margins.

However since the GFC the demand and thus the price of minerals has dropped therefore driving down the AU$ making imports much more expensive. This is of course good for the government since it reduces imports and increases exports leading to a lower current account deficit thus making our economy stronger. However it is not so good for buying overseas goods. It would not be so good as a high demand for Australian goods but that will drive up the AU$ and that drives down demand for Australian value add and drives up imports.

I had better stop before I put you all to sleep.