client wants to know our exact profit

[bizmum1]

At the moment I'm struggling with a client who wants an exact breakdown including costs of the project our company is doing for them.

We gave them a couple of pricing options - one simpler than the other - to complete the project so they had a choice of costings.

However, they now say they want to know exactly how much we pay our suppliers, where every penny goes including what we earn from doing the job.

We actually think it's not fair to expect us to say exactly what our profit is an expose it to the scrutiny of the client to pass judgement on whether that's right or not.

I understand them wanting a full itemisation of what is included in the price but to expect us to disclose every single cost is a bit much. What do you think?

I'd tell them to bog off, in slightly more appropriate language. Not on to be disclosing profit margins; they'll only use it to quibble. They are either happy with the quote or not, surely?

I don't think they need any more than a breakdown of their costs. If they have a budget and its within that, then how much you make from it is irrelevant (and rude to ask).
Do they ask Tesco for the profit made on their weekly shop?

No, tell them you've given them as much detail as you can and if they aren't happy they are free to go elsewhere.

Thanks for your reply Very - those are my thoughts too. I've never been asked to do this before and as far as I'm aware, it's not standard businesss practice.

We always say no to these sorts of requests. If they don't like it they can (and do) go elsewhere.

No, I'd never give this out. They get the quote, and the invoice and the rest is none of their business. I'd probably walk away entirely as they are likely to be very controlling and questioning every invoice.

I would be reluctant to provide this too. I would worry they would review the costings and use it to work out how much they are prepared to pay you!

I would be saying "no, sorry, we do not provide that. Here is the breakdown we are able to give".

Ladies, thank you so much for your sage advice - working from home can be lonely and it's great to be able to ask the Mumsnetters - I feel better already for having your feedback xx

I would be suspicious they may be setting up a competitive business, or thinking about it and trying to get this info out of you for that reason. I think most businesses would refuse to reveal that level of information for this reason.

I'd say regardless of whether they are happy to proceed now, have a long hard think as to whether you want to work with them.

They will be very difficult clients who are unlikely to be happy at the end of the process. Do you really need their business?

Slightly on a tangent, but when I was gathering shipping quotes, one company accidentally sent me their profit margins on a range of different options. We didn't choose them because what idiot shares that kind of information. Never share profit info.

It really is between you and your accountant, if you have one.

The only other people that may need to know are potential investors or the bank.

It's also surely impossible to work out profit on a single job - you presumably have a line for overheads but you can only work out how much profit you've made at the end of the financial year, going through all your income and costs.

Sometimes DH works on projects that are "open book" but that only happens sometimes when he is working on a project that involves several different people sharing a budget, to make sure one contractor is not expecting a bigger share of the budget (producers have been known to tell him the budget is half what it actually is!) even then he wouldn't say what his profit margin was just what his projected costs and hours would be.

Tell them no, your profit margin is up to you!

You could find that they decide to cut you out and go direct to source once they know how much you are paying for things.

I would also be reluctant to over-itemise. They will be trying to cut bits out here and there that they don't think they need to pay for, but if they are integral to the service/product that you are offering then you can bet they will be expecting you to fill the gaps for free.

I would think hard before doing business with them.

Unless you're a social enterprise or non-profit of some kind, WTF has it got to do with them? Very weird.

That information is commercially sensitive and shouldn't be shared.

TBH they sound like a nightmare to do business with.

Be wary of making a decision now based on the aim of securing the contract that you come to regret.
The fact that they even made the request would give me a bad vibe tbh.
It sets the tone for future requests where they feel they have the upper hand?
Are you in a position to be choosy ?

No. If they can find somebody who can do the same job cheaper, fine. However your profit is your business.

Also completely agree with Irene.

How will you allocate the cost of heating your office to the project? Depreciation of your computer?

I have just asked DH if this ever happens to him and he says he does have a client who does this (and seems to think its reasonable). The client in question thinks a20% profit is fair when the industry standard is 40%. Needless to say this client is at the bottom of DHs list when he is prioritising jobs.

It's fairly standard practice in some industries to have open book costings.

I would give an itemized breakdown with a lump sum per element of work and also list hourly rates but I would build the profit into the hourly rates. It's not on to ask for profit.

You tell them it's proprietary information. I've never given supplier costs to a client.

The thing is, who is to say whether a project has made or lost money once you take overheads and hourly rates into account?

Equally, you can argue all you like about profit margins, but the market rate is the market rate.