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?

In my industry we expect the profit margin to be disclosed - we won't pay unless it is on the final cost breakdown.

Hi Unescorted - what is your industry? I'm interested to see what sectors are prepared to reveal this info.

In construction a cost plus contract is one of the forms of contract used (rusty on this now but I think it was a green book contract). You provide fully audited monthly accounts based on pre agreed day rates for each service and an itemised list for each item supplied. If the project doesn't have a very clear outline this is a way of the client not feeling so ripped off if they want extras or as issues are found during the build.

Obviously as with all forms of contract there are good and bad points to this.

Is it possible that the scope of supply could be broken down into chunks and then an hourly rate provided for additional supply within each category where the supply need could vary.

As a simplistic example when you put your car in for a service. The basic service price may be £200 plus mot £50 with a footnote that additional labour is £40/ hr. So if windscreen wipers, bulbs etc need changing to get through the mot they get on and do that at cost plus hourly rate so when you return for your car its mot'd and ready to drive off but you may have incurred additional parts plus labour costs to get it to this state.

Ask for a research fee to determine market value of suppliers or suggest they source and you use their recommendations (a slowly raised middle finger) ask for their figures within a week or you will assume they have accepted your pricing.

Agree to be cautious over nit pickers.in good faith ok, but people who talk till they findfault and lie etc are worth limiting by a 'one review only' clause.

Some people are cunts to do business with and this is a cost in itself.

Agree with alternativetentacles second post:

'Look. You sell cars. I make adverts. If you don't like the quote then feel free to use another agency. The quote is the quote.'

Definitely do not ever Start a business mail with "I'm really sorry"

I think they sound a bit dim. You could charge everything at 'cost' if they ask and then charge them a greater fee to cover your time and overheads - you could make up any old rubbish to justify your fee, but really how long is a piece of string? You are charging for your skill and expertise and that is priced according to market rate, not cost plus.

Once they have this 'transparent' price, you are both still in the same position - the price needs to be competitive with other suppliers from their point of view and worthwhile from your point of view.

There is also the issue of confidentiality. Everything does not have to be 'transparent'.

If you do decide to go ahead with the exercise, make sure you bump up your price to cover the cost!

We are often asked for a full breakdown if costs but it doesn't show profit.

So we will say for example.

Prelims. £
Pipe work installation
No of radiators @ x each
Boiler installation
Electrical
Labour for above
Commissioning
O & M manuals

Etc

Turn it round on him, ask for a price for a car, then ask him to break it down into the cost of every last nut, bolt and screw!

Once they have this 'transparent' price, you are both still in the same position - the price needs to be competitive with other suppliers from their point of view and worthwhile from your point of view.

LOVE this point Merrymouse - nail on head

Ah but once they have this 'transparent' price they can start micro-managing parts of the bid. You're making a TV commercial - why does that sound guy cost £x/day? Can't you get someone to do it for less? Why x% on overheads? Trim those to the bone. Etc. They want to get you to do the work at cost - I really hope you don't need the business.

thanks tribpot - you have given some great advice. This whole thing has stressed us out a bit but I know we've got to hold our own. It would be disappointing if we didn't get the work but we are by no means desperate and have other clients. We'd use the time to target other potential clients too.