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Old 16th April 2006, 07:01 PM   #1
Warabit
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Default Young Entreprenuer Looking for advice

Hello everyone

I am very intereseted in opening a computer business. Due to my age(and thus my credit) I cannot get very large loans. Ultimately I want to open and run a company building custom computers. Because of my funds I figured maybe I would get a smaller loan from my bank($2000) and put in an order for some processors or video cards and resell them on ebay to build funds. So i have 2 questions:

1: In order to get access to the sites to make my orders I need a business licence. What Licence is the right one to get? I am thinking S-Corp.

2: what are you thoughts on all of this?

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Old 16th April 2006, 08:16 PM   #2
Bestmiler
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I was thinking about the same thing. Ive watched custom pc's on ebay but they dont seem to sell that great. The ones that sell great are the cheap ones. You want to make yours stand out from the many rest. There have been a few threads about this before, you might want to check. Good luck.

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Old 16th April 2006, 09:21 PM   #3
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I meant just selling components for now, they seem to sell pretty well. Like GPUs and CPUs. But yeah I'll search it.

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Old 17th April 2006, 02:21 AM   #4
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I'll make a general statement true for any new business and that seems very applicable for your case: find customers first

Apparently, you want to sell specialized computers. You should be able to find 3 customers that are ready to help you and buy a first machine. They should agree to pay at least partly in advance. At the same time, you probably will have a better feel of your market segment. If you want to tackle the 'commodity computer business', then you should rethink twice and probably you should try to be only an affiliate/reseller.

To fullfill your first orders, you can probably live without a corporation and use the legal structure of a friend. In most countries, there also exist companies similar to umbrella companies offering a similar service.

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Old 17th April 2006, 06:59 AM   #5
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I agree with araymus. I would take it a step farther and also look for suppliers who are willing to support your efforts. Is there anyone locally who can supply you. You could meet with them and explain what you want to do. If they are open to it, they could provide you a line of credit so that you could start shipping product based on their inventory. If you meet with them with a few orders already in hand they likely will be more receptive. I wouldn't get a loan for starters.

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Old 17th April 2006, 09:55 AM   #6
Warabit
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There are some of the Authorized
Distributors and Resellers of major companies (Intel, AMD, ATI) that have factories about an hour drive from me. That is who I was thinking of using as a supplier. Comment?

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Old 18th April 2006, 12:38 AM   #7
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Quote:
Originally Posted by Warabit
There are some of the Authorized
Distributors and Resellers of major companies (Intel, AMD, ATI) that have factories about an hour drive from me. That is who I was thinking of using as a supplier. Comment?
Are they a wholesaler distributor or reseller? Some of the big distributor names in this industry would be TechData, Ingram Micro, and Synnex. Resellers typically buy from these distributors and "resell" to the end user.

I started a computer service company 7 years ago. We started out focusing on our services and recommended the customer buy directly from Dell, mostly because of our lack of credit. I don't want to be a naysayer, but I figured that I would share some of my experience with you.

We chose to not focus on hardware because of the low margins involved (5-10%). With players like Dell and Acer involved, you can never compete against them with price. Then there can be warranty issues. Consider this scenario...

You purchase the parts to create a clone (custom build), which you are going to sell for 10% margin. You give a one year warranty on the parts, as that is what the manufacturer will give you. IF the customer comes back to claim on the warranty (bad RAM, hard drive etc...), you would probably spend more time administering the return and replacement of the product than the product is worth. This can eat your entire profit for this computer. On the up side, I believe that you could get involved with a 3rd party warranty company so you can offer "3 year onsite" service. Then at least you can sell this to the customer if they want it (think agressive upsell on warranties when you purchase electronics).

If you want to get into component sales, then try and find a niche to carve out. Maybe you can get into supplying video cards that are hard to find, or Ram that is unavailable. If you tackle the high end stuff (gamers), expect to run into end users that know what they want and have done their research. These guys are typically looking for a good price, which may be difficult for you to offer due to you volume etc.

As far as the line of credit / loan goes, I would go anywhere you can to get some leverage. Try what Logan and others suggested about signing up with distributors. Get a co-signer for a bank line of credit. Apply for a credit card (make sure you pay it off when you get your cheque).

I think that is about it from me...time for bed. Hope that helps a bit.

Jason

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Old 18th April 2006, 06:23 AM   #8
Warabit
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Quote:
Originally Posted by jvance
Are they a wholesaler distributor or reseller? Some of the big distributor names in this industry would be TechData, Ingram Micro, and Synnex. Resellers typically buy from these distributors and "resell" to the end user.

I started a computer service company 7 years ago. We started out focusing on our services and recommended the customer buy directly from Dell, mostly because of our lack of credit. I don't want to be a naysayer, but I figured that I would share some of my experience with you.

We chose to not focus on hardware because of the low margins involved (5-10%). With players like Dell and Acer involved, you can never compete against them with price. Then there can be warranty issues. Consider this scenario...

You purchase the parts to create a clone (custom build), which you are going to sell for 10% margin. You give a one year warranty on the parts, as that is what the manufacturer will give you. IF the customer comes back to claim on the warranty (bad RAM, hard drive etc...), you would probably spend more time administering the return and replacement of the product than the product is worth. This can eat your entire profit for this computer. On the up side, I believe that you could get involved with a 3rd party warranty company so you can offer "3 year onsite" service. Then at least you can sell this to the customer if they want it (think agressive upsell on warranties when you purchase electronics).

If you want to get into component sales, then try and find a niche to carve out. Maybe you can get into supplying video cards that are hard to find, or Ram that is unavailable. If you tackle the high end stuff (gamers), expect to run into end users that know what they want and have done their research. These guys are typically looking for a good price, which may be difficult for you to offer due to you volume etc.

As far as the line of credit / loan goes, I would go anywhere you can to get some leverage. Try what Logan and others suggested about signing up with distributors. Get a co-signer for a bank line of credit. Apply for a credit card (make sure you pay it off when you get your cheque).

I think that is about it from me...time for bed. Hope that helps a bit.

Jason

Yeah, Ingram, Bell mirco, and afew others are what I'm looking at. Personally, I wouldn't consider myself competeing with Dell or Acer. A more direct competitor would be Alienware or Cyberpowerpcs. These I consider a higher level computer company. But all them have things that I dont care for, and I want to imtake what they do and make it a little better. Not only that but last i checked cyberpower had more orders than they could even handle, late builds and shipments. And alienware...well they are just so expensive.

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Old 18th April 2006, 10:29 AM   #9
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You are talking about a very small market. If you live in a large area, then you could probably just do custom high-end computers. If you don't, then I would bet most of your money will come from your services. I have a friend who has a computer shop and most of his revenue comes from fixing computers when they get a virus/worm or a piece of hardware fails.

About the S-Corp...my company is an S-Corp. It has its pros and its cons. The pros being that the business is a separate entity and the business owners can avoid some of the payroll taxes. The big con being a lot of paperwork.

My advice, from one young entreprenuer to another, make the sky the limit. Starting a business is one of the hardest things a person can do. If it was easy...everyone would be doing it. Seek advice from people who have been in your situation before (such as the people on this board). Make networking a priority...it will help. Think every decision through; you'd be surprised how one small decision can impact your business in a large way.

I hope this helps!

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Old 18th April 2006, 02:48 PM   #10
randy
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Default pricing on computer parts

I tried this awhile ago, it was a couple years ago. I tried selling hardware on ebay. The experience wasn't at all good. Because someone else out there always seems to be selling cheaper.

You have an insertion fee, and a sold fee, if you do not sell first time you can relist and if it sells you get a refund.

So if you do sell you are not getting much profit, unless you can get incredibly cheap parts. After you pay ebay fees there is not much profit. and if a product does not sell the first time or second time through, what do you do with the hardware?

in my opinion selling hardware on ebay is not a good way to generate funds for you to build capital.

An idea would be to find a place where you want to buy computer hardware, get them to provide you a couple quotes on something you would like to sell, and then go on ebay and see what those parts are going for.

We did have some luck on buying close out stock, which was older computer hardware for cheap and then selling it, but it wasn't all that profitable in the longrun. I am not saying don't do it, because there are folks making a living off of ebay every day, just realize the computer hardware marketing on ebay is pretty a pretty rough.......

Good Luck !


-Randy

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