Don’t make this expensive and painful mistake the next time you purchasing a product and reselling it to your clients.
There’s a “bad” business practice happening in interior design businesses and I want to share with you how to avoid the pitfalls that are traping other designers.
You may already know this, but let’s review the steps to successful and profitable purchasing:
1. Tell the client in your first meeting that after the design process is complete, your company offers concierge level purchasing services. Explain how you expedite, manage and supervise their orders and let them know you will certainly not be the cheapest price on the internet (those guys are not offering your level of service). You do however promise to provide excellent quality for the money through known vendors who stand behind the product they sell.
2. Explain your product purchasing service in your Letter of Agreement, being clear about the amount of your purchasing fee. Cover it thoroughly with your client when you present the Letter of Agreement and then you don’t need to bring it up again.
3. When you create your purchase proposals, just show one price for the product rather than separating the wholesale/designer net price and purchasing fee.
4. Last but not least… charge sales tax on the whole amount.
DO NOT split the wholesale/designer net price out from your purchasing fee and then charge sales tax on the smaller amount to save the client a little money.
You may think you’re being a hero for your client…
But if you get caught up in a sales tax audit (they actually do audits on small businesses often, I personally have been audited 5 or 6 times) you will be held personally responsible for all that sales tax you didn’t collect
That means you’ll be required to pay the state their sales tax due plus penalties out of your money.
The state wants their sales tax money, they can see through the ploy of a purchasing “fee”, they consider it part of the purchase price (as it actually is) and they expect to be paid immediately.
Just skip the heroic money-saving tactics and create a simple, honest, clear and repeatable system for your purchasing and you will be well protected from unseen liabilities.
It’ll be a win-win for both YOU and your client!