Copier Contracts Are Designed To Raise Your Monthly Spending
Copier leasing and copier contracts can be quite confusing. If you do not pay attention to the details, you can be signing a contract that is heavily slanted to benefit the copier sales company! Bob Brennan shows us how monthly minimum commitments and overages and penalties based on your usage can benefit the copier company, and suck the money right out of your company.
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Copier companies make their profits off of the toner and supplies area of a copier leasing contract
Typical copier contracts will have a “Min” which is a minimum number of pages you are billed for each period
Copier contracts will also have a “Max” which triggers you to pay more per page, once the maximum limit is reached each month
Monthly overages and penalties can be avoided with the proper copier selection and discussion up front
Hi, my name is Bob Brennan. I’m with International Office Technologies here in Eagan. We work in Minneapolis, and throughout the Twin Cities, helping people with their office equipment.
Today we’re going to cover copier leases and copier contracts, specifically, the min-max piece of it. Hopefully, I can give you some insight as you take a look at your contracts to figure out what this means and how it can affect you. It’s a really tricky area. It’s an area that most businesses get a little confused and they just acquiesce and sign it, thinking okay, I think this is the right thing to do, but it’s really important you understand it and where the copier companies are coming from on this specific issue.
So there’s four revenue areas that copier companies have. One is the service and supplies, which we’re going to cover today, the copier markup itself on the accessories and the finishers, the lease itself which according to Carlson you guys either covered or will be covered in the future, and end of lease purchase, buy-back, again, Courtney will be covering that as well in future videos.
Service and supplies, so copier companies make the most of its profits in this area. This is an area that the salesman has to create leverage, and this leverage is created in a penalty in the min-max area. What they typically try to do is set you up with a minimum that you have to print and then a maximum, and if you go over that maximum, you get penalized. Which, on the surface, is really a false or a phony penalty. You as a consumer need to understand that, because you’ll see as I go into this explanation further on, their cost and expenses are baked into this, so the more you print, in theory, the more revenue they’re going to generate. Yeah, they’re going to have more expenses, but that’s all baked into and offset already, but I’m going to go into details on that. Again, you have the minimum page that they try to produce and the maximum to get a penalty to get you to buy into a higher page count at a price point that is somewhat discounted in their math, but actually isn’t, and again I’ll get into that.
In order for you to have an understanding of this, it really comes down to what’s the copier’s cost, the copier company’s cost, on the service element of it. They have two major elements. One is toner and their cost between distribution, everything else, is between .02 tenths and .03 tenths of a cent per page. Then we have a service and a maintenance element, which is .06 tenths, or six-tenths of a page, or seven-tenths of a page, as well. A reasonable markup in this industry is probably to 20 and 30%. That nets out to somewhere between 1.2 and 1.3 cents a page, as it relates to, let’s say, a monthly usage around 6000 pages.
Now, this maybe higher, if you have a minimum. If you’re in a 2000 page range, it could be substantially higher, maybe, 1.6, 1.8 cents a page. The reason for that is more of on this part, right here, your service and maintenance tends to go up. Their cost is still right in this neighborhood, but your service and maintenance cost tends to go up for just your cost to do a trip charge to go out to a device is still pretty substantially high, so they have to pad this. I don’t know if that makes sense, but that’s how they’re covering their cost in that way.
How do copier companies make more money in this area? A crafty salesperson is going to say, “Hey, here’s the deal. Sure, you’re volume seems to be right around that 6000, really, I don’t want to have to penalize you if you go over. It’s okay if you’re a little bit below that, obviously, but if you go over it we got to nick you for five-tenths of a cent a page, because, hey, you’re using more toner. Hey, it’s more maintenance and everything else that goes with it.” Well, I mean, that cost is already covered over here. So, why is it coming up with a penalty, as it relates to your usage is strange.
And if they didn’t pick out the right machine for you, in terms of the machine being overworked, well, that’s their fault. They need to work with you better on that, to pick out the right machine. The end net is this, what they try to do is they come to you with a scenario where they say, “Hey, you know what? Rather than go with a lower rate and risk the penalty clause, if you will. What you really should do is go with a slightly higher rate of, let’s say, 1.6 cents a page, and we’ll go 8000 page minimum, and there’s no max.” They’re basically pulling out an extra $2400 during, let’s say, a four month contract in this scenario, or it’s an extra … I think it nets out to be another $50 a month, would be an example.
That’s how they do the funny math, as it relates to that. If you’re using a production machine, these numbers are all increased. The margin may not be as high, but your numbers are increased that way. We’ll get into more detail on that. But, basically, what we do, and we’ll cover this in another video, is we just charge a flat fee, period, and it’s fair for everybody. The more you use, again, more revenue is generated for us, but our expenses are going up, but again, it nets out to be about the same. I think the fairest scenario on this is to have a standard low price, whether you use toner, or not, so to speak, and it’s the most fairest part of this program.
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