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new machine - request a discount?

4/2/20       
alliedmill

Your business accumen input is requested:
A new machine was ordered by us last November, it was being built as we wanted with a different cutterhead than was in stock. We gave a 20% deposit at that time. It has taken the company over 4 months to produce the machine and get it to their US distributor - I was informed yesterday that it was in the states and ready for shipping. The company, of course, wants the other 80% payment first.
Needless to say, the business situation is quite different right now than it was last November. Last year was our best year ever, but we have been stone dead for the past month, with no readily foreseeable end to this.
I'd like to request a discount on the machine, or at least favorable extended payment terms. I don't know if I'm out of line for even thinking about this (can't hurt to ask, right?) - and I'm not sure how to go about wording this request.
This is not how I prefer to do business, but these are tough times and I'm trying to keep this boat afloat.
Your feedback is deeply appreciated.

4/2/20       #2: new machine - request a discount? ...
David R Sochar Member

You and I make capital purchases based upon confidence and projections. Then the world shifts under your feet, and we wake up in a new world.

I am unsure about the discount. You can always switch your shoes around and try it on the other foot. Would you consider a discount for a customer of yours?

I would be sure to take advantage of the SBA Payroll Protection Plan and the Emergency Disaster Loan program. There are links in several posts on the site, or go to the SBA site.

4/2/20       #3: new machine - request a discount? ...
alliedmill

Thanks for your thoughts, sincerely.
The federal "help" (quite a few strings attached) is not something I would use for this purchase.
My stinking suspicion is that machine sales are going to be very slow this year, and substantial deals are likely to be had for those that have the capital. So if I spend the precious cash for this machine, and 2 months from now a sizeable discount is being given then I've been a sucker.
Switching shoes: if I was a machine distributor- yes, I would allow a discount on the machine at this time. They 're probably dead in the water right now and are aware that they'll have to be offering incentives. Help a woodworker now and make a long term customer..
Again though, I don't operate in the manner of asking for more favorable pricing after a purchase has been initiated.

4/2/20       #4: new machine - request a discount? ...
Charles Wright  Member

Website: http://www.northcreekwoodworks.com

Simple:

A: If you had an order for a $30,000 oak unit that took 3 months to deliver, and the price of oak tanked during the build, would you honor a request by your customer for a discount ?

B: If you bought the machine from Germany and the Euro/ Dollar went against the dollar, would you pony up the difference ?

More to the point, you are thinking the future price may be lower because of sales incentives. But you don't know that...

I would never tell you what to do...

Be safe (just a suggestion)

4/2/20       #5: new machine - request a discount? ...
Alan F. Member

I assume you signed an agreement to the terms. If you cancel now you may lose the 20% plus whatever difference they take in selling the machine.

If you are paying cash then look at the emregency loans to replenish your cash.

If you were paying cash then maybe its time to think financing to preserve cash.

Asking for terms may be reasonable, asking for a discount on a custom machine after its been made isn't reasonable.

Are your customers canceling contracts or delaying the contracts? Are you lowering your prices 20% now?

We are closed for shelter in place so I wouldn't take delivery now but I would probally pay 60% and the rest after installation is complete but we almost always modify the terms of the agreement so we pay a percentage to start, a percentage when it lands in the US and another percentage when its arrives at our plant and another percentage 30 days after its installed.

If you signed there default agreement most likey if they want to sue you or you want to sue them it will be wherever their home office is. So you could burn 20% just in travel and out of state legal fees.

A-

4/2/20       #6: new machine - request a discount? ...
alliedmill Member

Those are both very good analogies, I think - thank you.
I posted here asking about this as I'm conflicted:
between doing what I feel is honorable (I agreed to a price on a specific machine and it was produced as requested) - and trying to sustain a business in these times and not spend cash frivolously (fear is a factor I'll admit).

4/2/20       #7: new machine - request a discount? ...
rich c.

You entered into a contract to purchase the machine when you made the down payment. I'd suggest you honor the contract.

4/2/20       #8: new machine - request a discount? ...
alliedmill Member

I've been in business for a few decades now, and you all are advising me to do the correct thing.
These are strange times, and fear has clouded my judgement.
At least - I was wise enough to ask you for your guidance! Thank you - again, very sincerely.

4/2/20       #9: new machine - request a discount? ...
Scott

Only you and your accountant and maybe your banker, probably your spouse and any business partners know the financial situation of your company.

Any options given here are just guesses on what your best course of action should be. I think there has been some good advice.
If it was me I would ask about your options , maybe they wonít change the price, but maybe they will give you more time to pay for it, sounds like you donít have the work for it now, so maybe they will hold off for 90 days?
There is also all the government financial packages, as mentioned.
The other option is maybe you need to walk away from your deposit. It is no use going bankrupt in 6 months because of a machine purchase decision that was made before the world went sideways.

You and your people have to make that decision based on your finances.
All the best.

4/3/20       #10: new machine - request a discount? ...
james e mcgrew  Member

Website: mcgrewwoodwork.com

I too have a Machine in Shipping, While I will pay the price I would guess the Answer is you can always ask. I am with some here, The capital Out Lay by the seller is done, has he met the terms, was fabrication delayed, he may have his own problems with the situation. Yet I intend to pay my suppliers price. and honor my deal.

4/3/20       #11: new machine - request a discount? ...
D Brown

I would ask for deferred billing on as much of the balance as possible or ask them to hold the machine for a period of time. Good luck

4/3/20       #12: new machine - request a discount? ...
Rob Young  Member

Website: nutekmachinery.com

We're all in tough times right now. Let's hope we don't lose all the momentum we had coming into this crisis. It will be a lot harder to get started again from a standstill then it will be from a slowed pace.

I'm a machinery distributor, bringing in several lines from Europe. I'm also a business owner just like you that needs to also make a profit. I feel your anguish and completely understand your dilemma. I can't attest how other machinery distributors operate as far as margins are concerned, but my thoughts are, we all need to make a living, just not all off one customer. I have priced machinery with enough profit over cost to allow me to carry spare parts, have technicians available to provide excellent service and make an honest living. It would be a tough pill to swallow to have to go back and reduce the cost of a piece of machinery that I may have already been running tight margins on. I personally would be willing to allow someone out of their contract if I found a buyer for the special ordered piece of machinery, I just wouldn't refund the deposit money till the new buyer purchased the machine. It doesn't sound like you no longer want the machine so I would suggest giving the same consideration to the distributor that you would like your customers to give to you.

I would say that now is the time to get the best deals on new machinery if you're in the position to do so. We typically wouldn't discount an Ott edgebander because they are simply worth every penny a company pays for one and more. The current climate does indeed dictate offering a few deals to continue moving forward so don't hesitate to do your homework on machinery you need to add to your production lines and negotiate an excellent price while you have the opportunity to do so.

4/3/20       #13: new machine - request a discount? ...
Russ

I would honor the contract, money is only paper with past presidents pictures on them.

Integrity & Honor is all about who you are as an individual that's more important than any amount of funny paper.

I think if you asked for a discount after an agreed sales contract the agent may be inclined might give it to you, just to assure he got something out of the deal in an upside down world, but think how you would feel, it would eat me alive if I ever did that to someone. Dave's comment about the other foot comes to mind.

Besides when you do the right thing it's always repaid twice over whether you realize it or not. Karma has a way of getting even in situations like this in our lives. I would be too scared to even post the question. I guess that's what makes us all different.

Bad news travels faster than good in our industry.

I would do the right thing whatever you think that is.

Good luck
Russ @ MR

4/3/20       #14: new machine - request a discount? ...
Russ

Maybe thinking of it this way will help you feel a little easier about your purchase.

After all the money the Feds are going to hand out during this trying period. What do you think the dollar is going to be worth after that?

The price you paid for that machine will most likely double in price when things settle down.

No one can predict the future, live each day like it was you last!

4/3/20       #15: new machine - request a discount? ...
cabinetmaker

I would hate to see what happens when you need tech support or parts.

Just pay as agreed

4/4/20       #16: new machine - request a discount? ...
Justin H

Since you already have a contract and money down it would be tough to expect a discount. But why not ask? This pandemic was not anyone of our faults. At this point I'm sure they are just hoping you dont back out. Learned along time ago, you will never know with out asking. If they cant give you a discount they wont. Maybe it's small and they are willing as maybe they had more markup on it since times were good. On the flip side, they may make it back in parts and labor down thr road. I'd ask, but not expect it.

4/4/20       #17: new machine - request a discount? ...
Peter Gagliardi Member

In my world, an agreement or contract is just that. An agreement or contract. You agreed to purchase at "x" dollars "x" machine, tobe delivered in "x" timeframe.
If they have not breached your agreement, neither should you.
Lick your wounds from the current situation, and move forward the best you can.
In the end, we are only as good as our word- why dilute that?

4/4/20       #18: new machine - request a discount? ...
rich c.

Maybe instead of asking for a cash discount, ask for a discount on additional tooling, service checkup, etc.. Might make you feel better and ensure a better working relationship with the dealer.

4/4/20       #19: new machine - request a discount? ...
Derrek

First the payroll protection loan is a no brained free money and easy to apply for.

Iím not giving advice one way or the other, except that I would definitely be making a phone call to discuss the situation with the company and let them know your situation and how you feel about business outlook.
Me personally I would be delaying the delivery and the payment of any money at least until they start lifting some of these stay in place orders. When people start back to work we will know where the economy is heading. Iíd rather have 80% of my cash than a 100% of a machine that wonít be needed if the USA goes all 1930 depression. I donít believe it will, but delaying delivery 30 days wonít hurt either of you

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