You
describe
a Cost Per Copy agreement
as an industry trick to
increase profit.How is it that a Cost Per Copy agreement is so bad?
Actually cost per copy agreement
are not just bad, they are the worst thing a vendor can do for you.There are three very important reasons for that:
Almost
all cost per copy agreements include a minimum number of copies that need
to be made a month.Typically
this number is higher than your actual usage.This means that even though your vendor says that they will charge
you $.025 per impression for 50,000 impressions, they are actually
charging you $.03125 because you actually only use 40,000 of the 50,000
copies they charge you for.
Cost
per Copy agreements are actually based on some complex formulas that make
it impossible to determine whether you are getting a good price or not.Because of the complexity of the cost per copy formulas (page
coverage, lease factors, and service costing factors) it is impossible for
the client to derive the purchase price for the copier or printer.Thus it is not unheard of to see profits of 40% - 60% Gross Profit.A perfect example of this is a law firm client we had some time ago
(and who’s name is withheld to protect the innocent).They had received 3 copiers under a Cost per Copy agreement from a
client.They were paying
approximately $4,000 per month for the copiers and 55,000 copies per
month.Only problem was that
they easily could have gotten a traditional lease plus service and
supplies agreement for around $1,500 an month.Additionally, they were not actually running 55,000 copies per
month but 40,000 copies a month.Their
end result was an agreement that was costing somewhere around $0.10 a
copy!
Cost
per Copy agreements are notoriously hard to get out of.On a traditional lease you can get out of the agreement for the
principal balance.On a Cost per Copy agreement you need to buyout the
principal, the interest, the full contract service value and the full
contract supplies value even though you will not be using the last two!If you read these agreements carefully, there is no cancellation
clause, no buyout clause and so the buyout is the full stream of payments
left including service and supplies.I prefer to call these the mob contracts.Want to get out early? Tough pay me.Want to go into Chapter 11 to reorganize?Tough pay me.Building
burnt down?Tough pay me.You get the idea.
We could go on for quite
some time on this practice but these three points hit the highlights. If a vendor pitches a Cost per Copy
agreement run don’t walk.
