ECN Forum Forums General Topics of the Trade Business Related Discussion What's a Fair Markup?

I learned my lesson on dimmers and fan controls. In the past I charged a bit more than my suppliers cost me. Sell and start the job. Were short one so I jump in the truck to go to the big stores. The box store charges more than I charged the customer. So I loose money and time. Then they call the next day cause the knob broke off. So I waist 2 hours and gas picking up another one, driving, replacing, and returning the bad one. Then there is the chance of someone fring one out. I think we all have? I had a 1000w 3 way this year go up in smoke. Had another one a guy broke tring to cram it in the box. I also ate a low voltage dimmer cause they gave us a magnetic instead of a electronic one. Was installed no returns. That is a few hunderd in losses on these things. I need to charge a reasonable amount to pay for warrenty, over head, bad debts, and MAKE A PPROFFIT. Charging only a few dollers MU on these items I would loose money.

Tom

In NJ the contractor pays tax on material at the supplier but the home owner pays sales tax on the material markup. So they say you should separate material cost and material markup on the invoice and only tax the markup. But then of course the customer sees your costs.

The law also says that if materials markup isn't broken down on the invoice the customer pays tax on all. So when I was contracting, the customer paid tax on all. I hated double collecting sales tax but I wasn't going to share my material costs.

I have never run my own business but I found this thread interesting.

From an 'outsiders' point of view, why not charge a mark up?

As a consumer I expect to pay a mark up, isn't that just business as usual?

I thought that was why we buy stock at wholesale so that it can be marked up for retail.

From talking to the folks in the office we have no 'standard' mark up. Small items get marked up substantially and larger items get a lesser markup. I list everything on the T&M slip, tie wraps, wire nuts, rolls of tape, screws, etc. and the office bills it all out. They certainly do not tell the customer what we paid for the stock.

When my mechanic installs a part I pay more for it than if I go and buy it at the auto parts place.


It seems you are giving up a substantial revenue source if let the stock go at cost.

Just to add a little more food for thought:

The stores where all of us shop mark up their items we are buying. Wal-Mart doesn't give us items for cost, if they did they wouldn't make money. Third party insurance agents mark up also. Everyone marks up their items. There should be no shame in it.

How do you guys deal with the "little dangerous knowledge" customers who want you to buy mats from the Box stores? (I seem to get them all in North Chicago).

I usually give 'em the option of paying my (marked up) price, or being charged labor rate to order & pick-up from the store.

I fully agree that you need to mark up your material.

A fellow EC just yesterday related this story. He had done work for a customer on two or three occasions within a six month period. The first two jobs went without incident, he gave the customer a price, was authorized to do the work and was paid.

The third time on completion the customer requests an itemized invoice rather than one that shows only material and labor as a condition of payment. My friend complies. Customer says that he was overcharged for such things as recessed lights. Now he wants itemized invoices for the previous two jobs to see "how he had been screwed". My friend goes to talk with the customer and the customer yells at him "YOU HAVE NO RIGHT TO CHARGE ME MORE FOR MATERIAL THAN WHAT YOU PAID FOR IT!"

If that were me I would be in jail right now.

Probably the subject of another thread but I think we need to discuss how to avoid situations like this.

-Hal

I give the customer the price for the total job. I don't break it down by labor & materials. I show them the price and have them sign that they accept the price before I start any work. When I go out to dinner I see the price on the menu if I order it I have agreed to the price. I don't care how much they marked up the steak and it isn't any of my business. I don't ask to see a breakdown of how much the labor was to prepare the steak and how much the steak costs. If I don't like the price I don't have to buy it.
Read "I Want A Breakdown" by Frank Blau
To read go to www.google.com and search for I Want A Breakdown by Frank Blau

[This message has been edited by A-Line (edited 11-23-2004).]

There was an article in the paper about markup on wine. Average was about ten times cost. Drink up!

Went to movies the other day. For 2 $18 to get in. But you want a medium soda (self serve) and medium popcorn $17. I never seen someone say how much does a fountan drink really cost? Or how much do those high school kids behind the counter cost?

Tom

Well, I read that article by Frank Blau and I can't say I agree with it. None of these arrogent SOB's are going to sit still for a lesson in business management especialy from you.

My experience has been that if you are going to have this problem it's going to come from a customer who is usually wealthy, maybe a business owner, executive or professional. They are used to pushing people around. The amount of money they try to beat you out of is just pocket change to them. It's an ego, being in control thing because they have no respect for you. It's no different than the bully in the school yard when you were the nerdy kid.

They know that you are going to throw in the towel because you don't have the resources and don't want to spend the time and money to defend your position. How many of us have a legal department? Most guys would rather eat $1000 than lein the property and take them to court and that's where the problem is. If you let them push you around the problem only get's worse for everybody.


-Hal