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

I think it would be a good idea to give the customer 3 breakdowns and let them choose the one they like.
Example: Total Job Price $500
Breakdown 1: Labor $400 Materials $100
Breakdown 2: Labor $450 Materials $50
Breakdown 3: Labor $500 Materials Free!!!

I wonder how many people would pay for the movie if they were charged after they watched the movie instead of before.

cutomers will complain about everything. they will look at your incoice and compare prices. example all we install is commerical grade devices and one of our customers asked why we charged them 4.75 for a light switch when he could of gotten one at the local home center for .48 cents aren't we a little pricy. when we explained to him that these are a different grade and brand he questioned us and hasn't called us back since we won't use the cheaper crap that won't last. This sucks because we thought we had alot of work lined up with him and now it appers we don't but oh well atleast we are standing b y our company policy of only using commerical grade devices in everything that we do

I think you will always have a percentage of customers that either won't pay or wan't a reduced price. I track this as bad debt on my P&L statement and figure it in as overhead so it gets included in my price structure. I quess its just another business expense like insurance, phone, gas,etc. You have to pass the expense on to your customers. All you can do is try to reduce your bad debt costs as much as possible. Thats why I like to give them the price upfront and get a signature before I begin any work. The ones that don't pay get a note not to do business with them on my computer when I look up their name. If a customer insists on a breakdown I can show that I only charge them what the material cost me, but this will increase the labor rate so they will complain about that. Your higher labor rate might be easier to explain though. If another contractor charges half the labor rate that you charge, you can explain to the customer that he isn't saving anything if it takes him twice as long to do the job. You can justify your higher labor rate by providing service superior to the other guys. Your labor rate is higher because you only employ the best electricians and to do that you have to pay them more and keep them well trained and motivated to do the job correctly. The customer may be able to find the exact same part that you installed cheaper somewhere else, but he isn't going to find the exact same electrician cheaper anywhere because he works for you. Not all parts are created equal and not all electricians equal. You have to pay more for the best.

[This message has been edited by A-Line (edited 11-24-2004).]

[This message has been edited by A-Line (edited 11-24-2004).]

Slumlord worker, you are going to "company policy" yourself right out of busuiness.

I would agree with electricmanscott. To put comercial devices in most homes would be a waist of money. If you marked up the two switches say 2.0 it would be:

$0.50 switch x 2.0 = $1.00 Charge
$4.50 switch x 2.0 = $9.00 Charge

As you found it may be difficult to get the $$$ for the comercial grade. As I understand it you did not mark it up anything and still lost a customer. Only a few $$ mark-up lost to give away a great switch at your cost might seem like it does not matter. At the end of the year look at the differance:

No MU every $1,000 in material you spend will bring you $950 with a 5% material loss.

MU 2.0 every $1,000 in material you spend will make you $1,900 with a 5% material loss.

I'm not saying it's a $900 profit cause you still have OH. I think a 5% material loss is on the low side. A MU of 2 may not be right for you or everything you sell but for small doller service call things it's not out of line.

Having inventory of the $0.50 switches is much cheaper also.

Try looking at it from another point of view. If you called a carpenter to put new interior doors in your home. For the door handles instead of using the $10 ones he used $50 comercial ones. With or with out a MU would you call himm back? The carpenter is only tring to do the best work.

Also it comes back to the job is broken down labor and materials then that caused problems. Sometimes it makes people happy if you put down free switch or what ever small and just charge more.

Long time ago I worked at an auto dealer. They would allways have problems with labor and materials seperate. One time the US post office figgured out on every oil change they were charged for 5 quarts of oil and not just "oil change" when the trucks took less than 5. They wanted a refund for every oil change on all the trucks for years past. No credit and the account was lost. Or a customer that was charged $4 each spark plug instead of $xx for a tune up swore he would never buy a new car there again. Auto shops have some of the same problems.

If you think a few cheaper swiches are going to wear out in the next few years than just figure on warrenting them. It does build customer relations and possibly lead to other work while your there.

Tom




[This message has been edited by Active 1 (edited 11-24-2004).]

in our area, most electricians use Hubbell commercial grade switches and recps. and our SP switches are only like 1.73 and the 15A recps are only like 1.43 before any mark-up. we only run commercial stuff here aswell, in our area with our customer base to date, they would rather pay a little more for a switch that will last them a good many years than pay next to nothing and have to replace them every few years! most of our customers tell us "to put the good stuff in" and we hafta reply "we already do sir/ma'am"!

I don't know what residential grade devices you use, but there is no reason for them to not last many many years.

I agree, we use primarily residential grade devices and I've never had to replace one we installed and only a few installed by others, most of those were cracked.

Slumlordworker, I'm not trying to pick on you, but do you really think a slumlord cares about the quality of the device? I also can't see them wanting to pay you enough to even cover labor and overhead, much less a profit.

My father ownes some apartments and the tenants are hard on things. After having to replace the cheaper receptacles alot he started having better grade commercial receptacles installed. In personal residences people are more careful when they own it and I think the cheaper grades work just fine. When they're renting they don't care as much. I think when wiring apartments using the commercial grade devices makes sense.