ECN Forum Forums General Topics of the Trade Business Related Discussion Mark up

I haven't been in business long and my thinking may be wrong but I try to cover overhead expenses as much as possible in my labor charges.

I don't want to have to rely on material sales to cover overhead. I would prefer that any markup on materials is mostly profit and not needed to cover overhead.

If a customer wants to supply their own materials I price the job as if I'm supplying the materials and then just deduct what the materials would have cost me if I had supplied them. This way I still get the material markup and the customer loses their warranty on materials. There is no benefit whatsoever for the customer to supply their own materials but if they insist this is how I handle it.
More and more I'm finding the customer has already bought the materials before they even call me.

The bottom line is I have to cover all my expenses and make a profit. It really doesn't matter how I come up with the price, whether I charge more for labor and less for materials or more for materials and less for labor I still should come up with the same price to cover all my expenses and make a profit. If I need to sell the job for $10,000 to cover my expenses and make a profit it really doesn't matter how much I'm marking up material or how much I'm charging for labor. I still need to sell the job for $10,000. If I charge more for the materials I can charge less for the labor but if I charge less for the materials I'll need to make up the difference in the labor charges.

When I install a switch for $135 and the customer wants to know how much I'm charging for the switch I can tell him the switch is free and the labor is $135 or if he'd prefer I'll give him free labor but the switch is $135. Either way I need the $135 to cover my expenses and make a profit.

The only thing the customer should be concerned with is the total price. How I arrive at the total price shouldn't be any of his concern. If he doesn't like the total price he has the option of doing it himself or finding someone else.

I try to avoid breaking out labor and materials but I do have some commercial and goverment customers that insist on having the labor and materials listed seperately on the invoice. I guess they're worried I'll charge them a $100 for a wirenut.

As I said, there are exceptions for every rule. Sometimes it's a tax issue, sometimes it's special order materials, sometimes it's equipment rental.

The main thing is that you pay your expenses. Some customers will try to "cherry pick." Others will try to dissect the billing to try to get a better deal. You've got to keep your eye on the ball.

You're there to make something work; you're not there to debate billing philosophy. You have enough non-billable time to cover, without adding hours of debate with the customer to the total. Never think you can win an argument with a customer; even when you 'win,' you lose. A bad experience means you don't get repeat business. It's best to not provide any opportunity for this to happen.

Those are the customers I avoid..... fortunately this and other forums have taught me how to pre qualify a customer

Every business needs to recover, their operating, and overhead expenses, and if they supply material for jobs, they need to also recover the cost of ordering, warrent, and taxes with all the added expenses of tracking and paying the taxes, tracking and paying liability cost money. Mark up helps offset these expenses.

Take out the work "fair" from your original post and I will help you with an answer. I give up on worrying about what is fair or not. Retention of commercial accounts is done thru providing exceptional levels of service. But that costs money to accomplish.

Set your pricing accordingly and stick to it. If customers want to supply materials, ask them if the bring the parts to the auto mechanic and what the responce from the mechanic might be? I also include a clause that say the following: any customers supplied materials, fixtures or equipment will not covered by any warranty, if said equipment is defective and or damaged, requires additional assemby or labor we retain the right to add additional charge and costs.

Then you charge them to get the right stuff. I have installed fixtures that failed to work and then started the clock to remove the fixture and return to install a new fixture. They usaully only try that trick once.
If the are to much trouble I just fire them with the I'm to busy clause. Call so&so

We have a large local Co here that does mostly res and I spoke to one of the guys when things where real busy and told me that they were swamped with hurry up and pain custmers, guess I was not the only one giving out there name.

Ob