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#154639 - 11/14/04 05:49 AM What's a Fair Markup?
electure Offline

Member

Registered: 12/24/00
Posts: 4226
Loc: Fullerton, CA USA
What do you consider to be a fair, yet profitable markup on material?

Service work ?

Construction Work ?

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Business, Office, Estimating, Legal:
#154640 - 11/14/04 08:36 AM Re: What's a Fair Markup?
golf junkie Offline
Member

Registered: 04/22/01
Posts: 511
Loc: York, NE
30%

cost/0.7=selling price

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#154641 - 11/14/04 10:49 AM Re: What's a Fair Markup?
andyp95 Offline
Member

Registered: 03/05/04
Posts: 47
Loc: Vermont
In my area 30% is the average.It varies around the country and depends on the type of item.

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#154642 - 11/14/04 11:46 AM Re: What's a Fair Markup?
Dave55 Offline
Member

Registered: 05/08/04
Posts: 666
Loc: Crystal Lake, Illinois, USA
I part from the norm here and pass materials on at cost. Almost all of my materials are low-end things like wire & steel. Legally I'd be required to pay sales tax on the markup. I often am being paid for my time getting materials.

If I were buying expensive lights, fans, or equiptment I'd probably mark up, but I usually have the customer get those things so the warranty is with the manufacturer.

Dave

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#154643 - 11/14/04 01:28 PM Re: What's a Fair Markup?
maintenanceguy Offline
Member

Registered: 12/02/01
Posts: 303
Loc: Southern NJ, USA
It costs money to order, pickup, warehouse, deliver, or stock materials. I don't think 30% covers the cost.

I'd think that on really big items,(over $1K) a 10% or 20% markup covers the costs but on coverplates, switches, breakers, etc. 100% is certainly fair, 200% wouldn't phase me.

I'm the maintenance supervisor for a city school district. I have to account for all of my costs. I have to figure out what it costs to have one of my guys drive to the electrical supplier to pick up a ballast we don't stock. The real costs are outrageous. There are lots of little jobs where the hidden costs of the job are larger than the man hours and materials costs. If you generally charge 30% markup, you're loosing money on materials.

I hire a lot of contractors. I know their costs of materials because I probably buy more electrical materials than most of the contractor's do. On big projects, I expect to get materials at close to cost. But on little jobs, 200% markup on a little part seems more than fair for a guy who just dropped everything to drive an hour to solve my problem so I can open school at 7:00am.

On rare occasions, I've been given invoices with 400% markups for materials on little jobs. I'll remind the contractor that I shop at the same supplier he shops at but on small jobs, it's still not big money so I don't really balk too much.

[This message has been edited by maintenanceguy (edited 11-14-2004).]

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#154644 - 11/14/04 01:57 PM Re: What's a Fair Markup?
Tom Offline
Member

Registered: 01/01/01
Posts: 1069
Loc: Shinnston, WV USA
To really answer that question, I think you have to look at your overhead costs & don't confuse overhead with direct job costs.. Also, you need to decide if you will also be marking up your labor costs.

One overhead item frequently overlooked by small shops is all the time spent on "free" estimates. The big shops have full time estimators & that position is overhead, so if you're a one man shop like myself, you should figure your estimating time as overhead.

Once you know what your overhead is and how much you generally spend on material purchases, then you should have a realistic idea of what you need to charge.

In my area, my 25% markup is just a little on the low side of average. I usually lower the markup on really large $$ items.

Keep in mind that the markup is a percentage of the selling price and is not the multiplier. A 25% markup calls for a multiplier of 1.33

Tom
_________________________
Few things are harder to put up with than the annoyance of a good example.

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#154645 - 11/14/04 04:42 PM Re: What's a Fair Markup?
drillman Offline
Member

Registered: 03/24/03
Posts: 97
Loc: Somewhere in Texas
I am not sure what markup is in my area. However if we want to talk estimate times...

I work as the electrician for a county maint dept. We have a contractor that has a "cost plus" contract with the county that we do business with from time to time.

He includes the time he spent on the job going over it with us on his price. I think it says "site visit 2hrs".

The county pays him.

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#154646 - 11/14/04 05:33 PM Re: What's a Fair Markup?
dougwells Offline

Member

Registered: 05/03/03
Posts: 1228
Loc: kamloops BC Canada
When I used to work for a Pool service Company most of the parts were marked up with a 40% Margin
The divisors are as follows

divide by .9=10 percent margin
divide by .8=20 percent margin
divide by .7=30 percent margin
divide by .6=40 percent margin

this was helpful as if you took 10 percent off your selling price you would not lose
but if you took 40 percent off you were selling at less than your cost

IE, marked up item that cost 100.00 + 40 percent margin= $166.00

100.00 + 40 percent =140.00
140.00-40 percent =84.00

but 166.00-40 percent=96.60
still less but more workable

I usually try and charge a 35 percent margin and get complained about that on material that are about 1000.00 material bill

oh well hopefully i can just charge properly one day and not have to explain to the customer why i mark up

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#154647 - 11/14/04 06:30 PM Re: What's a Fair Markup?
dmattox Offline
Member

Registered: 10/20/04
Posts: 267
Loc: Anaheim, CA
Also don't forget to take into account warrantee. If we supplied it, we warrentee it for one year, so if a light bulb burns out we will drive to replace it.

Doing that makes 200% markup on a $2 bulb look small

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#154648 - 11/15/04 02:10 PM Re: What's a Fair Markup?
writerguy Offline
Member

Registered: 10/07/02
Posts: 10
how many of you advocate flat-rate pricing?

edit: that question was for those of you who do service work. sorry.

[This message has been edited by writerguy (edited 11-15-2004).]

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