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#168919 - 09/20/07 06:12 AM Mark up
neutron Offline
Junior Member

Registered: 06/03/05
Posts: 23
Loc: longisland NY
Does any one have a fair percentage for mark up on materals and lamps? I have a new client on the commerical side that could be a great long term relationship and i don't want it to goe bad by charging to much. Any advice would be great.
Thanks to all in advance.

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Business, Office, Estimating, Legal:
#168922 - 09/20/07 07:24 AM Re: Mark up [Re: neutron]
Jim M Offline
Member

Registered: 08/10/01
Posts: 453
Loc: Chestertown, MD, USA
A fair percentage is whatever you need to cover your expenses. You have time invested to pick up the materials, drive back to the job and provide a warranty as well as waiting for your money until you get paid.

If you think things will go bad by charging too much, consider what will happen to your business if you charge too little.

A sliding scale is used by some based on the item cost. For example you can get a higher percentage markup on receptacles than you can on switchgear.

Are you buying these materials just for this job or are they truck stock? Will these parts be able to be used on other jobs?

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#168930 - 09/20/07 02:29 PM Re: Mark up [Re: Jim M]
LK Offline

Member

Registered: 01/21/03
Posts: 1721
Loc: New Jersey
 Originally Posted By: Jim M
A fair percentage is whatever you need to cover your expenses. You have time invested to pick up the materials, drive back to the job and provide a warranty as well as waiting for your money until you get paid.

If you think things will go bad by charging too much, consider what will happen to your business if you charge too little.


I had an auto repair shop that worried he was charged too much, and his way of thinking, almost drove everyone out of business, he was not able to do jobs correct, never charged eniough, truck would break down when we needed it to make money, his thinking that everyone wanted cheap, was the worst business give he made, he was not being fair to his customers, by offering cheap. People in business understand the real cost of operating a business.

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#168964 - 09/22/07 10:05 AM Re: Mark up [Re: LK]
Zapped Offline
Member

Registered: 10/01/02
Posts: 481
Loc: Huntington Beach, CA, USA
15% above tax, freight, etc. Sounds low, but we are not retailers. Take total cost and multiply by 1.15.

If it's a specialty item that requires a special trip, or a particular amount of research to locate, you may consider adding your time to the cost of the estimate/bill at your labor rate. Time is money.

This is just how I do it, and I've not had any complaints as of yet. If I have a particularly cost-concerned customer, I will explain the costs related to acquisition, storage, transport, etc. They, in a rare instance, may opt to acquire all or some of the materials themselves. Then I would supply a list with DETAILED spec info, and let them know that any improper parts that they provide cannot not be accepted. This invariably leads to them abandoning the notion and just letting me get what I need.

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#168969 - 09/22/07 01:10 PM Re: Mark up [Re: Zapped]
mahlere Offline
Member

Registered: 11/17/05
Posts: 514
Loc: New Jersey
 Originally Posted By: Zapped
15% above tax, freight, etc. Sounds low, but we are not retailers. Take total cost and multiply by 1.15.


just realize that you are not making 15% profit (gross profit, net profit, pre profit, post profit, any type of profit) with this math.

take a piece that is $10 total cost (taxes, licenses, registration, etc)

$10 x 1.15 = $11.50

or $1.50 gross profit on that material.

but, $1.50 / $11.50 = 13% profit on the sale price.

so at the end of the year, you add up all your material sales, thinking that you made 15%, and lo and behold, you only made 13%...and this is in a perfect world.

If you want to have 15% to you bottom line on material at the end of the year, take your total material cost and divide by (1.00-0.15)

so in this case, $10 / 0.85 = $11.76 sell price, will get you the extra 2% on the bottom line at the end of the year.

it's the difference between markup and margin.

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#168983 - 09/23/07 07:47 AM Re: Mark up [Re: mahlere]
Zapped Offline
Member

Registered: 10/01/02
Posts: 481
Loc: Huntington Beach, CA, USA
Like I said, we're not retailers. If customer X goes into Home Depot and finds a part I sold him for $20, and finds the exact same part for $12, I have just lost a customer.

If you happen to get a great deal on a bulk buy, sure, go ahead and mark each item of that package up to the retail price - nothing wrong with that. I usually do that with wire when I sell it by the foot off of my reel.

However, customer X is going to think that "electricians are rip-offs", and who needs that kind of publicity to make an extra $2 on a bundle of 1/2" EMT? Our product is our skill and knowledge, and that is something he can't get at a big box store.

BTW, I'm just relating how I do things and my view on it. I make no judgments on others. If you think that bumping products up 40% is a good business choice, and your customers don't seem to mind, then good for you! We're all in the business of making a living.

Good Luck!

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#168988 - 09/23/07 08:27 AM Re: Mark up [Re: Zapped]
LK Offline

Member

Registered: 01/21/03
Posts: 1721
Loc: New Jersey
If i was to question the price on my auto repair bill, the manchanic would most likely not welcome me back as a customer, I would have a hard time trying to fine anyone to work on my car,electricians seem to love being absused by customers.

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#168994 - 09/23/07 10:00 AM Re: Mark up [Re: LK]
Able Offline
Junior Member

Registered: 05/31/06
Posts: 5
Loc: British Columbia, Canada
Markup also covers warranty issues. If I had to replace the latest Hubbell GFCI receptacle's that were recalled with 15% of the material cost or markep to cover that expense my company would be broke. Small items such as GFCI's get marked up at least 400%, which doesn't go far when there is a major product recall/warranty issue.
Items such as conduit or fittings, etc. are usually around 15-30% markup.
Large items such as trannies are usually around 15% if they are over $10k.

Zapped, it sounds like you do mostly res. The kind of customers you are talking about we make sure are weeded out and sent to competitors early on, either when they first call or after a quick meeting.

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#168995 - 09/23/07 10:04 AM Re: Mark up [Re: LK]
renosteinke Offline
Cat Servant
Member

Registered: 01/22/05
Posts: 5305
Loc: Blue Collar Country
When the topic of "mark up" comes up, I often think we're confusing two very different topics: What YOU see, and what the CUSTOMER sees.

All the customer should get is the price to do the job. How you arrive at that price is your business. What parts are used, and how they are obtained, is your problem. Sure, there is some room for variation - there are exceptions to every rule - but it is your total price that determines your profit on a job.

Meanwhile, YOU need to know your costs. Controlling costs is key to controlling your profit line. There are costs associated with maintaining an inventory, etc. You need to recognize this. Sometimes, the best place to 'store' something is in the rubbish bin!

LK and I have discussed a few 'what if' jobs. Our approaches to mark-up could not be more different .... but, in the end, our total prices are remarkably alike. Different paths to the same destination.

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#168999 - 09/23/07 11:23 AM Re: Mark up [Re: renosteinke]
mahlere Offline
Member

Registered: 11/17/05
Posts: 514
Loc: New Jersey
if you are doing residential service type work on a T&M basis, you are missing money and setting yourself up for problems.

go to flat rate, charge $130+ to change out the GFCI, don't worry about markup or margin...have happier customers (the right customers) and let someone else deal with the people that don't want you to make money.

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