I Thought I would ask if anyone else has noticed a rather sharp increase in prices of wire and PVC in recent weeks. Our suppliers tell us that it is due to recent hurricanes. Supposedly the damage done to oil refineries is causing plastic feedstock prices to rise and there is a lot of extra buying by folks in anticipation of a lot of rebuilding along the Gulf coast. I guess it makes sense and I am sure my suppliers would not ever tell me anything but the complete and whole truth. Thanks
Buy high, sell higher. Make a profit. Simple. Now if you signed your contract a year ago, I am sorry for you. Mostly because you don't remember the last time copper did a big spike and lots of contractors got the hit in the wallet. I think it was about 1986 or 1987. Ever since then I have a price spike clause in any commercial contract I have done. Resi is a different story. Loose a little on the first house, make it back on the second. Keep smiling.
What is the average (if there is one) mark-up? We hove some contracts that specify cost plus 25%. Otherwise we use keystone mark-up. I know the local union shops use contractor net +50%.
Bigventure, if you guys do only service work, charge 200 % markup, you should shoot for industrial service work. One or two huge xfmr jobs or a few dozen vfd's and you can just retire.
We do residental work only. If we did industrial we would have to wait the obligatory 90 to 120 days for payment which eats 50-75% of your markup. Not a very good formula in my book.
I also concentrate on residential service work. I had been using a sliding scale multiplier for parts markup. The multiplier ranged from 6.00 to 1.33. Recently I came accross an article at the link below. It talks about only marking up material costs 15% because you include all of your overhead costs in your hourly rate. It says to simply divide your materials costs by .85 to acheive your 15% net profit on materials. What do you think of setting up your price books using the method described in this article. http://www.hvacprofitboosters.com/Tips/Tip_Archive/tip_archive16.html
Interesting stuff, For the record, we mark things up 25% to home owners and 15% for contractors. We have average ratios for the amount of materials per hour of labor for each type of job. This allows us to calculate how much our labor rate needs to cover our overhead and hit our profit targets.
The article on pricing strategy for the HVAC business is interesting and I will think about applying some of his concepts. However, there is a maintenance component to HVAC that is lacking in the electrical service business.
