ECN Forum Forums General Topics of the Trade Business Related Discussion T & M markup

I know in recent discussions mark up has been the subject. Something that I have not seen specified, is whether the norm in the industry is to mark up materials in t & m work. When in your billing you state that you are chargeing for p/u and handling of materials and you are adding that to your labor, are you still marking up materials. And if you are where are you capping?

You need to cover your material costs, recent articles in finincal publications, show electrical supply vendors are netting 38 to 42%, notice net, that means their gross mark-up had to be greater, part of your business sucess depends on material sales, are you building a business, or working for wages?

I agree. I have been in business for 8 years. One of my large customers has had an ongoing project in the past 2 year period. It has been t & m. Bidding this job would of been quite an undertaking because things are changing everyday. That is all the detail on that I will provide. Well after 2 years of T & M all of a sudden they are checking prices. They seem to think T & m means no material markup. They are dillusional. They are hoilding three large invoices and have been checking supply house rates. Noe they want an audit and all supply house invoices. I am afraid the only way to deal with this now is through legal litigation. Un ****in beleivable

When we do T$M, which is only for commercial customers, we have them sign a contract, it states material will be billed at list price, and our labor rate and terms are clearly noted in the contract, this avoids any suprises, If they desire they may purchase the material, and arrange, to have it staged, at the work site when needed, any delay in them staging material, will incur a standing charge, for all delay time.

These terms must be signed, before any work begins, without this protection, they can try any bag of tricks, they desire.

Any business understands, you have costs in suppling material, and should expect a mark-up.

"list" price meaning a markup. What is you median mark up? for T & M.

There is no set Mark-up
Mark-up will depend on job material volume.

Let's say you have service call, mark-up may be 100% , or you have a planned job it may be 50%, or you have a $500,000 job it may be 10 or 15%.

I would recommend quoting your list prices from the suppliers. And cover your overhead and profit on the labour side....

Just if they ask how much you are charging for the materials, give them suppliers list and then they can go ahead and check it out.

It doesn't matter how it gets spun, you have to cover your costs which includes your overhead and something for your profit.

I regularly tell my customers how much I pay for an item or two, so that they have an idea of my costs, but I still give them lump sum pricing that covers my costs, overhead and profit.... I just don't get into discussions about hourly rates or such...

Best of luck, cause these situations are difficult... hopefully it works out well.

Glen

I don't know any contractors that do not mark up the materials they supply.

It is part of doing business.

Can anyone think of a business that supplies products at their costs?

The amount of mark up varies greatly.

Wire nuts big mark up, expensive items smaller mark up.

Take a walk through the hardware aisle of your local super market, you can find packs of five wire nuts for $4.00, rolls of electric tape so small I would throw them away but yet they get $2.00 for them.

Do you think this is their costs?

There can be such a thing as "too much information."

I recently got hired to hang a chandelier. The reason? In this new house, the owner will not allow the original sparky to return.... seems the owner found that the fixture the sparky was charging him $2100 for was readily available for $800.

Are there costs involved in obtaining, transporting, storing, and maintaining materials? Absolutely. Yet, it's hard for the customer to not have hurt feeling when it looks like, from the invoice, you're planning to retire on the sale!

My own model is based upon minimal mark-up, and a seemingly high hourly rate. Sometimes, one of my customers will hire "the other guy,".... and learns that the imagined savings never appear. This, of course, makes for a loyal customer.

Another contractor uses a form, where the customers' invoice doubles as a worksheet for all his charges. This often results in the customer questioning every line. Personally, I consider time spent debating / explaining the invoice to be wasted time, and would rather eep things simple.

"seems the owner found that the fixture the sparky was charging him $2100 for was readily available for $800."

It is common practice for lighting retailers, to mark up lighting 200% and more, after all they are in the retail business, and operating a showroom, and investing in inventory, and paying all the expenses, that goes with amy business, deserves a good return, 200% gross, will only net 30 to 40% in this type of business, in my opinion the electrician, did not over charge, he just had a buyer, that felt the electrician, should not make a decent profit, it is as simple as, the homeowner wanted to pay wholesale, not retail!


[This message has been edited by LK (edited 07-01-2006).]