I've been using a model that I just read an interesting article about. I allocate all of my overhead and profit to labor alone, rather than labor and material markup. As LK has posted on numerous occasions, if the materials are customer supplied, you lose material markup. If material markup is needed to acheive your profit goals, you won't meet those goals.
I think it is important to keep separate "numbers for the customer" from "numbers for yourself."
While there are real costs in maintaining an inventory, (as there are in maintaining equipment, tools, whatever), I don't think it is helpful to present them to the customer as such.
With homeowners it's much easier to present a price than it is to explain your business. I think explaining all the details of why material markup is needed would be just the incentive for my client to do business with someone else.
When I'm dealing with businesspeople it's different. I don't have to explain it to them, they know it from their own business.
When I do business with other people I don't ask them to sharpen their pencil or drop their price. I ask them to do a good job for me and price it so they can do it again when I need it.
