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).]

I don't understand why there is always this question about material markup. If you supply the materials then you mark them up to cover :

Travel time and time at store to buy them

Storage of the materials

Interest on credit cards/supply houses etc.. depending on long these items sit in your shop before they are used on job

Warranty on these items which you are now responsible for.

If the customer questions your mark up tell them to buy it themselves and it is not covered by warranty. These types of customers remind of the people that drive across town to save $2 on gas but don't realize it costs them $3 to drive there.

Mark up materials no matter what type of work it is. If they do decide to get them on they're own then let them do just that... don't sit there and supply them a shopping list because the time you spend doing that is part of markup also.

Edited to remove Flaming comments.



[This message has been edited by dougwells (edited 07-02-2006).]

What?

Your kidding me right?


Rich, pls rethink that comment. Your way out of line here..

[This message has been edited by Dnkldorf (edited 07-02-2006).]

I know, "mark-up" can be a passionate topic. Perhaps I should clarify a few of my thoughts here.

I recognise that we all have bills to be paid, and we simply must pay them if we are to remain in business. I also recognise that our every activity has unseen costs associated with it.

Yet, no one ever won an argument with a customer. Even when you "win," you lose- the guy never need call you again, or reccomend you to others. You really don't want to leave an unhappy customer behind.

This is especially important in our trade as so much of what we do is "invisible." Heck, the very thing we control- electricity- is invisible.

The only price that matters to the customer is the bottom line- the total due. If, for taxes or some other reason you must break out a "materials" price, this price has to be something that looks reasonable to the customer. Appearances count!

Back at the office, you may have an entirely different figure for those materials- one reflecting your 'overhead' costs. Such a figure is of value, as it helps you manage your business- but that's not really of interest to the customer.

In the job I recently did, the customer, in effect, paid twice for the installation- once to me, and once as part of the other guy's material charge. Yet, the customer was willing to do this, as the pricing practices of the other guy had undermined the customer's confidence in him.

In business, things like "trust" and "confidence" cannot be ignored.

As a follow up to Reno's comments,

I found that when I began billing lump sum only, these issues dropped dramatically. I prefer to quote projects up front with a fixed price and then if the customer asks about the price of this item or that item, I am free to share my cost with him or her. I don't get into all the costs, it doesn't matter.

I know that my business needs to earn $X.XX per hour worked over cost and the same goes for materials. I even go so far as to remove the price that I pay for an item if the customer says that he or she can get it cheaper elsewhere. But, my overhead stays in.

Why would I do this? Quite simply because I warranty my installation. If something goes wrong and it is my fault, I will replace it - at my cost. Now, this doesn't mean that if the product is faulty, that I warranty the product, that is different - in that case, if the customer supplied it, they can pay for my time to replace it, and again I will charge for my time with the approprate $$$ for Overhead and Profit.

I have done this in both up front fixed bid contracts and in Time and Materials projects, but the key for it to work is a strong up front contract explaining the process, what you are providing and what is expected of the customer. With a good solid description of the work to be performed or in the case of time and materials the work that was performed and the cost to the customer as one lump sum, I rarely run into these types of issues.

No one goes into Mc D's and asks for the cost of the pickles, onions, 2 all beef patties... you get the idea. All they want to know is the price. It is no different for us. But, try to put yourself in a position that the client sees you working with and for them, not someone they need to fight with to ensure that they don't get worked over financially.

Just my opinion.

Glen


[This message has been edited by ExpressQuote (edited 07-02-2006).]

dnk, you are pretty adimant and surprised at rich's comment. I truly don't know your pricing policies (different markets, different customers) but I do know what you have been posting. Your base post line is that most of us charge too much. we should keep our overhead down anyway possible and charge less.

can you really argue with Rich R's perspective? You have created the image that the contractors on these boards have of you. Now you want to get indignant when someone uses your self-created image as an example?

Regardless of our opinions of each other there is no reason to add them to our posts.

We can disagree with each other without insulting each other.

Personal insults have no place here.

Bob

Personal attacks are not what this forum is here for. There are plenty of places where that kind of crap is acceptable. This isn't one of them.

Erik, you should know my pricing policies, they are posted on this forum.

Sometimes you can mark-up materials by 100%, and sometimes you can only get 10%. I shoot for annual mark-up on materials of 30-35%. there is nothing wrong with this at all.

We as contractors sell materials, it is what we do.

The problem I have, is someone trying to convince everyone, that EVERYONE should do it HIS way. This bugs me, as you know. You constantly preach this, and them blame everyone else for you not being able to make money. Why?


I have no idea who Rich R is. Or what he does. Or what market he is in.

i wire and electure, fair enough.

dnk, I don't blame anyone for me not being able to make money personnally. when i talk about the issue it's as an industry as a whole. Individually, we do what we need to in order to make money. It is a little more difficult when a licensed contractor thinks that $1250 is a fair price for a 200A service. But we deal with that as well.

Truthfully I don't preach anything. I do keep saying the same things, but you must admit that lately I've even backed off of that. When you first find a site like this or EK, you tend to want to spread your knowledge (in this case, information that has successfully been implemented by 1000's of contractors across the country) to help everyone do better. Then after a short period of time, you realize that you can put all the information in the world out there, but it doesn't mean everyone will understand it or follow it.

And as I've already said, I haven't posted hardly any of my own ideas. I've sipmly put forth systems, processes and procedures that are being used by thousands of contractors across the country with tremendous success.

My simple point here was that Rich R used you as an example based on the image that you have created for yourself. If that is not the correct image, than rethink what you have done to create it.

But I must ask this question, what is better - trying to pass information along to fellow contractors to build better business, better lives and better futures OR badmouthing contractors in a market that you don't even work in and undermining their ability to create a better business?

Think about it. And now, think about the image you have created of yourself.



[This message has been edited by mahlere (edited 07-02-2006).]

Sorry Guy I am locking this thread until i have my morning coffee. Unfortunately i have had a bout of bronchitis for 8 days now and am on very potent antibiotics. I may reopen it but don't count on it