ECN Forum
Posted By: neutron Mark up - 09/20/07 01:12 PM
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.
Posted By: Jim M Re: Mark up - 09/20/07 02:24 PM
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?

Posted By: LK Re: Mark up - 09/20/07 09:29 PM
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.
Posted By: Zapped Re: Mark up - 09/22/07 05:05 PM
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.
Posted By: mahlere Re: Mark up - 09/22/07 08:10 PM
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.
Posted By: Zapped Re: Mark up - 09/23/07 02:47 PM
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!
Posted By: LK Re: Mark up - 09/23/07 03:27 PM
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.
Posted By: Able Re: Mark up - 09/23/07 05:00 PM
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.
Posted By: renosteinke Re: Mark up - 09/23/07 05:04 PM
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.
Posted By: mahlere Re: Mark up - 09/23/07 06:23 PM
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.
Posted By: A-Line Re: Mark up - 09/23/07 07:53 PM
I haven't been in business long and my thinking may be wrong but I try to cover overhead expenses as much as possible in my labor charges.

I don't want to have to rely on material sales to cover overhead. I would prefer that any markup on materials is mostly profit and not needed to cover overhead.

If a customer wants to supply their own materials I price the job as if I'm supplying the materials and then just deduct what the materials would have cost me if I had supplied them. This way I still get the material markup and the customer loses their warranty on materials. There is no benefit whatsoever for the customer to supply their own materials but if they insist this is how I handle it.
More and more I'm finding the customer has already bought the materials before they even call me.

The bottom line is I have to cover all my expenses and make a profit. It really doesn't matter how I come up with the price, whether I charge more for labor and less for materials or more for materials and less for labor I still should come up with the same price to cover all my expenses and make a profit. If I need to sell the job for $10,000 to cover my expenses and make a profit it really doesn't matter how much I'm marking up material or how much I'm charging for labor. I still need to sell the job for $10,000. If I charge more for the materials I can charge less for the labor but if I charge less for the materials I'll need to make up the difference in the labor charges.

When I install a switch for $135 and the customer wants to know how much I'm charging for the switch I can tell him the switch is free and the labor is $135 or if he'd prefer I'll give him free labor but the switch is $135. Either way I need the $135 to cover my expenses and make a profit.

The only thing the customer should be concerned with is the total price. How I arrive at the total price shouldn't be any of his concern. If he doesn't like the total price he has the option of doing it himself or finding someone else.

I try to avoid breaking out labor and materials but I do have some commercial and goverment customers that insist on having the labor and materials listed seperately on the invoice. I guess they're worried I'll charge them a $100 for a wirenut.
Posted By: renosteinke Re: Mark up - 09/23/07 10:02 PM
As I said, there are exceptions for every rule. Sometimes it's a tax issue, sometimes it's special order materials, sometimes it's equipment rental.

The main thing is that you pay your expenses. Some customers will try to "cherry pick." Others will try to dissect the billing to try to get a better deal. You've got to keep your eye on the ball.

You're there to make something work; you're not there to debate billing philosophy. You have enough non-billable time to cover, without adding hours of debate with the customer to the total. Never think you can win an argument with a customer; even when you 'win,' you lose. A bad experience means you don't get repeat business. It's best to not provide any opportunity for this to happen.
Posted By: dougwells Re: Mark up - 09/23/07 10:22 PM
Quote
The main thing is that you pay your expenses. Some customers will try to "cherry pick." Others will try to dissect the billing to try to get a better deal. You've got to keep your eye on the ball.


Those are the customers I avoid..... fortunately this and other forums have taught me how to pre qualify a customer smile
Posted By: LK Re: Mark up - 09/23/07 11:22 PM
Originally Posted by dougwells
Quote
The main thing is that you pay your expenses. Some customers will try to "cherry pick." Others will try to dissect the billing to try to get a better deal. You've got to keep your eye on the ball.


Those are the customers I avoid..... fortunately this and other forums have taught me how to pre qualify a customer smile


Every business needs to recover, their operating, and overhead expenses, and if they supply material for jobs, they need to also recover the cost of ordering, warrent, and taxes with all the added expenses of tracking and paying the taxes, tracking and paying liability cost money. Mark up helps offset these expenses.
Posted By: macmikeman Re: Mark up - 09/24/07 01:17 AM
Take out the work "fair" from your original post and I will help you with an answer. I give up on worrying about what is fair or not. Retention of commercial accounts is done thru providing exceptional levels of service. But that costs money to accomplish.
Posted By: Obsaleet Re: Mark up - 09/29/07 04:18 PM
Set your pricing accordingly and stick to it. If customers want to supply materials, ask them if the bring the parts to the auto mechanic and what the responce from the mechanic might be? I also include a clause that say the following: any customers supplied materials, fixtures or equipment will not covered by any warranty, if said equipment is defective and or damaged, requires additional assemby or labor we retain the right to add additional charge and costs.

Then you charge them to get the right stuff. I have installed fixtures that failed to work and then started the clock to remove the fixture and return to install a new fixture. They usaully only try that trick once.
If the are to much trouble I just fire them with the I'm to busy clause. Call so&so

We have a large local Co here that does mostly res and I spoke to one of the guys when things where real busy and told me that they were swamped with hurry up and pain custmers, guess I was not the only one giving out there name.

Ob
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