I part from the norm here and pass materials on at cost. Almost all of my materials are low-end things like wire & steel. Legally I'd be required to pay sales tax on the markup. I often am being paid for my time getting materials.
If I were buying expensive lights, fans, or equiptment I'd probably mark up, but I usually have the customer get those things so the warranty is with the manufacturer.
#154643 - 11/14/0405:28 PMRe: What's a Fair Markup?
It costs money to order, pickup, warehouse, deliver, or stock materials. I don't think 30% covers the cost.
I'd think that on really big items,(over $1K) a 10% or 20% markup covers the costs but on coverplates, switches, breakers, etc. 100% is certainly fair, 200% wouldn't phase me.
I'm the maintenance supervisor for a city school district. I have to account for all of my costs. I have to figure out what it costs to have one of my guys drive to the electrical supplier to pick up a ballast we don't stock. The real costs are outrageous. There are lots of little jobs where the hidden costs of the job are larger than the man hours and materials costs. If you generally charge 30% markup, you're loosing money on materials.
I hire a lot of contractors. I know their costs of materials because I probably buy more electrical materials than most of the contractor's do. On big projects, I expect to get materials at close to cost. But on little jobs, 200% markup on a little part seems more than fair for a guy who just dropped everything to drive an hour to solve my problem so I can open school at 7:00am.
On rare occasions, I've been given invoices with 400% markups for materials on little jobs. I'll remind the contractor that I shop at the same supplier he shops at but on small jobs, it's still not big money so I don't really balk too much.
[This message has been edited by maintenanceguy (edited 11-14-2004).]
#154644 - 11/14/0405:57 PMRe: What's a Fair Markup?
To really answer that question, I think you have to look at your overhead costs & don't confuse overhead with direct job costs.. Also, you need to decide if you will also be marking up your labor costs.
One overhead item frequently overlooked by small shops is all the time spent on "free" estimates. The big shops have full time estimators & that position is overhead, so if you're a one man shop like myself, you should figure your estimating time as overhead.
Once you know what your overhead is and how much you generally spend on material purchases, then you should have a realistic idea of what you need to charge.
In my area, my 25% markup is just a little on the low side of average. I usually lower the markup on really large $$ items.
Keep in mind that the markup is a percentage of the selling price and is not the multiplier. A 25% markup calls for a multiplier of 1.33
Few things are harder to put up with than the annoyance of a good example.
#154645 - 11/14/0408:42 PMRe: What's a Fair Markup?