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| Subject - Material mark up | |
| Greg | What is an average % of mark up on material? Does the % change based on the type of material? In other words would a 1/2 emt strap have the same mark up as a 75 kva transformer? |
| Mike Delaney | I mark-up material for our service jobs @ 30%, sometimes if it is a couple of thousand dollars, I lower it to about 20%. That is in Colorado. |
| John A. Peters | We add 8.5% tax and 15% overhead and 10% profit for a total of about 33% on the material list for bid jobs. On service calls we double the cost of something like a breaker or a GFI. On big stuff it is negotiable. |
| Mike Delaney | Are tax is 3.8% plus 30% markup, so we are close...Our overhead I figure is about 30%...and I operate out of my garage..that's tough. On our service jobs we charge $60/hr for one man, and $75/hr for two, and we usually make anywhere from 15%-40% profit on our service jobs..but our residential is only about 10-15%, which I would like to get up to 20-30%...think thats resonable? |
| John A. Peters | Yes, but why not at least 1/2 price for the second man? $75 for first and $40 for the second. Did you mean on only $15 per hour for the second man? |
| Mike Delaney | I probably should charge that. It just seems that people already think that we are charging to much. But in reality thats what money you need to charge if your going to make a profit off your apprentice. |
| John A. Peters | It may be that your client has more experience with negotiation than you do. I read some books on management and on negotiating. One book I liked, may possibly been named "Getting To Yes", where the author wrote about a technique to get the best deal from a salesman. As soon as the salesman says the price, wrinkle your nose and act shocked, and yell something like "Holy smoke that's a lot of money! He even proposed that you practice your facial expressions in front of a mirror, ahead a time. Part of salesmanship is learning to cover the objections before they come up. For example you might tell the customer "It may seem like a lot of money but you certainly deserve your new dual fuel stove. Of course you will use the name of whatever it is that you're estimating. At this point the customer cannot tell you that it's a lot of money because you just finished tying him that may be a lot of money. You can use the same technique whatever the objection might be. Another example is "You may have to wait awhile for us to get your job but it's worth it and we will let you know a couple of days in advance or the start of work. Good advice - Yes! |
| JimmyDee | John gives a good piece of advice. It seems like all of life is one big negotiation after another. I had to take a negotiations class in grad school and it became one of the best classes I ever had. Remember in true negotiations, the object is for both sides to be happy and both sides to win. Never get caught in a lie or dishonest act and the best way not to get caught is to never do one. Credibility and integrity are the 2 most important aspects of a persons business. (life too) Jim |
| ecarbine | I hope you guys dont take me for a crook but in general I charge a 100% mark up and nobody blinks an eye. I think there are two ways of approaching pricing 1 being that you make a signfigant profit on the parts and charge less hourly, the other is that you put a small mark up on the parts but that forces you to charge more per hour to cover yourself. I think its sixes at the end of the day but my feeling is that smaller labor prices are more attractive to the customer. |
| John A. Peters | I think that you will find that most of the activity and discussions here have to do with learning to move in the direction of a flat prices or line item prices that include everything needed to get the particular task installed. That is one price that is a lump sum. Some here advocate using a book of flat rate prices, I use a computer full of modules or assembles which are essentially the same as flat rate prices, but my computer version can easily accommodate a bit larger jobs. However we all advocate sticking with the home owner and as many emergency calls as possible since these areas are less price constricted than other areas including competitive bids. I have heard that good money can be made on jobs that have lots of paper work or manority owner requirements or are too large for most of us i.e government and large corporate work. |
| Mike Delaney | Best thing's about Flate Rate pricing Customer knows upfront how much the job cost! Customer is not paying for slow or inefficient workers. The workers don't feel like they are against the clock, and focus more on getting the problem solved correctly. You don't have to worry (as much) with haggling the price..."You were there for only 1 hr...why are you charging me 1.5??" AND... You make a killiing!!! |
| zol_man | mike, what flat rate system are you using? |
| kbsparky | On some items, we will mark up 100% or more. For example, take an ordinary duplex receptacle outlet. You can get them all day at the supplier for about $.40 each. We charge a $1.00 a piece. That's 150% markup but not a whole lot of money to reach that percentage. On other larger items, it might be 30-50% but usually at least 25%. On some items, we use some comparisions of what the customer can buy it for themselves, VS our price. While we don't try to beat the prices that the customer can obtain independently, we monitor those as to appear to be competitive. |
| Speedwire1 | On service work, I usually try to charge 30 to 50% on material overall. I usually break out large items and treat them a little different. I would love to charge 30% on a $58,000.00 generator, but realistically, I would have a pretty angry customer to deal with when I tried to get my check. If it is a large item like that, and I don't have to worry about the customer paying me, I would tack on approximately 7 to 10% for getting it. |
| MONOLITH | A very successful Electrician, whom people are paying thousands of dollars to to emulate, stated he charges 100% markup on materials. The exception would be the high end items like the Xfmer. Then the margin comes down a bit, but I'm sure it's still got a good markup on it. The point being, why shouldn't you do the same. If I had an HVAC contractor or a plumber come to my house and sell me parts, I would have no idea what his actual cost was. And it's not really worth it to me to drive to home depot to see what the sink actually costs. So stop selling yourselves and your business short. Why charge 30% markup on a 2pole breaker, when a homeowner has no idea what it costs. Take the extra 70%, and see what it does for your business over the course of a year. If other contractors can do it, then we should be able to as well, otherwise we are just holding ourselves back, IMHO. Companies like Patrick Kennedy's, or your largest competition in your area, are the number #1 in the area because they generated the cash to grow and improve themselves. They didn't hold themselves back by shooting themselves in the foot. The whole premise of ESI, is 'charge more money', but provide the quality of service that allows you to. So, comb your hair a little better, and mark that stuff up.  |
| aline | I believe in a lot of cases the customer does know what this stuff costs. That is one of the reasons I went to flat rate instead of T&M. The customer doesn't know what I charged for the materials. They just get the total price. It doesn't matter if I markup the materials 30% or 100% the total price for the job is still the same. The less I markup materials the more I charge for my labor. The more I markup the materials the less I charge for my labor. The price of the job doesn't change. The important thing is that I cover all my expenses and acheive the desired profit for the company. |
| MONOLITH | quote: Yeah, sorry Aline. I should have specified in my post that I meant 'with a flat rate system'. I have never used T&M, just for that reason. I give a flat rate, then there's no questions about material or labor costs. It just is what it is. I have yet to give someone a flat rate price, and have them ask me "Well, what are you charging per hour". They just haven't asked. |
| MONOLITH | quote: I missed this earlier, I was zipping thru too fast. Just wanted to add that I fully agree with this. If you're in a situation where you do have to give the customer some insight into the breakdown of costs, lower labor per hour gets more attention than material costs. I think the average homeowner really focuses in on "How much do you get per hour", and pays little attention to the material costs, IMO. |
| CooCooMike | like i tell my friends this is not a side job any more.it is our livelyhood.we do this work with pride and responsibility we all (i am sure )went to school and are educated licensed individuals .lets not short change ourselves charge enough to cover your selves after all all other trades do it to us when you get your car repaired or call the plumber.they won't give you a break .i am not saying to screw anyone but we are at the top of the food chain when it comes to construction trades.hold your head high and don't flinch.thats my opinion |