Material Markup VS Other Methods...

ruger9

I know most people mark up materials, but with all the discussions going on lately about clients wanting a L&M breakdown, I was wondering if anyone does anything else INSTEAD... like what I do...

The cost of the materials is the cost of the materials. However, if I am going to the supplier to buy the materials, and in some cases multiple suppliers to find what I'm looking for, they do get charged my labor rate because that is work. The guy I'm working for now- I'm doing T&G wood paneling in the ENTIRE house. Local lumber yards won't sell me that much product (believe it or not- I need 8' boards, and I would wipe out their inventory with one swipe. They won't sell it all to me.) SO- I have to go to various other big box stores, "stocking up" on these things. OH- and this HO is picky. Only certain boards are "asthetically pleasing" to him, so I have to hand-pick every board I buy. Sounds like labor to me.

So instead of marking up materials, I charge my labor rate to procure & deliver it. I probably don't make as much $$ this way, but a HO can't argue that I'm over-charging him for the materials.

Just curious what everybody else does.

Gordo

Your gut has already told you.

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ProWallGuy

Sounds like a fine system to me. If it works, then it works.
In my biz, a 40% mark up on 2 gallons of paint is only a couple bucks. In that case, I do the same as you, charge an hour or two for material pickup.

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Mike Finley

I guess the answer to your question really revolves around whether you are showing the customer the mark-up or not.

If you are just submitting a final fixed price for the entire job, how you derive the bottom line can be all manner of things. Adding in for labor for material procurement of $250 is really the same as marking it up 20% for $250. With a fixed price it doesn't really matter how you come up with it.

If you are doing a T&M then I suppose it is different, then you are showing the customer how you are arriving at a final bill at the end of the job. Whether you show materials with 10% mark-up or show 4 extra hours for material procurement and the bottom line still comes out to be $4500 for the total job, then it is a matter of how you want to do business or how you want to change the way you do business to satisfy individual customers.

The scenarios are just plain endless. I can imagine even a customer questioning that method with the logic of procuring materials is unskilled labor and should be charged at a lower rate than the skilled labor rate for working on my house.

ruger9

Yeah, I was talking about T&M jobs specifically, since I do that sometimes. Charge $20 for a 4x8 sheet of plywood, then the HO goes down to big box store, and sees it's only $15. I guess I feel like justifying it as a labor charge is easier than as a mark-up. A mark-up makes people sometimes feel like they are getting ripped off.

Well, in THAT case, I need to start charging Plumber & Electrician rates when I change out a faucet or an outlet! I'll bet the HO wouldn't like that! Like I said, seems like they want their cake & eat it too.

River Rat Dad

I just read this whole thread. 1/4 hour at 50 bucks an hour, plus electricity, internet access fee's and depreciation on my CPU, monitor and keyboard......
lemme see 16 times 4, 37 divided by 12, mummble mummble...

You guys owe me $37.89....

RobertCDF

Well... in that case... I have a 2 hour minimum charge so you guys owe me like $100

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River Rat Dad

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maj

Jeez Ruger...... I guess for YOU to do it this way it's alright!!!!

I do exactly like you, because I feel it is the fairest for the customer. I depend on repeat & referral business to stay afloat. So by treating the customer right & fair, I am able to do this.

I have been up & down this street with these guys on this board about this topic & all they ever did was beat me to death about it!!! "That's not the way to run a business" or "Never, ever charge T & M" or "You should be marking up materials 20%, because you can" or "You have to mark up materials to cover your time for procurement" blah, blah, blah, blah.......

Nothing against you Ruger, I liked you since your first several postings. But now you start this thread, that has been repeatedly discussed on here in numerous threads & shot down out of the sky as not the way to run your business, and all of sudden it's OK to do this??? WTF, What gives guys????? Is just because the "herd" still thinks I'm a "scab" or some type of illegal "jackleg" or what?? BTW, those are not my descriptive titles, but rather ones used on this board in reference to me & a few others.

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dirt diggler

HAHAHAHAHA

Mike Finley

Yeah, I think that is what it is.

Hope I wasn't one of the guys who shot you down. I usually try to preceed any talks I make of not being a fan of T&M with, I'm not a fan of it, not that it necessarily is wrong or right.

Like I've said before, whether you mark-up materials 20%, 30%... 100% or you tack on labor hours, you're still doing the same thing, and I just hope everyone is able to recoup their expenses and get profit on it in some way, because just about any business model I can think of every time a hand touches the material used in a project there is a mark-up attached to it. (Eliminating the middle man to reduce costs is an accepted thought process in American business therefore it also means that for every middle man in the process there are costs.) A contractor is certainly the middleman in the process when it comes to materials.

Like I said, hope I wasn't one of the ones who soured you, but if I prefaced every post with "maybe not my way..." I would be prefacing about 99% of the posts and ideas on here.

realpurty2

I prefer to think of it as with our well presented and factual post, we've converted the "herd" to our way of thinking Maj.

We try to avoid T&M work but occaisionally it's the best way to CYA when a job has too many unforeen variables to risk a contract price.

I am against marking up materials, even though I am not in the majority or the "herd" when saying that. Customer's all too often feel ripped off when you show a markup. In my experience, I've found that they will readily accept any cost labled "Fee" or "Charge" but any "Markup" or "xx%" always brings on endless questions or negativity.

Don't leave the money on the table or eat the cost, but rather re-coup it with a line on your T&M Bill in the materials section that just says something like Procurement Fee, Transportation Charge, Material Handling Cost etc.

It works well for us atleast.

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maj

I'm sorry, but I just can't bring myself to charge a loyal customer thousands of dollars extra just for touching the materials that I am already getting paid good money to install. I figure it is part of my job description to pick up the boards from the pile and assemble them into walls. Or to carry the shingles from pallet to the roof. Or to take the cabinets out of the box & install them using my hands. Does this really qualify as a middleman?

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Tom R

I thought getting abused around here was a sign of popularity . . .

Mike Finley

Like I said, you can do it however you want. But here we go...

I am already getting paid good money to install. If you want to be thought of as just an installer, than go for it. Installers I know work for Sears or such. (Oops! Even Sears is marking up that hotwater tank or dishwasher aren't they!!! whoops, bad example, LOL.)

Anyways without getting into a whole battle of the semantics of being an installer. We do a lot more than just install something. Let's take a sink faucet for a bathroom for example. We often find that the customer is totally over-whelmed at what they perceive as a daunting task of choices so we start earning our mark-up right from the beginning as (1) we first start helping the customer pick it out. We start by asking about budget and likes and dislikes, we start educating the customer about finishes and costs associated with them, the pros and cons of each finish, we then look at the type of installation they are doing, some types require certain types of faucets, such as center set, mid spreads or wide spreads, we will educate the customer on what is typical, alot of my customers are interested in resale so we talk about that, we talk about brands and value. After we narrow down the type and finish we then help them decide upon style, often with product tear sheets with large pictures and retail (marked-up) pricing attached so they can make a choice. With that accomplished the faucet is now spec ed out for the job. The customer knows exactly what he is getting and exactly what it is costing him. He also is extremely confident in his purchase, he knows the product will fit his needs, his budget and his projects requirements in all facets, style, function, resale, longevity, etc... Is that not worth anything at all? In my world and with the customers we try to deal with it is worth something to them. They often comment about how wonderful it is for us to have done all this with them. (If they went to a store the chances are slim to none they would find a sales person working there who could do what we just did for them.)

(2) We now will warranty the product. If the product goes tits up, we will come out and diagnose if it is the actual product, the installation or something else. (If the customer supplies the product we don't warranty it, they are on their own) Worth something? Once again to the customers we deal with it is to them.

(3) We will pick-up or order the product and be responsible for it arriving before the job starts and make sure it is in perfect condition. If it arrives scratched or missing parts, it is our responsibility to take care of it and most likely take care of it fast and at our expense in order to ensure the job doesn't get delayed or even worse come to a stand still. Worth something? Most of our customers think it is, they don't want to deal with all that crap, and they really like the benefits of their project going off without a hitch (at least to there eyes, what we might be doing behind the scenes because of a vendors issues they don't have to deal with).

(4) We don't take a large deposit from customers to pay for our materials. Our 10% deposit doesn't begin to cover a job where we have $3000 worth of tub, shower, and double sink faucets. We are floating that $3000 and often much more during the weeks leading up to the job or even months leading up to the job. Any value to that? Our customers seem to like it. They love the no BS way things take place, without some jackleg contractor begging them for money to afford some 2x4s for their project. It actually seems like they are doing business with a real bona-fide company.

1,2,3 and 4 are value added services. We are adding value to that hunk of metal and plastic we are going to install. We want and need to be compensated for it. If we aren't compensated for it, then we can't provide it and then we are just turning into Wal-mart with cheap prices and no customer service.

If you are an installer, you are an installer, whatever you want to be. I don't want to ever be thought of as an installer.

I could go on and on about all the justification for marking up materials, but the bottom line is you can do it anyway you want to. It works for us, the customers we want to work for don't seem to have a problem, I actually suspect they would wonder why we weren't marking up materials to be honest with you. They would rather get all the above from us, rather than not. The customers we want appreciate good customer service, some nice hand-holding during their project and the reassurance that it's all going to be fun, easy and in the end they are going to get exactly what we promised them. For us and our customers there is real value in that, and we can't do it without being paid for it.

Hey if all I was going to do was show up and screw a vanity into the wall and be done maybe that would be a different story?

IHI

LOL, this thread took a turn question about mark-up's to individual labeling such as "contractor vs installer", much like the GC that does'nt pick up a tool thread floating around here

You can definately make/charge more money doing a time and material vs mark-up if you want to break it down like that since most of us get a fair amount per hour with everything figured in. IMO I have no problem's picking up materials and running after things, checking on things as I view this as part of my job description as I am the one selling the job and installing the job. Our line of work you take the good with the bad, if it was all good we'd have even more competitors than we already have to deal with. I guess I'd like to find out how to do a job with zero material handling...easy answer would be the "broker" of a job and sub it all out, but since most of us are in the feild it's our responsibilty one way or another to get the products we need to do the job. At least charging time and material on unforseen problems that rise up your being fair to all parties, the homeowner and yourself. Your getting paid for services rendered and homies getting charged for the time your out.

I guess in a perfect world we could flat rate every aspect and there are places with great sales staff that can pull that off, but myself and I'm sure many other's on here weather they truely admit to it or not are not able to participate-not naming any names but I think based off old posts and current posts things dont always jive with the "facade" being painted here, just a thing I've stumbled on as I'm sure some of you have too. We have to have honesty and intergrity for repeat business and refferals to keep the doors open so to speak. We all have times when we eat something, nature of ANY business, but when you step back, look at the large annual picture I think we all still do alright even with the few hiccups we encounter. I'd rather get paid for my time and stay working than try to make a killing and lose the chance of working with that customer again or freinds of theirs because I tried to go in for the kill at every opportunity.

And Mike, I agree with 90% of what you have to say and have alot of resepct for you and others, but based off the above post and "labeling" my thinking is this. Call me a contractor, call me a jack of all trades, call me an installer. I/we all wear alot of hats and so long as it pays the bills you can call me whatever the fock you want

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maj

Damn Mike, It never ceases to amaze me how you can pick ONE word out of someones post and write a freakin' essay about that one word that only you could construe into something intangible.

OK, so "installer" was a poor choice of word in my post. And Mike, I do ASSUME you remember what my trade is???? If so, then why all the silly innuendoes?

Mike, you & I have been through all this before. I don't care to repeat our differences because your business is totally different than mine. Besides, Ruger was posting about customers wanting Labor & Material breakdowns on their invoices, and working certain jobs Time & Material. I'm sure he is aware of(as well as I am) how markup & profit work. If he wants to post a thread about that, I will keep my mouth shut, as that does not apply to my way of doing business. On the other hand, when someone posts about something that I have experience with or agree with, I will respond with my opinions.

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Mike Finley

Agreed for sure. The whole thing just goes around and around, so whether you charge $80 an hour, $300 a window, or mark-up your materials or not, most likely you are figuring it out close to market rates anyways right? The final number still is going to come out pretty close to what it would no matter how you derive it.

Mike Finley

Don't take it too seriously, how many smiley faces do I have to throw in there?

The bottom line is there are lots of ways to skin the cat. You might have a view point that marking up materials is a sin, you used the words 1000s of dollars for just touching materials which implies to me you consider it a rip-off and you only are considering moving materials around the job site. I simply wanted to present that like you stated later "your business is totally different than mine.", and there are other ways of looking at it. If I was just moving materials around instead of all that we do then I might feel guilty too of the extra profits we reap from what we do for our customers.

You can be an installer, I'm a chief toilet mover, it even says so on my profile to prove it. But I still want to mark up the new toilet I am installing!

On a more serious note, now seriously if you can't see the added value of the difference between and: providing the process for selection of the cabinets, measuring for them, specifiying them, ordering them, carrying the costs of them, taking responsibility for delivery, taking responsibility for the condition of them, taking responsibility for correctness of the order....

come on now! Geeze my man!

maj

About that many...

Here we go again with the regional market differences, and I am just as guilty as everyone else here.

Yes, in my market it would be a rip off to charge thousands of dollars for handling the materials. The difference between what I do & what you do. I don't sell the materials like you do (except Pella windows(which I do markup)). Most of my work is new residential construction, so I would be talking about 10's of thousands of dollars in materials. It is all ordered & delivered to the jobsite. All I do is call the lumberyard for materials & they deliver to me. I would essentially be getting paid thousands of dollars above & beyond my labor(which has profit & overhead already included) to build a house from start to finish. My customers are very conservative and well educated on this type of stuff & would catch on real early in the construction process that I was marking up materials. Usually, around here, for large projects like I do, the customer wants to be the one paying for the materials.

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The views expressed in this post are merely opinions of named poster and in no way shall be deemed meaningful by members of the herd. By no means does anything posted by named poster mean a damn thing for anyone else partaking in this thread.