Mark-up On Materials

GoodPainter

Just wondering what you all do when it comes to price mark-up

This has been discused before but I think too much so here it is...

When you mark up material prices for your estimating do you mark-up say 15%, 20%, 25% etc., on the retail price or "your" price after the discount?

Seems like I want to for instance Gal of paint $42.95 retail is $31.25 my price-- 25% discount. Should I mark-up 33% to bring it back up to The $42.95 or should I mark-up 25% from the Retail at $42.95 to $53?

I need some help please.
Thanx

Robert

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donb1959

I pay 23.00 for a gallon of superpaint. I typically mark it up to 27.00. It would retail to the consumer at around 32.00

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Double-A

No one 'carries paper' for free.

If you get a loan from the bank, you pay interest on it. If you cash a check at a check cashing outfit, they charge you a fee. If you buy material from someplace, they have worked in the cost of their accounts receivable customers into the price of their products. This means, that when you buy that can of paint, put it on your account at your supplier, you are paying a slight premium for them having to wait for their money. You can see this reflected by the way some suppliers offer terms of 2% Net 10th.

This means if you pay before the 10th of next month, you can take a 2% discount, but on or after the 10th, you pay the full price.

So, in answer to your question, I would ask you to think about this as the other folks answer you;

How much is it worth to you to have to wait for your material monies to be reimbursed?

After all, buying materials to do a job, then doing the job ties up those monies. The longer the job (or draw milestone), the longer you don't have that money to use for other things. Remember, the goal of business is to make money. If you are not marking up your material, then you're losing 4%APR on that money (at a minimum) if you had placed it in a regular savings account. Do you want to carry your client's paper for free?

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GoodPainter

Don I understand you, about 20% markup for "your" cost.

DoubleA I might have questioned wrong, but I do mark up "my" price I guess about 33% since I get 25%-35% off retail I just use "retail" price.
And so far I pay cash for materials and am trying to keep it that way so I dont fall behind to "credit". I get a minimum of material cost to start a job --mostly more than that though.

Actually the exterior job Im on now is $2k material cost bout $300 well customers gave me $1k down--So now I even have more cash to pay some workers and plenty to even by some overhead too--like jobsigns,since im just startin out I need to get these

I read the other post with Kelly and others running out of money so cant complete job..Huh dont quite understand - scares me actually thinkin bout it but I hope I never get in that predictiment. I want to stay ahead and never fall behind using credit--always get enough down to finish and complete job--then the rest is my pay and profit.

thanx,
Robert

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donb1959

Robert,
You're on the right track. If you can keep your company debt free, do so. I also do not use the revoling credit from the paint store. My 1/3 down pay furnishes matierials, plus some. Keep doing what you're doing, when in doubt ask!

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dumplin1078

Robert, great to hear you are running debt free! I believe the worst thing you could do is open a credit account for materials. It has been my experience both personal, and from watching others, that these credit accounts always get used for something other than materials. I just had to have that new compressor, and I got 0% for ninety days, so it makes since to use other peoples money right. WRONG! As Dave Ramsey says, "It hurts less with you pay with plastic so you tend to spend more." I have experience this many times. My compressor is about 20-25 yrs old, the handle has fallen off, the end on the cord has been replaced a few times, it doesn't shut off or come back on with pressure build up or drop, but when I go to buy a new one I just can't. If I had a credit card I have no doubt I would have bought one a long time ago. I have a friend who owns a succesfull body shop, he is doing about a mil a year, but is always broke due to paying out every cent that comes in to employees and banks. I recently did some work for him, just a little patch job, but he had to scrape up the hundred bucks. If he ran his business on cash only he would have money to burn. DEBT STINKS!

dougchips

If the customer is aware of the price of a product I will tell them that I mark up products 20%. This sometimes covers my expense of picking up and delivering the materials. Once in a while a thrifty customer will pay for the materials and have them delivered. If they provide materials I do not warranty the materials, labor only.

rino1494

Depends on the material. For aggregate and pipe I'll mark-up 20%. For small items, I could mark up 50%. For manholes, I'll typically mark up manholes $100 per manhole, sometimes less. It just depends on for mood I am in I guess.

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Double-A

Okies. I understand now. I think you're doing fine then.

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New York Times, July 20, 2006

James Boyd

Certainly cash isn't free. Glad we're all on the same page there. Do you find that the customer is looking for you to extend some of your contractor discount to them?

Any offer to buy the materials themselves? To me that's a slippery slope, however. Next thing they're substituting materials, etc.

James

mahlere

debt when used properly can be a great thing to allow you to grow a company. as for the auto shop that does a mil/yr. what's his bottom line? Sounds like he really should be pricing himself to do $1.1 or $1.2 a year. He may just not be pricing his services correctly.

You can run a successful small operation COD. But remember, the greater the risk the greater the rewards. It would be very difficult in this day and age to really grow a company without having supply house credit.

As for markup, on commercial T&M work we do a 30% profit on our costs (cost/0.70) on residential we are anywhere between 30% and 300% depending on the cost of the material. (ie a $100 part would get a 30% profit tacked on, but a $0.50 part would get a 300% profit tacked on) However, we never do T&M for residential customers.

Good luck.

James Boyd

So basically a 30% margin across the board. More on residential for small items. That seems reasonable.

What do you say when a cost conscience customer asks about buying it themselves? Knowing they can buy a material for only 10% more than you, for example.

You'd likely mark up labor more, indicating "we need to get X on this job, whether it's materials or labor." Also throw in the warantee of material, etc if I buy it, rather than you buy it.

James

mahlere

our commercial customers don't want to be bothered with that. and our residential customers don't get a breakdown. So if they really want to buy their own material (after we explain warranties and guarantees, etc) we simply ask for their receipt and deduct the material cost (that they paid) from our total price. We still get some markup and we take no responsibility for their material.

realpurty2

Hmm.. that might actually make sense. Let me see if I understand this correctly.

Say that you've bid a paint project, using SW or BM paint and the number of labor hours it would take to do using those paints. The customer insists on buying their own paint and comes back with Behr. You leave the bid exactly the same price, subtract their lower cost paint from the total price, which would throw the remaining materials balance over into money for the extra labor that it would require to paint with inferior paint? Am I understanding that right?

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mahlere

that's correct. we're an electrical contractor, so we don't buy paint but the same premise would apply. Now, i guess with painting you would have to take into account some different factors (2 coats of BM vs 3 coats of Behr, etc) but apples to apples -deduct the customers material cost and leave the rest the same.

T&M for residential customers is a recipe for disaster. Especially with Home Depot, Lowes, etc.

donb1959

I detail what matierials are to be used, so in the above scenario I would completely wipe off the matierial cost I qouted. I would also void the warrenty, and add about 25-30% to my labor cost knowing the Behr isnt going to cover, and will require additional coats. If they arnt happy with that then I would void the entire qoute and walk.

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realpurty2

Oh no worries don, the original wasn't anything I'd even consider, I was just making sure I understood what Malhere was referring to. It may be hardnosed, but we won't even take a job where a customer wants to buy their own material. That's written in stone in fact.

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mahlere

understand guys, it might be different for other trades. but when you are dealing with residential electrical service, this is a simple way to not get people to purchase their own material.

For example, we quote a price to install a circuit and a dedicated outlet. We have a circuit breaker, wire, outlet, box and a few misc parts. Tell the customer, no problem, we can use the parts you purchased and deduct the minimal cost, but we offer no warranty or guarantee.

it simply lets the customer know that they are better off with us supplying the parts, but keeps us from getting into a pissing contest with them.

but again, we don't break down labor and material for our residential customers. it opens up too many cans of peas.