Material Markup

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Speshulk

Senior Member
Location
NY
I often see discussions on here about labor rates, but don't remember any about charging for material. Curious what methods others are using to calculate markup.
 

templdl

Senior Member
Location
Wisconsin
I often see discussions on here about labor rates, but don't remember any about charging for material. Curious what methods others are using to calculate markup.

Are you referring to supplies or items specifically purchased for a project? I am assuming it's for the latter. If so you deserve to make something on the time it takes to purchase the products and it also takes your money in some form or another to pay for the products. I believe your goal is to make this revenue neutral resulting neither in an expense nor profit.
Distributors mark up their products at least 10% if they merely pass it through where there is a direct shipment and no handling involved. The distributors that I'm familiar with like to see at least a 20-25% markup overall. However stocking and supplying products is their business. But they depend upon inventory turns while your concern is to be paid for your inconvenience and what it costs you to make the purchase. Product sitting on their shelves doesn?t make money until it is sold.
I doubt if you are in the business to make money necessarily from material. I would imagine that you would rather have the work and not loose money purchasing the material.
 

Speshulk

Senior Member
Location
NY
Are you referring to supplies or items specifically purchased for a project? I am assuming it's for the latter. If so you deserve to make something on the time it takes to purchase the products and it also takes your money in some form or another to pay for the products. I believe your goal is to make this revenue neutral resulting neither in an expense nor profit.
Distributors mark up their products at least 10% if they merely pass it through where there is a direct shipment and no handling involved. The distributors that I'm familiar with like to see at least a 20-25% markup overall. However stocking and supplying products is their business. But they depend upon inventory turns while your concern is to be paid for your inconvenience and what it costs you to make the purchase. Product sitting on their shelves doesn?t make money until it is sold.
I doubt if you are in the business to make money necessarily from material. I would imagine that you would rather have the work and not loose money purchasing the material.

I'm talking about the material that gets installed.
 

Little Bill

Moderator
Staff member
Location
Tennessee NEC:2017
Occupation
Semi-Retired Electrician
I'm talking about the material that gets installed.

For a specific job or what you might carry on your truck? Specifically, if you do service work and need a variey of things for service calls.

If I'm just buying for a specific job I usually mark up the material to cover my time/expense on getting the items. If it's stock for the truck for service calls, anywhere from 30% on up.
 

templdl

Senior Member
Location
Wisconsin
I'm talking about the material that gets installed.

I ubderstand. My intent was to provide some bench marks should you be in the business as a supplier which you are not of course.
If you reviewed the balance of my reply you will have noted that you deserve to make something on the time it takes to purchase the products and it also takes your money in some form or another to pay for the products. I believe your goal is to make this revenue neutral resulting neither in an expense nor profit, that I doubt if you are in the business to make money necessarily from material. I would imagine that you would rather have the work and not loose money purchasing the material.
Personally I would rather not have to supply material but it is a necessary evil. My goal is the work and not the purchase resale of supplies.
 

PetrosA

Senior Member
...
Personally I would rather not have to supply material but it is a necessary evil. My goal is the work and not the purchase resale of supplies.

This sounds pretty odd to me. I warranty my labor and materials for 1 year (except lamps), so the quality of what I install is VERY important to my business. I worked for a guy who got all his GFIs and recessed lights from Sunstar (really, really cheap, crappy product) and it took longer to install, broke more often during installation, and especially the GFIs had a high number of failures after installation resulting in non-billable callbacks. That was enough of a lesson for me.
 

Ponchik

Senior Member
Location
CA
Occupation
Electronologist
I supply everything for the job except the fixtures (chandeliers, sconces, ceiling fans....) On all of the material that i supply there is a mark up of 10-30% depending on the size of the job.
You have to mark up every other retailer does, so why not you?
 

cdslotz

Senior Member
Personally I would rather not have to supply material but it is a necessary evil.

Wow. Really?
On commercial construction jobs, the more and high dollar materials I get to purchase, the better.
The markup on materials is what protects my risk on labor.

On service, I markup materials 30-50%

How do you expect to grow a company selling labor?
 

petersonra

Senior Member
Location
Northern illinois
Occupation
engineer
Wow. Really?
On commercial construction jobs, the more and high dollar materials I get to purchase, the better.
The markup on materials is what protects my risk on labor.

On service, I markup materials 30-50%

How do you expect to grow a company selling labor?

Lots of contractors manage to do so.

I think you have to find some way, some how, to make a profit. Every one's situation is different. I work for a system integrator and panel shop. We get a fair number of build only jobs where the customer supplies the drawings and the parts. all we supply is shop labor. As long as we have a good feel for what it takes to do the build, it is a lock type of job. If someone forgot a piece, we don't have to eat it because it is someone else's problem. we don't have to pay overnight shipping on a late part. it is the customer's problem to get the parts he is supplying to us.

There is more risk to us on jobs where we supply parts because we might forget something, for instance. So there has to be some markup on the parts to cover the risk. we also have to cover the incoming freight, and the warranty costs, and the buyer's time, etc.

These days you pretty much have to grub for everything. Take your profit where you can find it.
 

kwired

Electron manager
Location
NE Nebraska
Marking up common dwelling related items generally doesn't result in a lot of profit even at 100% unless you mark a lot of it up every year. Start marking up industrial controls, industrial panels, MCC's, and other similar items even at 25% starts to become a big profit much quicker.

How many retail places do you see that have occasional liquidation sales to get rid of seasonal or other discontinued product lines and offer it at 75% discount prices. You think they are taking a loss on that product? Maybe sometimes they are taking a loss but they either made a big profit when it was in season and want to get rid of it because it is taking too much space or it just doesn't sell and they still want to get rid of it so they can sell something more profitable. They were likely selling at at least 50% mark up before the items were reduced for liquidation. There is of course some items sold for little or even no profit as a way to get customers in the door in hopes of selling some other higher profit items while they are there, I think Wal Mart does a lot of that.
 

templdl

Senior Member
Location
Wisconsin
Wow. Really?
On commercial construction jobs, the more and high dollar materials I get to purchase, the better.
The markup on materials is what protects my risk on labor.

On service, I markup materials 30-50%

How do you expect to grow a company selling labor?
Throwing around numbers and how much material should be marked up is largeley dependent upon what you can get away with in your market area. I will be the first to admit that my suggestion does not consider what your market can bare or your business plan. It's all about getting orders while stayin profitable.

No matter which way you do cut it, it's getting that contract to do the work that is the goal. If your formula of the cost of labor while adding the mark up for material keeps you competitive that's all that matters. You can't grow a company should you not win contracts. It's all about your market area and what your perspective customers are willing to pay.
Should your market be able to support your business plan that's all that what it's all about. It's trying to find out what latitude that you have by finding where that "sweet spot" is in your area in relationship to your competitors.
 

Fulthrotl

~Autocorrect is My Worst Enema.~
Marking up common dwelling related items generally doesn't result in a lot of profit even at 100% unless you mark a lot of it up every year. Start marking up industrial controls, industrial panels, MCC's, and other similar items even at 25% starts to become a big profit much quicker.

yep. 25% on ocal and SS stuff quickly outstrips the labor to hang it on the wall.

and then there's allen bradley.... :angel:

512-ESB-6P-27R
Manufactured by ALLEN BRADLEY
NEMA COMBINATION STARTER, DISCONNECT TYPE, NEMA 4,
Weight: 147.65 lbs
Condition: FNFP - Factory New Factory Package (Factory Warranty)
Estimated Retail Price - $36,616.00

cost was $27K..... so, 25% on that, give em a deal, call it $33k

so, $6k profit..... i like selling material i install. :happyyes:
 

satcom

Senior Member
The best way to run your business if you are an electrician, is let every else mark up material and make money, it should be your goal to work as cheap as you can, and never try to do anything crazy like make a profit on material and equipment sales

Must be we have a large number of guys on this site are not in business trying to support a family.
 

kwired

Electron manager
Location
NE Nebraska
The best way to run your business if you are an electrician, is let every else mark up material and make money, it should be your goal to work as cheap as you can, and never try to do anything crazy like make a profit on material and equipment sales

Must be we have a large number of guys on this site are not in business trying to support a family.

If I decided right now not to mark up another item sold, my labor rates would definately need to to be increased.

I also feel what I sell an item to a customer for is my sale price and they have no business knowing what my cost was. I feel same about any product I purchase from someone else. If I don't like the price I can try to get it somewhere else. If my customer doesn't like my price they can get it somewhere else. My price also comes with installation, may or may not be included in an item price, but if I get no profit from material mark up - then installation cost has to go up if I want to have same net profit. With a contract even if materials are itemized - so what - the bottom line should be the total of the contract and not get hung on a specific item or two - maybe that one item they think they are getting hosed on is offset by another item they are getting a steal on.
 

cowboyjwc

Moderator
Staff member
Location
Simi Valley, CA
If I decided right now not to mark up another item sold, my labor rates would definately need to to be increased.

I also feel what I sell an item to a customer for is my sale price and they have no business knowing what my cost was. I feel same about any product I purchase from someone else. If I don't like the price I can try to get it somewhere else. If my customer doesn't like my price they can get it somewhere else. My price also comes with installation, may or may not be included in an item price, but if I get no profit from material mark up - then installation cost has to go up if I want to have same net profit. With a contract even if materials are itemized - so what - the bottom line should be the total of the contract and not get hung on a specific item or two - maybe that one item they think they are getting hosed on is offset by another item they are getting a steal on.

I don't disagree with that comment at all. The problem has gotten to be, as I see it, is that when I first started out a wholesale house was just that. (as an example) I could get receptacles for .25 cents each and they were selling for .50 cents at the hardware store, then there was no problem marking your material up 100% and charging for your time to go get it. Not at our local wholesale house receptacles cost .50 cents and you can get them at the big orange or big blue or .25 cents. You have a hard time justifying marking that up 100%. Yes you can take quality into consideration and as someone else said, you can do what ever the market will bear.
 

templdl

Senior Member
Location
Wisconsin
Your market is the key. You can do anything that your heart desires. If you price yourself out of the market with whatever pricing philosophy that you want to use that's your prerogative.

I was taught a very important lesson while working as a sales an applications engineer for one of the largest electrical manufacturers in the country. When you are in the market with Eaton/Cutler-Hammer, Siemens, Square D, ABB, Cooper, and what was once Westinghouse and many more you have to pick and choose your battles. Any one of these companies could cause a price war if they elected to do so as they have other market areas that can cover the cost of losses that they may sustain in an embattled market.
I will never forget when the rumor gets out that there is going to be a price increase and who is going to lead it and will others follow. It?s almost like you are afraid to jump into the water fearing that the water may be too hot or too cold where there is that one brave sole that has the guts to stick his toe in to check it out. The others then decide that they will follow with a unagreeded upon but the same percentage price increase. It?s unbelievable how that works out. I?ve watched it work for almost 20 years.

My point is that you must be aware of there are others in the ball game also. If your pricing structure is above the market level in your area will others follow? Or are the others comfortable with where they are which may cause you to drop your prices.
But, the fact remains that prices often increase with inflation and who will be the leader in increasing the price levels?
The reverse is also true. If a business elects to be the low price leader there are other businesses with deeper pockets that can afford to drop their prices also. Where does that leave everybody?

With what ever way that you want to set up your pricing structure, your marketing plan as well as your vision to grow your company you have to fit into your market in order to obtain jobs and contracts.
All of the stuff as to how much to mark up supplies is irrelevant should you price yourself out of the market levels in your area and your business starts to suffer.

You must be aware of your market and as such are responsible to protect the market prices in your area thus protecting yourself.
 

Rewire

Senior Member
Marking up common dwelling related items generally doesn't result in a lot of profit even at 100% unless you mark a lot of it up every year. Start marking up industrial controls, industrial panels, MCC's, and other similar items even at 25% starts to become a big profit much quicker.

How many retail places do you see that have occasional liquidation sales to get rid of seasonal or other discontinued product lines and offer it at 75% discount prices. You think they are taking a loss on that product? Maybe sometimes they are taking a loss but they either made a big profit when it was in season and want to get rid of it because it is taking too much space or it just doesn't sell and they still want to get rid of it so they can sell something more profitable. They were likely selling at at least 50% mark up before the items were reduced for liquidation. There is of course some items sold for little or even no profit as a way to get customers in the door in hopes of selling some other higher profit items while they are there, I think Wal Mart does a lot of that.

We purchase around 80 grand in common dwelling related items. Material markup is used to offset warranty calls.
 
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