Material Markup

[satcom]

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.

Our markup is an internal book mark up we are contractors one bottom line price to the customer but never cheat yourself on your total estimate, and you may be able to survive in this tough business

 

[kwired]

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

Sell 100 fifty cent receptacles at even 500% markup and compare the profit to selling 100 NEMA size 4 motor starters that are only marked up 15% and you still have a lot more profit from the motor starters. Chances are you sold a lot more value of copper, steel, and other items with the motor starters also which you also marked up.

 

[ptonsparky]

Generally, we sell as much material as we do labor each day. Those days we install 8 recepts are obviously not the same as.installing a pump panel and 1300 feet of 4/0 quad in conduit. I don't markup sub work or shipping. Everything else is fair game and 15% means I have lost money on that item, IMO.

 

[PetrosA]

The trouble with marking up the expensive stuff is that most supply houses around here only have one price in the system for the big stuff, so if my customer wants to find out how much a 6 meter base with 100A main disconnects costs, he hears the same price I pay for it, and then wants to supply it himself. It used to be different - I remember when I could send a customer to the supply house and they would actually charge a markup, then refund me difference between the marked up price and the contractor price. I also remember when they had to know you were a contractor to give a discount. Those days are gone. Now anybody who buys a few lights can actually get a discount on the lower priced stuff. I've even had customers who had better pricing at my supply house than I do after buying just a few thousand dollars worth of lights for their house. That's ridiculous.

 

[cdslotz]

so if my customer wants to find out how much a 6 meter base with 100A main disconnects costs, he hears the same price I pay for it

That's a pretty crappy supply house you have there.
Most supply houses will sell retail except they charge book price. So your supply house is either quoting contractor net to homeowners or your getting charged book price. It's one or the other.
Do you have negotiated pricing matrix with your suppliers?
If I caught one of my suppliers doing that, I would dump them

 

[satcom]

The trouble with marking up the expensive stuff is that most supply houses around here only have one price in the system for the big stuff, so if my customer wants to find out how much a 6 meter base with 100A main disconnects costs, he hears the same price I pay for it, and then wants to supply it himself. It used to be different - I remember when I could send a customer to the supply house and they would actually charge a markup, then refund me difference between the marked up price and the contractor price. I also remember when they had to know you were a contractor to give a discount. Those days are gone. Now anybody who buys a few lights can actually get a discount on the lower priced stuff. I've even had customers who had better pricing at my supply house than I do after buying just a few thousand dollars worth of lights for their house. That's ridiculous.

Try walking into an HVAC or Plumbing supply house and ask for a discount price, the price you get may be retail or higher.

 

[GerryB]

Something not addressed here was taxes. In Connecticut we have a state sales tax. Now I mark up my material as much as I can get away with, but my book keeper tells me technically I should be set up at the supply house to not pay sales tax and then charge whatever I want for material and charge the customer sales tax. (Like auto mechanics do). My accountant said don't worry about it it all comes out the same in the end. Just a thought

 

[Rewire]

Something not addressed here was taxes. In Connecticut we have a state sales tax. Now I mark up my material as much as I can get away with, but my book keeper tells me technically I should be set up at the supply house to not pay sales tax and then charge whatever I want for material and charge the customer sales tax. (Like auto mechanics do). My accountant said don't worry about it it all comes out the same in the end. Just a thought

I would then have to apply for a sales tax number and report and pay the sales tax. That would be more work for me which I would need to account for the time . I just pay the sales tax at point of purchase and it is someone elses problem to comply with the statre.

 

[kwired]

The trouble with marking up the expensive stuff is that most supply houses around here only have one price in the system for the big stuff, so if my customer wants to find out how much a 6 meter base with 100A main disconnects costs, he hears the same price I pay for it, and then wants to supply it himself. It used to be different - I remember when I could send a customer to the supply house and they would actually charge a markup, then refund me difference between the marked up price and the contractor price. I also remember when they had to know you were a contractor to give a discount. Those days are gone. Now anybody who buys a few lights can actually get a discount on the lower priced stuff. I've even had customers who had better pricing at my supply house than I do after buying just a few thousand dollars worth of lights for their house. That's ridiculous.

If I am purchasing a meter center, I am also purchasing panelboards, breakers, maybe some disconnects or other items all made by same manufacturer. I will be asking supply house for a quote for all of it (and maybe even a few extras for other small jobs) and will end up paying 25-40% in most cases of what I would pay if I went in and purchased same items individually. If I sold for same price as customer had a price on the meter equipment I probably still profit.

Customer needs to keep out of selecting such items anyway. If they purchase this meter center and it is not what is needed - it can easily cost much more than allowing the contractor to get it - there will also be no contractor that will stand behind any defects or other problems with an item they did not sell.

Try walking into an HVAC or Plumbing supply house and ask for a discount price, the price you get may be retail or higher.

Open an sales account there and actually purchase things there from time to time and that will likely change. I have accounts at plumbing, HVAC, lumber centers, and even auto parts stores - most of them give me different price on account than if I were a cash customer, on many items.

Something not addressed here was taxes. In Connecticut we have a state sales tax. Now I mark up my material as much as I can get away with, but my book keeper tells me technically I should be set up at the supply house to not pay sales tax and then charge whatever I want for material and charge the customer sales tax. (Like auto mechanics do). My accountant said don't worry about it it all comes out the same in the end. Just a thought

Sales tax laws are different in every state, so you need to see what applies to where you do business, including other states you may do business in. If you do business in more than one state things can get complicated.

Add: within one state there can be more than one sales tax jurisdiction that needs consideration when you sell items in more than one jurisdiction.

 

[ptonsparky]

If I am purchasing a meter center, I am also purchasing panelboards, breakers, maybe some disconnects or other items all made by same manufacturer. I will be asking supply house for a quote for all of it (and maybe even a few extras for other small jobs) and will end up paying 25-40% in most cases of what I would pay if I went in and purchased same items individually. If I sold for same price as customer had a price on the meter equipment I probably still profit.

Customer needs to keep out of selecting such items anyway. If they purchase this meter center and it is not what is needed - it can easily cost much more than allowing the contractor to get it - there will also be no contractor that will stand behind any defects or other problems with an item they did not sell.

Open an sales account there and actually purchase things there from time to time and that will likely change. I have accounts at plumbing, HVAC, lumber centers, and even auto parts stores - most of them give me different price on account than if I were a cash customer, on many items.


Sales tax laws are different in every state, so you need to see what applies to where you do business, including other states you may do business in. If you do business in more than one state things can get complicated.

Add: within one state there can be more than one sales tax jurisdiction that needs consideration when you sell items in more than one jurisdiction.

And to add to that if I have materials delivered to a job, the sales tax rate will change to that area. I may pickup at the store for over the counter sales at 8%, but if I have it delivered it may only be 5.5%. That is 2.5% in my pocket with just a little bit of planning. Not counting I don't have to take the time and delivery is usually included in pricing anyway. Tax exempt customers change things again.

 

[PetrosA]

That's a pretty crappy supply house you have there.
Most supply houses will sell retail except they charge book price. So your supply house is either quoting contractor net to homeowners or your getting charged book price. It's one or the other.
Do you have negotiated pricing matrix with your suppliers?
If I caught one of my suppliers doing that, I would dump them

It happened on a large bid I worked up with the meters, panels etc. and I caught it by asking up front what the street price was so I could use that on the bid (I knew the customer was a scrooge and wanted to compare that price to what my standard mark-up would make it in case he called to check). I was told that they don't have street prices in the system for the large stuff since they don't get customers off the street asking for those prices.

It also happened with two supply houses and a resi customer who wanted her three-foot piece of plugmold as cheap as possible (ugh...).

It could be that I'm just not getting super deals on materials from my suppliers if they don't consider my turnover to be high enough. If that's the case, there's not a lot I can do about it.

 

[ptonsparky]

It happened on a large bid I worked up with the meters, panels etc. and I caught it by asking up front what the street price was so I could use that on the bid (I knew the customer was a scrooge and wanted to compare that price to what my standard mark-up would make it in case he called to check). I was told that they don't have street prices in the system for the large stuff since they don't get customers off the street asking for those prices.

It also happened with two supply houses and a resi customer who wanted her three-foot piece of plugmold as cheap as possible (ugh...).

It could be that I'm just not getting super deals on materials from my suppliers if they don't consider my turnover to be high enough. If that's the case, there's not a lot I can do about it.

Something is fishy in Denmark. Do have open accounts at these suppliers?

 

[cdslotz]

It happened on a large bid I worked up with the meters, panels etc. and I caught it by asking up front what the street price was so I could use that on the bid (I knew the customer was a scrooge and wanted to compare that price to what my standard mark-up would make it in case he called to check). I was told that they don't have street prices in the system for the large stuff since they don't get customers off the street asking for those prices.

It also happened with two supply houses and a resi customer who wanted her three-foot piece of plugmold as cheap as possible (ugh...).

It could be that I'm just not getting super deals on materials from my suppliers if they don't consider my turnover to be high enough. If that's the case, there's not a lot I can do about it.

So your supplier is giving the quote he got from the switchgear rep?
I would jump down my suppliers throat for doing that. Your supplier should protect you and quote him a real high price.
Secondly, when you quoted this job, did the owner ask you for a deduct for him to furnish these items?
Did you give back just the cost or cost plus all tax and markup?

 

[satcom]

I would then have to apply for a sales tax number and report and pay the sales tax. That would be more work for me which I would need to account for the time . I just pay the sales tax at point of purchase and it is someone elses problem to comply with the statre.

Here in New Jersey they assume all trades people are crooks, and make them pay the sales tax up front.

 

[kwired]

Here in New Jersey they assume all trades people are crooks, and make them pay the sales tax up front.

The vendors or the sales tax department?

The vendors only need to hold proper documentation, and is somewhat easier for in house accounts, if they are selling to cash paying customers it is a little more understandable they don't want to deal with tax exemptions as it is harder to track things. Run the sales through an account and you can show the taxing authority everything you sold to the account holder and whether or not tax was charged or not, if they decide to audit you. If the purchaser issues proper exemption form and vendor keeps it on file, it is no longer the vendors problem if the purchaser is not supposed to be exempt.