Basic Law of Mark up

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mdshunk ,

Nice schedule of mark-ups.

I don't run much service, mainly due to lack of good servicemen, but what little is run is I need to get more for.

Lets see how this works...
 
no such thing as gouging. charge whatever the market will bear.

keep in mind that your margin on parts on larger jobs will be very small compared to the margin on smaller jobs.

you may be able to sell a 50 cent part for $5, but you won't be able to sell a $500 part for $5000.
 
Bob Kraemer said:
I typically mark my material up 20%


You might want to up that a tad.

Generally 100% minimum.

Much more on smaller items, much less on big tickets.

If you only mark up a receptical 20% you will spend more than that in accounting for it.

If you mark up a $20k service section 20% you will fare much better.

Remember, you bring the materials to the job and you WARRANTEE them.
 
Gouging doesn't pay.

Gouging doesn't pay.

brian john said:
I know the gov. gets upset over what hey claim as gouging and IMO takinig unfair advantage may not be the most moral of things to do during times of emergency, but in a free market I ask if you are willing to pay 3 or 4 times what a generator cost, where's the problem?

The problem will be when someone decides that gouging is immoral and decides to enforce morality with a shotgun.

And never underestimate the value of "good will". Many a company has gone out of business because the community decided they were bad people. Wanne see something interesting? Check this out -- it's a chart comparing the stock performance of Wal-Mart to Costco. Which company do you think has the better reputation with communities, employees etc?

e1f3bc9d.jpg


Right now I'm betting that Wal-Mart shareholders wish Wal-Mart stopped treating everyone they run into as a source of profit or a competitor to grind into the ground.

A customer has unlimited funds and needs his flooded service cleaned, serviced and tested and on line ASAP, if he is willing to pay 3 times the going rate, would I be gouging?

Depends. If you're the only game in town, I might pay you 3 times what the job is worth. And then when the crisis is over, I'd make it a point to tell everyone what you charged me, how much the normal rate is, and you'd never get another dollar from me. Take another look at that Costco versus Wal-Mart chart if you still think predatory practices are best.

For necessities I see the issue (food water), but the big thing I saw in Florida the state was upset about were generators. So lack of planning on your part should hamper my income because I bought 20 last fall?

You should find a way to balance profit and earn good will.
 
basic law of mark up

basic law of mark up

most people mark up materials 20%.....my previous service mgr, in the biz over 30 years would divide the material cost by .6....don't ask me why, but it worked from 100.00 to 1M
 
Victor Kyam ("I liked this shaver so much, I bought the company") was on one of those morning TV shows aimed at bored housewives in the UK several years ago. It was during a cold snap, lots of frozen pipes, and you couldn't get a plumber for love nor money. There was a plumber also on the couch, explaining what happened to pipes in old snaps.

A caller pointed out that plumbers were price gouging, because, law of supply and demand, conventional logic says prices go up. Genial hosts asks "Victor, If you were a plumber, what would you do?" Victor says - "My company would be giving service free, as then in the future when people need a plumber they'll know who to call. And with the PR, everyone will know who the good guy is."

At this point the plumber nearly fell off the couch ...
 
Ahhh. But the guys selling the generators at the high prices, were out of towners and cared little about future customers in this market, unless there was an another extended power outage, in which case customers would return.

As one generator salesman told the story, it was all about supply and demand, and if you really need one of his units, you'd be willing to pay his price. If he sold them for less they would go really fast as everyone would buy them, not the people that really need it and were willing to shell out the big bucks.

Me I'd plan ahead for disasters if I lived in such an area, plywood (actually permanent window coverings), water, food and generator with spare fuel.


I do a lot of government work and occasionally we get a purchasing agent that is WORTHLESS, tell me they limit markup to 10% overhead and 10% profit. Usually they tell me they were in business and this is what they did (DUH "were in business" is the KEY WORD). Then I ask competitors how they make it on 10 and 10, their answer is they use the 3rd column in Trade Services pricing and mark that up 10 and 10. Well golly, If I wanted too I could make a DECENT living like that.


Fact is this is a free market and if you want to charge 20% knock your socks off and if another can charge 120% go for it.
 
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I like the sliding mark-up scale presented. The last time it was presented, I adopted it, but modified it to start at 3.0x and drop to 1.3x for the most expensive. I'm not sure my area can support a 6.0x multiplier.

It does have one glitch though. Items at the top part of one range end up costing the customer more than items at the low end of the next range.

Example:

If it cost $1.99, then multiply by 5.25 to get $10.45
If it cost $2.00, then multiply by 5 to get $10.00

The $1.99 part costs the consumer $.45 more than the $2.00 part.

Not really a problem, just an observation.

Mark

PS: Revised scale below.

$0.00 $0.49 3.0
$0.50 $0.99 2.9
$1.00 $1.49 2.8
$1.50 $1.99 2.7
$2.00 $2.49 2.6
$2.50 $2.99 2.5
$3.00 $3.99 2.5
$4.00 $4.99 2.4
$5.00 $5.99 2.4
$6.00 $6.99 2.3
$7.00 $7.99 2.3
$8.00 $8.99 2.2
$9.00 $9.99 2.1
$10.00 $19.99 2.1
$20.00 $29.99 2.0
$30.00 $39.99 2.0
$40.00 $49.99 2.0
$50.00 $59.99 1.9
$60.00 $69.99 1.8
$70.00 $79.99 1.8
$80.00 $89.99 1.7
$90.00 $99.99 1.7
$100.00 $139.99 1.6
$140.00 $169.99 1.6
$170.00 $199.99 1.6
$200.00 $239.99 1.5
$240.00 $269.99 1.5
$270.00 $299.99 1.5
$300.00 $349.99 1.5
$350.00 $399.99 1.5
$400.00 $499.99 1.4
$500.00 $749.99 1.4
$750.00 $999.99 1.4
$1,000.00 $1,499.99 1.4
$1,500.00 $1,999.99 1.4
$2,000.00 $2,999.99 1.3
$3,000.00 $4,999.99 1.3
$5,000.00 $9,999.99 1.3
$10,000.00 $24,999.99 1.3
$25,000.00 $49,999.99 1.3
$50,000.00 $99,999.99 1.3
 
Folks who complain about gouging have never had to take work at or below cost to keep their crews working and from losing your key players. I love how some people have concerns over what is fair pricing when they think the contractor is making ?too much? money but then would brag about how cheap they got the work done if the contractor had made a mistake on his bid and lost his arse.

Gouging is a buzzword used by people who don?t like the deal they got, but if they manage to work the deal so you take a loss then they call it a ?good deal? or a ?bargain?, which basically means you lost money, but hey at least you weren?t gouging.

Supply and demand is a HUGE part of our business, and we as contactors have to play the market. For every time you have to buy wire at 2x the cost you have in your bid, take a job at cost, make a mistake, break a tool, or suffer a theft then you have to make it up somewhere. When the market is hot, you need to work it hard for when the times get tough or things don?t go as planned.

The market is hot right now and my prices and bids reflect it, and I am not the only game in town, yet I am getting contracts for jobs that I bid obscenely high because I cant man them, is that gouging? Nine years ago I took a bunch of work at cost just to keep my doors open, was I being gouged?

Like I said ?gouging? is a buzzword for people who have not run a business and don't like the deal.
 
Gouge: To subject to extorortion or undue exation. (overcharge)

"I normally charge $90 an hour, but if you want me there today because it's an emergency it's $150."

That is price gouging. Doesn't matter if they are willing to pay it or not.
 
How is charging a higher rate because I had to re-arrange my schedule at the last second for an emergency "price gouging"? When I do charge a "emergency" price (which is not often), I usually give some of this back to customer who got cancelled at the last minute (they appreciate this and know I would be there on short notice for them if it was their emergency).

Not gouging in my opinion. It might be gouging if I were the only electrician in this area, but I'm not that lucky.

Mark
 
As long as you are not holding a gun to someone's head it is not price gouging. I don't believe there is any such thing as a fair price for anything. The price is whatever the parties involved agree to.

I don't even like the references to price gouging during disasters. People made the choice to live in a hurricane infested area. They made a choice not to be prepared to deal with the aftermath of a hurricane. Why is that suddenly someone else's fault?

If you live in such an area it is your responsibility to be ready for the inevitable disaster. It is not if, it is when. If the vast majority of people already had a small stash of plywood, a generator, and other supplies, there would be no complaining about gouging, because prices would not rise all that much because the demand would not be there. What is really happening is that people who deliberately chose to be unprepared are asking the rest of us to subsidize their lack of preparedness.
 
$150/h for emergency service sounds about right, especially if labor is short and there is tons of work due to a hurricane. If you want to move to the front of the line there is fee for it.

Extortion is when someone does not have food or shelter and you offer them an umbrella and a loaf of bread for a hundred bucks.

When everyone?s power is off and you only have 10 generators then supply and demand dictates the value of said generator just went up to the highest bidder. Likewise if a ship from China loaded with 100,000 of the same generators washed up on the Florida coast then the price just when down to what ever you could get for them.
 
cowboyjwc said:
Gouge: To subject to extorortion or undue exation. (overcharge)

"I normally charge $90 an hour, but if you want me there today because it's an emergency it's $150."

That is price gouging. Doesn't matter if they are willing to pay it or not.
BUT ... "I normally charge $90 an hour, but if you want me there today it's $150 because I'm already booked and will have to work until 10 tonight to cover my commitments." would not be gouging, IMHO.
 
cowboyjwc said:
Gouge: To subject to extorortion or undue exation. (overcharge)

"I normally charge $90 an hour, but if you want me there today because it's an emergency it's $150."

That is price gouging. Doesn't matter if they are willing to pay it or not.
No that's not price gouging. That's called an emergency rate charge. It costs you money to rearrange your schedule, clean-up and leave a job so you can respond to their emergency. Then you have to go back to the other job, get all your stuff back off the truck and get set up again. That's why you need to charge more.

It's like the difference between making an appointment to see a doctor and going to the emergency room because you can't wait. It's going to cost you more to go to the emergency room.
 
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aline said:
No that's not price gouging. That's called an emergency rate charge. It costs you money to rearrange your schedule, clean-up and leave a job so you can respond to their emergency. Then you have to go back to the other job, get all your stuff back off the truck and get set up again. That's why you need to charge more.

It's like the difference between making an appointment to see a doctor and going to the emergency room because you can't wait. It's going to cost you more to go to the emergency room.

Sure you may need to pay for rescheduling costs, or an employees overtime,

Price Gouging: "In precise, legal usage, it is the name of a felony that applies in some of the United States only during civil emergencies."

So even in a civil emergency, your ok charging that $150 established emergency rate.

In todays times, we scream price gouging, whenever we don't like a price increase on anything.
 
Our mark-up depends on a few factors...what it cost us to get it (price, time, pick-up or delivery, etc.), how fast the customer wants it, and, for lack of better wording, trade specialty. We deal with a few things more than the average EC for this area, so it may cost more for our ability and experience to have ready access/knowledge to a speciffic field or part.

As far as time mark-up, it is pretty much based on the same criteria. 75.00 for service call, 125.00-150.00 for emergency service call, 150.00+ for waste water calls. We had a job a few weeks ago to install an ATS. We quoted sight unseen 1500.00, when it was done were able to knock it down to 1000.00. The customer called irate because "nobody is worth 250.00/hr." (I was there from abot 8-12). We calmly explained to him that there was travel time to factor in, geting material, etc., that there was more than 4 hours invested in this job. Customers don't seem to understand, so the EC had better.
 
brian john said:
Then I ask competitors how they make it on 10 and 10, their answer is they use the 3rd column in Trade Services pricing and mark that up 10 and 10. Well golly, If I wanted too I could make a DECENT living like that.
10% on top of column 3 doesn't even get you up to the manufacturer's list price.
 
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