Business Owner Buying Materials

[Doc13067]

I just spent weeks going back and forth with engineers, my supplier, and the poco to get specs right for a job where we are installing a new load center adjacent the main switchgear to make room for some outside mini splits. After coming up with the entire material list which includes mark up and extra materials to be sure I can get the job done, the owner wants to buy the materials himself, thereby erasing all of the profits for the time spent doing all of this and entrusting him to buy the correct things and then exposing me to his wrath if there is what he perceives as waste in leftover materials that I would have just kept on my truck if I didn’t use but I would want to have to be sure that I can get the job done. What would you guys do?

 

[jim dungar]

Speaking as a non-contractor.

Make sure you leave most of your profit and extra charges in the final price you give to the owner.

Give him a breakout price of only your material cost with maybe a 10% profit. Yes, his savings will not be a large as he thinks they would be.

This is one of the problems of using 35-50% material markup rather than increasing your hourly labor rate.

 

[ptonsparky]

I had a restaurant owner want to do that and I replied ..How about I bring in the fixings for my next meal and you just cook it?

A smaller GC wanted to do that for his homes. Ok, but if anything is wrong, quantity, quality, or count, we pull off until you correct it.

 

[petersonra]

Seems to me this should have been worked out up front. We run into this all the time. Most of the time our parts cost is substantially lower so the customer is not happy when he finds out that he gets less credit than what he is paying for the parts.

We also point out that even if the parts cost us nothing, we still have to receive them, count them, check them against the bill of material and deal with the inevitable shortages and defective/broken parts.

Some customers are more rational about it than others.

We had one customer who used to supply us all the vfds and PLC parts. They would have their stockroom put new labels over the manufacturers part numbers to encourage spare parts sales. We have not done any business with them in a while but I seem to recall we were talking with them about relabeling the part numbers for them. But it never got there.

 

[roger]

As Jim says, give them credit for the material wholesale price but keep your mark up. In your revised proposal tell them delays, damaged, or incorrect materials will be cause for a request for extended overhead CO.

 

[Doc13067]

Just an update. The client wants me to put the material order in (in some cases I was selling wire off rolls I already have) and then let him go and pay down my account and keep all the materials himself. Any extra and he’s gonna wind up pissed. Anything wrong and I’m going to have to correct it. And I’m going to have to obviously still check that everything is there. But he says he uses smaller contractors to avoid a mark up and this is just how he operates. You should see the list. A bunch of conduit fittings and different types of wire. This is going to be an absolute disaster and I won’t get paid for it.

 

[AC\DC]

Why do it?

 

[ptonsparky]

Charge more on the other end or walk away.

 

[roger]

So It doesn't sound like you actually have a contract, I would tell the client to find another EC.

 

[Doc13067]

Yeah no contract yet. I sent a proposal and he came back with this. He made it sound like everyone does this but I foresee major problems with this method. What he’s proposing is way too much like going into my business’ pockets.

 

[ptonsparky]

So It doesn't sound like you actually have a contract, I would tell the client to find another EC.

You might even have an idea who, for THIS customer

 

[ptonsparky]

I told a few customers in the past that I just didn't have time for their project. Never missed them.

 

[LarryFine]

What would you guys do?

I would say, "That's fine if you want to supply materials, but you must accept the responsibilities along with the benefits. I'll tell you what I need, and it's up to you to supply the right parts and quantities.

"If there are any overages, they belong to you. If there are any shortages or wrong parts, you must make the corrections. If I am idle because of any of these reasons, you will pay me hourly at $XX/hr."

Then decide on the price you want for the job with loss of profit considered. He can stuff his wrath.

 

[roger]

Yeah no contract yet. I sent a proposal and he came back with this. He made it sound like everyone does this but I foresee major problems with this method. What he’s proposing is way too much like going into my business’ pockets.

And you are correct. We are not labor brokers, material sales are a big part of a companies revenue.

 

[AC\DC]

I just left a 8k job for the day cause found out every wire I was touching was bad- adding sub metering -
I did not see them till tolls were busted out.
She did not want to pay another 3k to fix

It sucks walking from jobs but liability or for you making a profit is important.
I feel your pain today

 

[Doc13067]

I just left a 8k job for the day cause found out every wire I was touching was bad- adding sub metering -
I did not see them till tolls were busted out.
She did not want to pay another 3k to fix

It sucks walking from jobs but liability or for you making a profit is important.
I feel your pain today

Hang in there. People seem to be cheap everywhere right now. These people have no idea what investment you’re bringing to the table when you show up and start fixing their property.

 

[Doc13067]

And you are correct. We are not labor brokers, material sales are a big part of a companies revenue.

For me it’s all of the revenue for designing the job. Labor only is like exactly what you said, like we’re a temp agency or something.

 

[AC\DC]

what happened

 

[mtnelect]

In my early days of starting out in the world of contracting ... I bid a job for a small shopping center. The bid documents stated not to include the lighting because the tenants have not been selected yet. So, our bid was selected. Before we signed, the developer asks if our bid included the lighting. We said no, because the documents stated not to include the lighting.

That was my first inclination that the bidding process was flawed.

After several more run ins with developers and taking a General Contractor to court on a Mechanics Lein (which took me five years to settle) I changed to being a HVAC service contractor. Best move I ever made !

 

[jmellc]

Ah, what could go wrong?

He calls 10 times a day that something is too high, can't he get a cheaper widget instead.
He calls that the supply house is too far away & can't he get stuff somewhere else. Or can he call it in and you pick it up.
He calls that the store is out of something, what else can he use.
A load of lights gets delivered, totally different than planned. He found cheaper ones. Didn't buy the boxes to mount them to.
He buys Romex instead of THHN or vice versa.
He buys AL wire instead of copper, same size.
He buys EMT where rigid was needed or PVC where EMT was needed. No connectors or wrong connectors.
He buys rolls of greenfield but either no connectors or wrong connectors.
He buys #8 deck screws instead of 8-32 screws.

This could work out if you're dealing with a plant electrician or maintenance chief. Typical store owner, manager; no. They have no clue.