Double my cost to get material markup

J

JoeNorm

Senior Member
Location
WA
I have been slowly raising my material markup over the last couple years as I have gained confidence in doing so. I started with 40%, then moved to 50%. Those numbers just don't seem to get me where I want to be so lately I have been just 2x for everything except bigger($1K+) items and very small stuff which goes up more. Cut wire I have been doing 3-4x.

Does this seem reasonable? For context it puts a single Lutron receptacle at $40(fresh on my mind). Sometimes I fear the customer or contractor will question it but so far they have not even blinked an eye.

What's interesting is that number is far less than people who use the infamous markup chart that floats around this forum.

I find it hard to believe material markup varies so greatly. Some people are at 20% and some at 500%.

2x for me is a nice easy number and helps get profits where I want them
 
Speaking as a customer. I am hiring you for your skill and labor not for you to be a supply house. Anything more than a 20-30% markup tells me you dont know how to track your costs and dont respect me as an informed consumer. I expect to see labor costs 》$100/hr and material comparable to pricing I see on-line.
 
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Speaking as a different customer, I don't really care about your exact breakdown between materials and labor and your associated markups. I care about the big number at the bottom. That is the number, weighed against your inclusions and exclusions as well as my confidence in your ability to complete the work to my satisfaction, that I will be using to compare your pricing to the pricing of the other bids I would be getting.
 
Here are several ways to express where you need to be:

1) extract as many funds as possible
2) the market will dictate your pricing structure
3) keep raising your prices until it adversely affects sales

Electricians are the only skilled trade caught in a "swap-and-shop" atmosphere where many expect everything to be negotiable and want us to charge less than a landscaper.

Some people charge more for labor and less for materials. It can highlight the value of their skill

Some people charge less for labor and more for materials. It can mask profit behind an inflated markup.

There's really no right of wrong answer except do what works for you.

When I did service work, whether for myself or for an employer, I didn't have a set percentage markup. I charged double retail unless it was a high-ticket item

Even though I use piecework pricing now, it's still pretty close to that.

For instance - I charge $50 to change a gfci receptacle.

gfci would be $17 + tax, times 2 for device ($37.40) and 78¢ + tax, times 2 for plate ($1.70) for a total of $39.10

My labor on a device change is $12.00 and that would put me at $51.10

But I buy my gfci devices for $8.00 each which leaves $42.00 that I can designate any way I feel like.

Materials at cost and $42 labor?
Big markup and $12 labor?

Doesn't matter. Bottom line is I'm charging $50
 
jim dungar said:
Speaking as a customer. I am hiring you for your skill and labor not for you to be a supply house. Anything more than a 20-30% markup tells me you dont know how to track your costs and dont respect me as an informed consumer. I expect to see labor costs 》$100/hr and material and comparable to pricing I see on-line.
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I cannot even get materials from my supply house as cheap as they are online. So by those rules I cannot markup materials at all.
 
JoeNorm said:
I cannot even get materials from my supply house as cheap as they are online. So by those rules I cannot markup materials at all.
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I worked for a supply house, I know somethings about their pricing.
My point is don't short change your labor and overhead thinking you can make it up on material.

As others have said, the answer may be to stop itemizing costs on the invoices, just provide a total amount.
 
James L said:
Here are several ways to express where you need to be:

1) extract as many funds as possible
2) the market will dictate your pricing structure
3) keep raising your prices until it adversely affects sales

Electricians are the only skilled trade caught in a "swap-and-shop" atmosphere where many expect everything to be negotiable and want us to charge less than a landscaper.

Some people charge more for labor and less for materials. It can highlight the value of their skill

Some people charge less for labor and more for materials. It can mask profit behind an inflated markup.

There's really no right of wrong answer except do what works for you.

When I did service work, whether for myself or for an employer, I didn't have a set percentage markup. I charged double retail unless it was a high-ticket item

Even though I use piecework pricing now, it's still pretty close to that.

For instance - I charge $50 to change a gfci receptacle.

gfci would be $17 + tax, times 2 for device ($37.40) and 78¢ + tax, times 2 for plate ($1.70) for a total of $39.10

My labor on a device change is $12.00 and that would put me at $51.10

But I buy my gfci devices for $8.00 each which leaves $42.00 that I can designate any way I feel like.

Materials at cost and $42 labor?
Big markup and $12 labor?

Doesn't matter. Bottom line is I'm charging $50
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You get a call to replace a GFCI. You drive 5+ miles, install the GFCI, and only charge $50?
Come on up, you're hired to do my service calls!
 
jim dungar said:
I worked for a supply house, I know somethings about their pricing.
My point is don't short change your labor and overhead thinking you can make it up on material.

As others have said, the answer may be to stop itemizing costs on the invoices, just provide a total amount.
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This is the real answer! I haven't had a contractor give me a breakdown on work I've had done at the house, and we rarely give a breakdown on even the largest automation projects I quote. Unless you are selling separate options, the materials and labor come together, you can't get one without the other so does it really matter what the breakdown is?
 
cpickett said:
This is the real answer! I haven't had a contractor give me a breakdown on work I've had done at the house, and we rarely give a breakdown on even the largest automation projects I quote. Unless you are selling separate options, the materials and labor come together, you can't get one without the other so does it really matter what the breakdown is?
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Knowing your proper hourly and overhead rate is important when the project is more labor than material. Don't under sell yourself.
 
Flat rate service calls. Good Customers like it they want to know what something will cost ahead of time and they want to see line items but don't really need the info of materials pricing to feel good about it.
 
cpickett said:
Absolutely, just that the customer doesn't need to see either number broken out, just the total for the job.
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That is all well and good except when a job requires tie and material charges. If you are on T and M and you have to run to the local hardware store to buy something, I assume you will be putting your time on the ticket, so if you do include your travel time, then I would think30% is a reasonable markup. If you go out to you truck and are carrying around what you need, then 100% markup isn't unreasonable at all. Even 200% could be OK, depending on the item, like bolts, nuts, tape wire nuts, etc.
 
I would not mark up my materials that much only because at a certain point I'm only misleading myself about my own cost structure. A certain percentage amount is justified due to waste, error, price fluctuation, etc. (Although for things like wire, I inflate the feet required for waste and error to begin with.) Beyond that you are just calling overhead and profit by a different name, which makes it harder to figure what your overhead and profit really are.

I mean, we don't itemize materials and labor unless a customer makes an issue of it. As has been said, why else give the customer anything besides the big number at the bottom?

If marking up materials too much is a sales tactic because the customer insists on a breakdown, and they're less able to verify materials than have an opinion about labor, then okay, I guess. But I'd have one thing I show the customer and another thing I use to track my real costs.
 
an HVAC contractor that i work with recently screwed the gc over a service call because he marked up his material about 500%. i would recommend 50% mark up of materials on smaller stuff under $20 dollars. like everyone is saying, not many people are asking for break downs of materials. Don't annihilate the people on material costs. word of mouth goes a verrrrryyyyy long way. labor is worth more than material and that is what we charge for.....btw can i get the number of the guy who changes outlets for 50 dollars..
 
HuntNJ said:
an HVAC contractor that i work with recently screwed the gc over a service call because he marked up his material about 500%. i would recommend 50% mark up of materials on smaller stuff under $20 dollars. like everyone is saying, not many people are asking for break downs of materials. Don't annihilate the people on material costs. word of mouth goes a verrrrryyyyy long way. labor is worth more than material and that is what we charge for.....btw can i get the number of the guy who changes outlets for 50 dollars..
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My price to replace an outlet comes out to 29 a piece no gfi.
 
We have one pretty good customer that insists that engineering and design cost be broken out for some reason. I can't really remember why, but I'm thinking it might have to do with the way the state of Illinois charges sales tax.
 
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