Lets talk about markup shall we?

[zappy]

I worked as a subcontractor for ---- electric, and he told me everything i sell mark it up times three. He's been in business since the seventies. It just kinda feels a little high, but if the customer's don't complain then why not? For example, i needed a ballast that wasn't in my van, so i went to HD and got one for about twenty. He said sell it for sixty. So when it was time to bill the customer all i could think of is this guy's going to say something about it, because he must know what this thing really costs. He never said a word. So if they do say something like why are you charging me thirty dollars for a gfci, i need a good comeback. I could give them five bucks off just so they feel better.

 

[TOOL_5150]

because time is money! Its your job to fix the problem they called you there to do. Your time to go to HD and pick up the part.

I dont understand why we get held under the microscope all the time for upcharging for parts and so on. I dont know about you, but I dont work for free - Id rather rexlax for free.

This is a specialized trade we are in, people dont respect that. I dont hear people complaining about the landscapers that sell jobs for 20, 30,000 for redoing someones front yard.

I would bet that most people on here dont charge enough for their work, which is why we are getting this negative resistance from customers now a days.

~Matt

 

[wireguru]

I worked as a subcontractor for ---- electric, and he told me everything i sell mark it up times three. He's been in business since the seventies. It just kinda feels a little high, but if the customer's don't complain then why not? For example, i needed a ballast that wasn't in my van, so i went to HD and got one for about twenty. He said sell it for sixty. So when it was time to bill the customer all i could think of is this guy's going to say something about it, because he must know what this thing really costs. He never said a word. So if they do say something like why are you charging me thirty dollars for a gfci, i need a good comeback. I could give them five bucks off just so they feel better.

look at it this way: you spent an hour or two going to home depot to buy the guy a ballast for $40 (60-20) You couldnt get me to go to home depot and get you a ballast for $40. Time is money. If the guy wants a $20 ballast, he can go get it himself.

 

[iwire]

I worked as a subcontractor for ---- electric, and he told me everything i sell mark it up times three.

I think you need to mark up cheap parts more then 3 times and expensive items less.

I think Marc has the right idea.

There's no such thing as gouging.

Sliding Scale Markup Multiplier Table, Per Item:

$0.00 to $0.49 x 6
$0.50 to $0.99 x 5.75
$1.00 to $1.49 x 5.5
$1.50 to $1.99 x 5.25
$2.00 to $2.49 x 5
$2.50 to $2.99 x 4.75
$3.00 to $3.99 x 4.5
$4.00 to $4.99 x 4.375
$5.00 to $5.99 x 4.25
$6.00 to $6.99 x 4.125
$7.00 to $7.99 x 4
$8.00 to $8.99 x 3.75
$9.00 to $9.99 x 3.625
$10.00 to $19.99 x 3.5
$20.00 to $29.99 x 3.375
$30.00 to $39.99 x 3.25
$40.00 to $49.99 x 3.125
$50.00 to $59.99 x 3
$60.00 to $69.99 x 2.75
$70.00 to $79.99 x 2.625
$80.00 to $89.99 x 2.5
$90.00 to $99.99 x 2.333
$100.00 to $139.99 x 2.25
$140.00 to $169.99 x 2.166
$170.00 to $199.99 x 2
$200.00 to $239.99 x 1.855
$240.00 to $269.99 x 1.823
$270.00 to $299.99 x 1.789
$300.00 to $349.99 x 1.75
$350.00 to $399.99 x 1.725
$400.00 to $499.99 x 1.6875
$500.00 to $749.99 x 1.6
$750.00 to $999.99 x 1.55
$1,000.00 to $1,499.99 x 1.5
$1,500.00 to $1,999.99 x 1.45
$2,000.00 to $2,999.99 x 1.4
$3,000.00 to $4,999.99 x 1.35
$5,000.00 to $9,999.99 x 1.3375
$10,000.00 to $24,999.99 x 1.3333
$25,000.00 to $49,999.99 x 1.33
$50,000.00 to $99,999.99 x 1.3

 

[Mule]

We use our mark up soley to pay our overhead. Our over head cost runs between 10-15 bucks/ billable hr depending on the amount hours we have scheduled that week.

We charge a flat rate of 25% markup unless it doesnt make the projected overhead cost. In that case, such as the ballast change as earlier stated, we take the $20 ballast cost plus the time investment in procurment and task time, say 1 1/4hr x $12.50/ovhd cost....so thats 1 1/4(time spent)x12.50(ovrhd cost)+20(ballast cost)= $35.62 (charged out for the ballast part).


Right or wrong, that's how we're doing it. This way we know when we leave the job, we are not upside down on our overhead cost and the labor charged is 100% labor earned.

 

[cal1947]

electrician

electrician

very well thought out

 

[jrannis]

We use our mark up soley to pay our overhead. Our over head cost runs between 10-15 bucks/ billable hr depending on the amount hours we have scheduled that week.

We charge a flat rate of 25% markup unless it doesnt make the projected overhead cost. In that case, such as the ballast change as earlier stated, we take the $20 ballast cost plus the time investment in procurment and task time, say 1 1/4hr x $12.50/ovhd cost....so thats 1 1/4(time spent)x12.50(ovrhd cost)+20(ballast cost)= $35.62 (charged out for the ballast part).


Right or wrong, that's how we're doing it. This way we know when we leave the job, we are not upside down on our overhead cost and the labor charged is 100% labor earned.

Nice formula but it would be about break even for us.
I know you have worked very hard for many years to get where you are. That is my goal.

 

[iwire]

We use our mark up soley to pay our overhead.

I know that is your choice and that is why you are own your own so you can run things your way.


That said, to me that is ridiculous not to make money on what you sell. Name another business that sells items just to break even? Your leaving money on the table.

 

[brian john]

I'd rather sell material and make a living it is easier than managing the men. Marks sliding scale is a good place to start.

Just remember the State of Utah marks beer up 87% (heard this on CBS news last night). Some can live without beer most folks won't live without electricity. I just bought new ski boots 50% off, yet the guy selling them still makes a profit (700.00 boots for 350.00).

An EC told me years ago, folks will complain if you change your labor rates and complain what you make per hour, but you'll never hear a word about material cost.

It really does help if you know your actual overhead, when we finally did this I was more than surprised on what we spend to make a profit.

Gas, paper, paper clips, pens, pencils, toilet paper, water, soda, food, secretary, ME, trucks, tolls, tools, tool rental, test equipment, desk, chairs, PS's, laptops, printers, plotters, high speed photo printers, ink for all printers, training, software, football tickets, baseball tickets, hockey tickets, bonuses, Christmas Party, Company picnic, Christmas cards, Christmas gifts for customers, Holidays, vacations, Truck, building, and all other insurance, office rent, IRS, State Tax, County Tax, special area tax, cell phones, Internet cost, parking tickets, truck maintenance and 10,000 things I forgot.

 

[Mule]

I know that is your choice and that is why you are own your own so you can run things your way.


That said, to me that is ridiculous not to make money on what you sell. Name another business that sells items just to break even? Your leaving money on the table.

I guess to me, we dont have a true, loyal, wholesale and retail market anymore. Instead we have a volume priced market, and because of that the consumer has almost as much buying power as the EC. ie: big box stores.

So for me to try and sell a ballast for $60 that the customer has the power to buy for $20 is approaching un-ethical. Now, with that said, there is value in our expertise and design capability, so instead of making that up in material cost mark up, I charge it out in "procurement or planning" cost, which is time, or labor fees. So if I go to lowes for a ballast, the customer is going to pay for the time and the part seperately, and they are going to see both on the invoice. I just think its a more honest approach, or shoud I say, more acceptable approach.

 

[iwire]

Let me point out again I have a lot of respect for anyone that has made the jump to running a business. I do not have the guts for it.

I guess to me, we dont have a true, loyal, wholesale and retail market anymore. Instead we have a volume priced market, and because of that the consumer has almost as much buying power as the EC. ie: big box stores.

I have to agree there.:smile:

So for me to try and sell a ballast for $60 that the customer has the power to buy for $20 is approaching un-ethical.

No, nothing at all 'unethical about it' unless your forcing them with a gun.

Is it unethical that Nike' sells $10.00 sneakers for $250?

Is it unethical that the same spark plugs I can buy at a local auto parts store for $2.00 each are $10.00 each at a dealership. Could I bring my own parts to the dealership and have them install them?

Sure your knowledge has value and of course you should make money from it, :smile: but to sell products at your costs makes no sense to me.

 

[ItsHot]

bottled water?

bottled water?

Don't forget that 16 ounce bottled water for $4 at the game!

 

[iwire]

Don't forget that 16 ounce bottled water for $4 at the game!

Right on.

I used to do work at an outdoor 20,000 seat concert venue, they always complained about our 'high rates' but when I was there during a show and bought a small fry and med drink it was just under $10.00, I stopped caring about what they thought of our prices.

 

[Mule]

Let me point out again I have a lot of respect for anyone that has made the jump to running a business. I do not have the guts for it.



I have to agree there.:smile:



No, nothing at all 'unethical about it' unless your forcing them with a gun.

Is it unethical that Nike' sells $10.00 sneakers for $250?

Is it unethical that the same spark plugs I can buy at a local auto parts store for $2.00 each are $10.00 each at a dealership. Could I bring my own parts to the dealership and have them install them?

Sure your knowledge has value and of course you should make money from it, :smile: but to sell products at your costs makes no sense to me.

I dont sell products at my cost, how can you say that? :smile:

I understand your comparisoms,and by them, one could easily justify just about any kind of business dealings you could dream up, because some where, some one, is doing it, but does that make it right in your mind? Do you just do things because that's what everyone else does?

Bob, Im truthfully not picking on you or anyone else, just pointing out that I dont justify my ethics or business structure, by some one else's actions. I justify my actions from my concious values. Now with that said, I am learning from you guys that Im a greenhorn at running a business, and I've learned alot from the forum in reguard to business and technical issues and Im greatfull. But to me the fundamental difference is that I believe that happy customers create a succesfull business, and others think that you must micro-manage your success. For me I must earn it, not take it.

Just like this morning we ate breakfast with my folks. We laid $4 down for the tip in which the waitress didnt see because it was on the other end of the table.. Then we laid out $30 for the $27 bill. The waitress comes by and picks it up the ticket and the $30, and then she asked " do you want the change?".....I said yes, and then I picked up my $4 and put it back in my pocket.......

Do I think its ok for another waitress to ask to keep the change just because this girl did? No, because my values think that it is un-ethical.:smile:

Not getting off on another topic here but, but to me, treat folks in a way in which you would like to be treated yourself, and to me if I was charged $60 for a ballast that Joe Blow can purchase for $20, I would think that I just got taken advantage of, and I probably would not go back for seconds....
But if a persons labor rate is $65/hr and he charged me 1/2 hr to pick up that ballast, that I can swallow. Nearly the same cost but its the difference in taste that it leaves in the customers mouth.....:grin:

 

[iwire]

I dont sell products at my cost, how can you say that? :smile:

You said ............

We use our mark up soley to pay our overhead.

You are covering your costs, not making a profit on what you sell, to me that is silly.:smile:

I understand your comparisoms,and by them, one could easily justify just about any kind of business dealings you could dream up, because some where, some one, is doing it, but does that make it right in your mind? Do you just do things because that's what everyone else does?

If you where gouging people for a service change after a storm that would be wrong.

Selling people products to bring more money into your home is not wrong, it is business.

But to me the fundamental difference is that I believe that happy customers create a succesfull business,

Anyone can make customers happy buy simply undercharging. Your work could be awful (I know it's not) and if you charged low enough you would still have a happy customer but I don't go to work to make other happy, I go to work to earn money and if I can leave the customer satisfied as well that is a bonus.

Honest question here and it is kind of personal so feel free to ignore it.:smile:

If you looked at what you have earned in the last year and diveded it out by the hours you had to put in have you made more or less per hour then when you worked for others?

[

But if a persons labor rate is $65/hr and he charged me 1/2 hr to pick up that ballast, that I can swallow. Nearly the same cost but its the difference in taste that it leaves in the customers mouth.....:grin:

We would charge for the time and still mark the part up, have you ever hired a plumber?

It is not wrong to make money.:smile:

 

[brian john]

If you where gouging people for a service change after a storm that would be wrong.

Selling people products to bring more money into your home is not wrong, it is business.

Charging higher prices after a storm is supply and demand. If I bought 20 generators 6 months ago for 5$00.00 each. Why is it wrong to sell them at $1,250.00 each to people after a storm. Those that really need it will be weeded out from the folks that might want one.

 

[rt66electric]

I mostly agree with mule

I mostly agree with mule

I mostlly (is that a word?) agree with mule..

I live in a small town near the big city. If I charged $60 for a ballast, word would get "around" and I would probably lose new customers. I could probably get away with $30.

HOWEVER, IF a customer pays me the hourly rate to goto the supply house and back ,I feel its hard to justify the 3X upcharge.

A small customer woud go Ballistic (ballast-tic)- pun intended -if I charged $300 to fix a 2X4 lay-in fixture.

-$90 ballast + 2hrsX $100hr(2men) + $10 for wirenuts etc.. = $300

 

[Mule]

You said ............



You are covering your costs, not making a profit on what you sell, to me that is silly.:smile:



If you where gouging people for a service change after a storm that would be wrong.

Selling people products to bring more money into your home is not wrong, it is business.



Anyone can make customers happy buy simply undercharging. Your work could be awful (I know it's not) and if you charged low enough you would still have a happy customer but I don't go to work to make other happy, I go to work to earn money and if I can leave the customer satisfied as well that is a bonus.

Honest question here and it is kind of personal so feel free to ignore it.:smile:

If you looked at what you have earned in the last year and diveded it out by the hours you had to put in have you made more or less per hour then when you worked for others?

[


We would charge for the time and still mark the part up, have you ever hired a plumber?

It is not wrong to make money.:smile:

Bob, I think your ignoring the fact that my wage rate is free and clear to apply as gross income before tax's..., as the material mark up pays the overhead exclusively.. That's pretty simple math...$65/hr x billable hrs is way more than I made working for the other guy, not to mention the freedom....Now I've made more money, grant you, but I had to work a gazzilion hrs to get it.....OT and DT, but Im too old for that...shew!! Let them young bucks have it now, its their turn...

Sorry to wear you out dude....:grin:

Example.....and thought....I occassionaly use the Ecost electrical data book. In that book it states the average material cost data that a small EC would likely pay to a supplier on the wholesale level(which should be like me right?). Repeatedly, I find that those figures are right at double of what my cost actually is. On top of that, local big box blues and oranges are even cheapier than the suppliers in some cases......So what am I saying? full Retail ie:2x,3x is a bunch of smoke and mirrors and the consumer is alot smarter than we give them credit, or least most of my customers are.

So,,,about that plumber...If you can go down and buy that HWT for $200, are you willing to pay a plumber 3x's? plus his labor rate of $75 x I dont know maybe 3hrs for a easy changeout or maybe 4hr. So that would be in the 800-900-1000 range....Not me....But your right I've heard of those kind of prices for a HWT change.....But like I've said time and time before its a free country go for it.....:grin:

So here's my question to Bob, but it might be a bit personal....If a person sold you a piece of bubble gum that is .25 in the machine, and you paid him $10 for it and he didnt hold a gun to your head...Is that un-ethical???? Just kidding...haha

 

[aline]

Bob, I think your ignoring the fact that my wage rate is free and clear to apply as gross income before tax's..., as the material mark up pays the overhead exclusively.. That's pretty simple math...$65/hr x billable hrs is way more than I made working for the other guy, not to mention the freedom....

Maybe I'm not understanding you correctly.
Are you saying that you cover all your overhead expenses with material markup?

It would seem to me you would have to mark materials up a lot in order to do this. Just opposite of what your saying you shouldn't do.

If you're covering all your overhead costs with material markup what happens when a job has little or no material involved?

I've always been of the understanding that overhead should be covered in the labor charges as much as possible.

Material markup would cover overhead costs associated with ordering, storing, handling and warranty of the materials.

Am I wrong in my thinking?

 

[aline]

So here's my question to Bob, but it might be a bit personal....If a person sold you a piece of bubble gum that is .25 in the machine, and you paid him $10 for it and he didnt hold a gun to your head...Is that un-ethical???? Just kidding...haha

I wouldn't consider it un-ethical unless that piece of bubble gum the person sold me turned out to be a rock.