Lets talk about markup shall we?

[bradleyelectric]

I could be way off base, but it seems to me it's easier to justify a high labor rate to a customer, as opposed to a high price on an item (like $60 for a readily accessible $20 item) to a customer.

I can see charging $20 a ballast that a customer can get themselves for $20 when I picked it up at a wholesaler for $10 and keeping the extra $10.

You make a pretty strong argument for flat rate pricing. That is the price for the job including materials and warranty. What if I buy my own materials? I supply materials so there is no problems as to who is responsible if I am held up during install if either you buy the wrong material, or I forget to put something on your shopping list.

 

[220/221]

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.

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

Uhhh....this is no more or less ethical. You are simply moving numbers around.


I mark up materials as much as I can. If it's a T&M ballast, I generally do 100%. Most of my ballast work is flat rate.

If a customer wants to supply a ballast, I will install it.

If he wants to pay me to go to the Home Depot and pick one up, I will sell it to him at cost.

If he wants me to buy it, stock it and bring it to him, I am going to get a decent mark up.

Also remember, the mark up helps cover warranty costs.

 

[aline]

You make a pretty strong argument for flat rate pricing. That is the price for the job including materials and warranty. What if I buy my own materials? I supply materials so there is no problems as to who is responsible if I am held up during install if either you buy the wrong material, or I forget to put something on your shopping list.

Also if the customer supplied the part and it fails you can end up with a dispute as to why it failed.

Was the part faulty or did you install it wrong causing it to fail?

Customers usually don't have a clue if the part was installed properly or not. If they knew how to properly install it they would have installed it themselves.

Since they have no way of knowing they may try to blame you for not installing it properly.
Even if they don't come right out and blame you they might still feel like it was something you did and harbor bad feelings toward you. You might lose them as a customer or they might bad mouth you to others.

When you provide both parts and labor there's not question who's responsible.

Unless of course the customer decided to mess with it after you left.

 

[Rewire]

Uhhh....this is no more or less ethical. You are simply moving numbers around.




If he wants to pay me to go to the Home Depot and pick one up, I will sell it to him at cost.

why at "cost" you are still buying it and bringing it to him?

If he wants me to buy it, stock it and bring it to him, I am going to get a decent mark up.

Also remember, the mark up helps cover warranty costs.

 

[Mr.Sparkle]

why at "cost" you are still buying it and bringing it to him?

I think 220 means is he making up the difference in his hourly labor rate for "shopping", as he stated it's just him moving numbers around.

 

[Mule]

So if the job is labor only and there are no parts you don't get the $10-$15/billable hour you need to cover overhead?

So if you use one wirenut you charge $10-$15 for it?

Isn't that kind of unethical?

Do you seriously think that I do that? You just dont like it, so you throw stones at it. ......We have a trip charge for that occassion, which pays that overhead cost.

If I make a statement about something being un-ethical,and that's what has you so testy, generaly speaking that's my thoughts about my rates and prices. If you want to charge $60 for a $20 ballast, knock your self out dude, you wont hear a complaint out of me....................:smile:

 

[aline]

Do you seriously think that I do that? You just dont like it, so you throw stones at it. ......We have a trip charge for that occassion, which pays that overhead cost.

If I make a statement about something being un-ethical,and that's what has you so testy, generaly speaking that's my thoughts about my rates and prices. If you want to charge $60 for a $20 ballast, knock your self out dude, you wont hear a complaint out of me....................:smile:

Lighten up Mule I was only joking with ya about the un-ethical thing.

I just couldn't understand how you cover your overhead with material markup if you have little or no material in the job. What if the job consists of 2 hours of troubleshooting and installing one wire nut on a loose connection? You mentioned that you markup material 1.25% to cover overhead or a minimum of $10-$15. Just sounded to me like you would have to increase your labor, which you said you didn't, or you would have to charge the $10-$15 per hour minimum you need to cover your overhead for the one wirenut you used.
This just sounded to me like you would need to charge $20-$30 for the wirenut to cover the overhead for 2 billable hours.

I understand now. You would charge a trip charge for comming out on top of your hourly rate.

I'm sorry but I just can't picture trying to cover all my overhead expenses with material markup. Makes more sense to me to include my overhead expenses into my hourly rate. This way my overhead gets covered regardless of whether or not I sold any materials.
If all my overhead gets covered with my hourly rate this means I don't need to markup a ballast from $20 to $60. I can keep my material markup lower. In fact if I charged enough for labor I wouldn't need to mark up material at all.

I really didn't think you would charge that much for one wirenut. I just couldn't see how you can cover all your overhead expenses with material markup and I'm still having a hard time grasping it. But that's ok I won't mention it anymore. Do what makes you happy.

You guys ever heard of free installation on labor when you buy our carpeting?
How much do you think they're marking up that carpet?

Or how about the other way around?
Free carpet when you have us install it in your entire house.
The carpet may be free but the labor is going to cost you.

 

[petersonra]

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.

you should have billed him for the time it took to go get the part too.

 

[busman]

I've posted this before, but I have this printed up for customers who give me the "I know what this costs at HD, why is it three times more from you?" line:


1) My level of knowledge of product quality/usefulness/ease-of-install was bought with trial-and-error (my time and money) and is worth quite a bit. In other words, I know what to use/not-use.

2) When you buy it from me, it's right there at your house. The things involved in that happening include:

a) Vehicle expense to drive to supply house/store
b) My time to travel and shop
c) Bookkeeping and Accounting costs
d) Inventory time to make shopping lists (to make sure the truck is always stocked properly)
​

3) Other factors

a) Waste (if I buy a 250' roll and have 15' left over it goes to waste)
b) Items involved in installation that are not itemized on the bill

i) Nails, screws, anchors
ii) Connectors, staples, pig-tails, wirenuts
iii) Caulk, duct-seal, tape
​

4) Warranty - Buying from me means that I warrant the item for a reasonable period of time. If something is defective, then it costs me the following:

a) Labor and Travel to replace the part
b) Time and Travel to return the part
​

5) Tools - The cost of replacing tools is really proportional to the amount of material installed and not time spent on a job. Five hours of troubleshooting is no wear on my tools, but virtually every part I use puts some wear on a tool.

If all this doesn't justify a 3x markup on small things and a 1.3x markup on the largest -- well then just buy it yourself and do it yourself.

Mark

 

[iwire]

Do you seriously think that I do that? You just dont like it, so you throw stones at it. ......

It's not that we don't like it it is that you have not explained it well, we (at least I) can not follow how you make your money. :smile:

It is my opinion you have put being the customers friend ahead of your making money. :smile:

 

[Dnkldorf]

It is my opinion you have put being the customers friend ahead of your making money. :smile:

I read him putting both of them being equally important.

This can pay huge dividends in the long term, and being friendly doesn't cost much.

 

[Mule]

It's not that we don't like it it is that you have not explained it well, we (at least I) can not follow how you make your money. :smile:

Sorry...........

It is my opinion you have put being the customers friend ahead of your making money. :smile:

By Golly, your starting to get it.....:grin: Remeber, Im a self employeed electrician not a EC as you guys put it. And to boot, I pride myself in customer satisfaction, while making, what I think, is fair transaction to all parties in involved.

But, put yourself as starting business just 6 months before the world economy falls apart. Do you think I want to be in the same shape as everyone else being out of work? Not trying to de-disregaurd the un-employeed, but mule is a surviver. Not to mention not eligible for un-employment..... Right now, its about surviving, and at the same time Im building a strong client base which is money in the bank IMO

You guys jumped all over me last fall, about working for less for a two day a week, full 8hour days, for a out of town client. When the phones stopped ringing, a couple of months later, and work fell back to 50%, ole mule had a ace in the hole. Now you guys are far smarter than me about making BIG money, but I have to continuelly justify my actions to you guys, and it wears me out. Im learning alot from you all, but Im doing what I think is most important, and that's surviving.......Ive heard the statement on this forum that if the customer is not angry when you left the job, you didnt charge enough...... DUH, If I did that around here, Id be out of business.

 

[Rewire]

Mule the best advice I was ever given was be willing to let go of old ideas. I have put almsot every dime of twenty years of savings into this business we are dept free and we have work and the phone is still ringing.I am going to do what ever I see as nesessary to keep the doors open and that is the bottom line.Sometimes I wonder if some here even own a business. You do what you need to do to keep your doors open.

 

[Mule]

Mule the best advice I was ever given was be willing to let go of old ideas.
Im not sure what your getting at, old ideas...?

I have put almsot every dime of twenty years of savings into this business we are dept free and we have work and the phone is still ringing.
You didnt start your business in 08, I did, your client base is much larger

I am going to do what ever I see as nesessary to keep the doors open and that is the bottom line.
Your smart IMO

Sometimes I wonder if some here even own a business.
If your beating around the bush, talking about me, my business is not like yours. You are a business man, that Im not. The best thing Ive learned on this forum is that Im a self employeed electrician, Ive had desk jobs before, working as an I/E super and hated every minute of it. I'll take my pouch any day

You do what you need to do to keep your doors open.
Thanks.....Im doing that.....

I told a person that asked me the other day...."hows the new adventure doing?" I told hime SUPER, Ive decided if I can survive in these conditions, I will be OK.....

Im going to take Pierre's advice given in another thread..........Thanks but this discussion as it pertains to me, is a waste of server space and our time. I going to focus on something else.......Thanks guys for your time..............Still Smile'n

 

[hardworkingstiff]

Mule has a "PMA"!

Mule has a "PMA"!

PMA = Positive Mental Attitude.

Nice Mr. Mule!

 

[~Shado~]

Mule,

I'm beginning to think you are related to my 2nd employer when I got into this trade.

In his interviews, he always said:
1 - When I hire, I hire for life (he really tried to keep this possible)
2 - As long as we have happy/satisfied customers, we have a business.
3 - As long as we have a business, we have work
4 - As long as we have work, you have a job
5 - If any of the 3, (customer, business, work) are missing....the results are self explanitory

Since this was totally opposite of my 1st employer (his idea...make all you can from this one, if they call back fine, if not....somebody else will take their place), I have carried his way of business all thru my years.
I really try to take care of customers...treat them with respect, give a fair price, do a good job, and it comes back to you

As we know, running a business is a difficult thing to do. Even in the best of times.
What works for some WILL NOT work for others due to many variables....location, overhead, labor pool, customer base, competition, material cost, cost of living, experience, knowledge, and personal beliefs and ideas.
As much as I respect and admire those who are, have been successful, I take what they say, (not so much as like a grain of salt), but simply as advice from their experience, and inject it into my ideas or dismiss them. I have learned a ton of things, I never would have thought of before, since finding this forum. Some, I have accepted others, I have not. I think we each define what we consider sucess.

With that being said...I will continue to run my business, the way I see fit and best for me, with plans for the future........as others will do the same for themselves.

I applaude all who have voiced their ideas, experience, etc....I have adopted some and dismissed others.