Markup Percentage

[krisinjersey]

With the company I used to work for I was told that markup was almost as complicated as estimating. You had to walk a tightrope between being overpriced and not making enough for handling and storing parts. Our price book was written by the owner and refined annually to adjust for changes is cost and the addition of new parts. Anything we purchased that was specific to a job but not in inventory was marked up 66%. Other parts were anywhere from 5% to 350%. Small items carried the largest increase, switchgear the smallest.

So now being on my own and trying to adapt this concept for use here, I'm lost. I can take everything up 25% and the cost seems fair but not overpriced. I can't write up a T&M ticket with 4 tan wirenuts at $.75 each. What do you guys use? Is there a better formula or is it better to use a generic percentage for everything. As I fill the estimating software with parts, I want to keep the markup accurate so I don't have to do it twice.

 

[Steve Beranek]

Does your supply company offer a book value, and you get a discount off? Put the book value in. That seems fair to me.

 

[480sparky]

I've seen two versions posted, both of which I copied & saved:

$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


$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

 

[wawireguy]

Instead of four tan wirenuts try this:

Miscellaneous; wirenuts, fasteners, tape. $5.00

 

[220/221]

I can't write up a T&M ticket with 4 tan wirenuts at $.75 each.

What do you mean you can't? Do you think it's too much effort or that .75 is too much?

If it makes sense, you can and should.

Even at $1 a minute, simply accounting for the wirenuts wil cost you .25


Writing them up for .30 would actually cost you money.

 

[dbuckley]

Even at $1 a minute, simply accounting for the wirenuts wil cost you .25

That's a very important point; in a big company, an invoice can cost what seems like a fortune to process, so an invoice for $5 ends up costing the customer $50, or even more.

Works the same way in your shop too; creating the invoice has a cost, accepting the cheque (when it arrives) has a cost, chasing the cheque when it hasn't arrived has a cost. There is cost everywhere along the line.

Selling four wirenuts T&M at $5 all day will probably send you to the bankruptcy court, even though there is a "healthy" markup on those wirenuts.

 

[LarryFine]

Selling four wirenuts T&M at $5 all day will probably send you to the bankruptcy court, even though there is a "healthy" markup on those wirenuts.

"But, I'll make up for it in volume!"

 

[krisinjersey]

Thanks

Thanks

All great points. The markup chart is proving to work very well for me, so a special thank you for that. I understand the "hidden" costs associated with processing the job, A.P. and A.R., and maintaining the inventory. I prefer to work those costs into something a bit less glaring than a 700% markup. I don't have an issue with charging a fair price for labor or material, I just don't want to litter an invoice with red flags. The easier it is to get the money out of the customers pocket with them still smiling the better. Repeat business and word of mouth are so important right now as I'm sure you all know. The number one complaint I got from customers with my old company was "You guys are great, but you're so expensive." We carried an incredible amount of overhead and that drove costs too high. If a crew didn't make $1500 - $2000 a day we weren't cutting it. And that's a huge volume of work for 15 crews. I started this company with the intention of keeping overhead down and controlling costs to keep margin small enough to get us off the ground and rolling in a tight market. It's working so far and much of that sucess is due to my opportunity to come to you all for your insight. So again thank you.

 

[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.

 

[220/221]

. The number one complaint I got from customers with my old company was "You guys are great, but you're so expensive."

That is NOT a complaint, it's simply a comment. I hear that often and I consider it a compliment.

If a crew didn't make $1500 - $2000 a day we weren't cutting it

That is what it takes to operate a service business.