Material Markup

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nyerinfl

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Broward Co.
Hey all, question for all the contractors out there. I'm trying to figure out what to charge for a material markup. Generally I do contract work so a markup is not really necessary as it is done in the estimate, but I've been picking up more service work and think I'm entitled a markup for the time spent getting, holding and putting up money for said material. I was thinking about 5%, too high, too low? Thanks for feedback.
 
Service work material requires a 100% markup IMO, at least that is how my last company did it. If it is truck stock, you had to pay to haul it around. If it is not something you have on the truck, at the very least they pay you to go get it, or mark that up 100% also.
 
Here are two examples for marking up. I hope I do not get into trouble for reposting these. Offcourse I prefer MD's but I think Busman's is more suited for my area. %5 is not enough for anything.

By Busman
$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

By MD Shunk
$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


Tim
 
!0-20% on bids. 50-100% on service calls. Sometimes I don't follow my rules and I'm on the low side.

Think of it like this:
You have $4,000 in inventory on the truck for service work. You had a great month and sold every item. At 3% MU I figure you made $123 (4,000 / .97). How long would it take to invantory, order, pic-up, and restock your truck? Dose anything on the truck get lost, broken, or scratched, or is just job waist? Do you ever get stuck with small special order items like funny trim plates or non standard colors? On top of that around here EC pay sales tax. It verries at least 3% from one place to the next. I would already figure your at a loss wit 3%. I would guess 10% for the above off the top of my head. How much would you make if you had that $4,000 in a savings or investment account? 3-5%? Don't forgert your a business. The job of a business is to make a proffit. Add another 7-10% minimal material proffit. That may be on the low side for many industries. Add it up and your about 25% MU.

Think of the big numbers at the end of the year. If you handeled $100K in material would you like to gross another $3K, 25K, or 50K from it?
 
for most $ ranges, multiply by 1.2
for the cheap stuff, x 1.5 or 2
for the $$$$$ items, x 1.1 or less
 
My last three companies charge 25% mark up.

I worked for one who charged 300%. They were a rip off. They paid me as a piece worker. They're labor rate is $91.50 per hour. I couldn't afford to work there.

All of the other shops I have worked for, charge 25%. That is the going rate in my area.
 
sparky_magoo said:
My last three companies charge 25% mark up.

I worked for one who charged 300%. They were a rip off. They paid me as a piece worker. They're labor rate is $91.50 per hour. I couldn't afford to work there.

All of the other shops I have worked for, charge 25%. That is the going rate in my area.
Click to expand...

Why do you consider them a rip off? Why couldn't you afford to work there? Are you aware of what some retail markups are?
 
basic business principles should be required knowledge of anyone who goes into business for themselves.

you need to markup your material at whatever rate is required for you to earn the money you need to earn to meet your required monthly income. If you let your monthly income determine your lifestyle, you are doing it backwards. One of the primary reasons to open your own company is to create a better life for you and your family. You need to determine the life that you want and figure out how to finance it...

so, the markup on your material really depends on your hourly rate. If you can charge a high enough hourly rate to generate the money you need, you can markup your material less. If you have to compete with knuckledraggers by billing a low hourly rate, you need to mark up your material more.

and then the question is...do you markup your buy price or manufacturers list price? and do you use markup or margin to determine your price?
 
Rates too high?

Rates too high?

I've had customers complain that my materials markup is too high. This is what I ask them to consider:

1) My level of knowlege 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) Bookeeping 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
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
 
Last edited:
I get pass seymour receptacles for .40 I sell at .80,Joe homeowner calls and says he saw receptacles "just like what I installed" for .36 at the box store and thinks I overcharged.
 
Rewire said:
I get pass seymour receptacles for .40 I sell at .80,Joe homeowner calls and says he saw receptacles "just like what I installed" for .36 at the box store and thinks I overcharged.
Click to expand...

Tell him delivery isn't free. How much for the box store to bring one out to him?
 
I normally mark up 30%. That usually covers my time to get latest material prices, work up the estimate and go buy materials. Parts houses are close but for very small jobs I realize the markup does not cover my time to work up an estimate. Win some lose some. Mostly I win. :cool:
 
RADHAZMAN said:
I normally mark up 30%. That usually covers my time to get latest material prices, work up the estimate and go buy materials. Parts houses are close but for very small jobs I realize the markup does not cover my time to work up an estimate. Win some lose some. Mostly I win. :cool:
Click to expand...
Winning every bid is not always a good thing.I have seen many a EC go OOB because they wanted to be low bidder on everything.
 
busman said:
I've had customers complain that my materials markup is too high. This is what I ask them to consider:

1) My level of knowlege 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) Bookeeping 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
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
Click to expand...

Mark, I'm going to print that out and keep that. Although I already know this stuff, you lay it out much better than I can. (I'll give you credit :D)
 
Rewire said:
Winning every bid is not always a good thing.I have seen many a EC go OOB because they wanted to be low bidder on everything.
Click to expand...
What I meant by "winning some qansd losing some" is with a 30% material markup I mostly make the profit I need for the job. :cool:
 
To divert the thread a little, the problem with material markup in a couple of the replies isn't the markup. The problem is showing your client a price for material that has been marked up. If you give them a price for the job, they won't see a material price (or labor rate). Then only you know what the labor rate is, and what the material markup is, and what the margin is. Sometimes less is more.

As already stated, your pricing better include the costs of purchasing materials, keeping inventory, and providing warranty.

Dave
 
People don't seem to have a problem paying twice as much for parts at the car dealership then the local DIY parts store.

Why should they be surprised an EC has to cover their costs?
 
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