Profit Margins....

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radiopet

radiopet

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Location
Spotsylvania, VA
Hey Guys,

What does your company consider a good profit margin and mark up on material.

I am in an arguement with my brother over this.....our current margins are this...

10 % of total and 8% on material markup margins.

I think that is too low.......your thoughts
 
lol......thats what I am gathering........I told him it should be based on the actual material costs and labor costs....I think it should be 10% on Material and 30% on Project actual bid.
 
About 50% for small jobs, on larger jobs you may be able to adjust it down a bit, we have 7% sales tax, 15% inventory, 12% ordering, and billing charges, so there is 33% before any material profit is added, so 33 plus 10 = 43% min, most of the AC installers mark up 100% or more, our garage marks-up anywhere from 100 to 300%, unless you doing electrical as a hobby, you need to recover material burden costs.

I think where the 10% came from, is smaller contractors were looking at large budget projects, where they put in 10% on material, but they failed to look at the total project contract bid, where burden costs were recovered, as seperate charges, so on most of these bids the contractor recovered about 20 to 30% additional monies.
 
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Good subject Radio
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Maybe y'all can explain some of this to me.
Mark up I understand basically I put 35% on materials, but I don't mess around with pennies & math on small stuff.
Swithes, plugs plates, all $1. Decora $5 SP breakers$20 2p Breakers $40 Lightolier recedssed cans F&I $150.

Now whats all this about Profit & WTF is a "burden cost"
Material profit? Is that the same as mark up?

Isn't Profit margin a measurement of what the finished job ended up costing? For Example, "Job ABC" material ended up costing $5000 & Labor spent was $10000. Bid price collected was $20,000 then you had a 33% profit margin.
Personally every job of mine makes money, but the company never makes a profit as the boss, me, takes it all out!
When I was startin out I crunched all these so called numbers & wasted a lot of time doing spread sheets & paper work, accounting for every penny & connector & face plate. None of that had anything to do with what I was able to take out of the business.
Now when I get a job I bid, I don't keep track of anything except the extras I can charege for.
Paper work is at a minimun, time is maximized.
Bid it high or don't bid it at all.
 
Material burden is the hidden costs of moving material from supplier to customer, the sales tax you paid on it, the accounting costs, for posting and billing, the cost of moving, or staging, these are added costs, not profit, then you can add profit if desired.

Material should generate a profit, how much, depends on what your goals are.
 
satcom said:
Material burden is the hidden costs of moving material from supplier to customer, the sales tax you paid on it, the accounting costs, for posting and billing, the cost of moving, or staging, these are added costs, not profit, then you can add profit if desired.

Material should generate a profit, how much, depends on what your goals are.
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OK I see, I just choose to minimize "the accounting costs, for posting and billing, the cost of moving, or staging"
I call all of that, part of being a small contractor,
I don't call any of this profit either, I just call it mine!

Material should always have a profit, things that break get more markup, things that are special order or on the other side of town get even more.
But for real, you always gotta charge for every screw or wire nut with a markup on each.

Another thread, someone said something like ... you go to Home depot & spend $10,000 on cabinets for your kitchen remodel, would you expect them to throw in the knobs & pulls for free? or for no markup? Why should any of our customers expect a wirenut or toggle for free & why should we give it to them for free?
 
77401 said:
Another thread, someone said something like ... you go to Home depot & spend $10,000 on cabinets for your kitchen remodel, would you expect them to throw in the knobs & pulls for free? or for no markup? Why should any of our customers expect a wirenut or toggle for free & why should we give it to them for free?
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Didn't see that thread, but we tack a "miscellaneous" charge on all T&M. Anywhere form $5 and up.
 
77401 said:
For Example, "Job ABC" material ended up costing $5000 & Labor spent was $10000. Bid price collected was $20,000 then you had a 33% profit margin.
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Well........... technically speaking, no.

Sale of 20K, costs of 15K, profit of 5K.

5K/20K = 25% profit margin.

15K*33-1/3% = 20K.

Most financial people I've met would say you had a 25% profit. I agree that you marked up your cost 33-1/3%.
 
I hear alot of people say they make 35% profit. I think some don't really know their true overhead. On a large project which is from $100,000 to $500,000 for us we get 11% overhead and 10% profit. The projects I lose on I usually add less than 3% and get beat by 2%. The bulk of large projects we get by less than 2%. The one we are on now is over 500k and I was low by $3,000. It is tight however you look at it. Smaller projects tend to have a little more profit margin but you have to manage things well. You show me a contractor who marks up his quotes, labor and all materials by 35% and I will show you about 4th place out of 5 bids.
 
dduffee260 said:
You show me a contractor who marks up his quotes, labor and all materials by 35% and I will show you about 4th place out of 5 bids.
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The jobs I get with high profit margins are jobs that are sold before the price is given. It takes a bit of work, but that's the only way I know to get them. Yours winds up being the only price because the customer wants you to do the work, period, and doesn't "shop" you (or at least not hard).

I've gotten quite a few jobs being 5-8 % higher just because of a relationship.
 
I tend to go 10% overhead and 10% profit and have been getting a high percentage of my bids. I included in my bids (before overhead and profit are applied) my total burdon cost. Burden includes -health insurance, pensions, FICA, unemployment for state and federal, workmens comp, annuity, and a few more which all add up to an additional $29.0905 per hour per man. What I have read on these boards are that a lot of people do not know what there burden is, much less their overhead.
 
chrsb What I have read on these boards are that a lot of people do not know what there burden is said:
Thats me! But please keep it in perspective.
Some of us are small contractors never neting over $250K While others on here would not touch a job less than that.
For a large shop, all of that is important & the projects you bid may expect that information.
For a small shop, we charge what we can get, material is what it is, & what left over is ours. K.I.S.S.
Electrical Contractor Magazine, this month has a good article on the profile of Contractors & the size of their shops & jobs
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