I agree. Don't rely on just one. Some projects will be labor intensive or have high material costs and little labor.I think in an electrical contractor business structure, profit is generated from both the hourly rate charged for labor and the markup applied to materials.
There are two different types of PROFITS.In a typical business structure does profit come separate from hourly rate and material markup? Or is profit simply generated from the two?
it's important to note that the overhead costs associated with materials for large projects are typically much lower compared to service work.I think it's best to measure profits across multiple time frames.
Profit on each job
Profit for a month
Profit for a year
It can be detrimental to look at only one aspect.
Only looking job-to-job can put you on a serious roller coaster ride. Up and down with each customer.
Only looking year-to-year can make you lose sight of where each job is. As long as there's money in the bank you may not be concerned until it's too late.
As to the OP and where profit comes from, it partly depends on the work you do. I know guys who do large retail and say there's no money at all in the materials.
I know guys who do service work and have great material markups
Do you have a fixed percentage for material markup to cover all these things?I try to make markup on material pay for the following:
1) My time to research and acquire the materials.
2) Wear on tools (almost all materials require a tool to install them)
3) Vehicle costs to get the materials
4) Costs to return defective materials
5) Costs for callbacks due to defective materials
6) Costs for records and bookkeeping.
7) Profit
If I've done that right, then those costs do not eat into my straight labor profits.
Mark
The benefit can be a set percentage, but I believe the overhead varies by the size of the project. However as the project size increases, the overhead also remains relatively fixed as a percentage. But for smaller jobs, the overhead can vary significantly.Do you have a fixed percentage for material markup to cover all these things?
No, I have a sliding scale. Markup on cheaper items is a higher percentage than more expensive ones.Do you have a fixed percentage for material markup to cover all these things?
I would say there are 3. First is necessary profit,,, which is enuf to stay in biz and then there is excess which is where the money is made. If eggs are a dollar and the cost is 90 cents no one goes in to the egg biz, you stay, you dont leave. Goes up to 125 and people start entering the biz due to some money left on the table after the necessary.There are two different types of PROFITS.
In the simplest terms for your question, profit comes from the difference in Your cost for labor and what you charge for labor plus material markup, minus overhead and fixed costs.In a typical business structure does profit come separate from hourly rate and material markup? Or is profit simply generated from the two?