Typical contractor markup on material

[kwired]

It always depends on the mat/labor ratio at the bid summary.
If the owner furnished fixtures, gear, generator or any big ticket items...it becomes an all labor job, and my labor risk goes way up.
I look at margin dollars per man/hr and markup accordingly (as if I furnished everything)

And they need clearly informed that if those big ticket items run into warranty issues your warranty only applies to potential installation errors and you have nothing to do with honoring any portion of factory warranties on those items, including any initial diagnosis that determines it is factory warranty issue.

 

[gadfly56]

And they need clearly informed that if those big ticket items run into warranty issues your warranty only applies to potential installation errors and you have nothing to do with honoring any portion of factory warranties on those items, including any initial diagnosis that determines it is factory warranty issue.

On the flip side of that, my old employer's standard terms made clear that if the warranty issue was the product installed, the customer was not going to get the re-installation labor for free. Contractors certainly test the installed equipment after installation, but this only catch the DOA's, not the early mortality events.

 

[kwired]

On the flip side of that, my old employer's standard terms made clear that if the warranty issue was the product installed, the customer was not going to get the re-installation labor for free. Contractors certainly test the installed equipment after installation, but this only catch the DOA's, not the early mortality events.

I certainly hope if one isn't taking a markup they should be expected to do anything warranty related for free. If you sold it I can understand they may expect you to handle any warranty issues, with any compensation being between you and the manufacturer or supplier. But if you the customer buys it yourself don't expect me to do any warranty work at all for free, other than if it were installation issues that I would have been responsible for.

 

[oldsparky52]

I would explain it like this, if you buy it from me, I deal with the warranty issues. If you supply it, you deal with the warranty issues, including any labor I provide.

 

[gadfly56]

I certainly hope if one isn't taking a markup they should be expected to do anything warranty related for free. If you sold it I can understand they may expect you to handle any warranty issues, with any compensation being between you and the manufacturer or supplier. But if you the customer buys it yourself don't expect me to do any warranty work at all for free, other than if it were installation issues that I would have been responsible for.

Pardon, I should have made clear that this was for any contractor supplied items. We'd handle the warranty issues with the manufacturer, but few if any manufacturers will compensate you for your labor. Hence, the company policy. Enforcement was...fungible. Long time customers, not so much. One time installs, much more so.

 

[petersonra]

I think some of you are overthinking. Most customers just do not care what you charge them for parts versus labor. They know there are a lot of silly games contractors play with that and really most focus on the total price.

I would try and move whatever overhead there is in selecting, receiving, and moving parts around into direct labor. That is where it is going to end up in reality. It seems silly to me to try and hide some direct labor in the form of a markup, especially when the only one who cares about it is the contractor.

I think you need to have some markup on material to accommodate some contingencies. You might miscount how many wire nuts or screws you need. Beyond that, figure some percentage as a standard markup, probably on a sliding scale that goes down as the total amount of material goes up. Then add another line item to your pricing form for how much profit you want to make on a particular job. It is probably worth having a lower profit expectation on customers that give you a lot of repeat business than with those who are a one time shot.

For service work, I would just have a fixed price for common items used that covers the cost of the material and some reasonable markup. The time spent chasing parts, writing up invoices, and refilling the bins ought to be direct labor though. But to simplify things, you could just charge $10 for a receptacle replacement for parts. That would cover the receptacle, cover, and wire nuts, and whatever overhead there is to getting replacements for the parts you used.

 

[James L]

Then add another line item to your pricing form for how much profit you want to make on a particular job.

That's probably the worst idea I've seen, if you mean adding a "profit" line to an invoice a customer sees.

I've listened to guys who've tried it, and they burn all that profit in the time it takes to explain and justify the profit.

I use 2 line item types for hourly service - labor and materials. I might separate out some materials into multiple lines just so they can see how the number added up so quickly

Labor profit is built into the labor price.
Materials profit is built into the materials price.

For bid jobs, I line item per task, per opening, etc and I don't show how much is labor, materials. Etc

 

[petersonra]

That's probably the worst idea I've seen, if you mean adding a "profit" line to an invoice a customer sees.

Note I used the term "pricing form", not invoice.

I would be giving them a fixed price for the work and not breaking out the cost of labor versus materials.

 

[electrofelon]

Is that the markup over the price paid or the multiplier to the price ($1 plus 120% of 1$ = $2.20 or 120% of $1 = $1.20)?

multiplier, 1.2 x price paid.

There are many different situations being discussed here I think. In post #3, OP said "firm bid" and in that case, I dont really see how material markup comes into things. Different ways of doing it I suppose but when I do a bid, I dont do any "material markup" but I do add a fudge factor to cover material being over my calculation and/or for all the little things I dont try to calc out and just cover with a lump sum guess. That may become profit but maybe not.

 

[paulengr]

I think some of you are overthinking. Most customers just do not care what you charge them for parts versus labor. They know there are a lot of silly games contractors play with that and really most focus on the total price.

I would try and move whatever overhead there is in selecting, receiving, and moving parts around into direct labor. That is where it is going to end up in reality. It seems silly to me to try and hide some direct labor in the form of a markup, especially when the only one who cares about it is the contractor.

I think you need to have some markup on material to accommodate some contingencies. You might miscount how many wire nuts or screws you need. Beyond that, figure some percentage as a standard markup, probably on a sliding scale that goes down as the total amount of material goes up. Then add another line item to your pricing form for how much profit you want to make on a particular job. It is probably worth having a lower profit expectation on customers that give you a lot of repeat business than with those who are a one time shot.

For service work, I would just have a fixed price for common items used that covers the cost of the material and some reasonable markup. The time spent chasing parts, writing up invoices, and refilling the bins ought to be direct labor though. But to simplify things, you could just charge $10 for a receptacle replacement for parts. That would cover the receptacle, cover, and wire nuts, and whatever overhead there is to getting replacements for the parts you used.

You haven’t dealt with purchasing people that try to read something into your hourly rates then try to argue with you why your rates are higher.

My first intro to this was with a hydro blaster outfit who had rates double the rate that the purchasing managers favorites charged. It’s too bad that the cheaper contractor took three times as long and borrowed half of our equipment and our mechanics had to fix their stuff so they could do the job, so in mind they were twice as expensive.

Good work isn’t cheap and cheap work isn’t good. You get what you pay for.

Which is why I DO look when I’m the buyer. If someone is obviously way below market on any factor there is probably a reason. If it’s not a good one I’m setting myself up for a bad job.

 

[rnatalie]

Nope, anybody with an account got the discount at the place I dealt with. The only people who paid list were people who walked in cold and asked to buy something.

 

[Dennis Alwon]

$0.01 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+ x 1.3

Ken there is no way we could sell something at $97.50 if we paid $30 for the item. If I had charge what the list shows I would have retired a wealthy man. In general we get 40% markup. Lately I have been charging 100% on smaller items

 

[James L]

Ken there is no way we could sell something at $97.50 if we paid $30 for the item. If I had charge what the list shows I would have retired a wealthy man. In general we get 40% markup. Lately I have been charging 100% on smaller items

On service work, I've been marking up 100% on basic materials, and 30% on larger items or components.

For instance, I recently added a 50amp car charger plug. My materials cost was about $350 because of the 6-3/g and a couple of twin breakers, plus the 2-pole.

I marked up about 30% on the wire, from $250 to $330

Then I marked up 100% on the breakers, from $75 to $150

Then my labor was added on.

 

[480sparky]

Ken there is no way we could sell something at $97.50 if we paid $30 for the item. If I had charge what the list shows I would have retired a wealthy man. In general we get 40% markup. Lately I have been charging 100% on smaller items

The question was asked. I provided an answer. Nothing more.

 

[kwired]

Your markup is partially to cover things you don't necessarily account for. How many count and invoice for every wire nut, screw, staple, tape, etc? Larger project that will use full packages of wire nuts, screws, etc. maybe you do bill those out, but not necessarily for the small project where you added one single receptacle and that was it.

 

[James L]

How many count and invoice for every wire nut, screw, staple, tape, etc? .... not necessarily for the small project where you added one single receptacle and that was it.

If I'm doing a T&M job, I count every single item.
Every staple, every screw, every wire nut, etc.

I did service work for a shop once, where I handled the whole call including pricing, and the owner saw my first bundle of completed and paid invoices, he was a bit taken aback.

15 years ago I charged 5¢ for a staple. That's $250 on a 5,000 count bucket. His price was about $40.00

Same thing with wire nuts - 25¢ each. That's $37.50 for a 150 count bucket that costs about $9.00

It adds up

 

[ptonsparky]

I have a hard enough time getting the guys to write down the 200 amp 42 circuit panel they put in, let alone how many wire nuts they used. Then again I trained them so maybe there isn't much hope.

 

[kwired]

If I'm doing a T&M job, I count every single item.
Every staple, every screw, every wire nut, etc.

I did service work for a shop once, where I handled the whole call including pricing, and the owner saw my first bundle of completed and paid invoices, he was a bit taken aback.

15 years ago I charged 5¢ for a staple. That's $250 on a 5,000 count bucket. His price was about $40.00

Same thing with wire nuts - 25¢ each. That's $37.50 for a 150 count bucket that costs about $9.00

It adds up

Yes it adds up, but at same seems a little overboard to me.

Where it starts costing you is if you find you are frequently making trips to the supply house, nearest hardware store, etc. just to get a few bolts or washers that are only a quarter a piece or something of that nature when it should maybe something you keep stocked on your truck if you use them often enough, but when you do stock them don't purchase them as individual items at the hardware store but rather in less costly bulk packages. The hardware stores need to mark them up just to utilize the store space and the extra labor in keeping up with those individual pieces vs packaged products, but is handy for customers to only purchase a few when they will never use the bulk package contents.

I did say on larger products that if you have multiple packages of screws, staples, wirenuts, etc. that you should bill the project for those items at standard markup on those items.

If I have larger project that I did sell them full packages of such items, I still likely don't itemize those two big blue wire nuts I happened to need on that project.

 

[blueheels2]

3 months ago I was charging 35% to 50% markup on every job across the board. 100/.65 or 100/.45 and then adding that to my hourly rate and charging that as a flat rate price.
But a while back I found a flat rate book online that i now I’m use. Book is incomplete but has enough info I can do most residential service with. The markup is small like 10% but that’s ok because the money is in the labor of the job.

I make more money this way but I don’t get as many jobs. Fortunately I’m getting more leads.

 

[zbang]

If I'm doing a T&M job, I count every single item.
Every staple, every screw, every wire nut, etc.

I suppose, but for small things like that, it's often a good deal easier to just include in your own calcs "half box of staples" (wire nuts, screws). You'll probably know if the job will use that much or not, and whether you need to get another box to finish. Over time it'll average out, and "box of 100 screws, use 10-20, charge for half-box" gets the markup.