# Marking up materials on T&M jobs- are you transparent about markup?



## DE-carpenter (Jun 11, 2017)

I think I kick off all my posts the same...

TLDR: How does one mark up materials on T&M jobs? I don't mean how to do the math, I mean do you tell your customer about marking up materials and have to sell them on why the mark up is justified?

I'm a small-time carpenter in New England. I'm trying to scale up and get into larger projects, additions, roofs, porches, outbuildings, small new builds, etc. In the meantime I do a lot of punchlists, home repair, and small remodels. I live in a part of coastal Maine that has no building inspector and most of the houses are old as dirt and have all those associated problems.

I've had a busy but not particularly financially rewarding season. Up to this point I have almost entirely billed my jobs as T&M. Mostly due to a lack of confidence in job estimating. Most of my jobs mushroom and I fear losing my rear end on the sorts of jobs I have found myself in up to this point (sill jobs, rot remediation, punchlists, etc). 

A lot of carpenters around where I live bill T&M as well for similar reasons. Not a lot of bidding it seems. Almost no one marks up materials around here either, so to follow suit I have only sold my labor. I have found that I can't make up all my business expenses this way. I barely break even and I can't grow this way.

My goal is to move towards work that I can confidently bid at a reasonable profit, new or new-ish construction.

That said I know a lot about working on existing work and it's hard to focus solely on new construction up here, so I'm open to continuing to work with existing work, but that probably means continuing to bill T&M.

I gotta mark up at least a little or I might as well roll it up. My question ultimately is how does one sell their customer on allowing a markup on materials on a T&M job? What kind of experiences have people had doing so? Other contractors must do this, right? 

I think I say this every time, but I really do appreciate this great resource. Thanks for all the input folks.


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## JoeStanton (Sep 24, 2008)

I just send a T & M invoice with line items, it gets marked up but not shown on the bill. I usually tell them when we meet I mark everything up 20%. If that doesn't fly you can always just raise your hourly rate so they feel you aren't making money off the materials. Start putting jobs into spread sheets with hours and materials. It's very easy to get pricing after a few similar jobs with good job costing. 

If I'm curious about a price I gave, I go over the hours and materials to see what it would have been T & M. Usually it's about 20% to 30% less the my price. I don't like T & M for much because you can only make so much with the time you have. Gotta hit a couple home runs throughout the years to make it worth being self employed. I'm down to the crew working 4 days a week and me in the office on Friday making more than when we were 5 days a week.


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## KAP (Feb 19, 2011)

T&M is fine as long as your M part includes things like a percentage to cover material acquisition, handling, deliveries, etc...

It's not much different than LOMP (Labor, Overhead, Materials and Profit)... all of which need to be incorporated into your T&M otherwise you'll have to make it up on your next contract job to cover the losses from your T&M job...

So what that means is that you're still going to calculate all your expected material and labor costs for a job, as well as, overhead and profit, and then incorporate them into your Time (hourly rate) and/or Materials numbers... how you want to do that or present that to your customer is up to you, but they can't NOT be in there...


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## 402joel (Sep 1, 2011)

I show my clients every invoice pertaining to their job, and my margin on every invoice
Its justified because I get materials at a wholesale cost, and I pass that along to my clients, even with my margin markup, it’s still a good deal
if it goes through my books, I get my margin


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## Mordekyle (May 20, 2014)

Can you stop doing T & M?

I started out doing that, but after a couple months, I figured I could make more with bids/estimates.

-An hourly wage is antithetical to innovation, motivation, efficiency, and technology.

-Why would you invest in cordless tools when a hammer and handsaw would take longer?

-Even if you are innovative, motivated, efficient, and have the best tools, most homeowners wouldn’t want to pay you 6000 units per hour when the going rate is 2500 units per hour.

- If they are hesitant to pay 20% on materials, they will certainly be hesitant to pay $X/hr.




Line item estimates work for me:

Deck repairs $X.

Trim replacement $Y

Door replacement $Z

Add paint $200

Etc.

Would you like X, Y, Z, or all the above?



Restaurant pricing, take some or all.
no negotiating or customer worrying how long the job will take.
more margin for you

If you charge T & M, you own a job.

Do you want to own a job that doesn’t pay enough, or do you want to run a business that pays you enough, is viable enough to withstand a downturn, and rewards you for your risk?


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## Kingcarpenter1 (May 5, 2020)

[QUOTE="I mean do you tell your customer about marking up materials and have to sell them on why the mark up is justified?
You don’t have to explain anything on this matter. Your the one shopping, hauling & delivering etc. You need to get away from T&M & start setting up your proposal. Don’t matter if that is what others are doing. Concern yourself w/something that sets you apart from the rest. If your work is quality the word will spread. I found long ago you will get nowhere if you don’t set yourself apart from others. The old hands that built old houses were true craftsman in your area. Carry that on. I once did repairs & inspectors punch list etc. during a long recovery from an injury. Did well & helped my business skills. Won’t happen over night but I would gear toward that. Best of luck

Mike


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## VinylHanger (Jul 14, 2011)

I only do T&M on extra repairs, or jobs where there is no way to know what it is going to take.

If you do T&M, your T cost needs to be higher. You need to make what you need to make.

You need to mark up your materials. That is contracting 101. If you need to, raise your rates instead, but it won't always balance out.

If you are building a shed, it may be 4,000 dollars in materials. If you use margin, you add 1,000 bucks to the price. If it takes 5 days to build, you need to add 200 bucks a day. That may be doable.

Setting 4,000 dollars in cabinets in 6 hours, you won't be able to raise rates enough to compensate. You end up losing a ton of money.

I've raised my rates substantially this year. Will probably go higher later in the year. My expenses are going through the roof, so my costs need to cover that.

When a customer says that is near or higher than the price of a plumber, I explain I have probably 5 times the equipment and at least that much in added skillsets I bring to a job compared to a plumber or electrician.

They understand that when it is explained.

I have moved toward those types of customers whenever possible.

You will end up paying to do jobs every once in a while, or make way less than you should. you want that pain to be as small as possible.

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## MarkJames (Nov 25, 2012)

I don't do T&M because my hourly rate is not on the low side. My invoices are basically two columns; base + "extras". Sometimes the base included materials, and I just say "materials included". I line item the extras as what I'm charging them, which happens to have a little markup for the aquisition, etc. Never have any complaints or quibbling this way. 

So if there's a job where I don't know the time involved, I still try really hard to figure that out ahead of time, and be sure to define the estimated work, along with caveats if it's more than expected. If that happens, I still bill a flat, fair additional amount, not hourly.


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## Kingcarpenter1 (May 5, 2020)

VinylHanger said:


> f it takes 5 days to build, you need to add 200 bucks a day. That may be doable.


I was getting that in the 70s

Mike


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## pizalm (Mar 27, 2009)

T&M should be more than enough to pay your bills and get ahead. I’ve been on my own for a little over a year now and even on T&M I’m making good money. Maybe your rates should go up? 

How is bidding a job going to all of a sudden put extra money in your pocket if you can’t make a solid rate now? At least on t&m if you miss something you aren’t going to eat it. 


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## VinylHanger (Jul 14, 2011)

Kingcarpenter1 said:


> I was getting that in the 70s
> 
> Mike


I meant add to your normal rate if you can't add margin or markup.

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## griz (Nov 26, 2009)

T&M, cost plus or whatever you choose to call it...

More guys get in trouble with this than you can imagine.

If you can't be straight up & COMPLETELY. TRANSPARENT in your billing go do something else.

You may get away with hiding costs on a job or 2 but you will soon be destined for unemployment or a carreer in fast food...


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## Kingcarpenter1 (May 5, 2020)

I know what you meant as my reply should have indicated. Like I said we were doing t&m like your talking about in the 70s

Mike


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## Mordekyle (May 20, 2014)

pizalm said:


> T&M should be more than enough to pay your bills and get ahead. I’ve been on my own for a little over a year now and even on T&M I’m making good money. Maybe your rates should go up?
> 
> How is bidding a job going to all of a sudden put extra money in your pocket if you can’t make a solid rate now? At least on t&m if you miss something you aren’t going to eat it.
> 
> ...


Because you bid it a rate of double what you normally charge.

The homeowner is generally OK with paying $X/hr.

They wouldn’t knowingly pay $2X/hr. It seems unreasonable to them. All they know is the hourly rate that they make. And they know the “going rate”


Your estimate has the $2X/hr rate. Not disclosed.

They don’t flip out about an “outrageous” hourly rate.

They see 3500 units for a job and its yes I’ll pay it or no I won’t.

The 3500 units doesn’t break down hourly labor, materials, markup, profit.

If they don’t want to pay you a high hourly wage, they certainly don’t want to pay your company profit.


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## VinylHanger (Jul 14, 2011)

Yep. For easy math, if you make 3 4,000 a week labor draws, they don't think twice about it.

But if you tell them you are charging them 100 dollars an hour and they make 20, they mind. 

Was on job helping a buddy pour concrete years ago. He had given the guy a price, labor and forms only, he bought the concrete.

We went in, set up a large driveway with curved walkways.

Showed up the next day to pour. He suddenly decided to do the math. He got mad because it came to 60 an hour if we finished by noon or so. He had never made more than 12 and thought we were ripping him off.

He decided he wasn't going to pay the agreed upon price because he could find guys on the corner to do it cheaper.

We grabbed our gear and started packing up. He wanted to know why. We told him to hurry and get those guys because the concrete was on the way and we were leaving.

After explaining he was hiring a skilled, licensed, bonded and insured crew that would back any issues, though not that politely, he paid.

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## TxElectrician (May 21, 2008)

I do a good bit of t&m on electrical remodels. I provide an estimate, and explain in my proposal the actual cost will be x$ per hour for labor and material at cost + x% for overhead + x% for profit.

If they balk, I walk.

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## DaVinciRemodel (Oct 7, 2009)

Man, a whole lotta hate on T&M here! I wonder how I survive let alone prosper?

We're near 100% T&M... No markup on materials... No markup on subcontractors... No risk!


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## wallmaxx (Jun 18, 2007)

DE-carpenter said:


> I think I kick off all my posts the same...
> 
> TLDR: How does one mark up materials on T&M jobs? I don't mean how to do the math, I mean do you tell your customer about marking up materials and have to sell them on why the mark up is justified?
> 
> ...


Since I had to look up TLDR and now that I know what it means, I’m not going to read whatever you post if you’re going to start your thread with those four letters. Thanks for the warning in advance. You’re the best.


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## wallmaxx (Jun 18, 2007)

1. T&M is not contracting, its working by the hour.
2. T&M grants the customer too much access to your business and the decisions you make to accomplish the mission. 

Contracting is a completed end-state for a fee. How you get there is no one's business. 
Customer gets to choose the end-state versus price comparison between competing contractors.
Only very experienced contractors are good enough to thrive. 
It's way more risky to fixed price bid than T&M especially in remodel or repair work because no one knows whats really behind all the layers.

I've seen T&M turn sour as time goes on because the client sees money draining without end as more issues arise. People will question why something took "x" hours when they were able to sneak onto a contractor blog and found out said task takes less time than billed (for example).
The risk of fixed price bids typically scares many business people to seek T&M out of their own minimizing risk. That's okay.....but T&M comes with some of their own issues.

The very experienced contractor knows how to educate his client on all the project considerations and to bid high enough to cover potential hang ups. The contractor is NOT hiding anything. He is running his business to achieve a successful outcome for his customer. He is NOT in the business of teaching how to run a business...therefore sharing the experience he has gained on how he runs his business is NOT part of the contract. Customers are just naturally nosey because they are spending money.

I don't judge how others choose to provide their services to others. Just do the work to industry standards and keep your word to your clients.....and don't cut corners.....all good!


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## Kingcarpenter1 (May 5, 2020)

wallmaxx said:


> 1. T&M is not contracting, its working by the hour.
> 2. T&M grants the customer too much access to your business and the decisions you make to accomplish the mission.
> 
> Contracting is a completed end-state for a fee. How you get there is no one's business.
> ...


Thanks for explaining what I was too lazy to do. Well stated. Gives any client too much control and only hurts us all. Will bite you in the arse too many times. Give em control once & that’s it. Busts everybody’s balls. Plenty of contractors looking for hands.

Mike


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