# material mark up?



## jshuatree (Feb 21, 2010)

If you guys order materials and have them delivered to the job do you mark up for that? Or if you are a sub working for a homeowner do you do this? Usually around here if we work for a GC he handles all our materials. If that not be the case do you mark up? this question came to me while reading the previous thread on bidding work. Now remember this is calling the building supply and them deliver.Thanks in advance.


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## Ohmy (Sep 10, 2009)

Yes, you should mark-up the material unless you think its cool to do the following for free.

1. Spec the material and find a local vender.
2. Order material. 
3. Pay for material.
4. Warranty the material.
5. Re-order the material if anything is wrong. 
6. Coordinate the deliver, unloading, and storage of the material. 
7. Basically take all responsibility that the correct material for the correct price gets delivered at the correct time and is placed in the correct place and is free from defects. 


I would do this for free for my wife or kids but that's about it.


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## Fence & Deck (Jan 23, 2006)

This is my take on it.
If I order material for a job, I order, recieve, inspect, accept or reject, pay, and use. As such, I am in effect the wholesaler, and I'm entitled to turn around and sell it to the project owner at a higher price. The profit on the material helps pay for my overheads. 
If the owner orders the material, the major difference is that I don't pay for it.
However, I still have to inspect, accept, or reject, and likely have to give the owner a list anyway.
However, I now have no markup on this material, and thus no profit towards my overheads. Why would I do this for free? Since my markup is now only on labour, why would I even take the job?
What's more, I have no control over this material. Since I am not ordering it, I cannot control quality, supplier, quantity, timing or anything else. I am then possibly going to have a "discussion" with the owner if I use a poor quality piece, or order too little, or too much, with problems like: who pays for replacement if we use a poor piece of wood, or for our time waiting if I don't use it, or who goes to get a missing piece, or who returns surplus.
All this for free?

On the very rare occaisions when I do a labour only job, I figure out what my material cost should be and mark it up anyway. Then I have my full margin even on the phantom material and can thus afford to take the job.


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## 480sparky (Feb 1, 2009)

Stone Mountain said:


> ..............If the owner orders the material, the major difference is that I don't pay for it..........


My biggest difference is I don't _warranty_ it.


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## olligator (Nov 23, 2007)

I don't mark up the materials themselves, but I do charge for the labor to unload, inspect, bring up to the unit, etc. I get delivery fees from vendors in advance prior to delivering the bid; I don't charge for bringing materials to the site unless it's a decent-sized quantity.

And like 480Sparky, I never warranty materials the owner buys either.





Ollie


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## olligator (Nov 23, 2007)

Also, regardless of whether or not I have leftovers I can use, I always bid as if I don't have them. Sorry for double post.


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## seeyou (Dec 12, 2008)

Whoever orders the materials is responsible for the right amount of the right stuff being in the right place at the right time. If a GC or HO wants to take responsibility for that, fine. But if we have to run to the supply house or are in anyway held up by material problems, the responsible GC or HO gets billed for time lost. Needless to say, we don't see this scenario much. 3 or 4 guys sitting in the shade on the clock all afternoon while a homeowner chases around town to find a special order product that just isn't there will clue them into why a markup needs to be charged on materials.


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## seeyou (Dec 12, 2008)

jshuatree said:


> Or if you are a sub working for a homeowner do you do this?


I'm not sure how you can be a "sub" working for a homeowner. You're either the contractor or an employee. You'd be a "sub" if you were subcontracted to another contractor - doing a portion or even all of a larger contract for a contracted price.


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## playsinmud (Jan 25, 2008)

how much do you guys mark up. Around here it's all over the map?


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## seeyou (Dec 12, 2008)

playsinmud said:


> how much do you guys mark up. Around here it's all over the map?


I mark up enough to cover my profit and overhead percentage. That will vary from company to company. Do you know what % your overhead is?


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## sbcontracting (Apr 22, 2010)

I'm interested in this too.

I've just started up shop and I've decided to offer major materials (eg: bathtubs, tile, etc) at cost plus 5%.... which is in actual fact ~10% after I get my GST (Canada) rebate back. My overhead I build into my hourly rate (est. $20 / hr overhead). I'll cough up receipts if the HO wants to see what I've paid. I'll probably mark up a bit more on some of the more mundane stuff like drywall or other stuff that they don't really have any interest knowing about.

I'm not sure this is going to work long-term, but I figure it's a way to be transparent and show that the HO knows they aren't getting ripped off. Hopefully it doesnt mean that I don't make money... hoping it actually has the reverse effect. But longer term, I can't see putting this much effort into every single contract, especially once my rep is established.

Mike


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## EES (Jan 4, 2010)

I wouldn't show the homeowner the receipt unless that was somehow part of the deal. My cousin has an automotive repair garage. He was telling me that they mark up the parts a lot more than we do. He said a $100 part they will sell for up to $300. I would sell a $100 part for $125, huge difference.


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## bert0168 (Jan 28, 2008)

EES said:


> I wouldn't show the homeowner the receipt unless that was somehow part of the deal. My cousin has an automotive repair garage. He was telling me that they mark up the parts a lot more than we do. *He said a $100 part they will sell for up to $300.* I would sell a $100 part for $125, huge difference.


See, that is what creates the problem we have with homeowners who cry about marked up material prices. I agree there is a markup, I do it but not for triple the price!


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## jarvis design (May 6, 2008)

sbcontracting said:


> I'm interested in this too.
> 
> I've just started up shop and I've decided to offer major materials (eg: bathtubs, tile, etc) at cost plus 5%.... which is in actual fact ~10% after I get my GST (Canada) rebate back. My overhead I build into my hourly rate (est. $20 / hr overhead). I'll cough up receipts if the HO wants to see what I've paid. I'll probably mark up a bit more on some of the more mundane stuff like drywall or other stuff that they don't really have any interest knowing about.
> 
> ...


 
IMO, 5% is not nearly enough!! I mark up my materials more than that and I mark up everything the same. There is a lot of work involved supplying all the materials needed for a job. And as mentioned, I cover warranty, shortages, etc. 

One other note, when I put in allowances for major items (tubs/tile, cabinets, faucets, etc) the allowance is always my cost - not my selling price. That way if a customer decides (and I agree) to supply something, I am still making the profit I need to stay in business.

Good luck, just don't do things SO cheap that you won't be around in a year!!


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## pinwheel (Dec 7, 2009)

If materials are run through my accounts, I'm getting paid for that service, whether I put the material on the job, or not.


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## 480sparky (Feb 1, 2009)

Here's a couple of mark-up rates I've garnered from a couple of sources:

$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 $3.99 2.5
$4.00 $5.99 2.4
$6.00 $7.99 2.3
$8.00 $8.99 2.2
$9.00 $19.99 2.1
$20.00 $49.99 2.0
$50.00 $59.99 1.9
$60.00 $79.99 1.8
$80.00 $99.99 1.7
$100.00 $199.99 1.6
$200.00 $399.99 1.5
$400.00 $1,999.99 1.4
$2,000.00+ 1.3

----------------------------

$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


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## Fence & Deck (Jan 23, 2006)

Any accountant will tell you 5% is far too low.
Let's suppose you purchase $100,000 material in a year. $5000 gross profit on that doesn't even pay your gasoline.
Materail markup should include a wastage factor as well as a markup. I include a 7% waste factor on EVERYTHING i buy, as well as a % markup on that. Most of us here in toronto go 35 to 50% which yields a margin of 33%.

After 27 years in business, I learned from this very forum to include EVERYTHING, right down to washers and nails. When I finally worked out my hardware for each job, I was shocked, because I had never included it before, figuring my waste factor would cover it, which it doesn't.


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## KennMacMoragh (Sep 16, 2008)

In remodel work I don't mark up material, but the time I spend getting it is accounted for. If I have to sheetrock a room, the time driving to the store and picking it up is accounted for in my bid. 

Marking up material makes sense if you're building new homes and using subs for practically everything. Doesn't make sense on remodels, not to me anyway. If I marked up material and the homeowner knew I was doing it that way, I can see them getting irritated over that. Then they'll want to get the material themselves, which would make things harder. But if I don't mark up material and instead hide it in my labor costs, what they won't know won't hurt them. 

But say you're a framing sub on a new home and the builder supplies the material. That's different, the poor framer may not have the cash flow to supply material. Builder would have to mark up material, it's just easier to write it up that way. I think homeowners still get irritated when they see that, but on a large job they probably won't get too involved.


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## Tiger (Nov 21, 2007)

Material markup can be all over the board for different businesses. IMO it depends on the availability of the client to get pricing information. In home construction prices are readily available at the big box stores. These prices are typically close to supplier prices (wholesale).

Now consider when that information isn't easily available like prescription drugs. If the markups were 3000% who would know?


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## Mike Finley (Apr 28, 2004)

KennMacMoragh said:


> Marking up material makes sense if you're building new homes and using subs for practically everything. Doesn't make sense on remodels, not to me anyway. If I marked up material and the homeowner knew I was doing it that way, I can see them getting irritated over that.


Try telling them this:



> Yes, I mark-up the material unless you think its cool to do the following for free.
> 
> 1. Spec the material and find a local vender.
> 2. Order material.
> ...


 


KennMacMoragh said:


> Doesn't make sense on remodels, not to me anyway. Then they'll want to get the material themselves, which would make things harder.


Tell them:



> I can't control the schedule or the quality of the materials if I don't supply them. You can fill in the blanks as to why it makes it harder as you said.


 


KennMacMoragh said:


> But if I don't mark up material and instead hide it in my labor costs, what they won't know won't hurt them.


That never works over the long run, everybody has a million stories of it.


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## sbcontracting (Apr 22, 2010)

Stone Mountain said:


> Any accountant will tell you 5% is far too low.
> Let's suppose you purchase $100,000 material in a year. $5000 gross profit on that doesn't even pay your gasoline.
> Materail markup should include a wastage factor as well as a markup. I include a 7% waste factor on EVERYTHING i buy, as well as a % markup on that. Most of us here in toronto go 35 to 50% which yields a margin of 33%.
> 
> After 27 years in business, I learned from this very forum to include EVERYTHING, right down to washers and nails. When I finally worked out my hardware for each job, I was shocked, because I had never included it before, figuring my waste factor would cover it, which it doesn't.


Thanks. Good to chew on. I definitely want to be in business longer. 

It's hard covering everything in a quote but I do agree. EVERYTHING should be considered in materials. What I've done is "Screws: $10" or "drywall mud/tape: $5/sf"... not super-accurate but does take little things into account.

Right now as I'm just starting out, it's brutal to price out a job. I'm going to start a new thread on that one!

But thanks for the advice.


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## AustinDB (Sep 11, 2006)

good point SBContracting. I include a 'fastener/hardware' line on most bids-depends on the size of the job of course, but often times something along $25 added on. Covers the occasional simpson hanger, lag/carriage bolt I pull out or other odds and ends which DO add up.


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## KennMacMoragh (Sep 16, 2008)

Mike Finley said:


> That never works over the long run, everybody has a million stories of it.


Why wouldn't that work? You're doing the exact same thing as marking up for material, except you're itemizing it under labor, not material.


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## moorewarner (May 29, 2009)

KennMacMoragh said:


> In remodel work I don't mark up material, but the time I spend getting it is accounted for. If I have to sheetrock a room, the time driving to the store and picking it up is accounted for in my bid.
> 
> Marking up material makes sense if you're building new homes and using subs for practically everything. Doesn't make sense on remodels, not to me anyway. *If I marked up material and the homeowner knew I was doing it that way, I can see them getting irritated over that. Then they'll want to get the material themselves, which would make things harder*. But if I don't mark up material and instead hide it in my labor costs, what they won't know won't hurt them.





> *Why wouldn't that work?* You're doing the exact same thing as marking up for material, except you're itemizing it under labor, not material.


Mike, I would, just out of curiosity, like to hear some of the ways it hasn't worked as well.

But my question to you Ken is why *would* you work it that way?

Taking the earlier comparison to the mechanic, would you seriously take your car into the shop and expect to supply your own parts?

By doing it the way you are doing it you are treating yourself as a "yard mechanic" as opposed to a professional repair shop.

I don't want to be an a**, but grow a pair. Sorry, but that just strikes me as a little sad that you are afraid of asserting yourself or of conflict with your clients; so you hide your material markup under labor. 

Those contracts you are entering into are *two* way streets. Do the profession a favor, and more importantly yourself a favor, explain to your clients how this sh!t works and act like the professional that I'm sure you are.

Again, I truly don't mean to be an a** to you, but I think you are deceiving yourself and you are definitely deceiving your clients out of fear of their reaction.

And to answer the thread, my mark up has been 10% but I am about to raise that to most likely 15-25% depending on the job size.


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## KennMacMoragh (Sep 16, 2008)

moorewarner said:


> But my question to you Ken is why would you work it that way?


I find it's easier to write it up that way as well. I find if I write it up and say "o.k pay me this much extra for material". It takes more time, and the customer doesn't need to see that. 

I also find it can be more accurate. If I am Sheetrocking a room, say I need 15 sheets of drywall, the drywall is cheap, so a percentage material markup won't make me very much money. But the stuff is heavy and a pain to load in my truck and bring to the job site. The time spent doing that can vary depending on how hard it is to get it to the area I need to get it to as well. But if I estimate the time it will take me to do that, add a little extra for gas, and the fact that I warranty the material, I can get a more accurate number.




> I don't want to be an a**, but grow a pair. Sorry, but that just strikes me as a little sad that you are afraid of asserting yourself or of conflict with your clients; so you hide your material markup under labor.


Whenever I hear that, I tell people I gave up my popularity contest in 8th grade. I don't care about ego, or how someone thinks I assert myself. I care about results.


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## Mike Finley (Apr 28, 2004)

KennMacMoragh said:


> Why wouldn't that work? You're doing the exact same thing as marking up for material, except you're itemizing it under labor, not material.


One of the most obvious pit falls is when the change comes to the product and you're suddenly in the trick bag.

Not to mention I just don't see the point of hiding things, just man up and look your customer in the eye and say --

YEAH I'M IN F'N BUSINESS, IT'S CALLED MAKING A PROFIT. I MARK SH*T UP JUST LIKE EVERY OTHER BUSINESS YOU DO BUSINESS WITH EVERY DAY, FROM THE GROCERY STORE TO THE GAS STATION, TO THE HAIR DRESSER TO THE MOVIE THEATER, I'M NOT SOME WET BACK ILLEGAL HERE TO DO THE JOB AS CHEAP AS POSSIBLE WHERE YOU BUY I INSTALL.

What the hell is so hard about just doing business as you should instead of cowering to every cheap ass homeowner who is looking to do something as cheap as possible?

I've told many customers straight out when they ask things such as --

"Is it cheaper if I do the demo myself..."
"Is it cheaper if we buy this or that ourselves..."
"You get a discount at the supply house right? We can buy our faucets through you cheaper that way right...."

THIS IS A FOR PROFIT BUSINESS. WE ARE A RETAIL BUSINESS, NOT A WHOLESALE BUSINESS. WE ARE HERE TO MAKE MONEY TO FEED MY KIDS AND PAY MY EMPLOYEES A LIVING WAGE.

Just grow a pair for god's sake and stop playing games with all this hiding. You are supposed to make a profit and you're supposed to make money on everything you do and sell, not be some god forsaken wholesaler to your customers, hoping to get the job of labor if you give them everything else at wholesale.


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## KennMacMoragh (Sep 16, 2008)

Mike Finley said:


> Not to mention I just don't see the point of hiding things, just man up and look your customer in the eye and say


lol, I see it as just the opposite. I don't see the point of not hiding it, it takes more paper work to itemize all that stuff out, for what I'm doing anyway. It has nothing to do with being a man, I leave the toilet seat up, that's all the re-assurance I need, thanks.


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## EES (Jan 4, 2010)

I was just talking with the excavation contractor today. I have a sub-division I need him to price the site work on. Since it is an hour away, this led into a discussion about different priced materials in different areas. He told me how a recent customer insisted that screened loam was $10/yd in that area. It turned out it was $15, and he told the guy he will only mark it up $0.50/yd. I got out my calculator and showed him that just selling it at a 50 cent mark up costs him over 27 cents per yard to sell it to the customer. Or roughly $15 on that small job.


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## Mike Finley (Apr 28, 2004)

KennMacMoragh said:


> lol, I see it as just the opposite. I don't see the point of not hiding it, it takes more paper work to itemize all that stuff out, for what I'm doing anyway. It has nothing to do with being a man, I leave the toilet seat up, that's all the re-assurance I need, thanks.


Why would you itemize anything? 

No wonder you have such trouble telling customers how it is.


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## KennMacMoragh (Sep 16, 2008)

Mike Finley said:


> Why would you itemize anything?
> 
> No wonder you have such trouble telling customers how it is.


I think we are doing it totally different. I don't show them material mark up, it's my business what I make. I don't see any reason to waste time showing them something they don't need to know.


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## hilal.itani (Jan 17, 2009)

olligator said:


> I don't mark up the materials themselves, but I do charge for the labor to unload, inspect, bring up to the unit, etc. I get delivery fees from vendors in advance prior to delivering the bid; I don't charge for bringing materials to the site unless it's a decent-sized quantity.
> 
> And like 480Sparky, I never warranty materials the owner buys either.
> 
> ...


 
it is a good thing to charge your direct costs to this job, provided you have a very good cost control and time control system. Moreover, what about your profit? 
Generally speaking and depending on the type of the Contract, the GC warrants the whole of the Works, including material. However, it is up to him to include in subcontract conditions warranty of delivery to be on the subcontractor, which is normally the case. 

regards;


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## Mike Finley (Apr 28, 2004)

KennMacMoragh said:


> I think we are doing it totally different. I don't show them material mark up, it's my business what I make. I don't see any reason to waste time showing them something they don't need to know.


So let's say for instance you were in the middle of a job and the customer said to you, hey while you are here, we want to finish the basement can you put together the costs and when you get done with what you are doing now, just keep going right into the basement finish.

Part of the project involves hardwood floors and they want some fancy track lighting.

You have a flooring showroom they can go to and a lighting showroom they can go to do the selections. Both of these showroom operate in the typical mode, they show a suggested retail price that means nothing and when your customers ask about pricing they are told the typical response, "that is between you and your contractor."

Customer calls you up and says hey buddy we found 3 lights we like and we found some really nice hardwood too, they couldn't give us a price on them, they said we had to talk to you.

What do you tell them?

1) The price is the retail price as marked
2) You price is lower then retail


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## olligator (Nov 23, 2007)

hilal.itani said:


> it is a good thing to charge your direct costs to this job, provided you have a very good cost control and time control system. Moreover, what about your profit?
> Generally speaking and depending on the type of the Contract, the GC warrants the whole of the Works, including material. However, it is up to him to include in subcontract conditions warranty of delivery to be on the subcontractor, which is normally the case.
> 
> regards;


 
I guess you could say that I make my profit in estimating/billing for the time necessary to put the order together, etc. While I have always done it this way and been profitable, I have gotten involved in a rehab job where I feel like I need to reconsider the materials markup practice and apply it on a per-job basis. Bigger jobs take less markup, smaller jobs more perhaps.

I don't warranty any materials provided by the subs; I require them to warranty their materials, or sign off an acceptance of the materials I give them as the correct materials and warrantable by their installation. 

I've only been in the biz 3.5 yrs, and my jobs have been varied from service calls to rehabs to gut-job remodels to additions. Profits have been reasonable (15~20%) but I think that as I get more of each type of job under my belt I will adjust a markup "formula" accordingly to that job type. This latest job has underscored your point about time control, so live and learn!


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## tbronson (Feb 22, 2010)

20% markup minimum. More if your overhead is higher.


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## DKnafo (Feb 1, 2009)

I just don't understand the argument here. Why should you markup your materials vs adding the labour costs to get them, spec the project etc..? I don't see why one involves balls and the other doesn't.


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## tbronson (Feb 22, 2010)

For me its a matter of apples to oranges in terms of labor v. materials. There is a overhead cost to my getting the materials etc that is not covered by labor since for us its a separate accounting item.


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## hilal.itani (Jan 17, 2009)

DKnafo said:


> I just don't understand the argument here. Why should you markup your materials vs adding the labour costs to get them, spec the project etc..? I don't see why one involves balls and the other doesn't.


 
Of course you must add mark-up to labor and any direct cost incurred. I totally concur. but the question was about material as i recall. Anyway, thanks for pointing that out. 

regards;


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## moorewarner (May 29, 2009)

DKnafo said:


> I just don't understand the argument here. Why should you markup your materials vs adding the labour costs to get them, spec the project etc..? I don't see why one involves balls and the other doesn't.



My comment wasn't directed at the method of *how* you mark up materials, in some ways Ken's method seems as though it could be more accurate as he is literally making it whatever he thinks it needs to be on each job. Sometimes, as he said, a straight percentage on materials doesn't really cover the hassle involved as his examples highlighted.

The issue was *pretending there is no markup* to his clients, 



> If I marked up material and the homeowner knew I was doing it that way, I can see them getting irritated over that. Then they'll want to get the material themselves, which would make things harder.


that's the issue. If his clients don't want to pay an extra $100 on their $500 in materials job, then they don't want to pay it whether Ken calls it a 20% material markup or an additional 2 hour (or whatever) labor charge.

He is obviously (I assume/conclude) not telling them that he is increasing his labor charge to deal with materials or they would once again say "well I will/am get the materials".

So one of two things is happening, either the customer *is* getting the materials in which case Ken is charging for something he is *not* doing; or Ken is getting the materials and essentially lying to the customer by telling them that he doesn't charge to do so.

Which is the issue that leads to mine and Mike's comments,



> Just grow a pair for god's sake and stop playing games with all this hiding.


He is being *deceptive* with his clients because he doesn't want to have to deal with their wanting to nickel and dime him down.

The issue has nothing to do with how you charge for handling materials and everything to do with being honest with folks about how you conduct your business.

My gf was shoulder surfing this thread and her response to Ken's method was that it was deceptive and she wouldn't want to deal with a contractor that did that, what a shock. i wonder how many clients Ken would lose if they knew how he handled their job and this issue. 

That is the argument. Does that explain it?


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## tedanderson (May 19, 2010)

I always markup the materials. It's how I pay for the cost of doing business and it helps me to ensure that I can stay in business so that I can provide quality service to members of my community. I don't have a set percentage but the way I factor it is that if I make a mistake or for whatever reason have to replace some of the materials, I can pay for it and finish the job. It also gives me an incentive to avoid mishaps.

I admit that I tend to hide my markups to avoid any issues with my client regarding what the materials cost me. If that makes me any less of man, I'll gladly admit to keeping the seat down too. :laughing:

But in all seriousness, I try to make it clear to the client that I charge what I charge to ensure that the job is done properly to his/her satisfaction. If my price motives come into question, I figure that it wouldn't be worth the headache and I decline the contract.

But at the same time I realize that if I business is slow, a difficult gig is better than no gig at all. If I am in a situation of competitive bidding or I come across a client that demands itemization and wants to scrutinize the bid with a microscope, I'll finagle the numbers to make the client think that he's getting a good deal. I will still do a good job with quality materials for a fair price, however, sometimes I will charge more for the materials and less for the labor knowing that at the end of the day, it all comes out in the wash.

Then if the HO decides to take my bid to another contractor and ask him to match or beat the price, nobody will touch it with a 10-foot pole. Although I had one instance where a client asked me for a bid and got one from another contractor. We both came in at the exact same price of $3600. He wanted $1500 for materials and $2100 for the labor. I wanted $2500 for the materials and $1600 for the labor.

He asked me if I could do the work with the other contractor's materials.

But if I ever find myself in a situation where the HO wants to be responsible for the materials, I make it clear to him both verbally and in writing that he is responsible for knowing exactly what to purchase, where to get it, the quantities, and so forth. I make it clear that I am not giving him any advice or making any runs to the store with him. Once I make that clear, then I might loosen up this stipulation depending on how well the job is going but I do have to tell him upfront that I can't run myself ragged all over town for free. I will show up at his house and work as much as the time and materials will allow.

So if anyone thinks that any of my practices are deceptive or dishonest, I'd really like know what you guys think.. not necessarily to debate the issue but to get some insight and opinions.


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## Mike Finley (Apr 28, 2004)

How about this -


You charge to show up to do an estimate

You charge to do design work 

You charge a mark up on materials in order to supply a warranty on them, for your time to specify and recomend the proper products (being paid for your expertese)

You charge a labor fee to go get them and deliver them to the job site and inspect them

You charge labor for your work on the job

You mark up your sub contractors 

You charge fees if you have delays due to the homeowner

You charge fees to roll up the job and redeploy if you would have to stop the job due to the homeowner

I can probably think of some more.

OR YOU JUST HIDE EVERYTHING AND PRETEND YOU ARE MAKING AS MUCH BY ADDING MORE TO YOUR LABOR.


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## KennMacMoragh (Sep 16, 2008)

Thx for the replies. I am busy, maybe I can decipher through this later.


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## MattM (May 11, 2010)

*Lump sum or T&M*

If your doing a job on a lump sum basis I don't think its anybodys business what your mark-up is and I would definitely mark it up 50%.

If doing work on a T&M basis I think the client has a right to know what you spent and how much your mark up is. Since I'm getting paid by the hour for figuring out quantities, specing it, sourcing and picking it up a 50% mark up is unwarranted. I think mark-up is still appropriate in this instance but not at 50%. More like 10% to 25% for warranty and processing.

I would be interested in your guys thoughts on markinig up material for T&M work.


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## KennMacMoragh (Sep 16, 2008)

Mike Finley said:


> So let's say for instance you were in the middle of a job and the customer said to you, hey while you are here, we want to finish the basement can you put together the costs and when you get done with what you are doing now, just keep going right into the basement finish.
> 
> Part of the project involves hardwood floors and they want some fancy track lighting.
> 
> ...


For the lights I would charge them the retail price plus a fee for installing it. For the hardwood I would call my hardwood floor installer and let him mess with it. 

I could add a mark up on the lights and lower my cost for installation, it would be the same difference, just means an extra step for me.


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## KennMacMoragh (Sep 16, 2008)

MattM said:


> If your doing a job on a lump sum basis I don't think its anybodys business what your mark-up is and I would definitely mark it up 50%.
> 
> If doing work on a T&M basis I think the client has a right to know what you spent and how much your mark up is. Since I'm getting paid by the hour for figuring out quantities, specing it, sourcing and picking it up a 50% mark up is unwarranted. I think mark-up is still appropriate in this instance but not at 50%. More like 10% to 25% for warranty and processing.
> 
> I would be interested in your guys thoughts on markinig up material for T&M work.


Just tell him ahead of time your mark up policy, he will be watching the material cost on a T&M job. But if you were doing something like building a deck on a T&M basis, he might want to buy the material so he won't have to pay you for spending the time getting it. Say he was buying it at the same place you would get it. I'd feel kind of silly telling him "Well if you pick it up I won't warranty it, if I go and get it I will give you a warranty". Even though you're buying the exact same stuff.


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## katoman (Apr 26, 2009)

I do a lot of T&M work. Here's what I do. The customer gets the materials at my cost. This helps me to sell the job. Everything that goes into the job - materials, labour, sub-contractors gets marked up with my overhead and profit percentage.

So I am marking up the materials, but at the end, not just that one item.


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## KennMacMoragh (Sep 16, 2008)

katoman said:


> I do a lot of T&M work. Here's what I do. The customer gets the materials at my cost. This helps me to sell the job. Everything that goes into the job - materials, labour, sub-contractors gets marked up with my overhead and profit percentage.
> 
> So I am marking up the materials, but at the end, not just that one item.


What if he already bought a bunch of decking then he called you up and said "Hey can you put this decking on my deck?" Would you mark up a percentage to whatever he paid for it?


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## katoman (Apr 26, 2009)

KennMacMoragh said:


> What if he already bought a bunch of decking then he called you up and said "Hey can you put this decking on my deck?" Would you mark up a percentage to whatever he paid for it?


I would say no problem. Here's my hourly rate.... If you don't have enough materials, or any other material related delay, I'm on the clock. If I have to go out and purchase materials, then he get's charged for my time, and the P&O on materials I have to purchase.

But I'm ok to do the job just for the labour. My rate includes my markup. (in that situation)

I should explain - on a large project the labour is charged at cost. The P&O goes on at the end. On a small job like that, it will be labour cost plus P&O in one hourly rate.


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## ottagosoon (Nov 4, 2008)

It really does not matter if you do or don't mark up your materials, labor or sub contractors cost.
It just matters that you have some kind of system that includes a job profit to pay for the unrelated job cost (overhead) when you do your estimates or proposals.
One guy does not care if he installs a $400 door or a $1000 door. He was working on a low material mark-up and it sounded like he had a higher mark-up on his labor. It works for him.
As long as you estimate your jobs the same way ever time, you pay your job cost, you have money to pay your unrelated job cost and the company has a profit you should make another year.
For my estimates I use a labor cost with a labor burden attached, plus my material cost and my sub contractors cost and then mark it up across the board. It works for me.
At the end of each year I look at those job cost and overhead cost, devise a new year budget (which I would say is real hard with this economy) and I figure what my mark up (%) should be for the new year. I also look at my budget during the year and make minor adjustments.
In my case if a HO wants to break up the pack (labor, materials or sub contractors cost) before or after I given them an estimate, I need to make some kind of adjustment in the cost to maintain my way of making a job profit to pay the overhead cost and have a net profit. Net Profit = everything is paid for and the company made a profit also 2%.
All you have to remember is to protect your standard mark-up.


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## katoman (Apr 26, 2009)

Exactly :thumbsup:


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## KennMacMoragh (Sep 16, 2008)

ottagosoon said:


> As long as you estimate your jobs the same way ever time, you pay your job cost, you have money to pay your unrelated job cost and the company has a profit you should make another year.


That's my thinking too. That's why it's called the 'bottom line', does anything else really matter?


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