# Why the mark-up on materials??



## L. B. Condulet (Aug 23, 2007)

tnt specialty said:


> Sorry for the redundancy, but the only reason I can fathom someone marking up material on a T&M is simply a shady way to dupe the customer into paying more for your services. JMHO


I see where you're coming from but you are wrong. The entire world marks up materials. When you go to the hospital, they charge $10 for an aspirin, when you get an oil change, they markup the cost of the filter.

You are competing in the same arena with businesses that markup materials. If you do not, you are at a profound disadvantage.

People like you say "why markup materials, just raise your rates". Well, why charge for materials at all? Just charge $300 an hour and include materials for free.

Materials consume a surprising amount of non productive time for contractors. Contractors are actually conduits that large amounts of materials pass through. Must contractors assume this huge administrative burden for free?

We sell materials and labor. Each is a separate topic. We markup labor. Why would we not markup materials? Materials are 35% of my gross sales, am I just supposed to eat the costs of material handling? Is 35% of my entire business really a waste of my time?

We sell materials. We are no different than a hardware store. We also offer professional installation, we needed a contractors license to do that so we got one. What if a restaurant made money on 65% of their menu but sold 35% of their offerings at a break even price?

As contractors, we're "in it to win it". That means we play by the rules everybody else does and we do not deliberately handicap ourselves.


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## KillerToiletSpider (May 27, 2007)

tnt specialty said:


> Breyer; We have similar approach. We also, seldom ever do "T & M". The "T & M" that we have done is typically an additive/change order. Never gone into a T & M job at the onset.
> 
> FWIW; We've done alot of Gov't work in the past. Any T&M is just that....there's no "marking up" the materials. That's shysterish.
> I would think the very nature of a T&M would imply "labor, plus the cost of materials". Anything else would be a stretch. We're a contractor, not a retailer.
> ...


We mark up everything, because we have to handle it, and store it most of the time, we pay an apprentice to pick it up and bring to the job on the rough, and then we pay him to pick up the trim part for when the job trims, we store that trim in our shop, and pay to deliver it again when it trims. Those costs are part of the material cost, not part of the job cost, and adding to the operating costs would only increase our bid rate, which is already the highest around.


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## tnt specialty (Apr 19, 2007)

So let me get this straight; To some of you, a T&M agreement would be you charging an agreed upon hourly rate, plus the costs of materials, (which is actually the costs of the materials, plus whatever you choose to add to the costs of those materials),?

So why have a T&M agreement at all?

Of course we add P & O to the entire costs on a standard "bid" contract.
Wich, of course includes materials.

But, to arbitrarily "mark up" materials on a T&M is wacko/shysterish...IMO 

The customer has absolutely no clue.......

I wonder what a court would thnk, if one of these wacko "T&M" contracts were contended.


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## Mike Finley (Apr 28, 2004)

I'm sure in the history of courts, on the subject of contractors suing customers, or the subject of customers suing contractors there have been probably a couple hundred thousand T&M contracts scrutinized by a judge or two somewhere in that process, wouldn't you think?



L. B. Condulet said:


> The standard, traditional markup is 100% But typically, business men double the price of an item. But anyway, standard markup is 100%. If someone wants me to install a smoke detector, I pay $12 and it would be totally ethical if I resold it for $24. But when people ask if I markup material I say "I discount material 25% for my customers". I multiply by 1.5 when I resell materials. So in reality, because I care for my customers, I resell the smoke detector for $18. I've just saved my customer $6.
> 
> Never underestimate yourself or sell yourself short, you bring a lot to the table as a professional businessman and craftsman. On small, service call type jobs, small T&M jobs, I markup using a multiplier of 1.5 thus giving my customer a nice discount.
> 
> Discount is a nicer word.


I like the way you think L.B. and I'm also glad to see so many contractors chiming in that they do standard business with mark-ups.


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## PipeGuy (Oct 8, 2004)

bujaly said:


> ...I'll just let him make himself look bad with his assumptions...I have an A.A. in business, but how would you know that, you didn't bother to ask. I went back to school JUST to learn about business as a whole. I've had a business plan for over 3 years now...
> I also ran 2 restaurants in downtown DC in the Georgetown district, but how would you know that, you didn't bother to ask. One of the restaurants brought in 10 million a year,...I was in charge of beverage cost. You know, alcohol. Which is a huge money maker in that business. But see, here's the CONTRASTING part. We sold food and ambiance!!! OF COURSE they mark up their food and beverage, they are selling PRODUCT!!!!! I'm selling a service...
> ...why don't you just be like most of the people in here and give me an example, instead of being an a55...about people when all they did was ask a very good question?
> 
> ...


hmmmmmmm.:shifty:


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## dirt diggler (May 14, 2006)

tnt specialty said:


> So why have a T&M agreement at all?



exactly

if you're confident with your lump sum pricing - go with that. 

Some think "well, I can for certain make what i set out to make"

you can do this on lump sum as well. 



In lump sum - I estimate for everything I can control and foresee. Measurements, material quantities - that's all on me. I CAN control and foresee that. If i make a mistake measuring, that is my problem - not the client's.

Now - there are certain factors that i can't see. Expansive soils .. groundwater ... utility lines ... trash pits ... i can't see them, and i cannot control the fact that they're there


So ... there's a nice friendly CLAUSE in the contract that allows me to bill for any of these factors that are unforeseen or uncontrollable, or unknown at the time of contract


So any mistakes in a lump sum estimate comes from myself. If not, it was unforeseeable and there is a clause to accompany that. Client is aware of this at all times.


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## theartisan (Apr 16, 2007)

T&M = your time + your materials

I don't do t&m but if I did it would be b/c I couldn't accurately estimate time; not b/c I couldn't determine my material markup.

Do your t&m customers deserve the discounts you have earned thru your suppliers? If so why don't you discount your labor at same rate, and while you are at it give them extended terms.

If you think marking up materials is shyster, you are kidding yourself into the wrong thought process. Business is business, giving away your margins will put you out faster than following FAIR business practices.


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## BreyerConstruct (May 22, 2006)

Material mark-up: 

Acceptable, yes. 
The only way to do things, no.



(Stirring the pot completed)

~Matt


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## L. B. Condulet (Aug 23, 2007)

I like this Bujaly guy, he's brought up a great topic and we're getting some really great give-and-take here. This is good stuff. Keep it going...


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## Kent Whitten (Mar 24, 2006)

I guess that would make every.....doctor, auto mechanic, video rental place, grocery store, automaker, hardware store, gas station, hotel....and on and on....a shyster.

And don't forget...bar, movie theatre, baseball game.....


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## L. B. Condulet (Aug 23, 2007)

Sometimes guys say we are not entitled to mark up materials because we are in the service business. We should make our money on the labor we provide when servicing our customers...

WE ARE NOT IN THE SERVICE BUSINESS!!!!!

A guy that mows lawns is in the service business. He does not install anything. A housekeeper is in the service business, she does not install anything. A guy that trims trees is in the service business.

Each one of us, whether you're a framer, a plumber or a drywaller, is in the custom installation business. No two jobs are alike, each job is a custom, one-off, hand crafted masterpiece made to unique specifications.


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## POOLMANinCT (Oct 7, 2006)

marking up material on a T&M is simply a shady way to dupe the customer into paying more for your services. JMHO.......

I mark up for one reason only, more money for me!!!!!!!!!


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## bujaly (Dec 16, 2006)

Mike Finley said:


> This is the first person to hint or (admit) why people don't or (are scared) to mark up materials. Calling it a "marketing" approach is bridging the truth. I know quite a few people who follow this approach. They are all handymen, part-time handymen, part-time contractors, jack-legs, unlicensed contractors... etc...
> 
> Not saying you are one of them Breyer, only pointing out that the method matches the mentality of the person using it. I've asked a few why they do what they do and the answer is always the same or a derivative of something regarding customer resistance or it's easier (as in - scared customer will hassle them).
> 
> It's sad. bujaly demands to only compare contractors to contractors and seems confused or appalled if you contrast contractors against the entire business world. That's part of the real problem, the bottom feeders have a tendency to set the tone for much of the middle tier of our industry. There is no secret that there is a low barrier to entering our industry as a business owner, so it attracts those with more skills in trade then business knowledge. However that is no excuse to not educate yourself and try to think beyond just your world comprised of your truck and your tool box. Someday there will be a time when you want to or can't work the hours you do now, someday there will come a time to think about retirement. If you are doing your best to drag your industry and your market down there won't be much of a future 20 years from now.


Finley, you just so happen to leave this part of your message out. WTF? How did you miss this?
Look dude, you can say anything you want, about anybody you want. Bottom line, you don't know me from a ham sandwich. That is what pissed me off, your assumptions, not anything about my ethics and morals of running MY business, because you HAVE NOOOOOO clue. You just assume things, I've seen it in your past posts. You're just probably some old as fart set in your old fashioned ways and is pissed at everyone all day for disagreeing with you. I've worked for a55holes like that..

Here's another thing you said.. "First off if you've got a guilty conscious then so be it, but don't go off on a rant on me when you've got over 30 posts here saying the same thing I told you right from the start."
WHAT IN THE WORLD DID YOU TELL ME FROM THE START? GO BACK AND LOOK A55hole. Do me a favor, don't reply to any posts that I put up oldman...

Anyway, this is a good topic and I'm very glad I asked this question. I certainly didn't think I would receive this much info. This is all very useful and I will definitely be looking into different ways of being more profitable with my materials. If you think about it, it is a HUGE part of what we do. This is why i asked, I'm glad you all here to help me along this journey..


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## PipeGuy (Oct 8, 2004)

bujaly said:


> why do you all mark-up materials? I just charge my hourly rate for the time I'm taking to go get the materials. So for those of you that charge "time and material", why the mark-up? I just want to know, so I can tell the clientèle.


How does "telling the clientele" benefit you?

If we both want the same job and I charge $20 an hour plus materials plus 5% of materials and you charge $25 an hour plus materials and no mark-up, who will get the job provide price is the factor upon which the sale will be made?


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## PipeGuy (Oct 8, 2004)

Mike Finley said:


> Tell us the real reason you don't want to do it.


 Has this been answered yet? I'm still reading.


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## bujaly (Dec 16, 2006)

Well pipe guy, thats one thing I've learned here today. I won't be telling them anything, regardless of how I charge or mark-up.
Also, on the question you want to see answered. I just believe it to be shady, but my ethic beliefs here are somehow construed to be ignorant or stupid it seems and some how driving down the industry.. <img> I don't get it. I'm not that shady contractor. And I feel that to be shady, not wrong, but shady. This is where ethics come in. Ethics can't really be fought, it's a personal thing.


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## Tscarborough (Feb 25, 2006)

Shady is no insurance. Shady is working out of the back of your pickup. Earning a living and charging a markup is NOT shady.


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## L. B. Condulet (Aug 23, 2007)

bujaly said:


> Well pipe guy, thats one thing I've learned here today. I won't be telling them anything, regardless of how I charge or mark-up.
> Also, on the question you want to see answered. I just believe it to be shady, but my ethic beliefs here are somehow construed to be ignorant or stupid it seems and some how driving down the industry.. <img> I don't get it. I'm not that shady contractor. And I feel that to be shady, not wrong, but shady. This is where ethics come in. Ethics can't really be fought, it's a personal thing.


When you take your truck in for an oil change and they charge labor and markup the cost of the oil and the oil filter, do you feel you're getting ripped off? Do you express your outrage to the service manager?


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## mahlere (Aug 6, 2006)

I *CHALLENGE* any T&M contractor to prove that they can make a profit on charging the 'going rate' for labor and no markup on material. 

I claim that it can't be done.

I claim that if you actually figure out your true cost of doing business in a way that makes you the money you want (and not one where you survive on whatever money you can make) that your hourly rate would put you out of the running on any job quoted T&M.

You can not make a good profit on $55/hr or $65/hr (and this is profit after you pay for all your direct OH costs, as well as medical benefits, 401k, holidays, vacations, etc) or $75/hr or even $85/hr without marking up your material.

Plus, I ask some questions for tntspecialties, beyer construction and bujaly - how many days have you only actually worked 8-10 hrs, yet somehow billed out a total of 12-14 hrs to your customers? How many days have you worked 8-10 and only billed 6? How do you explain to your customer that they are paying an extra hour because the HD/Lowe's/Supplier was busy and you had to wait in line? Do you charge for travel time after hours to go pick up material for the next day? or do you spend 2 hrs each day getting supplies and only working 6 hrs on site, yet still bill for 8 hrs?

I also claim that if you truly billed what you needed to bill as an hourly rate in a T&M structure, you would probably spend more time calling for ambulances for the potential customer that just fell over, than doing actual work.


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## PipeGuy (Oct 8, 2004)

Ed the Roofer said:


> *Why the mark-up on materials??*
> Not all jobs run smoothly...Not all customers pay on time or sometimes not at all...


And that's called?........................................RISK! OF COURSE...RISK!

And what correlation is there between the risk one might be exposed to on any given job and a standard "percent mark-up"? The answer: none.

If the prices you're charging aren't commensurate with the risks you're taking you'll eventually, sooner or later, be out of business. Either because you're not recovering the expense of what you're doing or because someone else will do the same work for less.

Hey bujaly....which job needs more mark-up: painting an apartment in Anacostia or painting a dining room in Georgetown? Why is that?


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## Mike Finley (Apr 28, 2004)

Well, since you seem to believe I have something against you, fine then, might as well be guilty of it if you're going to accuse me of it.

How does a guy with a biz degree, been in the trades, been running multi million dollar restaurants and so on and so on and over 50 posts later be completely ignorant to the very basic principals that a *3 year old understands from the day they open up a lemonade stand on the corner*?

Are ya f*cki'n stupid or just pretend to be?:laughing: Your question was answered in the first page about 10 times and you still don't get it.

You're like a retarded fish.

Why am I wet father? Because you are a fish, you live in the water.

But why am I wet? Damn, here kid let me get you a hook to suck on.

Now rant on, at least now I deserve it.


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## L. B. Condulet (Aug 23, 2007)

Almost any question related to contracting can be examined this way:

What do the successful contractors do?

What do the unsuccessful contractors do?


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## PipeGuy (Oct 8, 2004)

Mike Finley said:


> I know quite a few people who follow this approach. They are all handymen, part-time handymen, part-time contractors, jack-legs, unlicensed contractors... etc...the method matches the mentality of the person using it. It's sad....part of the real problem, the bottom feeders have a tendency to set the tone for much of the middle tier of our industry.


It's in the same suite of methods as tracking job costs by looking at the bank account balance when you hit the ATM.


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## mahlere (Aug 6, 2006)

PipeGuy said:


> It's in the same suite of methods as tracking job costs by looking at the bank account balance when you hit the ATM.


that's not how you do it?:whistling


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## PipeGuy (Oct 8, 2004)

Francois said:


> ...Problematic, because you have to explain why you're marking up materials.


Why do you have to explain?


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## PipeGuy (Oct 8, 2004)

bujaly said:


> I mean, I don't mark-up materials cause I don't want to piss anyone off or scared I wont get the job, I just don't want the hassle of what follows, according to what my accountant has advised me of.


You need to ask your accountant if he's stayed in any Holiday Inns lately. I have a feeling he's not really an accountant.


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## Zatol (Dec 4, 2005)

This is from Colorado... Mike do you collect and pay taxes on the marked up billing price of all materials? Do you have a sales tax license?

I am not an advocate for marking up materials because of the tax liabilities. If any of you guys are audited, you may be hit with a big surprise... 

Be Careful.. Here is the link that contains the paragraph below..http://www.revenue.state.co.us/fyi/html/sales06.html


Billing and Contracts

The method of billing and type of contract can affect the way tax is imposed on or by a contractor.

Time and material billing: The contractor who invoices separately for labor and materials must have a sales tax license and charge applicable taxes on the marked up billing price of all materials. The contractor is liable for use tax on the cost of all supplies not separately billed to the customer, as well as on tools and equipment. A time and materials agreement cannot be treated as a lump sum contract for sales/use tax purposes.

Lump sum contract: A contractor cannot treat this type of contract as time and materials for sales tax purposes. All supplies and materials are taxable on the contractor’s cost, either through sales tax paid to the vendor or use tax paid by the contractor on Form DR 0252 "Colorado Consumer Use Tax Return." The contractor is liable for sales/use tax on the cost of all supplies and materials becoming part of the real property, supplies not becoming part of real property, as well as on all tools and equipment. Local taxes are paid in conjunction with building permits.


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## POOLMANinCT (Oct 7, 2006)

jeez,

to get more money.........

30 posts summedup nice & neat


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## L. B. Condulet (Aug 23, 2007)

Zatol said:


> Time and material billing: The contractor who invoices separately for labor and materials must have a sales tax license and charge applicable taxes on the marked up billing price of all materials.


This is not the case in California, and even if it were, it would be a trivial task to comply with the rule.

Lots of companies collect sales tax, it's not rocket science and certainly no reason not to mark up materials.

The taxes and withholding required for employees is far more complicated yet people still hire employees...


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## PipeGuy (Oct 8, 2004)

tnt specialty said:


> We've done alot of Gov't work in the past. Any T&M is just that....there's no "marking up" the materials. That's shysterish...the only reason I can fathom someone marking up material on a T&M is simply a shady way to dupe the customer into paying more for your services.


Huh?
First off, I've done lots of government change order work too and the contracts ALWAYS provide for a "mark-up" on materials. There is, however, sometimes no markup on equipment if the rates for such are established by some predetermined publication. I totally disagree that marking up materials in a T&M cost basis is, in any way, underhanded.
Secondly - "T&M" is never specified as the preferred basis for pricing changed conditions - it's only a secondary, or even tertiary, basis for situations in which a price can not otherwise be agreed upon. For change orders, T&M is used when the customer requires you to do work at a price less than you want and you recover the value of the work by documenting the costs, marking them up and presenting him with a bill "after the fact". If a customer wants me to do T&M then they accept the risk that it might be more than they expect. What's the point of offering any kind of estimate if you know from the onset that the basis of price is T&M? Agree on hourly rates and a fee structure and be done with it. Why does the customer have any right to an "estimated cost"?


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## PipeGuy (Oct 8, 2004)

L. B. Condulet said:


> ...when people ask if I markup material I say "I discount material 25% for my customers". I multiply by 1.5 when I resell materials. So in reality, because I care for my customers, I resell the smoke detector for $18. I've just saved my customer $6.


That is perfect:clap: I love the way you think.:thumbsup:


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## PipeGuy (Oct 8, 2004)

Tscarborough said:


> ...unless you are paid upfront for any material, then you are incurring a risk. Risk carries a value


Can I hear an amen!:clap::clap:


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## PIPES (Nov 8, 2006)

Mike Finley said:


> Are ya f*cki'n stupid or just pretend to be?:laughing:
> 
> You're like a retarded fish.
> 
> ...


 
LMAO that's perfect! :thumbsup:


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## Tscarborough (Feb 25, 2006)

Ask your bank to loan you money at all, much less at "only" 30 percent, when the only information or collateral you offer is a name on a dotted line.


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## EasTnBldr (Jun 25, 2007)

_There's a 1000 ways to bid a job. For those contractors that make it past the 2 yr. mark for successful operation ... you can be assured that their profit percentages maintained a basic minimum and beyond. Success in the end is about how you sell your customer on the money you charge and why they need you to do the work. Personally, I spend more time reading my customers and designing a sales approach than I do worrying about EVERY detail of the bid. I've made some mistakes (doozies even) but in the end, I've been able to do it right for the customer and make enough money for my business to survive and be happy. Confidence in what you do is your greatest asset. You can overthink a bid or project before even having the first dollar put into your bank account._


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## PipeGuy (Oct 8, 2004)

tnt specialty said:


> So let me get this straight; To some of you, a T&M agreement would be you charging an agreed upon hourly rate, plus the costs of materials, (which is actually the costs of the materials, plus whatever you choose to add to the costs of those materials),? So why have a T&M agreement at all?...to arbitrarily "mark up" materials on a T&M is wacko/shysterish...IMO The customer has absolutely no clue.......


T&M: The TIME it took to perform some task, paid for at an agreed upon hourly rate, plus the cost of the MATERIAL paid for by the contractor plus some previously agreed upon basis of CONTRACTOR FEE.

The customer has no clue? Presumably if you don't have to provide evidence of the cost of the material (receipts) then good character dictates you only charge an amount equal to an items cost. What clue is required?


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## PipeGuy (Oct 8, 2004)

L. B. Condulet said:


> Sometimes guys say we are not entitled to mark up materials because we are in the service business. We should make our money on the labor we provide when servicing our customers...
> WE ARE NOT IN THE SERVICE BUSINESS!!!!!
> A guy that mows lawns is in the service business. He does not install anything. A housekeeper is in the service business, she does not install anything. A guy that trims trees is in the service business.
> Each one of us, whether you're a framer, a plumber or a drywaller, is in the custom installation business. No two jobs are alike, each job is a custom, one-off, hand crafted masterpiece made to unique specifications.


Now THAT's an interesting topic. Is contracting a "service" industry? I have to say I think it varies, even within industries, from one proprietor to the next.


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## PipeGuy (Oct 8, 2004)

bujaly said:


> I just believe it to be shady


Shady is doing something of questionable intent. There's nothing shady about telling someone your going to charge them $1.20 for every dollar you spend at Home Depot provided you don't then go and bill them $1.50 per dollar.


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## Celtic (May 23, 2007)

tnt specialty said:


> So why have a T&M agreement at all?



Good point.

Go to Flat Rate pricing.


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## PipeGuy (Oct 8, 2004)

Bottom line - using a standard "mark-up" is little more than (1) factor in the process of attempting to consistently price work within a given market. And, frankly, to the extent a "mark-up" may or may not have any correlation to the risks being assumed in a job, it might not be a very useful factor. The important thing is, find a way of pricing the work that consistently works for you and tweak it over time. If you can't consistently price the work you can't stay in business.


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## dirt diggler (May 14, 2006)

how'd this question cause such a stir??

:laughing:


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## bujaly (Dec 16, 2006)

Finley, your good at skirting the questions I gave you and your little poem was quite nice. But really, why don't you man up and answer my questions? You didnt tell me ****, NADA!!!


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## Tscarborough (Feb 25, 2006)

You two can get a room, but your question has been answered 5 ways from Sunday. If you don't want to markup materials, <shrug>, don't. The title of your thread is "Why the mark-up on materials", and it has been answered ad nauseum.


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## bujaly (Dec 16, 2006)

Tscar... Your right, we should get a room..<img>


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## Mike Finley (Apr 28, 2004)

bujaly said:


> Finley, your good at skirting the questions I gave you and your little poem was quite nice. But really, why don't you man up and answer my questions? You didnt tell me ****, NADA!!!


I don't even know what your question was at this point, I'm too busy trying to get my walker oiled up right now and replacing the battery in my hearing aid.

After 60 posts all saying the exact same freaken thing to you, I guess I should feel honored that you're still holding out hope that what? Maybe I'm going to be the one that agrees with you?









Ain't it past your bed time yet? Don't mamma turn your lights off in the basement after 10:00? I'd think you'd at least be busy packing up your Black & Decker tools to get ready for that job tomorrow that you landed off of Craig's list.


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## Mike Finley (Apr 28, 2004)

Zatol said:


> This is from Colorado... Mike do you collect and pay taxes on the marked up billing price of all materials? Do you have a sales tax license?
> 
> I am not an advocate for marking up materials because of the tax liabilities. If any of you guys are audited, you may be hit with a big surprise...
> 
> ...


No, I'm not considered a "retail contractor" and all our contracts are lump sum.


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## welovepainting (May 24, 2007)

I recommend www.yourcostcenter.com


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## wackman (Nov 14, 2005)

FRICKIN A!! I can't believe this has gone on this long.....so now I gotta add (very little) to it, can't miss this one:w00t:

At the very least, you should be getting much better pricing than your customers can ( I get between 10%-30% off at home depot even) and you should be marking those up to the retail price. Then if the tire kickers want a break down (and you actually give them one) to check your prices then they'll see they're just paying what they'd pay.

Personally I don't ever do any of that. This is my price, want it to go down we need to change the scope and remove something.

Good luck bud, and don't hate Mike, he's a good guy and gives some of the best advice here. Try asking one of your local competitors these questions and see how receptive THEY are.:blink:

Wack


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## Driftwood (Feb 15, 2004)

*Here's how it works*

The heard gets cut now and then! Handy Andy puts on an Orange apron !


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## Zatol (Dec 4, 2005)

Sales tax does not apply only to "Retail Contractors"... At least not in Colorado..

The definition of "contractor" for Colorado sales tax purposes is any entity or person who bids for and performs work on real property for another party pursuant to an agreement. This includes but is not limited to:

• building contractors;

• foundation, curb, parking lot contractors;

• painting, stucco, brick and other finish contractors;

• roofing contractors;

• road, grading and excavating contractors;

• electrical, plumbing and heating/air conditioning contractors.

This definition also applies to persons involved in cabinet, casework, sheetmetal, glazing and other such trades when they construct components on site for permanent incorporation into real property. It also includes any other person engaged in the construction, reconstruction or significant repair of any building, bridge or structure under a contractual arrangement. It does not mean any individual who is working for a salary or wages. For state sales tax purposes, subcontractor has the same meaning as contractor.


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## tinner666 (Nov 3, 2004)

Interesting thread. Since we're talking T&M, how many also figure in the estimating and the time in the office for part of that T&M? I do. And I mark up the material. When you get something at the store, you don't always buy every exact screw, nail, piece of flashing, or whatever is needed. I'll bet that no one here can say he NEVER had to dig in the truck for something that was omitted from the 'package' or the take-off. Mark-up' helps cover some of these expenses. That's how I explain my reasoning for mark-up. Which is about 25%, and I can't see THAT creating a profit. Unless it's a big job, like a whole house, addition, or whatever, and that would have been done on a complete contract basis.:thumbup:


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## tinner666 (Nov 3, 2004)

I'm not running a retail building materials store. I pay the sales tax at purchase time. THe billing is 'lump-sum'. I don't believe any state charges the sales/use tax twice. 
I went around a few times with the tax department in VA, and they finally agreed I shouldn't pay the same tax twice. :clap:


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## PressurePros (Jul 3, 2006)

dirt diggler said:


> how'd this question cause such a stir??
> 
> :laughing:



No kidding. This thread is two days old and look at the number of hits and posts within it.


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## tnt specialty (Apr 19, 2007)

Here's an analogy....

Most attorney's I've delt with, chagre a flat hourly rate; Say $ 200/hr. In that hourly rate is their costs and anticipated profit.

Some attorney's charge an hourly rate, plus expenses. They charge for every nickle & dime item; i.e. mileage, postage, etc....but they don't "mark-up" those items. Their hrly rate tytpically reflects that. It's generally less than that of a "flat rate" attorney.

Much the same as attorney's; With T&M jobs, we charge an hourly rate for all work performed in connection to that job, which covers our entire costs, from ovhd, admn., through actual labor performed, and profit, plus the actual costs of materials.

It's clear, concise, simple, fair, and no surprises to the customer. There's no need to play games with the cost of materials. 

FWIW;
The mere contract discription; "Time & Materials" implies that the customer will be charged the agreed upon hourly rate, plus the costs of the materials. This has gone on so long, that I consulted with 3 attorney's...ALL agree.

Our rate is our rate, regardless of "the going rate".

The only time we ever do T&M, is when it's a job that is very difficult to "hard-bid", or in the case of "extra work"/"change orders". Quit frankly, sometimes we make out much better on T&M than hard-bid.

Been doing it this way for 24 years. Very successful.


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## L. B. Condulet (Aug 23, 2007)

tnt specialty said:


> Here's an analogy....
> 
> Most attorney's


The practice of law is not analogous to home improvement contractors.


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## tnt specialty (Apr 19, 2007)

O......, M,...... G..... !!!!!

I've had enough of this subject , thank you.....................


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## Mike Finley (Apr 28, 2004)

Zatol, I'm not sure what you are getting at, the link you provided explains how to pay sales tax directly to the vendor upon purchase of the materials. The double taxation principal that tinner666 pointed out in VA is the same here. Like I said we don't bill T&M so I don't see what your concern is for us.


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## A.W.Davis (Oct 17, 2006)

This by far has been a very informative thread. 

However, I do believe we've exhausted the obvious explaining ourselves on the significance of material markup, and are now starting to sound redundant. We as contractors know our time is very important.....maybe should send bujaly an invoice for our time spent in offering such sound advice and it only to be wasted!

Only a fool would refuse accountable knowlege and guidance, maybe its best just to let him go fail now!


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## Mike Finley (Apr 28, 2004)

bujaly said:


> I just believe it to be shady...





tnt specialty said:


> It's clear, concise, simple, fair, and no surprises to the customer. There's no need to play games with the cost of materials.


Mark-up or not is not an ethics issue. It never has been and never will be.


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## crb555 (Jun 14, 2007)

Well, I certainly mark up everything I sell, be it labor, or material, or equipment rental, etc.

Very rarely will we do a T&M job, but that is no different than anything else. You still have project management to pay for...accounting..secretarial.... lights, phone, all the general overhead items.... these costs do not stop occurring just because you are doing something on a T&M basis.


In my mind, you own a job, NOT a business if you subscribe to this mentality that it is somehow "unethical" to make a profit on the goods and services you sell.

Crb5


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