*
I am curious to how much mark up you put on material, ect. What do you all mark up? Material, subs ect.
Discussion Forum
Discussion Forum
Up Next
Video Shorts
Featured Story

Learn how synthetic panels can create watertight shower walls and tub surrounds — or a big problem.
Featured Video
Video: Build a Fireplace, Brick by BrickHighlights
"I have learned so much thanks to the searchable articles on the FHB website. I can confidently say that I expect to be a life-long subscriber." - M.K.
Replies
*
.. we mark it all up the same.. at the bottom of the estimate sheet...
but before you get to the bottom you have to add the labor burden to the rates... for us that is 50% added to the rate...
the mark up is based on what your overhead is for overhead..
and then you add profit...
if you are a GC, doing new homes.. your markup will be different than a full service remodeler..
if you are a specialty contractor .. your markup will be different also..
generally speaking... the longer you are in business, the greater will be your markup ..because you finally wake up to what the true cost of business is..
walt stoeppleworth is basically right on...with his markup percentages...
*In the retail business, average PROFIT margin is 40%.This means that they mark up their goods an average of 70% (multiply the cost of goods by 1.70) It is a formula they use, and it gets long to explain.In my business, I mark up materials 35%. On small itmes, this makes very little profit. But on high dollar items, the profit amount goes up. It all averages out. When my expenses for dealing with materials increases, so will my markup. Cost of fuel in recent months has increased my costs for dealing with materials. My markup now reflects that.I do not use subs, but I would mark them up too.A builder will do it differently. So will a LARGE remodeling company. Everybody has their own way of doing things. Just know your costs, overhead, and expenses, and make sure your income covers ALL of them and allows for a profit. Profit is why you are in business.James
*James, the markup on many retail industries such as furniture, is 100%, clothing is 100%, jewelry 400% - 500% and those parts we're charged for at dealerships are marked up 400%.Part of the reason for such markups is the retailers cost of carrying the inventory, and is the reason why quick inventory turnover is so important.Not so in auto parts markups since many parts must be ordered.
*Sonny,Close, but no cigar.Markups on items that are sold by commissioned sales people fall into a whole different category. Appliances, cars, jewelry, furniture, etc... all fall into this category. Also, the Manufacturers Suggested Retail Prices (MSRP) is entirely different than normal retail markups.Markup is not an exact science. Most companies will mark up as high as the market will bear. The larger retail stores (Sears, Wal-Mart, Best Buy, etc...) set their own standards and markup practices. They are in a competitive market like nothing you've ever seen. A few marketing mistakes on this level could cost these companies millions of dollars. They will also sell some items at or below cost (called Loss Leaders) in order to get you in the store. Grocery stores do it too. Mom and Pop stores can't compete on this scale, but they manage to survive anyway.There is a BIG difference in retail businesses nowadays. Larger markets do things a bit different than smaller markets.Saturn set the standard in the car buying industry by putting a set price on the automobile, and paying the sales people salaries rather than commissions. There is no negotiating, and no hard sell tactics by the salesmen. Lots of dealers have started to follow suit. A company needs to set the markup for their goods in such a way that they cover costs, overhead, and make a profit. The amount of PROFIT is where the market will keep you in check. Too high, and you lose sales. Too low, and you get lots of sales, but lose profit (why we're in business). Just right and you make profit, get sales, and make everybody happy. You gotta do your homework, know your market, and know your costs. James DuHamel
*James. I sold furniture, appliances, and other retail items including jewelry, while the store my wife owned sold clothing and jewelry. However, our disagreement is not the point. The point is the markup comparison between other industries and our own - your main point.My contention is that too many of our peers operate under ovehead percentages that they way understate and/or some overhead line items misunderstood.
*Materials I sell at list price or 50%. Wichever I think is appropriate.. Subs are marked up a minimum of 30%. Labor is $50.00 an hour. Unless the market dictates a different price. A steel entry door install retails for $200.00 for a standard replacement. I need about an hour & 15 minutes, set up to clean up. Customer usually buys the door & arranges for delivery unless it is part of a larger job or there are several doors. Even a 100% markup at $50.00 an hour won't equal the market price. So don't just look at markup. Pay attention to what the market will bear.
*Thanks for all the responses. James do you put a percentage on material and then a percentage to the total of your bid . What happens if you don't supply material. What do you do on a labor supply only. I just finished contracting labor only to an electrical company and at my current rate I didn't feel adequately compensated. If I jack my labor rate up they will go else where, it's a gamble when so many people are willing to work for just a wage.
*Mercer I think you miss the point of all the profit discussions we have had over the last year or so. A successful businessperson doesn't focus on Markup. The focus is on Profit.Read the several topics in this location(Business). They give the various perspectives on how to determine your costs and how much profit you need.Very, very summarized your Minimum Profit covers all costs Plus at least the return on investment you could get if the money were in a financial institution Plus the wages you could get if you were working for someone else Plus whatever you need to compensate yourself for taking the risk of business. If you can't make at least that Minimum Profit the market is telling you to do something else.But you should strive for a Much Much larger Realized Profit. That is based as much on experience, good guesses and good analysis of your business as anything.This is a summary so read the posts and then come back with questions. But, this whole thing really is very simple. Anyone who can add two and two can do it. The only hard part is having the stones to make good guesses and force yourself to have self-discipline to stick with the analysis.Remember the focus is on Profit at the end; Not each detail along the way. The details have to be taken care of but only as a means to get to the end. How they are taken care of will be different for each business.
*Mercer,Let those other guys work for "just a wage". You ain't in it for the wage, you are in it as a company, and your company needs to make a profit.If I do not supply materials, then I have no costs associated with the materials. I have been hired to install the customer supplied materials, and I will gurantee that they are installed correctly. After that, it is between the customer and the manufacturer. If what I need is not there, or it is the wrong one, then the customer is responsible for going to town and getting everything straight. After about two or three trips, they tell me to take care of the materials. I then charge accordingly. I am NOT going to run around correcting their material mistakes for free. I have never had a client supply materials twice. After the first expereince, they have me supply all materials for their future jobs.As for labor, I have calculated all of my costs including overhead, my wages, and profit. I charge enough to cover all of these, and still be able to make a profit. That is what I am in business for.Only you know the actual costs of your business. Make sure that whatever you charge will cover all overhead, expenses, wages, and allow you to make a profit. Sometimes, especially when the market is tough and tight, you may have to lower the profit margin in order to get some jobs. Don't ever totally eliminate profit, but lowering it a small bit to remain in the competetive market might be necessary from time to time.When you are with a potential client, do not try to sell them the job. Sell them your company. Explain to them WHY you are the best company to go with. When you are hired, deliver everything you promised. Then go the extra mile to make sure that they are a happy customer. A happy customer will be a customer for life. Make enough customers for life, and no one will ever question your pricing, or hire you specifically for price. They will hire you because YOU are the best company they can get to do their job, and they want YOU to do the work. Pricing becomes secondary. James DuHamel
*Sonny,This was my main point...i A company needs to set the markup for their goods in such a way that they cover costs, overhead, and make a profit. The amount of PROFIT is where the market will keep you in check. Too high, and you lose sales. Too low, and you get lots of sales, but lose profit (why we're in business). Just right and you make profit, get sales, and make everybody happy. You gotta do your homework, know your market, and know your costs. My first remark in my first post was about the profit PERCENTAGE, not the markup. And MOST retail businesses shoot for the 40% range. Some go more, some less, but the target is usually the 40% range.The main poinst is this: Know your costs, know your costs, know your costs! If you know your actual costs, then you can calculate your needed revenue.Business is really pretty simple when you keep it on a simple level - know this one rule, and you WILL survive. MAKE SURE MORE MONEY COMES IN THAN GOES OUT! If you are paying out more than you are bringing in, then you are not making a profit, and you need to start finding out why (real fast). James DuHamel
*Mercer,One other note about materials:When I buy materials, I pay sales tax at point of purchase. I do this for a specific reason. I am not going to be the tax collector for the state. I refuse to do so. I am not wasting my time filling out all the tax forms for the state, setting up a bank account to pay the taxes, and in essence, working for the state for free. By paying sales tax at point of purchase, I am eliminating the need to be a tax collector for the state. I recover the money I spent on sales tax when I sell the materials back to the customer. I simply charge the sales tax on the bill, and everybody is happy.Some states won't allow you to do this the way I do, so if you decide to try it, check with the state Comptroller's office first. My state started charging sales tax on SOME labor in recent years. I got lucky and avoided this mess. I am categorized as a Repair Company, and am not required to charge sales tax for labor. Some of my peers and competitors have had to start charging for sales tax on labor. This increases their job costs, and makes them higher than some of the rest.James DuHamel
*Mercer, James said: "Sell them your company."That's the most important thing you can, and have to sell. Gerber in The E-Myth says, "Technicians sell the 'product' they provide to the customer." Business owners 'Sell the Business", as James said. If not, the only thing you can sell is price, and sure as hell you will lose cause there's always someone cheaper. Always! And the better you are at selling, the higher the margin you can obtain - regardless of geographics or the state of the economy. That has already been proven by too many companies in too many industries, and in a lousy economy to boot.Take youself off of the list of "supply" and place (or have the public do it) yourself on the list of "demand". Make your "business" one that's constantly in demand.Never sell price!
*
I am curious to how much mark up you put on material, ect. What do you all mark up? Material, subs ect.