Replies

1. 
   calvin | Jul 16, 2005 07:22pm | #1

   There are several methods to use to make sure you are reimbursed for ALL the time you spend on a job.  What works for you is your decision.  If your hourly billable wage covers all the leg work/office work/ or if you bill for the time spent calling, going, whatever, then at least your physical time spent is rewarded.  I don't think you could ever markup the material enough to cover your physical effort except in the case of a large quantity purchase or big price item.  In addition to all the above you still need to think of the cost of doing business.  You need a good wage and the business needs to make money to succeed. 

   If you had placed this question in the Business Folder here, you would attract more attention from those who have it down businesswise.  Me, I'm just a dumb carpenter who has set his wage and markup/billing practices to suit my business, the area I work and the remuneration I need to stay working for myself.

   Most here feel T&M is not the way to go.  I myself work almost entirely on total cost plus 10 %.  All material, subs, fees, and my labor I nick 10%.  This keeps the work coming and as a referral only business works for me.  It is simple, to the point and has been fair to me and the customer.  I still have to bid, but not competively.  My Cost Study provides the customer a "from/to" price to work a budget around.  Job usually comes in at a cost in between. 

   Best of luck.

   Remodeling Contractor just outside the Glass City.

   Quittin' Time

2. 
   drbgwood | Jul 16, 2005 08:23pm | #2

   What sort of work are you doing?

   I do some things at a set price if it's a clear cut job, such as painting a room, or building a cabinet.  Others I only take at time and material, such as rotten wood repair where it's impossible to know the extent of the job untill your halfway thru it.

   Most all of my t&m customers have seemed pleased with the results of the work and have no complaints about the price.  I try to give them the best rough idea of what it's going to cost ahead of time - fixing a rotted band joist on part of a house that's got a deck connected to it usually goes around $1500 to $2500.

   However, I just finished a major rotted wood / termite repair the other day along the entire front of a large 2 story house where I did everything top notch to the customers request.  Bunch of new ceader siding (all back-primed), hardi, azek trim, premium caulk and flashing details that I consider a work of art.  As well, a portion of the basement had to be jacked up to replace rotted band and floor joist.

   After the 2 week job was completed and I handed him the final bill, and a very fair one at that, of $3500, I got dragged around with a solid hour of bitch'n about how he'd never hire a contractor on t&m again.  I had to sit down and defend every aspect of the detailed bill I had written.... damn yankee's!

   After all that, he conceaded that he was pleased with the quality of work and wanted me to start on the back of the house next.

    

    

    

1. 
   jpeaton | Jul 17, 2005 05:29am | #3

   most of the work i do is small remodels, one step above handyman work. thanks for the help.

1. 
   drbgwood | Jul 17, 2005 06:11am | #4

   Guess i got off on a rant about my last customer...  he was in the small minority, most of them are pleasant to work for... watch out for rental proporty landlords though...

   More to your question... For material I usually charge about 15% above whatever I pay for it.  Personally, I don't charge time for picking up material, unless it's a large job, then maybe a half day at the beginning for it, but no more for any addtional trips to get miscellanious items that I always forget.

   With the 15%, I guarantee that there won't be any problems with the material.  Some customers want to supply materal themselves, so I make it clear to them that they will be resposible for any problems with it and time I spend to correct it if there is a problem.  This most often happens when people want to order their own doors or windows. 

   On small jobs, I double my rate for the first hour, which compensates somewhat for getting material and getting a job started in general.  If I can do 3 or 4 small jobs in a day, that works out pretty good for me, and haven't had anyone fuss about it yet.

   Everybody's got there own system, this is what's working for me.

   Good luck.

    

    

    

2. 
   wdbtchr | Jul 17, 2005 06:31am | #5

   T&m is the only way to do small remodels because estimating them can sometimes take longer than doing them(not really).  I charge 10% on labor and material and bill subs at cost.  I tell people that I don't expect my last customer to pay for my next estimate.  That is also how you keep your costs down compared to bigger companies. 

   To keep them happy with the time you do charge for, make sure you give detailed bills.   Include copies of reciepts that have times on them to prove you were at the lumber yard at 7 am even though you didn't get to their house until after 8:30.  However, if you have 6 reciepts for the same day from the same place, don't hesitate to give them a labor credit.  Even if it wasn't your fault, they will smell idiot.  Count it as marketing!If the claw is sharp, who needs a saw?

3. 
   awschmidt | Jul 17, 2005 06:38am | #6

        When I work on t&m, I look to the labor to cover all time and business expenses (plus profit of course).  My education an business experience tells me to markup materials; However, I'm lazy and don't want to deal with the state sales tax paperwork.   Which btw is another issue for you to consider.  I prefer to have the client set up an account at one of MY selected local lumber yards so I can charge the materials out on their account when needed.  If they insist on price shopping and going big box on me, they are made aware that the time I waste on materials problems will be charged to them at normal rate.

   Kevin

4. 
   piko | Jul 17, 2005 08:03am | #7

   Here's my 2-bits worth...My lumberyard, and many of my suppliers, gives me 10% discount on materials. I rack all  my customers' materials up that I need - and request they also put on all they purchase independantly of me (eg personal choices like door hardware, paint, toilet roll holders). I make a point of saying I don't mark up materials...partly because it's true, and partly because if I purchase materials and mark up I am, in a way, selling the materials to them. Which means a different tax assessmant. I show the total of their purcahses on the billings, which gets included in their cheques.

   The lumberyard totals up my invoices and keeps a separate tab for me, upon which I buy the oddments (sawbldes, lumber for my own place, etc) and a whole heap of new tools every year.

   I bill from the time I hit the lumber yard, and that includes packing materials (and the odd joke with the guys), and the driving to the jobsite. Driving home I pay for, unless I wangle another vist to the suppliers. And if I do 2 or 3 jobs in the day, i bill from the time I leave each previous one. Now that gas has hit $5.50 a gal on my island I'm seriously thinking of adding a mileage charge, too.

    

   ciao for niao

   To those who know - this may be obvious. To those who don't - I hope I've helped.

    

5. 
   drbgwood | Jul 17, 2005 08:38am | #8

   I noticed several of the replies saying they don't charge any profit for the materials to avoid sales tax complications..

   The CPA that worked with me for last year told me that it doesn't work like that for a small contractor.  Unless your bussiness is strictly buying and selling stuf, it's all considered profit and goes into the same pot.  You pay tax on whatever profit you make on a job, labor or material.

   Maybe my CPA is nut's and I'm going to jail, but that's what he told me.

1. 
   davidmeiland | Jul 17, 2005 08:59am | #9

   Not sure I understand what you're saying. Here we charge sales tax on the entire cost of the work. You are selling tangible personal property, and they don't care what part is labor, what part is material, and what part is your profit. You guys working on 10% markups don't have any profit to speak of anyway, in my opinion.

1. 
   blue_eyed_devil | Jul 17, 2005 02:04pm | #10

   You guys working on 10% markups don't have any profit to speak of anyway, in my opinion

   I agree.

   10%? Why bother?

   blue 

1. 
   calvin | Jul 17, 2005 02:38pm | #11

    

   150,000.00 gross sales

   15,000 bucks that wasn't there b/4 the 10%.Remodeling Contractor just outside the Glass City.

   Quittin' Time

1. 
   blue_eyed_devil | Jul 17, 2005 03:42pm | #14

   Cal, that 15k hardly makes up for chasing the lumber for free and offering to warrant it.

   I think if you double that amount, it might come close to covering the true costs of procurment and warranty.

   blue

     

2. 
   calvin | Jul 17, 2005 03:45pm | #15

   Lumber chasing with consideration is on the labor side.

   I was already warranting b/4 the 10.

   The 10 p is what I was not making. 

   I'm a very simple minded guy, now a bit more remunerated.Remodeling Contractor just outside the Glass City.

   Quittin' Time

2. 
   BobKovacs | Jul 17, 2005 03:03pm | #12

   Now, now, Blue....

   "If" (and that's a BIG if) their labor rates are loaded to cover all overhead, that 10% is pure profit, and is an excellent profit margin for this industry. Of course, most contractors don't cover all of their overhead with their labor rates (for whatever reason- maybe they just don't grasp the concept), and if they're relying on that 10% as OH&P, not just P, they'll be working at Home Depot soon.

   Bob

2. 
   DonCanDo | Jul 17, 2005 03:34pm | #13

   Sales tax and income tax are figured 2 different ways.

   Around here (NJ) sales tax is collected (and then paid to the state) based on whatever you charged the customer for your labor.  If you buy a can of paint for the job, you've already paid the sales tax on the paint and the customer (nor you) has to pay it again.  Re-sellers charge tax at the point of sale.

   Income tax is based on profit which is most likely less than labor charges.

   -Don

1. 
   davidmeiland | Jul 17, 2005 06:17pm | #16

   So in NJ you cannot get a resale license and get all of your materials without paying sales tax? That's how it works here. I charge sales tax on the entire amount of the sale. Man would I hate to break out the materials and labor separately on my invoices just for the purpose of charging my customers sales tax on the labor only.

1. 
   DonCanDo | Jul 17, 2005 10:43pm | #19

   So in NJ you cannot get a resale license and get all of your materials without paying sales tax? That's how it works here. I charge sales tax on the entire amount of the sale. Man would I hate to break out the materials and labor separately on my invoices just for the purpose of charging my customers sales tax on the labor only.

   Yes, indeed you can, but I don't know how to do it.  I'm a handyman/painter and I just keep my materials and labor separate.  You're right though, it's not easy.  Especially for things like screws, caulk, glue, etc.  Usually, I just "round".

   -Don

    

2. 
   davidmeiland | Jul 18, 2005 01:45am | #20

   Call whatever state department handles sales tax and get a resale license (or whatever they call it there). Then you can buy all your materials without sales tax. You may find that your vendors give you better pricing if you make yourself a wholesale customer.

3. 
   hmj | Jul 18, 2005 04:50am | #21

   Are you saying that you charge an additional state sales tax for materials that already had a sales tax paid, when you bought them from the lumberyard?Sorry, I didn't read the last few posts mentioning a resale license before I posted; now I understand.

   Edited 7/17/2005 9:58 pm ET by HMJ

2. 
   rasconc | Jul 17, 2005 08:01pm | #18

   That all depends on your state and maybe even local gov.  In North Carolina labor (service) is not subject to sales tax.  You pay sales tax at big box and lumber yard when you buy unless you have a state tax #.  If you have the tax number you must file for the total value of the goods sold. 

   They have been wanting to make the labor taxable, which will probably make crooks out of some of us.  My FIL did refrig. repair and I watched him go through the grief of his returns.  Not worth it.  I would add a labor charge to make up for it.

   I do materials at cost while doing the picking up and shopping on the clock.  If I spend two hours trying to save them money I get paid for it. 

   An interesting aside, if any of you do a job for a church in NC give them a statement of materials and sales taxes paid.  They can file every six months and get it back.

   Edited 7/17/2005 1:49 pm ET by RASCONC

6. 
   CAGIV | Jul 17, 2005 06:32pm | #17

   Our T&M rates are 60/hr and materials subs, ,etc. plus 25%   Most of work isn't T&M though.

   Are you giving a warranty on these materials you're installing?

   If you are you better be making something to cover the risk.

   And you should be charging for calling around and any other job related expenses you have if you're working T&M.

   

7. 
   MikeSmith | Jul 18, 2005 05:24am | #22

   you should load your labor rate to recover all of your required Overhead and Profit

   but in addition to that... it is fairly standard in Insurance work to allow 15% overhead & 10% profit... those are the minimums we will handle subs, equipment and materials for... and it isn't enough.... you really need to get your labor rate high enough to run your business

   we don't like T&M work... it's hard to make a profit..... and it usually sours the customers...

   but if you are going to do T&M... charge enough.... the old business saw about  1/3 for the job, 1/3 for the company & 1/3 for you isn't pie in the sky.... it's a traditional markup.... total costs plus 50%...

    google on  Proof System  for more insight...

    your labor rate should include the  worker's rate..... plus burden... plus overhead... plus profit..... if it doesn't , you are losing money on every job

   Mike Smith Rhode Island : Design / Build / Repair / Restore
1. 
   buzbldr | Jul 19, 2005 08:32am | #23

   Though I would like to build a nice custom someday, I have been pigeon holed in the remodeling market. I have yet to discover the formula for 'Bidding' a remodel as each one is so unique. I ball park them to the best of my ability and then charge t&m. I have a spreadsheet and each of the crew is charged out at his base pay, plus tax and workers comp burden, plus a fixed add on for the company. So a guy being paid $18/hr is billed out at $37.86.Beyond that, the customer is charged for everything from permits to materials, labor and subs, engineering, etc .... total that and add on 15% overhead ... total that and add on 5% profit and there's the bill.It took me years and years to decide me and my experience was worth something and needed to be billed for accordingly. Talking around locally and I think I am still low in all areas (labor costs and P & O.

1. 
   earl06 | Jul 19, 2005 02:05pm | #24

   I do mostly remodels and mark-up materials 50%-100% unless it's something like a cabinet install.

   How the heck do you make money marking up 10%?DCS Inc.

   "He who xxxxs nuns will later join the church." -The Clash