Dumb question...How are you charging for materials?

[pablodomingo]

Up until now, I have charged for labor only and had the customer pay for the materials with a credit card over the phone or in person. There are exceptions like when I build a built in and hand them the receipts and have them pay labor plus materials, How are you handling the materials for jobs when you're doing finish carpentry and moulding installation work? I know I must be leaving money on the table by not making something on the materials but I'm not sure how to approach it.

[okmrazor]

Re: Dumb question...How are you charging for materials?

Can't imagine not marking up materials. You are definitely leaving money on the table. Will expand on that when not typing on this damn phone.

[SteveC]

Re: Dumb question...How are you charging for materials?

Add 10% quantity of trim to allow for oops.
Add 20% on material cost.
7% NJ State tax

BUT....
Crown in a 10' x 10' room
Simple
40 LF crown @ $1.00
$40 + $4 x 27%

Actual
Crown comes in 16' lengths so...
5 X 16 = $80 x 27%
If you're perfect,and never miscut, figure 4 pieces :)

[mdannolfo]

Re: Dumb question...How are you charging for materials?

I bill for labor and materials all on one bill. For t and m work, I mark up anywhere from 5 to 20 percent depending on size of job. Small job, larger markup and vise versa. On bid work, usually 10 - 30 depending on complexity, risk and how much I need work. You are surely leaving money on table. Most of subs I work with mark up 20 to 40.

[dlhunter]

Re: Dumb question...How are you charging for materials?

I'd agree with the others. You definetly need to mark up the material some. Usually anything I put any time or effort into I bill for one way or another even if its just phoning an order in on mynride hone Most of my clients would rather just cut checks to me anyway. I've started getting a material deposit up front for my t&m jobs recently and it has been working well so far. Basically a retainer that I pull money from to purchase any materials needed at my leisure. When it gets low I get another check from the client. Anything left at the end goes towards the labor. I don't give receipts usually but am pretty upfront with clients that I'll be marking up materials. Sometimes the markup winds up what the client would have to pay anyway if I'm getting a good contractor price.

[philthegreek]

Re: Dumb question...How are you charging for materials?

So basically, you research the material, you go and get the material and deliver it to the job, you guaranty the material AND you don't mark it up? If you are shopping at Home Dopey or Blowes, are you concerned about them being able to know your costs? By them paying directly for it, you just broadcasted it to them. Is all your time not worth any money?
I mark-up a min of 25% except for friends and relatives, then I mark up 50%, lol.

seriously though, if you are concerned about that, Just get a store contractor credit card. You'll get 5%-10% off, you can add PO's or customer names to the receipt, you'll get an itemized report at years end AND you get to keep more $$$ for yourself.
Don't sell yourself short.

phil

[Jeremy]

Re: Dumb question...How are you charging for materials?

Oh my....

First off, if you are not marking up materials, how long have you been in business & how much longer do you think you will last? I don't ask that to sound like an ass, but I was in the same boat as you.

I'd only charge 15% for materials, because my main supplier gave me a 10% discount if I paid by the 10th of the month so I figured I'd get a 25% markup. Worked fine until work got slow, projects ran over budget, ect, ect. Then I was losing my 10% markup plus sometimes paying 1.5% on past due balances. There was always the inevitable mis-cut too. So then I started charging 25% markup with or without the discount. Then I got educated on markup vs margin, operating costs, overhead, yada yada yada...

To answer your question, I buy all materials for all jobs. I mark them up at LEAST 40%, typically 50%. If the HO is insistent on buying or supplying something, I still charge 50% of the estimated (by me) cost. I'm still the one having to deal with the cheap paneling they bought at the surplus place but expect to look like A+ material.

Read the book "A Simple Guide to Turning a Profit As A Contractor". Your eyes will be opened. You'll be amazed at how much money you are losing out on.

I NEVER show the customer what I actually paid for material. They are paying me for a finished product; installed crown molding, installed cabinets, finished addition, repaired window frame from leak, ect. On the rare time I do a T&M job, I have three lines: 1. Materials total (with 40-50% markup included) 2. Labor total (same markup as materials) 3. Total they owe me.

I don't itemize anything. Grand totals only. You are the professional, so take charge.

[archmolding]

Re: Dumb question...How are you charging for materials?

Thank you I ordered that book! I could use some advice in this department as well. My only worry now is that I wont land any work with all my new price increases. I'm prepared to be enlightened!

[mike maines]

Re: Dumb question...How are you charging for materials?

Pablo, I work for a design/build company with a somewhat unique approach. We do most jobs, even large ones, T+M. We have a nominal rate for labor. Then labor, material and subcontractors all get marked up the same amount. Keeps things simple, and we're open-book but clients rarely take us up on the offer to see the raw costs.

[Happy Home]

Re: Dumb question...How are you charging for materials?

Like Jeremy and others have said. Time, miss cuts, warranty service, small rework in a future day, etc.

You have to mark up materials. It costs me 2% - 3% just to pass it through my books. GL ins and a few other factors.

On my jobs that can be a few hours to 3 - 7 days I mark up materials generally 30% - 50% however I find myself marking up more materials to the 75% - 100% range when available / risk. That is "margin" I should say. Divide by .65. Most all of my customers understand this...."I know you have to mark up materials because...." I hear this a lot. They know the other side of the coin too. Even with a good margin it has gotten used up on addl materials or labor I have chosen to include at times. So I have to mu materials.

I have also done a lot of larger remodeling too. Decks, additions - structural lumber imo you can only mu 10% - 15%. All other materials as said 20% - 40%. You then add contingency, profit, overhead. During negotiations on these jobs if items are taken out I only take out the net cost of the item. The rest of the related expense in the recap stays in. If it gets real tuff I still have the added margin, P&OH to work with if needed.

[jobercian]

Re: Dumb question...How are you charging for materials?

Thanks for book recommendation Jeremy- I'm getting it today!

Markup is key- If I markup well, it makes the difference between scraping by and thriving. I don't have a fixed %- tends to be higher on small items (sort of a sliding scale based on cost and risk factor of item being damaged)

The nice thing about marking up well is that as I sell more expensive materials my income goes up without me having to work any harder.

I am not as transparent as Mr. Maines' outfit, but I will lay things out for people if it is a job that the customer cannot understand the reason for the high cost. Granted, I am not revealing markup, just educating the customer as to what is required to accomplish their job.

Naturally I would prefer if everyone would just leave me a blank check and go on vacation until I called them to say I was done.

Cheers-

[Albion]

Re: Dumb question...How are you charging for materials?

Howdy what about your soft costs markup. Tools wear out, insurance, vehicle, office space, staff .... Got to add in these too to have an ongoing company that is able to maintain business.
Consider spending some time learning about small business management, perhaps a class .
Continued success& Happy Easter.

[pablodomingo]

Re: Dumb question...How are you charging for materials?

Happy Eater e everyone. I am getting that book and hope my market will accept it.

[J.Buesking]

Re: Dumb question...How are you charging for materials?

First word that comes to mind is Insane! How can you operate like that?

Here's how I do it. I don't touch a tool. So if you do your installs this might now help.

First you need to figure your man hours. This includes picking up material all the way to job cleanup. Multiply the number of hours times you labor rate. Your labor rate includes taxes and workers comp.

Second figure your material costs. Like others said. If you are running trim in a bedroom that's 12x12 you need 4-16' pieces not 48 lin. feet.

Third figure your expenses and overhead. Include percentage for bad debt, marketing, small tools, fuel, trash removal, warranty.

Fourth add all three (labor,materials,expenses) up in to one sum. Then hit that entire amount with markup.

So if my actual costs are $100 and I want a 37% Gross Profit the sellling price should be 100/(100-37)= $159.00

Here are a couple free spreadsheets that some of you might find interesting:

http://thecontractorsclub.com/downloads/estimating

[Jeremy]

Re: Dumb question...How are you charging for materials?

Thanks for adding that link Josh. I forgot about those spreadsheets.

To Pablo: I don't think it is so much 'if your market can support it' as it is you telling your market to support it.

From my personal experience, once I committed to finally charging so I would be making money, I was much more confident in why I was charging what I was charging. This spilled over into my sales call and it seemed that customers understood that my price was my price & it was not negotiable.

For me in 2011, I did fewer jobs in number but with a higher profit margin on each job. I made more money doing less work last year than I did in 2010. This is due to the fact that I finally understood what I needed to charge for not only labor but for markup. I did lose some jobs because my price was higher than some other contractor. At first I thought maybe I did the wrong thing, but stuck with it. In the end I came out ahead. This year I am already 46% ahead of where I was at the end of the first quarter of 2011.

It will work. You just have to know your costs, your honest costs, and be willing to charge what you deserve.

Would you rather have the headache and hassle of doing 4 jobs with a $5 profit on each or one job with a $20 profit? I used to be the guy doing 4 jobs for $5. That was 4 sales calls; 4 estimates; 4 contracts; 4 bills to send out (and send again after 30 days); 4 of everything. That is a lot of overhead time. Now I go for the $20 profit job. I don't get all of them but the ones I do get I make money on.