An issue has come up when I am doing mulch delivery lately. Part of my business is Landscaping so I sell a good bit of mulch. Mulch is sold by the yard where I am from so I quote all of my customers prices by the yard. I get a discount at the mulch place because of the volume that I buy from them and I mark it up 25% plus delivery. I know my truck has a ten Cubic yard bed, Ive done the math and its 10.16 yards when it is full to the bed rails. But when I go and get loaded up they sometimes only charge me for seven or eight. They almost never charge for ten yards even if the truck is full heaping over the top of the bed. I think they have one yard excavator buckets but they use the thumb and grab way more than a yard per scoop. So here is my problem, do I only charge for the amount that I am charged for? Or do I charge for the full volume that I know I am delivering? On a large mulch job those two or three yards of mulch per load really add up. I bid most of my projects as time and materials and I just don't want someone to think I am overpricing the materials side of my bid if I ever get an audit. Ive asked several people that are in other businesses what they think and I keep getting mixed answers.
ALM, if you were to buy the mulch in bulk and stockpile it in your yard, you would pay the supplier for the quantity he charged you. If you order 100 c/yds, but actually recieve 120 c/yds, that is between you and the supplier. When you deliver the mulch to your customers, you use your truck knowing that it has a 10 c/yd body on it. As long the customer receives his 10 c/yds and is charged accordingly, I don't see any problem at all with you picking up a little extra in the middle. We buy sand in and our supplier is fairly liberal with the quantities, but when we sell the sand, it is weighed and the customer is charged for the weight, we see that they get good measure and everybody is happy. RnR.
+1 Conceder your suppler is giving you a bonus for buying large quantity from him. it is easer for him to five you a little extra then give you a discount. If your customer pays your suppler directly and not through you then he should get the extra but if he pays you and you pay your suppler then charge for what you deliver. What you are doing is proper. Do you also charge for delivering the material? Also is your profit margin 25% or is 25% your markup. There is a large difference.
I learned somewhere along my business learnings that... "(Sale) Price has everything to do with what the market will bear, and should have virtually nothing to do with cost." {My bigger question is... is it "bare" or "bear"?} Obviously "price" is what you sell for, and "cost" is what you buy any product/material for. AND obviously, the lower your costs, and the higher your price, the more worthwhile the venture is.... but the two shouldn't be tied together. Your customer couldn't care less if you had to replace a bad tire yesterday... why give him the option to care less if you happen on a good deal on material? Good question, and good luck.
why would a customer ever get to see your books? unless your customer is you accountant or irs auditor, it is your little secret to produce more money and i would keep it that way. get all you can when you can
-RnR, Good point about stock piling it and selling it myself. I had never thought of it that way. -Dwan, I mark up the material 25% more than I pay for it. Thats not to say that I only make 25% of the mulch cost for profit on the job. Because I am also installing it I make most of my money on the labor. But mulch delivery around here is really competetive so i make sure that my material and delivery charges are not high enough to warrent the costomer to order the material and just have it on site when i get there to provide the labor. And with me getting 20-30% of the mulch for free it just adds icing on the cake. -Steven, Good point about the bad tire analogy! I have lost 100% of the profit on many a job because of equipment problems, and only rarely have I been able to charge the costomer for it. -lgammon, I shouldnt have said audit, that was the wrong word. One of the ways i keep most of my big customers is providing them with a spreadsheet before the job starts with all of my costs and how much I expect to make. That way they dont feel like they are getting jacked and dont want to look for a cheaper contracter. Because around here there is ALWAYS a cheaper guy. I just didnt want somehow for them to see my spreadsheet saying I expected to buy 150 yards, and then a freind of a freind owns the mulch company or something and he ends up finding out that i only ended up buying 105 yards for his job. That extra mulch adds up to almost two grand so thats why I was worried. Thanks for the input guys! I really didnt think I was doing anything wrong but its good to have everybody's opinion.