My self I have been using a markup of 20% on gravel and septic tanks etc. I figure that I have to add a markup on the materials to generate revenue to cover overhead expenses that are not part of the equipment hourly bid rates. Now with slow years that 20% markup does not cover all the over head expenses and I have to eat it out of my wages ( what ever is left at the end of the year after all expenses are paid).
I have no idea what your business size or model is, but it sounds like your equipment hourly rates are too low if you aren't covering overhead with that. What if none of your work involved purchasing materials? Then you wouldn't have any income from mark-up.
Mark up is paying you for the time to go get them, handle them more than once also it it is your wikle room Incase you missed something on the bid. I agree with materthegreat, you shouldn't really be living off of them per say.
I agree with the 20% but I even charge a minimum labor charge for making a hose. 5 minute job but it’s a 1/2 hour labor charge. Same with going to get some pipe or a catch basin. It’s not cheating or unethical, my time is worth money. I had thought about raising my percentage on mark-up but that would bring in less money, if there was less materials.
My standard MU on materials is 10% and 15% on equipment and labor. Equipment and labor rates are retail + the 15%. The 10% MU on materials covers the shop drawings, financial carry on the materials, missed items and profit. The 10% MU is a profit center for us. Average materials per job is $50-75K.
Where are you getting these materials? A supply house or a box store? I buy my materials from a supply house but I use box store prices + 20% to my residential clients and the commercial ones I use the supply house prices + 20%-50% I probably could do closer to 100% because I know that the small to mid size company's cost on the materials I am quoting is no where near what I am buying them for but that would be greedy and I would rather have a customer that feels like they're getting a deal, probably thinks I am barley marking or giving it to them at cost just to get the job.
This is for commercial projects - precast structures, concrete and HDPE pipe from a supply house. I would never win a bid if I put 50-100% mark up on these types of materials.
And you are the a bigger project and bidding against the bigger companies my jobs are smaller my biggest material job was around 42k so I am bidding against the mid size companies and I know more or less we get they are paying so I can a little more aggressive. But I just bid a state job I was really soft on mark ups for that one barley over cost knowing that everyone else is doing the same
The place i work at just got sold out . Were i work they have a shop that sells fixes tires and does other stuff for the public . I just work on company stuff. I have always made tickets out to show were parts were going . The new owners want me to put a markup on the parts i put on company trucks. Why I dont under stand this ? Its like they are buying and selling stuff to them selves making money?
Possible that those are different companies on paper
It doesn't seem right to have a worker dealing with money situations. Most every place I have seen, the workers are not allowed to "see the books", and have no idea the markups and other money matters. Let management do the accounting markups. Just one more thing they are handing off to you, and something they can blame you for when stuff goes "south".
They are marking up materials sold to themselves to look better on paper and taxes.
This new company does so many things different there is so much more paper work. I dont like doing it If i just turned wrenches i would like mechanic work a lot better . The new company is doing a lot of stuff different there is not as much for me to do. I am thinking about quitting or going to less days.
My cat dealer does a form of this, everything is compartmentalized, when I bought my grader blade my machine software from the factory was not the correct version even though the D series was supposed to be smart attachment ready, when service received the machine they didn't check. Field service charged the sales department to come out and flash my machine. Sales was also willing to pay Sitech to do it when they installed the Trimble if field service didn't make it out before they did. Field service also charges rental to fix the rental machines. I don't know how the parts work but this what I think of when I read your post.
I cant kind of understand this when one department does work for another is money changing hands? My deal seems like money is being made inside a business .
Money is being xfered and accounted for inside the business. Not a bad thing, but you doing it IMHO is.
I'm sure I'm in the minority, I'm a building, fencing, and excavating contractor and my markup on materials is zero. Everything I do is by the bid/turn key pricing, material cost is exactly what I pay and the rest is labor. Makes the book keeping easy.
Our work is lump sum as well I just break down the profit margin between materials, labor, equipment and overhead. I do put a % of the total in for overhead. Are you deciding the amount of markup on the parts or just making out a ticket? They are probably doing it for tax reasons - either income or ad valorem The large general contractors here all have an internal equipment rental division they use for all their local and for one international jobs. The PM's and Supers have to pull from the company's rental fleet and it is billed back to the job. We have done work for the international GC at their main equipment yard. Everything one could imagine from cranes to go buggies. They build alot of embassy's and we did a couple of projects at their international warehouse. All materials for the embassy they are building except sand, gravel and cement goes through that warehouse - everything. They have their own fleet of trucks that take the sealed conex's to Mobile to be shipped around the world. State Dept. is worried about listening devices implanted into the materials like drywall and such.
Its for balancing the books between the subsidiary companies under the parent company. My business has been structured as such almost my entire career and its beyond beneficial for structuring your tax liability. Im with you. I never have marked up materials themselves, but instead figured the handling, transport, and anything else associated with materials into the equipment/labor rate. Customers seem to appreciate it more being broken down on their proposal. I primarily work for my own companies though so do very little contracted work and if so its always commercial and never residential. Possibly that's why its worked out so far.
I have a friend that does remodeling, whatever the cost is on the materials is passed on to the customer but he marks up the bid of each sub that he uses 20% including himself when he self preforms.
How about sit work excavators like myself, what do your firms do? Use a % markup on materials included in the bid or????
Yes I put a % MU on all materials. The % ranges from 5-15% depending on the material and how bad I want the job. If it's a StormTech system that may run $75-100K in just material, I may only put 5% on that portion. If it's standard RCP, HDPE and structures it's a standard 10%. I use a spreadsheet that's been honed in over the years with a markup column so it's easy to change the MU to whatever you want.
I think there is a sweet spot between being competitive, not leaving money on the table or not getting the job because you got greedy on the mark up.I would rather put less on the materials, get the job, and keep busy, I am not losing any money in that senerio just not making as much.
Someone has to do it. If it isn't the mechanic tracking parts use, then it would be someone in the office, or a fleet manager. Either way, an employee is keeping track, and starting the process.
Keeping track of parts & labor is one thing, assigning/deciding dollar amounts especially profit mark ups is clearly another. Front line employees should not have such knowledge of just how the business is being run.
That's why I asked Doug the question. Big difference in the 2.
They came up with a % to add to the price of parts.
Pretty standard practice, they are just trying to mimic as if they hired an outside company. More of a deduction for one company and more profit for the other under their umbrella. Now how they balance their books and make it all work should remain unknown to the guy on the floor just writing up the work order for the office.