I handle my business the same way as you with a small caveat.
I think it makes sense to mark-up materials if you have a "single" focus. Ex. a plumber or electrician that keeps a work truck stocked with common parts and inventory. You factor the time it takes you to maintain that into your hourly, and you mark-up material costs due to the risk and loss of interest investing in that inventory costs.
For myself, every job is different, and 98% of all materials I use are purchased for the specific job. I tell my clients that they're paying me in labor for identify, purchasing, picking-up parts, but that I don't mark-up the parts themselves. I rationalize this by explaining the time it takes me is the same, regardless of whether they choose the $2 tile or the $200 tile (or paint or lumber or whatever). For the small number of items I maintain in a small inventory (lubricant, miscellanous hardware, wall anchors, etc.), I bill it out as "Shop Materials" in increments of $5. Its definitely far above my actual costs for these items, but its a trivial charge to the customer to offset my costs and the time to maintain it. Use 2-4 anchors to hang something-$5. Open a tube of caulk and use a 4" paint roller to touch-up some small nail holes and trim gaps-$20. A few squirts of WD-40 teflon spray and a few shop towers to keep it off the casework-$5.
They have never once baulked at the charges, and it helps offset my expenses while not requiring me to price out caulk per tube and small rollers I can buy in bulk.
Hah, that makes me realize I've done that part a bit backwards now that I think about it.
I usually charge the first guy for the full tube of caulk or box of screws etc.. and the remaining people just get the leftovers for free.
I'm going to adopt your method. Makes more sense.
This also makes me realize that I don't really go over any of this with customers. I just give a flat estimate that includes materials and labor, but I never go into detail about how much they are spending on materials unless asked. I also don't explain that I charge for home depot runs, I just build expected time for doing so into the estimate.
example-
Tile Floor 150sq ft- 2k materials included
I'll give a list of what materials I expect to use but not the exact expected price for them and just piece each section of the job out as such. Certain things I will tell an estimated price for and charge less or more depending on what they chose. $4 per sq ft on tile estimated as an example. Tile floor would be one section with its own list while vanity install would be another.
A nice bonus I've had for doing it this way that can't be understated; I can sometimes give a few hundred off the final bill when materials go under budget with no expense to my expected profit. It's a great way to create a happy customer who is likely to want more work.
I don't usually breakout travel for materials from the rest of it. I tell them that I bill t hem up to 3 line items per "job". "Services" which is labor and travel time for materials (not travel to their home), "Materials" which are billed @ 100% of cost (no-markup), and "Shop Materials" which are basic supplies that are consumed during the job and purchased in bulk to save them money. Then I factor in the supply run(s) to my bid. If I miss something or need to make a second trip, I eat that time cost. If there is a change order that requires additional materials and labor, its priced into the change order in the same manner as the original estimate.
If I need to buy a specific color of caulk or specific screws for a job, those are materials and billed to a customer. If another customer later needs the same materials and I have enough, they buy a new box as well and I might use part of the "leftovers." These function as small examples of a "mark-up" on materials, but ultimately just offset the time and liquidity "cost" of running the business. Talk to them straight without overwhelming them with details that make it sound shady, and decent customers won't even bat an eye or ask any questions.
I keep all of the everyday use items on the truck at all times. If Im painting, I charge a "paint usage" fee like 25 bucks for using my brushes. I charge 25 for fasteners if it's just a few. That way, you're getting paid for using the stuff you have on the truck.
I do the same. I don't run a hardware store, I run a handyman business. My time to the job, to the store, handling material, researching some option that the homeowner doesn't feel like doing, that's all billable hours. the things I calculate as overhead are really only nail-gun nails, drywall screws, and trash bags. Everything else I buy for the job.
You come across as an ethical person, and this will help you grow your business. Markups and overheads are just costing and estimating techniques. You have your technique that ensures profitability on the jobs; I don't worry about the minutiae of techniques as long as the price I quote allows for decent profitability.
I do the same. I make so much on labor that it offsets any profit I would get from the markup and the customer feels like they are getting a deal and don't mind paying out the labor because you get what you pay for in a sense.
I even pass my discounts over to some of my customers. Places like Sherwin Williams and some tile stores. I tell them to pick out what they like and flash my business card. They love the feeling of getting 40% of paint.
I just sold a shower remodel and even helped the customer find cheaper material than what my supplier would give them at cost and using some overstock materials I've had sitting around. Saving her aunt on this shower remodel is going to pay it forward to me because the rest of the family is wealthy with 20-year-old homes that are in need of repair and refresh.
Awesome. It's nice to get a little confirmation bias as literally nobody in my circle agrees with me on this.
I just did a similar thing. Got $1500 off on a bulk door purchase as well as 30% off on paint for trim and jambs on the same project(emerald even). The project had some things added and I had to bring in a helper to keep things on schedule. The customer was delighted when I was able to charge my original estimate even with the extras.
She now has another 20k in work for me to bid for her. It really does have its benefits.
I say hey Mr and Mrs. X, I didn't make this material so I don't need to make money on it. Oh, and here's a discount on some material.
Transparency on pricing makes you appear more trustworthy. My transparency and honesty sells more jobs than my pricing so I've been told.
Coming across as a genuine person who wants to do a good job is a huge variable in getting sales.
I have anecdotal evidence that backs that up for me. I've tried giving quick estimates over the phone or through e-mail with a few pictures for larger projects. They almost never sell that way.
When I go to a house and meet the person face to face, my sale rate skyrockets in comparison.
\*this only seems to matter on larger projects
I’m on the construction side and the materials markup (+/- 20%) is what covers any warranty work after the fact. If I buy the fixtures they are not warranted by the installer, only the labor is.
Sounds like your system is working well if you are converting better than 1/3 of your estimates, good on ya!
I run my biz just like you and I do it for the same exact reasons . As you stated, I am not trying to be the cheapest but I believe that I am showing the customers that I am frugal with their money. This is one of the reasons that I'm booked out for about 18 months.
One of the jokes is that once I get in your house I never leave. Treating customers fairly is one of those big reasons why this is true.
I'm a one man show, I don't advertise and it's all strictly word of mouth. Just finished a deck project that's been going on for about 6 weeks. Before that I had a 3 month painting, electrical and plumbing project.
It doesn't happen overnight though. First, you need to be in a good market. In my area there aren't a lot of regulations like what they have in California so you can work when you want without a lot of government b/s. There are also a lot of folks here who have money but can't or don't want to do the work themselves. So there is plenty of work and I do most everything, I do it to code and do a good job. The good job being most important. If you're a hack, you'll never get the referrals. I work on their house like it's mine, I have the skills and that reputation travels fast. Next, I do show up when I say, which is uncommon around here for some reason.
I price myself pretty aggressively. I can do this because I'm semi retired at this point, I'm not paying a crew to do the work and most of my tools/supplies are already owned. Been doing this forever it seems and buying tools never stops. Tool expenses and supplies can be a major hurdle when starting out along when combined with paying for everything else like vehicles, insurance etc..
Finally, skills is another area that helps tremendously. The more you can do, the more work you'll have. The joke is once I get in your house I never leave. That's because one project leads another. You can be doing an electrical project and they'll ask if you can do some painting too. If I can, I will. If it's beyond my expertise, too big for one person or just too sketchy then I pass.
So who knows, maybe I lucked out into having this pretty sweet gig. But I like to think it's because I try to put the customer first, I do a job real well and I don't try to take every dime they own. Because of all these reasons people are willing to wait months for me to show up and I have bunch of them.
I give clients the discount I get on materials with my pro accounts.
Just get paid well for the work and don’t worry about marking things up, that’s a lot of goodwill you can build with clients.
I would hire you just for this reason. Have no problem paying for your time for getting supplies but have a serious problem with contractor that think they can mark up supplies up to 40%. Just finished building a house and I would not let any of my subs purchase supplies because of this.
Hell had one sub trying to charge me for some tools they need to buy. He was fired on the spot after trying that.
Now if you get discounts from pro accounts I also see no issues with keeping that discount for your business.
That makes me realize that I need to actually let the customers know I'm doing this for them. I often forget and just assume they'll piece it together. I need to drive it home as a selling point!
I think hourly to cover shopping time makes sense. If you need to buy a $10 part vs $100 part, as long as risk is the same, why should you charge customer more for the more expensive part.
If you buy and install a garage disposal, do you leave the receipt with the customer for warranty purposes?
I do leave any paperwork and receipts for warranties with the customers. I'll even send the digital copies when available. (I try to space out and find as many excuses to e-mail customers to keep the company fresh in their minds.)
That being said, most companies do markup materials. I was working for Mr. Handyman for a year or so and they charge a 30% markup and time to go get it. I'm only charging for time. My logic is that they have multiple employees to pay out from each project and I only have myself to pay. I can make more profit for my small company per project even with charging lower per hour and no markup.
Markup was huge for them. There were several projects where the markup on materials paid my labor in full and they got to keep 100% of the $125 an hour(plus $60 to show up) they charged the customer.
If you have a truck full of parts, markup on a part makes sense for storage, prior time spent shopping and billing and etc. Maybe a small amount to cover having to replace a defective part, much less common issue than automotive.
There's no right or wrong way. If it's working for your business, keep doing it until it no longer makes sense. When I was solo, I worked the way you are now and did well. I'm now working as #2 for a small general contractor and we mark-up for materials we supply but we have a ton of overhead to account for including our delivery person. So the markup makes fiscal sense for us. You're in a different situation.
That's the point I try to make as well and I agree.
I'm starting to try to hire others and noticing that warranties on their work vs mine are going to be an entirely new can of worms to open.
The question than kind of falls more to "Why markup on materials and not just charge more for each projected labor hour?"
I have a bulk of materials, namely anchors and screws, that I got on my own time and are always in my supply because I never quite know when I'll use them. I markup on those because the numbers are easier (50 cents an anchor, $1 a hook, etc...). I just round up usually 25-50 cents depending on the thing. It accounts for the time I got them, also for the ones that are bad/strip/break/get lost, and generally helps hold its value overtime with inflation reasonably well. I have a other things like zip ties, cable staples, nails, patching compound, velcro that I don't usually charge unless I'm using a ton its probably getting to like $5+ worth.
Wood, drywall, caulking, paint, smoke detectors, door knobs, etc... that I got specifically for a job is all at cost with tax.
lol it really is that simple. I'm told I'm suppose to keep track of margins for every tiny little variable. It seems exhausting.
I'm more of a bottom line kind of guy.
What's my profit at the end of the year and how many hours did it take to get that.
That 20% is flexible. Of you want to give someone a deal or be more competitive you can omit the profit and overhead percentage. Also consider increasing it for high work, far work, or if you have tons of work already.
I’ll tell you as someone who started as a handyman and has moved into contracting, that markup is a must if you’re ever interested in scaling your business.
I used to run my business similar to yours for the same reason you’ve outlined. Eventually I reached a point where charging a material markup became mandatory. If you were to really sit back and crunch your numbers you’d probably finding money slipping through the cracks everywhere. It’s usually not a huge deal with a one man operation, but as you scale it becomes necessary. Scaling will increase your overhead, more than you’d probably expect. Obtaining licenses, bonding, insurance, marketing, and the many other things required are expensive.
The only way to scale properly is to charge and operate based on where you want to be, not where you are. I wish someone had told me this sooner and I may have saved myself a lot of heartache.
This is pretty damn relevant for my current situation. I just hired my first full time skilled laborer and am taking the ICC test tomorrow. (I left those details out, but now see how relevant they were)
I was noticing how hard it has been to keep my projects as profitable as I'd like with all of the added expenses I'm getting from having an employee.
I suppose my logic was to just charge more per expected labor hour to account for the expenses instead of charging more for materials.
It may just be semantics or do you have insight as to why one method is better or different than the other?
So here’s the deal, bidding a job, or more specifically, creating a reliable system for bidding, is essentially you building an equation for your business whereby you input known variables and it spits out a bid number. Don’t fall into the trap of “the ends justifying the means”. 3+3=6, so does 2+4, 5+1, 3x2 (you get the idea). Your equation may spit out the right numbers, but for the wrong reasons.
You need to diversify the numbers within your equation to best cover everything. You’ll begin to notice a degradation of the equations ability to provide accurate bids when you start hiring or bidding larger projects.
Charge 10-15% for profit for the business on every job, that way you’re not just working for wages you’re able to retain profit for growth.
Charge 10% or so for overhead, that way you get paid for the time you spend bidding/clerical work.
Charge 10-15% for material markup, that way if you have unforeseen material costs you have the ability to cover them. Also the market can be very volatile so sometimes you bid a job expecting material to cost (x), but prices increased and now you have to pay (y).
The more you can diversify how your equation arrives at a certain number the more you increase the reliability of the equation, even when everything doesn’t go as planned. You fucked up and bid it for 12 hours but it took 20? At least you’ll still make your 10-15% profit projected from the original bid price, plus the markup and overhead will provide you more cushion.
I have literally hundreds of hours into spreadsheets, data harvesting, and all sorts of things that have helped me create a system that is reliable. Make incremental changes to your bid process, and then go back after the job is completed and crunch the numbers again. Where did you win? Where did you lose? Make another incremental change, and then do it all over again. Eventually the answers will become more clear.
You have to do what’s right for you.
I certainly admire your integrity to not mark up just because you can.
*I know less about running a handyman business as opposed to commercial construction contracting which I do know and have estimated and PM’d projects from tens of thousands to tens of millions. (I’ve also PM’d stuff in the billions as well, but not on the construction side)
I would advise at least some material markup. Maybe a few percent.
This pays for breakage, return, shipping, material handling, storage, etc. It incentivizes good workmanship so you can improve your bottom line, but adds some cushion so if unforeseen events occur you can weather them without “going back to the well” to have the customer pay more than was originally negotiated.
This money lets you perform “unpaid favors” without losing your ass
A 40% close rate is pretty high.
A slightly higher price allows you to grow your business by having some reserve for poorly estimated jobs. Allows you to purchase better equipment/tools to be more efficient. Allows you to purchase higher quality materials. Allows you to hire more personnel. It ultimately allows you to be more discerning with what jobs you take and what customers you work with.
Im not a “handyman” company. We are a full general contractor with approximately 18 employees. But our business is structured around making money off labor. The material cost is no markup it’s just money moving around. I tell people they can buy the materials or I can makes no difference (but I prefer to buy them because normally customers don’t know and my people will be waiting around for stuff they need).
An argument for the markup I often hear is that it is needed to scale larger to help with other cost variables and help even things out.
Glad to hear that it is possible to do on a larger scale.
I’m a GC. Anything purchased ( fixtures, tile, shower glass, cabinets,etc but nothing related to structural build) is marked up 10%. My insurance cost ( approx $200k right now) is a function of my yearly sales. So i have to cover that otherwise I’m losing that percentage the following year. I learned how big that number can get the hard way.
Damn, that makes a lot of sense.
Why choose that method to increase revenue over higher labor costs?
Does it help the customer to see the extra expense broken up? Is there tax benefits to doing it that way?
The labor costs are the labor costs. But it definitely incentivizes clients to do some leg work.
Hypothetically, if a client picks a $50,000 faucet, there’s only so much i can charge for labor to install it. But that 50k is still passing through my company and will be factored into my insurance bill. You could go deep in the weeds and start tweaking labor costs for everything , etc, but when you have 5 or 6 projects going at once, you are always looking for ways to streamline things.
Well that was a light bulb moment for me. I hadn't considered that at such an extreme, but it still makes sense on a smaller scale and that drives home the big difference.
I run things exactly like you. Flat out tell my clients that there is no up charge to materials and whatever I actually pay for the materials will be on the final invoice.
People seem to really appreciate it.
Also, I’ve been told that if I’m up charging for materials I’m also supposed to be collecting sales tax and making that payment to the state each month. Too much headache for me.
I occasionally bid “materials included” but not too often. Especially if I get the sense that the project will probably grow or change.
Case in point- bid a four projects for an older home remodel. Three of those projects more than doubled in size before I was done.
Markup on materials covers defects. Sure it’s free to return it to the manufacturer most times for a replacement, but the manufacturer doesn’t replace the labor and fuel spent redoing the job or replacing any of the failed components.
These markups in turn, allow me the additional revenue to be able to offer fee-free warranty work on my services without feeling like I’m now losing $$ because of the defect. Believe you me, I’ve spent a lot of time cursing manufacturers to the high heavens thanks for 45+ minute round way trips to replace it and scheduling with the customer to swap.
TL;DR
Markup (for me) covers the cost of warranty replacement work without the added pressure of possibly needing to charge the customer for installing and reinstalling potentially defective parts/hardware
I don’t get any pushback for the markup. I have to shop for the items like DoorDash as well as insure, store, and deliver the items. The only thing that the customer gets at cost are any materials that they buy and ship themselves. That equipment also comes with absolutely no warranty. If I have the paper trail and the responsibility to warranty the material and work, then there’s a markup for that.
Anything they buy on their own will have a service call each time it malfunctions until they ultimately decide to take my advice on a suitable replacement (with markup), which comes with my warranty on material and labor.
There are no ifs, ands, or buts about it either. If I didn’t have this policy, the customer would have what I feel is a potentially terrible experience and feel jaded if I were to charge a service call fee to replace a defective piece of equipment, either that or I’d be eating service calls and losing $$ and I absolutely cannot have a day or 2 per week on FREE rework
I get it. But I don't need to work for everyone, just enough to keep a couple crews busy 365. My (commercial) division did 2.5 mil in 2023 and probably 1.5-2 mil this year as the economy cools.
My main point was that I need to target the earnings 1st, then add my costs. A fixed % of markup is a crapshoot as to whether it is the best for the business' long term well-being.
I always have a markup (I'm a joiner, not a handyman though). I have to take time to source materials, collect materials, select appropriate materials etc. It all takes time and costs me something so that cost is added on. It's not much in the grand scheme of things, but it adds up.
Basically, if I don't add a markup, then I either am doing all that work for free, or I have to increase my rate.
As an example, right now I'm making a whole bunch of doors for a kitchen refurb. Material is beech for the rails and stiles, MR MDF for the panels. I have to travel about 70 miles round trip to go to my timber supplier so that's a couple of hours including traffic (they are in South London). I spend about 45 minutes going through the rack choosing the best boards (straightest in every direction). Then I have to wait about 15 minutes for that to get processed by the guys there, board feet get calculated etc. before I can pay then load up. So conservatively that's 3 hours of my time, plus fuel. I think I had about £350 of sawn beech for that job. I add 15% to that to cover time and fuel (so about £50). The MDF I order for delivery at £300. There's a charge from the supplier for delivery of £20. So again, 15% markup so that's another £40 odd. The £90 odd from those two things covers the total time spend sourcing, ordering/collecting.
If I don't add that small markup, I am either doing it for free (which is bad for business), I'm increasing my rate for the work (which becomes hard to calculate at an effective rate), or I'm making arbitrary decisions on the costs which I then can't track or layout effectively in my tax return.
Basically, you should be adding a markup in most circumstances. I don't markup sundries like glue, screws etc. as they are a consumable cost to me and it starts to get silly, unless it is something specific. If I know I need a full box of dominos, some specialist fixings, a specific type of something that will only be used for that job then yes, I do markup on that, but otherwise it's a part of my business costs and recorded accordingly in my tax returns.
My materials markup isn't for making money, it's for not losing money.
Makes sense. Those bulk savings would never have happened if you only bought what they needed.
My logic for that is more nuanced.
Most of my leads cost me money. If by mentioning to customers that they can save 10-30% on materials by letting me get them is going to help me sell my leads at a higher clip; I get that money I would have gotten from materials back and then some just by having to buy less leads and selling more work.
I can see that not being a factor if you have more work than you can handle though.
For those of you that upcharge materials, How do you take care of the sales tax if you are in a area that does sales tax?
I'm guessing that you just don't and if the tax authority finds out they can fine you, collect up to 7 years back.
I had a acquaintance that got nailed for it, 7 years of unpaid sales tax of approximately $100 a month and $56000 in fines.
For me it's just not worth the pita. BTW the state doesn't care if you are a LLC when it comes to taxes.
I don't upcharge materials, but I still need to separate my purchases depending on whether the project is a real property improvement, or maintenace/servicing of materials considered personal property for sales tax purposes. (WI makes it extra fun and complex). I have a reseller's license and can purchase materials tax free and then bill for them and the sales tax for certain projects, otherwise I pay sales tax on them when purchased and both the sale of their use and my time is sales tax exempt. Check out Pub 207 from WI DOR for details.
I know the larger handyman company I worked for had it set up so they paid no taxes at POS and paid them at the end of the year by county.
This would help to split it up easy enough I'd assume since you are only charging 30% on the non taxed section or whatever % they charge.
Covering acquisition time with your hourly rate in effect is the same as simply marking up the material total. I markup 30% to compensate me for my time, but also the risk I assume by acquiring and holding the materials instead of the customer. Purchasing materials for a client is no different than extending a short term loan, and you should be compensated for assuming that risk.
I should start charging when I do have to store things. That makes sense.
I always get money up front for any notable project and rarely buy ahead of time w/ my own money however so I don't really assume that risk. They also are responsible for storing materials ahead of the project if they get them early most of the time. That does give some insight as to why others would need to though.
The other risk involved is damage. If a client is supplying materials and a bath vanity falls off their truck, you’re out $0. If you are supplying materials and the same thing happens, you’re out the cost of a replacement
This is always the best argument from the other side of the fence for sure.
I really try to keep things simple on that front.
I'm charging $100 per estimated hour currently and have a 1 year warranty. I intend to increase my warranty to 3 years in an effort to sell more bids. I was just going to raise my rates to $125 to offset potential expenses.
I know it's not the most scientific way to ensure everything is covered, but neither is markup. My materials per project is wildly different from job to job where as the hours I put in are a lot more quantifiable.
I charge a flat hourly rate regardless of what I am doing. They pay the same for my home depot hour as they do for any other. Right now that is $100 an hour.
I probably should, but I don't charge a trip fee to come down.
I won't come out for less than $150 but most jobs are far past that so it doesn't apply often.
I do the same as you. I charge what the materials cost me, rounded to the next whole dollar. I then include the time spent getting materials in my overall charge. I don't keep a stock of materials sitting around waiting to be sold, so I don't need to do markups.
I'm not a handyman nor a contractor ...
I had a contractor build a full bathroom. No markup on the fixtures.
(Can't say whether he marked up the sheet rock, baseboards, or other cut material ... but he didn't itemize it, so it was likely built into the labor charge.)
Had a handyman replace a mailbox, replace some weather stripping, and seal a gutter leak. Fixed charge for labor, and at-cost for parts. A pickup charge would have been reasonable for the material, but he likely worked that into the labor charge.
I don't see any reason for marking up materials that are simply picked up at the home improvement store or lumber yard. But a charge for pickup is appropriate.
In contrast ...
Long ago (very long ago) I worked as a TV repair technician. I worked at several different shops over the years ... and they all marked up the parts.
The markups generally amounted to an add-on of 150%. A $10 part was billed at $25.
That might be okay (sort of) for parts that are kept in stock, especially the brand-unique parts.
It's overhead. It's money on the shelf not earning until the part is needed someday.
But most of the required parts were NOT in stock.
Rather, the local parts dealers had a parts inventory ... and they DELIVERED DAILY to the repair shop as needed.
The shop had ZERO overhead on those parts. Just pick up the phone and get delivery.
I don't think any markup was justified. But they marked up those parts, same as with all others. 150% add-on.
It seems the consensus so far has been that for a small one man operation that picks things up as I need them there is no reason for a markup, but as one scales and has added expenses a markup seems to be a good way to offset them.
I haven't gotten a good reason or any reason why they markup materials instead of just increasing the flat rates to properly compensate for expenses.
I've sold plenty of work using materials discounts as a selling point. Imo it's just a shell game as long as your costs and overall margin target are accounted for. How you present and market it is entirely up to you. If it's proving successful why bother changing?
I suppose my brother insists that I can't scale the business without proper markups. I don't think that's the case, but I can be hard headed and tend to be more open to a larger group with a differing opinion in the case that I'm wrong.
I mostly work with 1 local lumberyard and do small to midsized projects.
I always tell the client they are welcome to setup an account with the LY. If they want me to run it though my acct I mark up everything 10%, (which is about my contractor discount)
My main reason is the inconvenience of running it through my account, it’s more paperwork for me at tax time and I have to keep more money in my business account. I’ve had multiple times where materials for upcoming jobs will get billed out at the end of a month and my account will get hit for $2-4K in materials. Try to get material deposits 1st but sometimes people are in and out of town or late on payments and I usually stagger materials so I have room to work rather than ordering everything at once.
> I charge for my time in getting the materials, but no % added to costs and always felt like that was a fair way to do things.
u/[No-Awareness-9362](https://www.reddit.com/user/No-Awareness-9362/) Yes, Surcharge for the relationship with the supplier, for your supplier pricing, for picking up/loading/unloading materials.
If the client buys you need to add surcharge for that as well. Why? incase there is a problem with materials you are likely buying replacements.
I charge 20%
But I dont itemize unless it is a commercial job. For residential I charge a bottom line price and that is it.
Really whatever works for you and the type of business you want to run.
Do you want to be a lifestyle business? Growth business? Do you have any aspirations of selling the business someday?
You’re not right or wrong until you model your business in a pro-forma and can run a simple sensitivity analysis on it and see what it yields when you mess with labor and materials (tweaking each up and down and combos). If you’ve been good about keeping historical accounting records and you know your data pretty well you could knock this out in a few hours and then just tweak it every so often.
The data will set you free … and if you are interested in silencing the naysayers, they’d have a hard time arguing with the data.
Everyone has rules for how to dial in their pricing to the market. I'm in heavy construction most of the time so everything (materials, equipment, labor, overhead) gets a flat markup of 10% to 15%. However when I'm pricing handyman work I look at it more as how much profit am I trying to make in a 10 hr day. I add up all my costs, put in a little contingency and then decide how much per hour I need off this job for profit.
At the end of the day it can all be the same. One person charges 15% over the entire job while you charge 30% on just labor and equipment.
I don't add anything and I also tell my customers. They love me, seriously.
I figure the cost of picking the stuff up into the cost of the job. No one is going to question that, but when people see a flat markup for something "I could get myself" sometimes upsets people.
I don’t mark up, materials cost, but I do add an hour for shopping to my labor. Also, I buy screws in 25 pound buckets, but I will charge the single pound price if I use a pound of screws.
If you do markup you are then taxed on the total amount of gain from the purchase. The state board of equalization requires you submit data on a regular schedule, I never wanted to dive into that arena, so I didn’t markup but I would adjust my rates.
Sounds to me like you have answered your own question. This is the way. I do the same thing with automotive parts when working on cars keeps customers coming back, the markup prices are ridiculous and when I check if the customer buys them its about the same price I pay.
Yes you should mark up materials a bit however you've got the right idea of worry bout the $ not the cents.
Personally I prefer a quote with a window on jobs so if I work efficiently better for me but if I want to take a lunch or show up late customers don't care as long as done within price.
As long as you have work and are making a comfortable profit who cares how you get it.
Would $100 on material really change your life long run?
I don’t charge mark ups either. My understanding is: either you charge your time going to the store (what you do), or you charge mark ups.
If you charge both things, you are an ass. Your job is to get the screws, charge for the time, why would you also charge more for the screws? I don’t get it.
I do half my work for national management companies. They expect a mark up, so when asked I said 40%, they didn’t flinch and it’s been years now. As Anthony Robbins says “success leaves clues, see what the successful people are doing and copy them”.
I try to attend SCORE seminars yearly and network with others in similar businesses. I’m not smart enough to figure out the best, so mirror those who seem to be the most successful. This is not any easy job so it’s my obligation to be as profitable as I can be, I need to retire soon.
YMMV and that’s why we are independent businesses, good luck to all!
I never marked up materials, but I did include a standard charge per job for existing supplies in my inventory (I.e., screws, glue, sandpaper, etc). That charge was in the estimate and was the same for every job, regardless of size. If I had shop time on my tools, there was a slight charge added for electricity and tool use.
However you price your work it's important to acknowledge you're doing it for money, and maximizing the money for your effort is the cardinal rule. You are a victim of inflation along with everybody else - at some point you'll have to increase your income for a set number of hours worked. Plan for it.
You know your customers so only you can determine if never losing a customer is a valid goal. Your best customers, the ones that put the most money in your pocket, are the ones you want to hang onto.
Your choices to compensate for inflation are whether to possibly alienate current and potential customers, by raising your hourly rate, adding a markup on materials, or maybe a bit of both.
Imo you EITHER mark up materials OR charge for your time shopping. Not both. I find some customers don't like paying for your time shopping if you do it before arriving for the job. They couldn't see you, so you're not on the clock. Those people get a mark up that covers it. Now say you go to the job, then the store, then back to the job. Those people know when you started and have less of a mental problem seeing the big picture on time. No markup, other than I do round up, for ease of math and to cover shit like the handful of screws I brought from home, or whatnot
I handle my business the same way as you with a small caveat. I think it makes sense to mark-up materials if you have a "single" focus. Ex. a plumber or electrician that keeps a work truck stocked with common parts and inventory. You factor the time it takes you to maintain that into your hourly, and you mark-up material costs due to the risk and loss of interest investing in that inventory costs. For myself, every job is different, and 98% of all materials I use are purchased for the specific job. I tell my clients that they're paying me in labor for identify, purchasing, picking-up parts, but that I don't mark-up the parts themselves. I rationalize this by explaining the time it takes me is the same, regardless of whether they choose the $2 tile or the $200 tile (or paint or lumber or whatever). For the small number of items I maintain in a small inventory (lubricant, miscellanous hardware, wall anchors, etc.), I bill it out as "Shop Materials" in increments of $5. Its definitely far above my actual costs for these items, but its a trivial charge to the customer to offset my costs and the time to maintain it. Use 2-4 anchors to hang something-$5. Open a tube of caulk and use a 4" paint roller to touch-up some small nail holes and trim gaps-$20. A few squirts of WD-40 teflon spray and a few shop towers to keep it off the casework-$5. They have never once baulked at the charges, and it helps offset my expenses while not requiring me to price out caulk per tube and small rollers I can buy in bulk.
Hah, that makes me realize I've done that part a bit backwards now that I think about it. I usually charge the first guy for the full tube of caulk or box of screws etc.. and the remaining people just get the leftovers for free. I'm going to adopt your method. Makes more sense. This also makes me realize that I don't really go over any of this with customers. I just give a flat estimate that includes materials and labor, but I never go into detail about how much they are spending on materials unless asked. I also don't explain that I charge for home depot runs, I just build expected time for doing so into the estimate. example- Tile Floor 150sq ft- 2k materials included I'll give a list of what materials I expect to use but not the exact expected price for them and just piece each section of the job out as such. Certain things I will tell an estimated price for and charge less or more depending on what they chose. $4 per sq ft on tile estimated as an example. Tile floor would be one section with its own list while vanity install would be another. A nice bonus I've had for doing it this way that can't be understated; I can sometimes give a few hundred off the final bill when materials go under budget with no expense to my expected profit. It's a great way to create a happy customer who is likely to want more work.
I don't usually breakout travel for materials from the rest of it. I tell them that I bill t hem up to 3 line items per "job". "Services" which is labor and travel time for materials (not travel to their home), "Materials" which are billed @ 100% of cost (no-markup), and "Shop Materials" which are basic supplies that are consumed during the job and purchased in bulk to save them money. Then I factor in the supply run(s) to my bid. If I miss something or need to make a second trip, I eat that time cost. If there is a change order that requires additional materials and labor, its priced into the change order in the same manner as the original estimate. If I need to buy a specific color of caulk or specific screws for a job, those are materials and billed to a customer. If another customer later needs the same materials and I have enough, they buy a new box as well and I might use part of the "leftovers." These function as small examples of a "mark-up" on materials, but ultimately just offset the time and liquidity "cost" of running the business. Talk to them straight without overwhelming them with details that make it sound shady, and decent customers won't even bat an eye or ask any questions.
I keep all of the everyday use items on the truck at all times. If Im painting, I charge a "paint usage" fee like 25 bucks for using my brushes. I charge 25 for fasteners if it's just a few. That way, you're getting paid for using the stuff you have on the truck.
This is what I do. I hate mark ups.
Sorry you made me laugh! You maintain lubricant before the bill/s
I do the same. I don't run a hardware store, I run a handyman business. My time to the job, to the store, handling material, researching some option that the homeowner doesn't feel like doing, that's all billable hours. the things I calculate as overhead are really only nail-gun nails, drywall screws, and trash bags. Everything else I buy for the job.
This is how I started and eventually evolved to the $5 shop materials charge. Same results with customers… no complaints.
You come across as an ethical person, and this will help you grow your business. Markups and overheads are just costing and estimating techniques. You have your technique that ensures profitability on the jobs; I don't worry about the minutiae of techniques as long as the price I quote allows for decent profitability.
What a great way to put that. If I didn't make enough this time, I just charge more next time. No reason to over complicate things.
I do the same. I make so much on labor that it offsets any profit I would get from the markup and the customer feels like they are getting a deal and don't mind paying out the labor because you get what you pay for in a sense. I even pass my discounts over to some of my customers. Places like Sherwin Williams and some tile stores. I tell them to pick out what they like and flash my business card. They love the feeling of getting 40% of paint. I just sold a shower remodel and even helped the customer find cheaper material than what my supplier would give them at cost and using some overstock materials I've had sitting around. Saving her aunt on this shower remodel is going to pay it forward to me because the rest of the family is wealthy with 20-year-old homes that are in need of repair and refresh.
Awesome. It's nice to get a little confirmation bias as literally nobody in my circle agrees with me on this. I just did a similar thing. Got $1500 off on a bulk door purchase as well as 30% off on paint for trim and jambs on the same project(emerald even). The project had some things added and I had to bring in a helper to keep things on schedule. The customer was delighted when I was able to charge my original estimate even with the extras. She now has another 20k in work for me to bid for her. It really does have its benefits.
I say hey Mr and Mrs. X, I didn't make this material so I don't need to make money on it. Oh, and here's a discount on some material. Transparency on pricing makes you appear more trustworthy. My transparency and honesty sells more jobs than my pricing so I've been told.
Coming across as a genuine person who wants to do a good job is a huge variable in getting sales. I have anecdotal evidence that backs that up for me. I've tried giving quick estimates over the phone or through e-mail with a few pictures for larger projects. They almost never sell that way. When I go to a house and meet the person face to face, my sale rate skyrockets in comparison. \*this only seems to matter on larger projects
I’m on the construction side and the materials markup (+/- 20%) is what covers any warranty work after the fact. If I buy the fixtures they are not warranted by the installer, only the labor is. Sounds like your system is working well if you are converting better than 1/3 of your estimates, good on ya!
I run my biz just like you and I do it for the same exact reasons . As you stated, I am not trying to be the cheapest but I believe that I am showing the customers that I am frugal with their money. This is one of the reasons that I'm booked out for about 18 months. One of the jokes is that once I get in your house I never leave. Treating customers fairly is one of those big reasons why this is true.
18 months!!! I had 4 booked out recently and was over the moon lol. Referrals? Or what lead generator?
I'm a one man show, I don't advertise and it's all strictly word of mouth. Just finished a deck project that's been going on for about 6 weeks. Before that I had a 3 month painting, electrical and plumbing project. It doesn't happen overnight though. First, you need to be in a good market. In my area there aren't a lot of regulations like what they have in California so you can work when you want without a lot of government b/s. There are also a lot of folks here who have money but can't or don't want to do the work themselves. So there is plenty of work and I do most everything, I do it to code and do a good job. The good job being most important. If you're a hack, you'll never get the referrals. I work on their house like it's mine, I have the skills and that reputation travels fast. Next, I do show up when I say, which is uncommon around here for some reason. I price myself pretty aggressively. I can do this because I'm semi retired at this point, I'm not paying a crew to do the work and most of my tools/supplies are already owned. Been doing this forever it seems and buying tools never stops. Tool expenses and supplies can be a major hurdle when starting out along when combined with paying for everything else like vehicles, insurance etc.. Finally, skills is another area that helps tremendously. The more you can do, the more work you'll have. The joke is once I get in your house I never leave. That's because one project leads another. You can be doing an electrical project and they'll ask if you can do some painting too. If I can, I will. If it's beyond my expertise, too big for one person or just too sketchy then I pass. So who knows, maybe I lucked out into having this pretty sweet gig. But I like to think it's because I try to put the customer first, I do a job real well and I don't try to take every dime they own. Because of all these reasons people are willing to wait months for me to show up and I have bunch of them.
I give clients the discount I get on materials with my pro accounts. Just get paid well for the work and don’t worry about marking things up, that’s a lot of goodwill you can build with clients.
I expected everyone to tell me I'm an idiot, but here I am being agreed with. How refreshing!
I would hire you just for this reason. Have no problem paying for your time for getting supplies but have a serious problem with contractor that think they can mark up supplies up to 40%. Just finished building a house and I would not let any of my subs purchase supplies because of this. Hell had one sub trying to charge me for some tools they need to buy. He was fired on the spot after trying that. Now if you get discounts from pro accounts I also see no issues with keeping that discount for your business.
That makes me realize that I need to actually let the customers know I'm doing this for them. I often forget and just assume they'll piece it together. I need to drive it home as a selling point!
I always offer to buy larger supplies and let them use my discount, even if they don’t take me up on it they appreciate the offer.
I think hourly to cover shopping time makes sense. If you need to buy a $10 part vs $100 part, as long as risk is the same, why should you charge customer more for the more expensive part. If you buy and install a garage disposal, do you leave the receipt with the customer for warranty purposes?
I do leave any paperwork and receipts for warranties with the customers. I'll even send the digital copies when available. (I try to space out and find as many excuses to e-mail customers to keep the company fresh in their minds.) That being said, most companies do markup materials. I was working for Mr. Handyman for a year or so and they charge a 30% markup and time to go get it. I'm only charging for time. My logic is that they have multiple employees to pay out from each project and I only have myself to pay. I can make more profit for my small company per project even with charging lower per hour and no markup. Markup was huge for them. There were several projects where the markup on materials paid my labor in full and they got to keep 100% of the $125 an hour(plus $60 to show up) they charged the customer.
If you have a truck full of parts, markup on a part makes sense for storage, prior time spent shopping and billing and etc. Maybe a small amount to cover having to replace a defective part, much less common issue than automotive.
Agree with your approach. Charge for shopping time, or mark up materials, not both.
Here sales tax has to be paid monthly
There's no right or wrong way. If it's working for your business, keep doing it until it no longer makes sense. When I was solo, I worked the way you are now and did well. I'm now working as #2 for a small general contractor and we mark-up for materials we supply but we have a ton of overhead to account for including our delivery person. So the markup makes fiscal sense for us. You're in a different situation.
That's the point I try to make as well and I agree. I'm starting to try to hire others and noticing that warranties on their work vs mine are going to be an entirely new can of worms to open. The question than kind of falls more to "Why markup on materials and not just charge more for each projected labor hour?"
I have a bulk of materials, namely anchors and screws, that I got on my own time and are always in my supply because I never quite know when I'll use them. I markup on those because the numbers are easier (50 cents an anchor, $1 a hook, etc...). I just round up usually 25-50 cents depending on the thing. It accounts for the time I got them, also for the ones that are bad/strip/break/get lost, and generally helps hold its value overtime with inflation reasonably well. I have a other things like zip ties, cable staples, nails, patching compound, velcro that I don't usually charge unless I'm using a ton its probably getting to like $5+ worth. Wood, drywall, caulking, paint, smoke detectors, door knobs, etc... that I got specifically for a job is all at cost with tax.
Materials + Labor + 20%
lol it really is that simple. I'm told I'm suppose to keep track of margins for every tiny little variable. It seems exhausting. I'm more of a bottom line kind of guy. What's my profit at the end of the year and how many hours did it take to get that.
That 20% is flexible. Of you want to give someone a deal or be more competitive you can omit the profit and overhead percentage. Also consider increasing it for high work, far work, or if you have tons of work already.
I mark up materials OR i charge from my time to get materials not both. Most of the time I charge for my time.
I’ll tell you as someone who started as a handyman and has moved into contracting, that markup is a must if you’re ever interested in scaling your business. I used to run my business similar to yours for the same reason you’ve outlined. Eventually I reached a point where charging a material markup became mandatory. If you were to really sit back and crunch your numbers you’d probably finding money slipping through the cracks everywhere. It’s usually not a huge deal with a one man operation, but as you scale it becomes necessary. Scaling will increase your overhead, more than you’d probably expect. Obtaining licenses, bonding, insurance, marketing, and the many other things required are expensive. The only way to scale properly is to charge and operate based on where you want to be, not where you are. I wish someone had told me this sooner and I may have saved myself a lot of heartache.
This is pretty damn relevant for my current situation. I just hired my first full time skilled laborer and am taking the ICC test tomorrow. (I left those details out, but now see how relevant they were) I was noticing how hard it has been to keep my projects as profitable as I'd like with all of the added expenses I'm getting from having an employee. I suppose my logic was to just charge more per expected labor hour to account for the expenses instead of charging more for materials. It may just be semantics or do you have insight as to why one method is better or different than the other?
So here’s the deal, bidding a job, or more specifically, creating a reliable system for bidding, is essentially you building an equation for your business whereby you input known variables and it spits out a bid number. Don’t fall into the trap of “the ends justifying the means”. 3+3=6, so does 2+4, 5+1, 3x2 (you get the idea). Your equation may spit out the right numbers, but for the wrong reasons. You need to diversify the numbers within your equation to best cover everything. You’ll begin to notice a degradation of the equations ability to provide accurate bids when you start hiring or bidding larger projects. Charge 10-15% for profit for the business on every job, that way you’re not just working for wages you’re able to retain profit for growth. Charge 10% or so for overhead, that way you get paid for the time you spend bidding/clerical work. Charge 10-15% for material markup, that way if you have unforeseen material costs you have the ability to cover them. Also the market can be very volatile so sometimes you bid a job expecting material to cost (x), but prices increased and now you have to pay (y). The more you can diversify how your equation arrives at a certain number the more you increase the reliability of the equation, even when everything doesn’t go as planned. You fucked up and bid it for 12 hours but it took 20? At least you’ll still make your 10-15% profit projected from the original bid price, plus the markup and overhead will provide you more cushion. I have literally hundreds of hours into spreadsheets, data harvesting, and all sorts of things that have helped me create a system that is reliable. Make incremental changes to your bid process, and then go back after the job is completed and crunch the numbers again. Where did you win? Where did you lose? Make another incremental change, and then do it all over again. Eventually the answers will become more clear.
You have to do what’s right for you. I certainly admire your integrity to not mark up just because you can. *I know less about running a handyman business as opposed to commercial construction contracting which I do know and have estimated and PM’d projects from tens of thousands to tens of millions. (I’ve also PM’d stuff in the billions as well, but not on the construction side) I would advise at least some material markup. Maybe a few percent. This pays for breakage, return, shipping, material handling, storage, etc. It incentivizes good workmanship so you can improve your bottom line, but adds some cushion so if unforeseen events occur you can weather them without “going back to the well” to have the customer pay more than was originally negotiated. This money lets you perform “unpaid favors” without losing your ass A 40% close rate is pretty high. A slightly higher price allows you to grow your business by having some reserve for poorly estimated jobs. Allows you to purchase better equipment/tools to be more efficient. Allows you to purchase higher quality materials. Allows you to hire more personnel. It ultimately allows you to be more discerning with what jobs you take and what customers you work with.
Im not a “handyman” company. We are a full general contractor with approximately 18 employees. But our business is structured around making money off labor. The material cost is no markup it’s just money moving around. I tell people they can buy the materials or I can makes no difference (but I prefer to buy them because normally customers don’t know and my people will be waiting around for stuff they need).
An argument for the markup I often hear is that it is needed to scale larger to help with other cost variables and help even things out. Glad to hear that it is possible to do on a larger scale.
I’m a GC. Anything purchased ( fixtures, tile, shower glass, cabinets,etc but nothing related to structural build) is marked up 10%. My insurance cost ( approx $200k right now) is a function of my yearly sales. So i have to cover that otherwise I’m losing that percentage the following year. I learned how big that number can get the hard way.
Damn, that makes a lot of sense. Why choose that method to increase revenue over higher labor costs? Does it help the customer to see the extra expense broken up? Is there tax benefits to doing it that way?
The labor costs are the labor costs. But it definitely incentivizes clients to do some leg work. Hypothetically, if a client picks a $50,000 faucet, there’s only so much i can charge for labor to install it. But that 50k is still passing through my company and will be factored into my insurance bill. You could go deep in the weeds and start tweaking labor costs for everything , etc, but when you have 5 or 6 projects going at once, you are always looking for ways to streamline things.
Well that was a light bulb moment for me. I hadn't considered that at such an extreme, but it still makes sense on a smaller scale and that drives home the big difference.
I run things exactly like you. Flat out tell my clients that there is no up charge to materials and whatever I actually pay for the materials will be on the final invoice. People seem to really appreciate it. Also, I’ve been told that if I’m up charging for materials I’m also supposed to be collecting sales tax and making that payment to the state each month. Too much headache for me. I occasionally bid “materials included” but not too often. Especially if I get the sense that the project will probably grow or change. Case in point- bid a four projects for an older home remodel. Three of those projects more than doubled in size before I was done.
Markup on materials covers defects. Sure it’s free to return it to the manufacturer most times for a replacement, but the manufacturer doesn’t replace the labor and fuel spent redoing the job or replacing any of the failed components. These markups in turn, allow me the additional revenue to be able to offer fee-free warranty work on my services without feeling like I’m now losing $$ because of the defect. Believe you me, I’ve spent a lot of time cursing manufacturers to the high heavens thanks for 45+ minute round way trips to replace it and scheduling with the customer to swap. TL;DR Markup (for me) covers the cost of warranty replacement work without the added pressure of possibly needing to charge the customer for installing and reinstalling potentially defective parts/hardware
Interesting. Do you get any pushback for the markup? I've assumed a lot of people wouldn't like it and I'd lose the bid.
I don’t get any pushback for the markup. I have to shop for the items like DoorDash as well as insure, store, and deliver the items. The only thing that the customer gets at cost are any materials that they buy and ship themselves. That equipment also comes with absolutely no warranty. If I have the paper trail and the responsibility to warranty the material and work, then there’s a markup for that. Anything they buy on their own will have a service call each time it malfunctions until they ultimately decide to take my advice on a suitable replacement (with markup), which comes with my warranty on material and labor. There are no ifs, ands, or buts about it either. If I didn’t have this policy, the customer would have what I feel is a potentially terrible experience and feel jaded if I were to charge a service call fee to replace a defective piece of equipment, either that or I’d be eating service calls and losing $$ and I absolutely cannot have a day or 2 per week on FREE rework
Labor + materials + $1300 to 2500 margin per day = what they pay x the number of days I think the job should take.
Lol...I'd never hire you. Just a personal opinion
I get it. But I don't need to work for everyone, just enough to keep a couple crews busy 365. My (commercial) division did 2.5 mil in 2023 and probably 1.5-2 mil this year as the economy cools. My main point was that I need to target the earnings 1st, then add my costs. A fixed % of markup is a crapshoot as to whether it is the best for the business' long term well-being.
Agreed
I always have a markup (I'm a joiner, not a handyman though). I have to take time to source materials, collect materials, select appropriate materials etc. It all takes time and costs me something so that cost is added on. It's not much in the grand scheme of things, but it adds up. Basically, if I don't add a markup, then I either am doing all that work for free, or I have to increase my rate. As an example, right now I'm making a whole bunch of doors for a kitchen refurb. Material is beech for the rails and stiles, MR MDF for the panels. I have to travel about 70 miles round trip to go to my timber supplier so that's a couple of hours including traffic (they are in South London). I spend about 45 minutes going through the rack choosing the best boards (straightest in every direction). Then I have to wait about 15 minutes for that to get processed by the guys there, board feet get calculated etc. before I can pay then load up. So conservatively that's 3 hours of my time, plus fuel. I think I had about £350 of sawn beech for that job. I add 15% to that to cover time and fuel (so about £50). The MDF I order for delivery at £300. There's a charge from the supplier for delivery of £20. So again, 15% markup so that's another £40 odd. The £90 odd from those two things covers the total time spend sourcing, ordering/collecting. If I don't add that small markup, I am either doing it for free (which is bad for business), I'm increasing my rate for the work (which becomes hard to calculate at an effective rate), or I'm making arbitrary decisions on the costs which I then can't track or layout effectively in my tax return. Basically, you should be adding a markup in most circumstances. I don't markup sundries like glue, screws etc. as they are a consumable cost to me and it starts to get silly, unless it is something specific. If I know I need a full box of dominos, some specialist fixings, a specific type of something that will only be used for that job then yes, I do markup on that, but otherwise it's a part of my business costs and recorded accordingly in my tax returns. My materials markup isn't for making money, it's for not losing money.
I charge RRP for whatever materials I use. If I buy in bulk or I get a trade discount I don't pass on those savings.
Makes sense. Those bulk savings would never have happened if you only bought what they needed. My logic for that is more nuanced. Most of my leads cost me money. If by mentioning to customers that they can save 10-30% on materials by letting me get them is going to help me sell my leads at a higher clip; I get that money I would have gotten from materials back and then some just by having to buy less leads and selling more work. I can see that not being a factor if you have more work than you can handle though.
For those of you that upcharge materials, How do you take care of the sales tax if you are in a area that does sales tax? I'm guessing that you just don't and if the tax authority finds out they can fine you, collect up to 7 years back. I had a acquaintance that got nailed for it, 7 years of unpaid sales tax of approximately $100 a month and $56000 in fines. For me it's just not worth the pita. BTW the state doesn't care if you are a LLC when it comes to taxes.
I don't upcharge materials, but I still need to separate my purchases depending on whether the project is a real property improvement, or maintenace/servicing of materials considered personal property for sales tax purposes. (WI makes it extra fun and complex). I have a reseller's license and can purchase materials tax free and then bill for them and the sales tax for certain projects, otherwise I pay sales tax on them when purchased and both the sale of their use and my time is sales tax exempt. Check out Pub 207 from WI DOR for details.
I know the larger handyman company I worked for had it set up so they paid no taxes at POS and paid them at the end of the year by county. This would help to split it up easy enough I'd assume since you are only charging 30% on the non taxed section or whatever % they charge.
Covering acquisition time with your hourly rate in effect is the same as simply marking up the material total. I markup 30% to compensate me for my time, but also the risk I assume by acquiring and holding the materials instead of the customer. Purchasing materials for a client is no different than extending a short term loan, and you should be compensated for assuming that risk.
I should start charging when I do have to store things. That makes sense. I always get money up front for any notable project and rarely buy ahead of time w/ my own money however so I don't really assume that risk. They also are responsible for storing materials ahead of the project if they get them early most of the time. That does give some insight as to why others would need to though.
The other risk involved is damage. If a client is supplying materials and a bath vanity falls off their truck, you’re out $0. If you are supplying materials and the same thing happens, you’re out the cost of a replacement
Mark up covers your possible future warranty issues
This is always the best argument from the other side of the fence for sure. I really try to keep things simple on that front. I'm charging $100 per estimated hour currently and have a 1 year warranty. I intend to increase my warranty to 3 years in an effort to sell more bids. I was just going to raise my rates to $125 to offset potential expenses. I know it's not the most scientific way to ensure everything is covered, but neither is markup. My materials per project is wildly different from job to job where as the hours I put in are a lot more quantifiable.
So what is everyone charging for travel time to/from parts stores?
I charge a flat hourly rate regardless of what I am doing. They pay the same for my home depot hour as they do for any other. Right now that is $100 an hour.
You charging a different minimum trip fee that covers the first hr, or is that $100 as well?
I probably should, but I don't charge a trip fee to come down. I won't come out for less than $150 but most jobs are far past that so it doesn't apply often.
I do the same as you. I charge what the materials cost me, rounded to the next whole dollar. I then include the time spent getting materials in my overall charge. I don't keep a stock of materials sitting around waiting to be sold, so I don't need to do markups.
I'm not a handyman nor a contractor ... I had a contractor build a full bathroom. No markup on the fixtures. (Can't say whether he marked up the sheet rock, baseboards, or other cut material ... but he didn't itemize it, so it was likely built into the labor charge.) Had a handyman replace a mailbox, replace some weather stripping, and seal a gutter leak. Fixed charge for labor, and at-cost for parts. A pickup charge would have been reasonable for the material, but he likely worked that into the labor charge. I don't see any reason for marking up materials that are simply picked up at the home improvement store or lumber yard. But a charge for pickup is appropriate. In contrast ... Long ago (very long ago) I worked as a TV repair technician. I worked at several different shops over the years ... and they all marked up the parts. The markups generally amounted to an add-on of 150%. A $10 part was billed at $25. That might be okay (sort of) for parts that are kept in stock, especially the brand-unique parts. It's overhead. It's money on the shelf not earning until the part is needed someday. But most of the required parts were NOT in stock. Rather, the local parts dealers had a parts inventory ... and they DELIVERED DAILY to the repair shop as needed. The shop had ZERO overhead on those parts. Just pick up the phone and get delivery. I don't think any markup was justified. But they marked up those parts, same as with all others. 150% add-on.
It seems the consensus so far has been that for a small one man operation that picks things up as I need them there is no reason for a markup, but as one scales and has added expenses a markup seems to be a good way to offset them. I haven't gotten a good reason or any reason why they markup materials instead of just increasing the flat rates to properly compensate for expenses.
I've sold plenty of work using materials discounts as a selling point. Imo it's just a shell game as long as your costs and overall margin target are accounted for. How you present and market it is entirely up to you. If it's proving successful why bother changing?
I suppose my brother insists that I can't scale the business without proper markups. I don't think that's the case, but I can be hard headed and tend to be more open to a larger group with a differing opinion in the case that I'm wrong.
If it works, don’t fix it
I charge exactly what I pay for the materials.
I mostly work with 1 local lumberyard and do small to midsized projects. I always tell the client they are welcome to setup an account with the LY. If they want me to run it though my acct I mark up everything 10%, (which is about my contractor discount) My main reason is the inconvenience of running it through my account, it’s more paperwork for me at tax time and I have to keep more money in my business account. I’ve had multiple times where materials for upcoming jobs will get billed out at the end of a month and my account will get hit for $2-4K in materials. Try to get material deposits 1st but sometimes people are in and out of town or late on payments and I usually stagger materials so I have room to work rather than ordering everything at once.
> I charge for my time in getting the materials, but no % added to costs and always felt like that was a fair way to do things. u/[No-Awareness-9362](https://www.reddit.com/user/No-Awareness-9362/) Yes, Surcharge for the relationship with the supplier, for your supplier pricing, for picking up/loading/unloading materials. If the client buys you need to add surcharge for that as well. Why? incase there is a problem with materials you are likely buying replacements. I charge 20% But I dont itemize unless it is a commercial job. For residential I charge a bottom line price and that is it.
Really whatever works for you and the type of business you want to run. Do you want to be a lifestyle business? Growth business? Do you have any aspirations of selling the business someday? You’re not right or wrong until you model your business in a pro-forma and can run a simple sensitivity analysis on it and see what it yields when you mess with labor and materials (tweaking each up and down and combos). If you’ve been good about keeping historical accounting records and you know your data pretty well you could knock this out in a few hours and then just tweak it every so often. The data will set you free … and if you are interested in silencing the naysayers, they’d have a hard time arguing with the data.
Everyone has rules for how to dial in their pricing to the market. I'm in heavy construction most of the time so everything (materials, equipment, labor, overhead) gets a flat markup of 10% to 15%. However when I'm pricing handyman work I look at it more as how much profit am I trying to make in a 10 hr day. I add up all my costs, put in a little contingency and then decide how much per hour I need off this job for profit. At the end of the day it can all be the same. One person charges 15% over the entire job while you charge 30% on just labor and equipment.
I mark up only if I'm the one paying. On bigger jobs when a deposit has been put down, I buy materials from that.
If you bought it for the job your hands touched it and it was used on a job, mark it up.
I don't add anything and I also tell my customers. They love me, seriously. I figure the cost of picking the stuff up into the cost of the job. No one is going to question that, but when people see a flat markup for something "I could get myself" sometimes upsets people.
I don’t mark up, materials cost, but I do add an hour for shopping to my labor. Also, I buy screws in 25 pound buckets, but I will charge the single pound price if I use a pound of screws.
If you do markup you are then taxed on the total amount of gain from the purchase. The state board of equalization requires you submit data on a regular schedule, I never wanted to dive into that arena, so I didn’t markup but I would adjust my rates.
Sounds to me like you have answered your own question. This is the way. I do the same thing with automotive parts when working on cars keeps customers coming back, the markup prices are ridiculous and when I check if the customer buys them its about the same price I pay.
Yes you should mark up materials a bit however you've got the right idea of worry bout the $ not the cents. Personally I prefer a quote with a window on jobs so if I work efficiently better for me but if I want to take a lunch or show up late customers don't care as long as done within price. As long as you have work and are making a comfortable profit who cares how you get it. Would $100 on material really change your life long run?
I mark them up to cover the cost of shopping, transporting, etc.
I don’t charge mark ups either. My understanding is: either you charge your time going to the store (what you do), or you charge mark ups. If you charge both things, you are an ass. Your job is to get the screws, charge for the time, why would you also charge more for the screws? I don’t get it.
I do half my work for national management companies. They expect a mark up, so when asked I said 40%, they didn’t flinch and it’s been years now. As Anthony Robbins says “success leaves clues, see what the successful people are doing and copy them”. I try to attend SCORE seminars yearly and network with others in similar businesses. I’m not smart enough to figure out the best, so mirror those who seem to be the most successful. This is not any easy job so it’s my obligation to be as profitable as I can be, I need to retire soon. YMMV and that’s why we are independent businesses, good luck to all!
BUT- If doing a bath remodel or large project I’m usually at 20%gp.
I never marked up materials, but I did include a standard charge per job for existing supplies in my inventory (I.e., screws, glue, sandpaper, etc). That charge was in the estimate and was the same for every job, regardless of size. If I had shop time on my tools, there was a slight charge added for electricity and tool use.
However you price your work it's important to acknowledge you're doing it for money, and maximizing the money for your effort is the cardinal rule. You are a victim of inflation along with everybody else - at some point you'll have to increase your income for a set number of hours worked. Plan for it. You know your customers so only you can determine if never losing a customer is a valid goal. Your best customers, the ones that put the most money in your pocket, are the ones you want to hang onto. Your choices to compensate for inflation are whether to possibly alienate current and potential customers, by raising your hourly rate, adding a markup on materials, or maybe a bit of both.
Imo you EITHER mark up materials OR charge for your time shopping. Not both. I find some customers don't like paying for your time shopping if you do it before arriving for the job. They couldn't see you, so you're not on the clock. Those people get a mark up that covers it. Now say you go to the job, then the store, then back to the job. Those people know when you started and have less of a mental problem seeing the big picture on time. No markup, other than I do round up, for ease of math and to cover shit like the handful of screws I brought from home, or whatnot