View Full Version : Material mark-up
Craig Turf Management
07-15-2001, 02:11 AM
I'm a little confused.
I need help in determining the mark-up for materials.
For example, I'm going to do a mulch job on a prepared planting bed. I'm going to pay 18.85 per cubic yard for the mulch. I need 21 cubic yards, and I'm having it delivered.
I've been paid for the bed prep, my client can buy the mulch for the same price that I paid, and have it delivered. I am labor in this equation only. I will install this material when it is delivered.
I know most of you folks charge a mark-up on the material, I just want to know how you justify it for one, and how do you determine how much of a mark-up to add.
Should the marked-up price include the installation?
Like I said, I'm confused.
This question could probably fly in the Landscaping forum, but I'm hoping to spur some discussion on pricing structure and the way we all come up with those numbers. I think a lot of members are probably a little confused on pricing, but afraid to ask.
I need help, I don't care if you call me a dummy, I'm gonna be rich some day.
Thanks and take care, Bill Craig
Vandora Lawn & Landscape
07-15-2001, 06:19 AM
If you have to wait for payment, you're providing financing for the job by paying for the mulch ahead of time.
Craig Turf Management
07-15-2001, 08:27 AM
That's a good point. How do you mark up mulch, and how do you determine your mark-up?
I bill for most landscape projects at the completion of the job, and usually see a check back in my office in 7 days. The landscape supply co. that I purchase from gives me net 30 days to pay, so usually I don't have any of my monet tied up.
Really appreciate your response.
07-15-2001, 09:25 AM
We resell all materials at our cost. It lets the consumer think that they are buying something cheaper than they can buy it themselves. We get all of our markup in the labour charge. Remember to factor in all your time to get the material as well as pay for it. It takes time (and therefore money) to match packing slips to invoice, invoice to statement and writing the cheque.
07-15-2001, 12:36 PM
If you want to know how much you need to charge to make the living you want to make, go look under the "Estimate?" thread in the landscaping forum, and read my post, and follow the directions. It might give you a better idea of what you need to charge.
As for being rich someday, I wish you luck. Being smart helps, but I'm also finding that getting back up after receiving a** kicking after a** kicking is a big part.... Here's to your next a** kicking (and getting back up)!!
Craig Turf Management
07-15-2001, 11:52 PM
Thank you for the input. Interesting formula. I appreciate your help.
I want to know if you mark-up materials that your clients can buy at the same cost that you can get them?
I feel pretty comfortable with my pricing on labor etc., but so many members say they mark-up mulch etc. and I'm wondering if that's the norm. I'm trying to justify it.
I can buy a bag of soil conditioner at Home Depot for 2.47.
I charge labor rate for pick-up and delivery, and labor to install the material. Do you mark up the product as well, and why?
I make money more often than not on my landscape jobs, but I'm really new at landscaping. I find that I use a different formula nearly every time I bid a project (usually under 2000.00), and I want to come up with a pricing standard thast I can load into my computer and stick to it for every client.
Thanks a bunch, Bill Craig:confused:
07-16-2001, 08:02 AM
You mark up materials by using gross profit margin.
If your sell price is $18.85
30% gross profit margin is 26.92
35% ' " " 29.00
40% " " " 31.41
PLUS cost of transportation and at least a labor rate of
$30 per man hour.
07-17-2001, 12:48 AM
A lot of people price differently, depending on what profit they hope or expect to realize. I know that some people when it comes to mulch determine their price for the entire project based on a set amount per cubic yard. For example, if you are applying 10 yards of mulch you could arrive at a price of $750 for the job or $75 per cubic yard. That $75 includes the mulch itself, pick-up, delivery, cleaning up the beds if necessary, edging or re-edging the beds, and applying the mulch, and finally cleaning up the work area. Of course, that price of $75 per cubic yard can deviate depending on what the job calls for. If the customer had you clean the beds earlier in the spring and no edge needs applied, then the price per cubic yard can be reduced. It all depends on your expense, time, and difficulty of the project. That price can rise in the same respect if you have to wheel the mulch a long distance or up hills and you apply pre-emergent after the application of mulch. Regardless of what pricing technique you decide upon, you have to know your numbers inside and out. Hope this was helpful.
07-17-2001, 08:09 AM
An easy way to get your price at the gross margin you want is:
take your cost and divide it by 100 less your margin percentage,
18.85 / .7 = 26.93 is a margin of 30% , the most common in business.
18.85 / .75 = 25.13 is a 25% margin.
18.85 / .6 = 31.42 is a 40% margin.
There may be some rounding differences, but I check invoices using this method and it works well for me.
Craig Turf Management
07-17-2001, 04:22 PM
Thanks for all of your help folks. But how do I justify marking up the materials that I buy on this project, when I'm buying at the same price that my client can purchase them for. I'm making my money in labor. From phone time to drive time, to install/clean-up time, I'm charging my client. Should I charge this and mark-up the materials as well? Sounds like double-dipping. Is this the norm for the industry? I'm not trying to argue, I want to make every penny that I can. I just want to know how you usually handle this.
I almost see the light. Thanks for your patience, Bill Craig.
I'll try to justify my reasons for marking up materials. First I spend my time and energy coordinating the delivery and purchase of these materials. Next, I assume responsibility for the correct materials getting to the correct location at the proper time. I charge for my expertise. I know where to get the best materials for my clients, and I know how to get them there on time.
I take a risk whenever ordering materials for a job. How do I know for sure that I'm going to get paid? How do I know The driver isn't going to dump the materials on top of a million dollar statue.
Reasonable customers are willing to pay me my costs plus a profit to perform my services. It's not a secret that I make a profit. Why else would I be in business? Part of the profit I make comes from markup.
07-17-2001, 05:05 PM
See if you can get a price break from the supplier.
If not, I would determine what hourly rate you're gonna charge, then add your markup difference to that so that you'll get pd extra for the hassle of buying the materials yourself and the customer will still think they're getting the mulch at your cost.;)
07-17-2001, 06:06 PM
Homeowner can buy the material for the same price as you can? Mmmmmm....what is wrong with this picture? Find yourself a new supplier.
07-17-2001, 06:36 PM
Right on Avery
Part of being in business is to find the wholesale suppliers and getting price breaks from other retailers to taking 2% for paying cash
That all adds to your profit and makes you more competitive
Craig Turf Management
07-17-2001, 08:08 PM
Thank you for your help. I can get a price break by buying in quantity, truckload or more. That's about it. Like I've said, I'm new to landscaping so I'll continue to try and find a true wholesale supplier.
Take care, Bill Craig
07-17-2001, 08:30 PM
I don't know if it applies in your state but I have a tax number and therefore don't pay tax on the purchase from the supplier but I have to add the tax to my customers bill. If you are not taking advantage of the tax break then you are paying twice.
07-19-2001, 01:30 AM
After getting burned on a project to the tune of $5,000.00 (Contractor did not pay his sub trades!), I now price out the materials and have the customer give me a cheque (made out to the supplier) for the cost (I usually give them my price). I then factor into my price the time taken to do this extra work. The discount off materials around here is only 10%, so to me it's not worth it.
The other advantage to this is that the supplies are already paid for and the customer doesn't think that you are going to run off with a deposit.
08-09-2001, 08:55 PM
Mow Ed - nice point about the tax, and correctly using a resale number. I think it is also prudent to mention that even the simple act of collecting a check, collecting the tax from the end user, and writing a receipt contribute to the cost of doing business.
Passing along wholesale prices to the end consumer is, in my opinion bad business. You are simply leaving money on the table. I have a supply business in addition to a contracting company. We give a significant discount on many items to landscapers. If they have us work with their customers, or sell directly to thier customers, we charge retail, not wholesale. It is the contractor's loss for leaving that money on the table. Some guys don't even charge for the time spent shopping for items or truck time for delivery. I get a kick out of them when I know they don't mark items up, but want a lower price from me. I suggest that they ought to be marking up the materials even nominally and that is fair to the consumer.
Trying the make up for a lack of markup on materials with a labor charge increase will skew labor rates. That is, you would have to charge a significant amount more money per hour to make up for the lack of a material mark up.
Furthermore, what do you do about a guarantee. For instance, in some cases we offer a material price (including markup), then calculate a warranty based upon this price. Usually it is an additional 30%, especially with plant material.
08-10-2001, 05:11 PM
I'm also a rookie as far as landscaping goes. Been doing maintenance for 10yrs but have just gotten my feet wet landscaping.
I definately agree that you should markup all materials. IMO the majority of customers (residential at least) are more likely to scrutinize your labor charges than your material charges. Artificially inflating your labor charge to make up for not marking up materials is asking for trouble. Most educated customers will understand that you will not pass on discounted wholesale prices to them for materials. In your particular case, you do need to find a supplier that offers landscaper discounts.
However, since this particular scenario doesn't allow for that then perhaps there's an easy way around it. Did you tell the customer exactly how many yards of mulch were required? If not, then simply put "mulch" on the invoice and a total material price beside it. This way you can markup the mulch invisibly since the customer does not know the total cubic yards he's being charged for.
LOL I just now looked at the dates for this thread. Guess it's too late for my idea. Oh well, I'm sure you figured it out in the end.
08-10-2001, 08:16 PM
What do you consider to be a 'considerable' discount.
All of the suppliers here give 10%, which is not (Since I do not pay for it as per my previous post) worth the risk of having a customer not pay. One bad customer can make all of the 10% markups disappear really fast.
08-10-2001, 08:43 PM
For residential customers, get a deposit that will cover your cost of material. Buy at wholesale, sell at retail, put money in your pocket instead of a retailer's pocket. Since you are new to landscaping, find re-wholesalers such as Shemins that sell only to the trade yet let you buy small quantities and sometimes even provide a warranty. The warranty is the biggest issue when buying wholesale, which is another reason to mark up plant material in case you have to replace it. The other point that I see is when you spend your money for materials you are making an investment and should expect to see a positive return on that investment. Otherwise why 'risk' the money?
08-11-2001, 08:41 AM
Discounts we offer
Alan - our yard caters to wholesale, but allows for retail. That is, basically a retail person here pays about 20% more than a legitimate wholesale account. The difference is less on low profit items, more on good markup items. Good wholesale accounts are also offered terms - that is a house account with a discount for early payment versus net 30. I give my customers an incentive to pay early and often. The retail customers are not afforded this opportunity.
In your scenario, at 10%, isn't it worth collecting the money from the customers and paying the wholesaler separately, as others have mentioned?
If you are buying $1000.00 worth of materials, have the customer pay you the $1000, then at least you'll make about $100.00 and still have your up front money.
Due to the nature of our type of work we have to give prices based on a per plant installed price. The bid might look some thing like this.
5 3.5" Autmnum Purple ash 460.00 2300.00
6 3.5" Honey Locust 410.00 2460.00
Ect......then the total package price, the break down is used for payment we might bill for all the plants and mulch or wall only leaving out the plants and they need some way to justify payment amounts. prices are adjusted acorrding to the size of the job and how hard it is to get the plants:) (seems the last 3 years good plant material is getting real hard to find!)
08-15-2001, 07:36 PM
There is a big difference between contracting services and retailing so I don't use the material markup idea too much any more.
Materials in our business are just a way of putting peole to work. I calulate the costs of labor, taxes, ins., production equipment, overhead and materials, then add a per hour profit.
This is a very predictable way to generate a known profit per year. If you know how many billable man hours you employee per year it gets easy.
I do vary the profit from an acceptable minimum (assuming no materials were sold in a year) to several times the minimum based on risk and what the market will bear.
08-18-2001, 09:07 AM
I agree with Alan 100%. If the average supplier is only offering say $3-$4 off a yard to you, is it really worth fronting on a 20 yard job (for example) at a final cost of $28 a yard, $560 to make a profit of $60 on the mulch? I would rather bill an extra hour or 2 for my time involved with the estimating and delivery information to the supplier, than tie up my cash flow waiting for 30 days to get my $620 back. And if it's a new customer with no track record, possibly losing the whole amount. I would rather order the mulch, have the customer pay the supplier directly, and bill out my labor, and get out. I'd rather eat the labor on a job than labor and materials!
08-20-2001, 07:25 AM
Why extend terms to the customer? When the job is done, pick up a check.
08-21-2001, 07:27 PM
you are paying too much for your mulch to start with. i know prices vary in different parts of the country but the $18.00 or so you are paying is way too high. you should be getting it for $12 - 14.00 or $15.00 at the most. the $18.00 price is what homeowners and othe retail buyers pay around here. (knoxville, tn)
Always ask the supplier for a "landscaper's price". Even if you can only get it by the pickup load, it's worth it.
Then when you get the special price, sell it to the customer for retail plus labor. of course your labor price should include your "cost of doing business".
as a member of "the trade" you should nver have to pay retail for your supplies and plant material.
09-04-2001, 12:51 PM
I have a pretty good example for you.
Ther is a big landscaping firm here they grow their own stuff. Sell it to themselves. Then sell it to the customers, which are comm. cutomers only, and are installed prices.
Eg: $1 taxus densimofia grown for 4 years
sold again $12
sold again and installed $75
Just a rough example but give you an idea of what's going on.
11-20-2001, 11:42 AM
Around here we buy wholesale.
The nursery I use sells lets say a Rosey Glow Barberry 3gallon size to me for $6.25. He retails this plant for $12.50. So why shouldnt I retail for same amount?
I buy 3cu ft bags mulch $1.61ea by the pallet.
This co sells the same bag to lowes which retails it for around $3.25. I buy the bags because its easier to handle. I mark up materials and plants 2x cost.
Why not? its what the customer would pay if they took the time to drive and pick out and purchase.
I mark up the plants 3x for warranty.
The barberry is about $20.00 at lowes so I beat their price even with a warranty.
I add labor by the guidelines in the PGMS estimating guide. I also add to this guide a difficulty factor depending on the job.
For example the guide says for a 3-4' tree to spade, excavate subsoil, add topsoil, cleanup, outline .85hr.
I still come out less than some of the other co's around here and make a good profit per job.
Plus I offer the option of the warranty as you guys pointed out on another post so this gives the customer two ways to go.
Anyone think this is wrong or off(lol) or stupid or right on? lol
Craig Turf Management
11-20-2001, 06:26 PM
Thank you for the insight Lawndoctor. I have been trying to come up with a consistent pricing structure. I am going to spend more time at the desk from now on. I sort of have a grasp on this overhead, profit margin thing, but I really don't know how to work those numbers. My overhead is pretty low I think, and I charge oftentimes according to what the market will bear and what other companies are doing. We make pretty good money, but I know that it could be better.
Where can I get my hands on a PGMS estimating manual. Does it offer really good info?
Thanks for all of your help. Bill!
11-20-2001, 06:39 PM
I think the best price structure should be:
X2 + 35% with no warrenty.
X3 + 35% with warrenty.
For the items, plut instalation price. REmember you have to ge get them, pay for them and deliver them before you install them.
11-20-2001, 08:46 PM
If you are paying the same price for product as your customers, you are doing business with the wrong supplier.
11-20-2001, 08:53 PM
Professional Grounds Management Society
12 Galloway Ave.
Cockeysville, MD 21030
it used to be $12.00
Craig Turf Management
11-21-2001, 04:51 AM
I know that you are right. I'm fairly new to the landscape end of the business, and still trying to locate suppliers. I just don't know of any wholesale landscape material dealers. I do have a pretty good line on wholesale plants though.
When it comes to landscaping, I never realized how expensive a job could be. I still get sticker shock when I prepare a bid. Most folks accept it though. Especially when I walk them through and explain everything that's involved. I know that I'm not charging what I should though.
11-21-2001, 07:27 AM
Hey Bill, ever heard of Metrolina, They are near huntersville. Some of the guys here drive all that way. they have good prices and nice stock. But if you want shrubs and trees they buy from the same guy I do. Cooleys nursery, in Wagram.
Craig Turf Management
11-21-2001, 08:03 AM
Yes I know about Metrolina. I'm not set up to do business with them yet. I'll probably call them today. I get a lot of plants from Latham's in Monroe(Unionville).
Where do you buy bag mulch etc.
11-21-2001, 08:11 AM
Southern Importers in Aberdeen. They sell Southland products. You have to buy by the pallet but a pallet of 3cuft bags pine mulch 44 to a pallet is 1.51 per bag. They also sell in bulk.
They just started making us buy by the pallet because they sell to Lowes and Lowes started complaining because they sell the same products cheaper. But I dont mind I can save a lot of money buying anything from mulch, mushroom soil, potting mixes to SI-1 and SI-2 Growers mix. They even have lime pellets and powder brick nuggets volcanic rock and premium red mulch not chipped up pallets for 2.45 a 2cu ft bag.
11-22-2001, 05:45 PM
Bill, if you are buying 21 yards, you are buying a truckload. If you canít get any discount for that kind of quantity, Iíd let the homeowner order it and pay for it himself. Just charge him $525 for the labor --- thatís $25 a yard for installation and cleanup. If he balks at the price, Iíd come down a little bit and then heíll feel like he got a deal.
Craig Turf Management
11-23-2001, 08:26 AM
You folks are right, and I appreciate all of the good advice. I'm going to have to search for wholesale suppliers and develop relationships with these people. Take care, Bill Craig
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