Markup Question

Discussion in 'Business Operations' started by Darryl G, Mar 10, 2010.

  1. Darryl G

    Darryl G LawnSite Fanatic
    Posts: 8,033

    I just realized I've been doing my markups of materials wrong since I started my busniess, so I was wondering how you all do it.

    Lets suppose your cost for materials was $100 and you wanted to mark them up to a 20% profit margin. How much would you sell the materials for to achieve that margin?
     
  2. LouisianaLawnboy

    LouisianaLawnboy LawnSite Silver Member
    Posts: 2,199

    I'm not exactly sure I understand what your asking, but 20% mark-up would be 120.00.

    You said though, that you would like a 20% PROFIT. To achieve that you would need to charge 20.00 on top of all your expenses(gas, time, etc)
     
  3. Darryl G

    Darryl G LawnSite Fanatic
    Posts: 8,033

    Yah, that's what I always thought too. The answer is actually $125. I got a headache trying to figure it out and finially did but not sure I can explain it, lol. You don't just multiply the $100 by 0.2. You need to look at it that $25 divided by $125 is a 20% profit margin.

    See, I have a set markup for materials and I've been shorting myself all this time of what I could have been charging. I always thought markdowns and markups were straight forward multiplying the percentage, but they're not.
     
  4. LouisianaLawnboy

    LouisianaLawnboy LawnSite Silver Member
    Posts: 2,199

    But that is marking up the mark-up, which I don't do. Your marking up the materiel cost, and not your total price.
     
  5. Darryl G

    Darryl G LawnSite Fanatic
    Posts: 8,033

    It's not marking up the markup. It's calculating markup based on selling price rather than cost, which is done all the time..most people just don't realize it. You can do it either way, but from now on I'm doing it to my benefit :)
     
  6. bohiaa

    bohiaa LawnSite Fanatic
    Posts: 5,220

    by being in the business you should be able to purchses wholesale, most of us do.

    when I purchase this way, I simply use retail prices.

    case in point, I just purchases some dwrf yopon hollys at 6.00 retail was 16.00

    that's 10.00 per plant we ordered 98 of them.

    that will cover cost of delivery. then I charge 5.00 per plant to plant them.

    it can come out to be a good chunck of change.

    also this gives you a ton of "play" room when someone makes a large order you can giv it to them at a lower price, RETAIL that is. DONT NEVER SELL BELOW COST. you may find officials knocking at your door.
     
  7. Darryl G

    Darryl G LawnSite Fanatic
    Posts: 8,033

    Unfortunately the best discount the garden centers around me will give is 10% and that's with no plant warranty. If I buy full price I get a warranty but then I get charged 6% sales tax as well and I have to tax again when I sell them. Usually I buy my stuff as tax exempt and the tax is charged to the customer when I resell. Some materials they discount a little more than 10%, but a 10% markup just doesn't cut it for me. I do better on things like grass seed which I buy in 50lb bags.

    For large orders like the 98 plants you had, I can get direct from a nursery at a really good price but can't select at all...you get what they give you, so I order a few more than I need. Basically you pull in and they load you up...you can't even help.
     
  8. bohiaa

    bohiaa LawnSite Fanatic
    Posts: 5,220

    WOW
    I think you need to shop around, at 10% sounds like that a home improvement store. " Lowes Home depot " we have several suppliers, " it's a MUST" if they wont give you wholesale prices move on. 10% is nothing.
    I see your issue, it's hard to make a living at that.
    landscaping/lawn service is not unlike any other business IT's a MUST that you make and keep business contaics.
    knowing the people who have the right products can deliver, and sell to you at wholesale prices.
    do your slef a huge favor and shop around TODAY, call every nursery in your area, and demand wholesale prices.

    best of luck
     
  9. Darryl G

    Darryl G LawnSite Fanatic
    Posts: 8,033

    Trust me, I have shopped around. I still have to run up to the local Hayne's Materials though. They used to just quarry products and masonry supplies. Supposedly they sell plant materials and bulk mulch now too. They've been steadily adding to what they sell and I'm looking for a new source for top soil anyway. Most of the stuff available is closer to screened fill. But the salesman who called quoted me $37/yard for top soil!!!!
     
  10. snomaha

    snomaha LawnSite Senior Member
    from midwest
    Posts: 871

    Markup and margin are two different things. To get a 20% margin on $100 divide $100 by .80 = $125. 20% markup is $100 x 1.2 = $120
     

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