Material mark-up

Discussion in 'Business Operations' started by Craig Turf Management, Jul 15, 2001.

  1. Craig Turf Management

    Craig Turf Management LawnSite Senior Member
    Posts: 354

    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
     
  2. Vandora Lawn & Landscape

    Vandora Lawn & Landscape LawnSite Senior Member
    Posts: 386

    If you have to wait for payment, you're providing financing for the job by paying for the mulch ahead of time.
     
  3. Craig Turf Management

    Craig Turf Management LawnSite Senior Member
    Posts: 354

    Cullen,
    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.

    Bill Craig:cool:
     
  4. diginahole

    diginahole LawnSite Member
    Posts: 249

    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.
     
  5. Stonehenge

    Stonehenge LawnSite Bronze Member
    from Midwest
    Posts: 1,277

    Craig -

    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)!!
     
  6. Craig Turf Management

    Craig Turf Management LawnSite Senior Member
    Posts: 354

    Stonehenge,
    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:
     
  7. 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.
     
  8. Sean Adams

    Sean Adams LawnSite Gold Member
    Posts: 3,597

    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.

    Sean Adams
    www.lawncaresuccess.com
     
  9. AltaLawnCare

    AltaLawnCare LawnSite Senior Member
    Posts: 962

    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.
     
  10. Craig Turf Management

    Craig Turf Management LawnSite Senior Member
    Posts: 354

    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.
     

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