Material mark-up

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

  1. site

    site LawnSite Member
    Posts: 168

    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.
     
  2. AltaLawnCare

    AltaLawnCare LawnSite Senior Member
    Posts: 962

    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.;)
     
  3. Avery

    Avery LawnSite Bronze Member
    Posts: 1,389

    Homeowner can buy the material for the same price as you can? Mmmmmm....what is wrong with this picture? Find yourself a new supplier.
     
  4. dan deutekom

    dan deutekom LawnSite Senior Member
    Posts: 424

    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
     
  5. Craig Turf Management

    Craig Turf Management LawnSite Senior Member
    Posts: 354

    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
     
  6. MOW ED

    MOW ED LawnSite Fanatic
    Posts: 5,028

    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.
     
  7. UrbanEarth

    UrbanEarth LawnSite Member
    Posts: 142

    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.

    Alan
     
  8. SLSNursery

    SLSNursery LawnSite Senior Member
    Posts: 442

    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.
     
  9. cutntrim

    cutntrim LawnSite Senior Member
    Posts: 474

    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.
     
  10. UrbanEarth

    UrbanEarth LawnSite Member
    Posts: 142

    Phil,
    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.

    Alan
     

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