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Material mark-up

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

  1. Lanelle

    Lanelle LawnSite Bronze Member
    Posts: 1,361

    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?
  2. SLSNursery

    SLSNursery LawnSite Senior Member
    Posts: 442

    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.
  3. paul

    paul Lawnsite Addict
    Posts: 1,625

    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!)
  4. HBFOXJr

    HBFOXJr LawnSite Bronze Member
    Posts: 1,712

    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.
  5. lbmd1

    lbmd1 LawnSite Senior Member
    Posts: 462

    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!

  6. HBFOXJr

    HBFOXJr LawnSite Bronze Member
    Posts: 1,712

    Why extend terms to the customer? When the job is done, pick up a check.
  7. jwalker

    jwalker LawnSite Member
    Posts: 16

    Bill C.

    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.

    good luck:)
  8. 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.

  9. KerryB

    KerryB LawnSite Senior Member
    Posts: 661

    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
  10. Craig Turf Management

    Craig Turf Management LawnSite Senior Member
    Posts: 354

    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!

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