What percentage of mark up do you charge?

[Jock Spanners]

Good Afternoon Everyone,

I'm having a few days off to avoid working myself into an early grave. Like most of us on here I'm self-employed so I've been thinking about how to make my business more profitable. I've been reading lot of business advice for plumbers online. Most of it is American and the concensus seems to be that a self-employed plumber should charge a 30% mark up. I've always charged 15% and I've never had a problem with customers. I'm curious to know what everyone else charges. I know people who charge 50% on boiler parts but only 15% on boilers. I know others who charge 20% on non-stock items. Of course the internet and mass volume online retailers have skewed everything as customers can always find things cheaper online. I buy a lot of kit from Screwfix which isn't the cheapest way but is very convenient. I'm now contemplating buying more from my local merchant and negotiating a better margin. What do you guys charge?

Jock

 

[SimonG]

30% on my parts across the board. Probably a bit more on cheaper stuff.

 

[Ric2013]

I don't have much leverage with my merchant and Screwfix is sometimes cheaper. In that context, I tend to add 10% as a rule of thumb.

 

[Jock Spanners]

30% on my parts across the board. Probably a bit more on cheaper stuff.

So for say £2000 of bathroom kit you would charge £2600. Don't you ever get customers challenging you on that? Are you VAT registered?

 

[SimonG]

So for say £2000 of bathroom kit you would charge £2600. Don't you ever get customers challenging you on that? Are you VAT registered?

Yes, £2,000 of materials would be charged out at £2,600.
If a customer queries the price then I wont do the job. If they are unhappy with money before you start then they will be a mare to get money off at the end.
If I do supply materials on a job then I get a deposit to cover the cost of high value materials plus my 30%.
Not VAT registered, work hard to stay under it. I have a rolling spreadsheet to keep track of my rolling turnover.

I prefer customer to supply high value materials. I maybe supply 1 in 5 or 6 bathrooms when it comes to materials. But when a complete bathroom can take 2 to 3 weeks to do it makes it easier to stay under the current VAT threshold.

 

[SimonG]

But then if customer uses one of the suppliers I direct them too I get a cheque every quarter for 5 to 10% of their spend.

 

[ShaunCorbs]

10-15% is normally round my area

 

[mfgs]

20% on everything for me.

 

[Jock Spanners]

I do agree with you Simon that if a customer makes a fuss about the cost before a job it raises a red flag. I walk away at that point. I'd rather sit at home watching Netflix than work for free.

 

[Jock Spanners]

I am curious. Why did you settle on 30%?

 

[SimonG]

I am curious. Why did you settle on 30%?

Started at 20 then after about 5 years I increased it to 30.

I sat down and on a couple of jobs and looked at my estimate versus actual costs and time. I then looked back at issues arising when I had to change an item at no cost due to something failing under warranty. Yes you get the part for nothing but the time taken to look at the problem, get the new part, swap the part, return the part and decided I was happier with the 30%. Also looked at quality of materials I was using, after all I'm not paying, the customer is.

To me it's all about 'am I happy', my price is my price, i wont reduce it because then I wouldn't be working at my happy rate. Sounds daft, but what's the point of working if you're not happy?

Sometimes you just need to take a more detailed look at the business side. At first I was too focused on the work and sort of flew by the seat of my pants on the business front.

 

[Last Plumber]

We use 25% gross profit as an absolute minimum (33.3333 % added onto materials pre VAT). and always have as far back as the memory of man. Never less than that, often a bit more dependent on what it is, how much of it and who it's for. Customers never question the material prices, mainly I presume because they don't know what we need for the job, aren't interested and wouldn't understand if you told them?
We supply all our materials, no labour only work. It is all fully guaranteed so there in lies one good reason for decent profits (you're working for free if it goes wrong in the warranty period) . Anyone who might have asked if they can provide their own materials in the past gets a point blank no and either accepts it or goes elsewhere.
As you know, working as a self employed Plumber/Heating engineer is hard graft, long hours, sometimes unpleasant, dirty, dangerous, expensive and can be quite stressful, particularly if you are taking it all on alone!
There is - in my opinion - no point doing what we do for wages only. That's another good reason for decent profits, it is all part of running a business. Profit on material can also help a bit with lost time. No ,matter how long you think a job will take, you will be out on time I find, due to the unpredictable nature of the beast.

That's my thought on the subject, hope it helps!

 

[Ric2013]

I see I'm charging less on materials the others. I'm running a retail shop until the end of August and I recognise the incongruity in the mark-up is much higher in a shop.

That said, I don't really mind - my attitude is that customers will look at the overall price and I feel I have no need to 'hide' a labour charge with a price on materials. My feeling is that the fluff-up factor that makes a job take forever is a labour cost, not a material cost.

Question of psychology really and finding what works best for customers. Also, as hometech would no doubt comment, if there should be a dispute with materials that may give give the customer a legal right to reject them, it really isn't in my interest to make them a greater part of the bill than they need be. Experience will show if I am right or wrong.

 

[Last Plumber]

I'm not sure I follow. Labour charges are a completely separate matter for us. I was talking about profit on materials only.

 

[SimonG]

I see I'm charging less on materials the others. I'm running a retail shop until the end of August and I recognise the incongruity in the mark-up is much higher in a shop.

That said, I don't really mind - my attitude is that customers will look at the overall price and I feel I have no need to 'hide' a labour charge with a price on materials. My feeling is that the fluff-up factor that makes a job take forever is a labour cost, not a material cost.

Question of psychology really and finding what works best for customers. Also, as hometech would no doubt comment, if there should be a dispute with materials that may give give the customer a legal right to reject them, it really isn't in my interest to make them a greater part of the bill than they need be. Experience will show if I am right or wrong.

Hometech doesn't have access to the arms, he wouldn't need it either. Sounds like he knows everything, or thinks he does.

As last plumber said, percentage on materials has nothing to do with labour charges. Sweetens it a bit if your running behind and theres no extras to charge to customer.

 

[Ric2013]

Profit on material can also help a bit with lost time. No ,matter how long you think a job will take, you will be out on time I find, due to the unpredictable nature of the beast.

As last plumber said, percentage on materials has nothing to do with labour charges. Sweetens it a bit if your running behind and theres no extras to charge to customer.

Sounded to me that Last Plumber was suggesting markup on material could be used to reduce labour charges. My point is, if you find you often over-run on time then adding a bit extra on the labour charge (what I call a f up factor) at the time of quotation achieves the same result without potentially making you look silly.

I think it's mostly a matter of what looks better to the customer and how you'd like a tradesman to charge you. I always grimace slightly when a tradesman feels a need to hide the true labour cost using inflated part prices.

Personally as I know my customers can get the same materials cheaper than me if they have the time and patience (after all, nearly everyone has internet these days), what I've said to people in the past is that I use wholesalers with whom I have an ongoing relationship with, that I take responsibility for anything I supply, that I apply about a 10% markup to cover time and diesel and to make sure my van is stocked (I don't charge for time spent at merchants obtaining standard parts) but that they won't find what I'm selling at half the price at Screwfix. They have been happy with that explanation. I suppose it depends on what your customers are like. Whether 10% is enough or not is another matter, but so far I've not been hit by faulty materials leading to callbacks.

 

[Last Plumber]

Sounded to me that Last Plumber was suggesting markup on material could be used to reduce labour charges. My point is, if you find you often over-run on time then adding a bit extra on the labour charge (what I call a f up factor) at the time of quotation achieves the same result without potentially making you look silly.

No I wasn't, you misunderstood. Our labour charges and materials are totally independent of each other. I was merely saying that if you run over by a very small amount or let's say you used a small amount of material you didn't allow for in an estimate, a realistic profit on material can help to soften the blow a little bit amongst the other benefits it gives you.

We only give estimates so there is always scope for genuine extra cost in the same way there is for a reduction if a job takes less time and material. Sometimes you might decide a small amount of time or material is not worth potentially upsetting a domestic customer for when you made a profit out of the job anyway. Industrial & Commercial customers are a different kettle of fish.

We probably all look at running a business differently and if it works for you, great. I can only speak for our experience in this trade.

I never look silly.

 

[Jock Spanners]

You only do estimates - that's interesting Rob. I try to do the same. Do you explain the difference between a quote and an estimate to customers? Do you have many customers insisting on a fixed price? On bigger jobs I get customers to sign a contract listing my terms and conditions. In it I specify the final bill could be more (or less) than the estimate but it will be no more than 20% higher. Most times I'm bang on the money.

 

[Jock Spanners]

I've just looked at Pimlico Plumbing's website. Mullins makes it very clear that for materials he charges the trade price plus 25%. https://www.pimlicoplumbers.com/rates

 

[Last Plumber]

No explanation is required it seems. No-one ever questions it. It says estimate on the header, it is worded as an estimate and the final words are 'this work should cost £***'.
No, no-one asks us for a fixed price.

As far as 25% on top of the trade price goes, that depends on what 'trade price' means.
Trade price to who?

 

[Ric2013]

Trade price to who?

Exactly. I don't currently have good terms with my merchants. When I can get things cheaper, I'll probably bring my margin up to keep the cost to customers roughly where it is now.

I suspect I'm not the fastest out there and (being relatively new to business) I'm probably competing on price with people who are, let's say, less finicky than I am, so if I were to estimate, I'd probably estimate too low and it would be seriously awkward.

So I'd quote a price (with some conditions) I know I'll be happy with and if the customer is happy too then I go ahead. My attitude is a bit of extra time doesn't actually cost me money, so as long as my materials are spot on (which they usually are), it's all a learning curve and my next quote will be more accurate.

I suppose, truthfully, I'm working how I'd like a tradesman to work. I once turned up at a campsite late and night and they said the office was closed and to pay in the morning: I spent most of the night worrying about how much it was going to cost - illogical, but probably comes from a childhood of 'we can't afford it' being a common occurence.

 

[Ric2013]

Going slightly off topic, if you charge by the hour and not by the result, how do you factor in costs use of expensive equipment such as powerflush pumps and magnets and electric pipe freezers?

To use the freezer as an example, as an electric pipe freezer can save £30 on a single-use kit, £30 on inhibitor, and possibly a couple of hours' labour - all of which would be chargeable to the customer - it seems you are shooting yourself in the foot if you can't find a way to charge the customer something for having brought it out to play.

 

[ShaunCorbs]

I charge £45 per job for the freezer and £50 per power flush

 

[SimonG]

£50 for powerflush machine

 

[Stanios]

I've started off charing market price, a mistake of an innocent begginer I guess.. What I've realised is I was losing money by supplying materials and my stance changed. My wife works at opticians their markup is in thousands of %. As years went by my mentality has changed to the right price is the maximum the customer is happy to pay so my markup on materials will depend on how likely the customer is to query the quoted labour. Particularly with boiler work - customers are unwilling to pay any sort of premium for years of your knowledge so its either overcharge for parts or not bother with boiler work for me.