Curious what kind of markup and business strategies are used to pay for all the stuff we have to bring around. I just spent $200 on 3 boxes of sandpaper and realized it may be time to start adding more profit on goods like this. Sandpaper and vacuum bags are all i'm thinking about now but theres more.
Billing out for expendables?
- Thread starter duburban
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Cost + at least 12% was the advice I was given long ago.
Peter
Peter
overanalyze
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If you are in buisness for yourself, you need to learn all your true cost to operate. Overhead should include consumables as well as utilities, taxes, insurance, fuel, etc. Those should always be included in your overhead and should not come out of gross profit.
I agree with ya'll on true costs. I'm in school now so my business operations are only on breaks. Most of my jobs and T&M and I don't think I can charge anymore than I am in my area.
I will create a spreadsheet for expendables so that I can quickly reference and appropriately bill for 10 sheets of sandpaper or whatever.
I will create a spreadsheet for expendables so that I can quickly reference and appropriately bill for 10 sheets of sandpaper or whatever.
Sparktrician
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Peter Halle said:
Around here 40% seems to be the general consensus.
3PedalMINI
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Im in the AV business, So our model is a little different then yours but just FYI here is how we bill consumables
Items like mudrings,interconnects,mics. items get thrown in a "Mics. Parts category". This is usually marked up 100%; Ive been in business long enough that I can pretty much hit on the nail on head what all of the mics items and what my cost will be. I used to not do this but by the end of the job that extra mudring or two i forgot to quote for started to add up.
Also ive found customers get Irked when they see a line item charge for consumables so everything gets put in the Mics. Parts line. Sometimes if you end up not needing those additional parts it just added to your bottom line for the profit of the end of the job.
I think everyone has to be in business long enough and looking at the Profit/Loss sheets your accountant hands you to figure out what needs adjusting. Just as the OP is starting to realize he needs to charge for things like glue-sandpaper-nails etc.
Items like mudrings,interconnects,mics. items get thrown in a "Mics. Parts category". This is usually marked up 100%; Ive been in business long enough that I can pretty much hit on the nail on head what all of the mics items and what my cost will be. I used to not do this but by the end of the job that extra mudring or two i forgot to quote for started to add up.
Also ive found customers get Irked when they see a line item charge for consumables so everything gets put in the Mics. Parts line. Sometimes if you end up not needing those additional parts it just added to your bottom line for the profit of the end of the job.
I think everyone has to be in business long enough and looking at the Profit/Loss sheets your accountant hands you to figure out what needs adjusting. Just as the OP is starting to realize he needs to charge for things like glue-sandpaper-nails etc.
most materials are bought and marked up and reimbursed immediately. i had to purchase 3 grits of sandpaper and spent $200. because i can't bill the entire box of each i'll be "eating" those expenses until they all get used, which begs the question, how do i get more of my money back faster?
Tim Raleigh said:
I don't think better clients has anything to do with it. Its just establishing a markup that makes sense. More so, all expendables will be paid for eventually so it doesn't really matter. The issue for me is that I only do my work on school breaks so high overhead (festool!) doesn't help.
Wooden Skye
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If you buy a box of Granat, I think that is $62 for 100 sheets. So each sheet costs $0.62. Mark it up to a $1.00 a sheet. For glue, buy the 16 oz bottle for each project, glue is $7.85 where I live, factor in taxes, time to get, and do a markup to $10.00 or what you feel comfortable. If you have a spreadsheet, then you can apply to your bids. Expendables is something I wouldn't add as a line item, but finishing supplies, joinery supplies (dominos), or something similar.
Just my 2 cents. Actually make that 4 with the markup [big grin]
Just my 2 cents. Actually make that 4 with the markup [big grin]
tjbnwi
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duburban said:
The sandpaper is both a consumable (what you have used) and inventory (what you have yet to use). Each consumable item should be part of your overhead when you figure your labor charge per hour. Some consumables will be covered per job, others over multiple jobs.
I purchase my finish in 5 gallon pails, It is rare that I use an entire 5 on one job. I know I have the finish in inventory to use on a subsequent job. The only way I'll "get my money back sooner" is to use anything on the shelf. Only way that will happen is to get on to the next job. You're not eating any of those expenses, they are to be billed for at a latter date. You'll get your funds back if you do everything correctly.
By the way, I have about $2500.00 worth of Festool sand paper on the shelf. Just part of doing business.
Tom
ccarrolladams
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Did those who are concerned about billing for expendables ever take courses in operating small businesses?
Someone mentioned buying new bottles of glue for each job. He also mentioned paying tax. Did he mean sales/use tax? Sales tax rules vary. In California the general rule is that any product you purchase for resale to a given job can be bought under your sales tax exemption certificate, so long as it shows as a line item and is taxed on the invoice to your customer.
My company does not ever accept time and material contracts. We make a quote based on the scope of work specified in the purchase order. Then we make additional quotes on every change order. We do not break down materials as line items. But we only accept purchase orders from wholesale clients, who will be taxing the entire job to their retail clients.
For internal purposes we do keep track of all supplies and expendables used on every job. On the shop floor abrasives are drawn from the Systainer holding the appropriate size. Each job has separate Systainers. Every night those Systainers are re-stocked and the number of sheets used is recorded.
Most of the time clients have us buy the hinges and slides. Of course we mark-up our bulk wholesale cost. We do have clients with their own relationship with cabinet hardware vendors. When we are not selling such hardware, we do include an amount equal to the markup had we made the sale. This is no secret from our clients, most of whom studied cabinet design and business operations with me decades ago.
Someone mentioned buying new bottles of glue for each job. He also mentioned paying tax. Did he mean sales/use tax? Sales tax rules vary. In California the general rule is that any product you purchase for resale to a given job can be bought under your sales tax exemption certificate, so long as it shows as a line item and is taxed on the invoice to your customer.
My company does not ever accept time and material contracts. We make a quote based on the scope of work specified in the purchase order. Then we make additional quotes on every change order. We do not break down materials as line items. But we only accept purchase orders from wholesale clients, who will be taxing the entire job to their retail clients.
For internal purposes we do keep track of all supplies and expendables used on every job. On the shop floor abrasives are drawn from the Systainer holding the appropriate size. Each job has separate Systainers. Every night those Systainers are re-stocked and the number of sheets used is recorded.
Most of the time clients have us buy the hinges and slides. Of course we mark-up our bulk wholesale cost. We do have clients with their own relationship with cabinet hardware vendors. When we are not selling such hardware, we do include an amount equal to the markup had we made the sale. This is no secret from our clients, most of whom studied cabinet design and business operations with me decades ago.
Ujipster
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I run a small business and I have had to really work at understanding and conditioning myself to think in terms of margin (percent based on revenue) instead of markup (percent based on cost). Margin is a clear goal. Markup helps me achieve that goal. Know what your industry margin should be as a target and then it helps to back into what you charge for labor and expenses. Don't forget new tools and vehicle should be considered in your expenses if it is used in your trade. If you don't account for ALL expenses you will lose margin quickly.
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