Materials markup: the number most trades guess at

Ask ten trades what they mark materials up by and you get ten answers, most of them round numbers inherited from whoever trained them.

The number is usually defended as a margin on the part. It is really paying for the hours around the part, and once you see it that way the right figure stops being a guess.

What the markup is actually buying

Between choosing a part and installing it, somebody does a run of work nobody bills for.

• Sourcing. Finding a part that fits, checking stock, and ringing a second supplier when the first has none.
• Collection. The trip to the branch, which is nearly always a detour rather than a stop on the way.
• Capital. You paid the supplier weeks before the customer paid you.
• Storage and shrinkage. The stock in the van, the parts that go missing, and the ones ordered for a job that never ran.
• Warranty. The return visit when a part fails, which the manufacturer covers and your labour does not.

Price the markup against that list rather than against what other trades charge, and it becomes a figure you can explain to a customer who questions it.

One rate across everything is the wrong shape

A single percentage overcharges on the expensive item and undercharges on the cheap one. A four thousand dollar unit does not take forty times the sourcing of a hundred dollar valve, and a box of fittings takes more handling per dollar than anything else in the van.

Bands work better than a flat rate. A higher percentage on small value items, a lower one above a threshold, and a fixed handling charge on anything ordered specially. The customer sees one price per line and you stop losing money on consumables.

Decide what the customer sees

There are two honest ways to present it, and one dishonest one.

You can show materials at your sell price, line by line, which most domestic customers expect and never question. Or you can quote a single supply and install price per item, which hides the split entirely and is cleaner for work where the customer is buying an outcome.

What does not survive is showing trade prices and adding a separate margin line. It invites a customer to argue with the margin as though it were optional, when it is paying for real hours.

A quote is where the markup gets applied, not the invoice

Materials priced at quote time, on the line, carry their markup into everything downstream. Materials typed onto an invoice at the end of the month get entered at cost by somebody in a hurry, and that mistake is invisible because the invoice still looks right.

Write the lines once, with the sell price on each, and let the accepted quote become the invoice. From quote to invoice without typing it twice covers why retyping is where the numbers drift.

Check your real recovery once a year

Take a quarter of finished jobs, total what you paid suppliers against those jobs, and total what you billed for materials. The ratio is your actual recovery, and it is always lower than the rate you think you charge.

The gap is made of parts left off invoices, jobs quoted at cost by mistake, and the consumables nobody lists. That gap is easier to close than a price rise, and it costs a customer nothing.

What to do first

• Write down what your markup is paying for, including the collection trips
• Band the rate by value instead of running one percentage
• Add a handling charge for specially ordered items
• Price materials on the quote line, never on the invoice at the end
• Compare supplier spend against materials billed for one quarter
• Fix the leaks that comparison finds before you raise the rate