Standard Markups

In Canada the standard 'asked for' markup is 25% gross profit or a margin of 1.35ish or so.

Is this consistent with what you would charge on a bought item?

Would it be different if you had to research and find the product yourself and have the customer approve?

Not trying to get nosy - general fact finding. Thx in advance.

Cheers from: Jeremy Pollard, CET The Caring Canuckian!
www[.]tsuonline.com

Control Design www[.]controldesign.com
Manufacturing Automation www[.]automationmag.com

I don't know why you say the "standard" markup in Canada is 25%, when I've never seen anyone in Canada use a figure that high. I've seen 20%, and and I've seen 0%. I should mention I have only seen the "markup" used as an accounting rule of thumb for estimating job costs. It's used to estimate engineering and accounting manhour costs for sourcing and purchasing material (wire and conduit, proxies, terminal blocks, etc.) plus carrying costs.

In the end, though the customer is going to go around and get their three or four quotes for the complete project and base their decision off the bottom line.

Some shops use the markup method, while others simply say 0% markup but then explicitly estimate a certain number of manhours plus cost of working capital. Some places use a mixture of the two methods, depending upon the cost of the individual item. Since they are normally giving the customer a fixed quote for the project anyway, how they estimate it out is an internal matter.

Having seen it done both ways, I would say the markup method causes more difficulty. The problem is that it treats everything as more or less the same, which is only true for small, simple jobs. The people doing 0% markup seem to run into fewer difficulties because they aren't trying to apply a single rule to all cases.

The biggest failing of the markup method of estimating is that you can on one hand have an expensive but routine item that is easy to deal with, and on the other hand have an inexpensive item that requires a lot of research. You will overestimate your costs in the first case, and under estimate them in the second. You'll then try to fudge the numbers up and down because you know they just aren't right. So why not just estimate what you really want to know in the first place?

In the distribution business for control instrumentation, a 30% gross margin (a 1.42 multiplier on the seller's purchase price) for products (physical goods) is an accepted and typical target margin. Labor for service is a different case.

In the end, the margin you accept depends on the 'bargain' struck between you and the buyer.

There are certainly cases where we take less than 30% margin, but 30% is our target.

Iris Felzenhaus