When it comes to decorating services, one of the most debated topics among professionals is the markup on materials. Over 100 professional decorators took part in a survey which has shown that there is a wide range of practices, with decorators offering various justifications for their pricing strategies.
Some decorators pass on materials at cost, while others apply significant markups to cover the costs associated with procurement and to boost their profit margins.
In this article, we’ll explore the different approaches decorators take, the reasoning behind them, and the arguments for and against marking up materials.
Markup Practices Among Decorators
The markup on materials varies significantly among decorators, with rates ranging from 0% to 75% with rare instances of decorators marking up over 100% on materials. Here’s a breakdown of the common markup percentages based on the survey:
- 0% Markup: Some decorators choose not to mark up materials at all, preferring to pass their trade discounts directly to customers. This approach is often justified by the belief that the labour charge is sufficient to cover their earnings. A few decorators, like Trevor H., charge a small fee for time and travel to pick up materials but do not add any additional markup.
- 10-25% Markup: Many decorators fall into this range, charging a modest markup on materials. For instance, Elliot H. marks up paint by 10% and other materials by 20-25%, arguing that it’s necessary to cover business expenses like time spent sourcing materials and processing payments. Others, like Jody G., argue that the markup compensates for time and fuel costs.
- 30-45% Markup: Some decorators, such as Michael L. and Keith D., apply a 30% markup on all materials, considering it a standard business practice. They argue that without this markup, running a profitable business would be challenging. For larger commercial jobs, decorators like Paul B. may apply a slightly lower markup (10-15%) to remain competitive in tender situations.
- 50% or Higher Markup: A smaller group of decorators, like Graham P., apply a markup of 52%, and others, like David G., go as high as 75%. These decorators often justify the higher markup by pointing out the significant time and effort involved in sourcing materials, particularly when discounts are negotiated, or special items are ordered.
Arguments For Marking Up Materials
- Compensation for Time and Effort: Decorators who mark up materials argue that the time spent sourcing, purchasing, and transporting materials is a legitimate business expense that needs to be covered. Without a markup, these costs would come directly out of their profit margins, potentially making their business less viable.
- Covering Business Expenses: Markups help cover various business expenses, including fuel, vehicle wear and tear, storage, and the administrative costs associated with managing orders and invoices.
- Profit Margins: In a competitive industry, decorators need to ensure that they are making a reasonable profit. Markups on materials can help achieve this without having to increase labour rates, which could make their services less attractive to potential clients.
- Standard Business Practice: As Elliot H. pointed out, other businesses, such as supermarkets and mechanics, do not sell products at cost. Applying a markup on materials is seen as a standard business practice across many industries.
Arguments Against Marking Up Materials
- Transparency and Trust: Some decorators prefer not to mark up materials to maintain transparency with their clients. By passing on materials at cost, they build trust and avoid any perception of overcharging. This approach can be particularly appealing to clients who are price-sensitive or who prefer to know exactly where their money is going.
- Competitive Pricing: In highly competitive markets, keeping material costs low can be a way to offer more attractive quotes. By not marking up materials, decorators can offer lower overall prices, which might help them win more business, particularly for smaller or residential jobs.
- Client Relations: Some decorators believe that by passing on their discounts, they can create better relationships with their clients, potentially leading to repeat business and referrals. For example, Luke D. offers discounts to long-term customers as a gesture of appreciation for their loyalty.
- Simplified Billing: Not marking up materials can simplify the billing process. Clients are charged the actual cost of materials, and decorators only need to focus on billing for their labour. This can make the entire process more straightforward for both parties.
Statistical Overview
To provide a clearer picture of how decorators approach material markups, here’s a visualisation of the data discussed:
The chart above shows the distribution of markup percentages among decorators based on the conversation. As you can see, the most common markup range is between 10-30%, with a significant number also choosing not to mark up materials at all.
Conclusion
The decision to mark up materials is a highly personal one for decorators, influenced by factors such as business expenses, client relationships, and competitive pressures. While some decorators see markups as a necessary part of running a profitable business, others prioritise transparency and customer trust. Ultimately, the right approach may vary depending on the specific circumstances of each job and the decorator’s overall business strategy.
Whether you’re a decorator considering your own pricing strategy or a client looking to understand how decorators charge for materials, it’s important to consider the various factors at play. Both approaches have their merits, and the best choice will depend on individual priorities and business goals.
