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Sliding markup percentage for small to large cost for subbing out work

doug925

Titanium
Joined
Nov 21, 2002
Location
Houston
Hi all.
I just came across a situation that I've not faced in 26 years of business.
If you had a $1000 cost for subbing work to another shop, what percentage markup would you go with?
I would shoot typically shoot for 10-25%, [part AND customer (payment history) depending]

What about $10K, 100K (or in my case-->) $560K ???

Thanks for any input!
 

Ox

Diamond
Joined
Aug 27, 2002
Location
West Unity, Ohio
I think it would depend on the price of the boat you're looking to buy,
Should all stay relative. but you have a little more wiggle room. I wouldn't go below 12%

worthless.gif



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Think Snow Eh!
Ox
 

Ox

Diamond
Joined
Aug 27, 2002
Location
West Unity, Ohio
Here's what I'm thinkin':

We all toss out some random numbers.

You decide which number that you want to go with

Then, if y'all git the work and all goes well, This time next year (or so) you post pics of the boat that you bought.
(don't want you to buy something 'till Aretha has sung)
Then, any of us that tossed out the number that you went with, we git to come down for "A Day on the Gulf with Doug".
Prolly not all at once you understand...

???


--------------------

Think Snow Eh!
Ox
 

Ox

Diamond
Joined
Aug 27, 2002
Location
West Unity, Ohio
Glad to see that you deleted those "pics".
Otherwise you may be hindering our chances of riding on the boat!


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Think Snow Eh!
Ox
 

RC Mech

Stainless
Joined
Jul 21, 2014
Location
Ontario, Canada
There’s truth to “more money, more problems”.

You’ve identified it’s a sliding scale, more risk, more expenses, more liabilities. Of the $560,000 how much is your deposit? How long will the project take?

If you were a lender and you lent your profit would you make 7-10% a year on it?
 

AARONT

Stainless
Joined
Feb 19, 2013
Location
Madison, WI
Hi all.
I just came across a situation that I've not faced in 26 years of business.
If you had a $1000 cost for subbing work to another shop, what percentage markup would you go with?
I would shoot typically shoot for 10-25%, [part AND customer (payment history) depending]

What about $10K, 100K (or in my case-->) $560K ???

Thanks for any input!
Depends on the risk. If it was going to a vendor I know and use frequently that does quality work I'd be in the 10-12% range on a high dollar order that I didn't have to do more than inspect and ship(but I'd be charging for that time on top of the markup). Otherwise normally I'd be around 20%.
 

Sam I

Plastic
Joined
Nov 6, 2020
Personally in this situation I've referred my customer on to the shop doing the work unless its part of a larger project I'm taking on. While it does sound good to pop a markup on and get paid for essentially nothing I've been stuck in the middle before when things have gone wrong and for me it's not worth the stress. Some of my customers like this - they know I'm not slapping a huge markup on the job. Some would rather place the order with me so they don't have to go through the approvals process for a new vendor but I usually decline.

That being said, I don't have any reliable sub-contractors to go out to. Every time I have subbed work out I've not been impressed with the service (communication, lead time, part quality or a combination of the above).
 

DDoug

Diamond
Joined
Oct 18, 2005
Location
NW Pa
How much work do you do to effect this ?
Meaning....do you have to pick up the parts, deliver material to sub vendor ?
 

BT Fabrication

Stainless
Joined
Nov 3, 2019
Location
Ontario Canada
generally, my good customers are 10%, most of the time I will send them to the guy (Less headache for me unless they don't want to do it themselves). anyone else is 25%
 

triumph406

Titanium
Joined
Sep 14, 2008
Location
ca
I don't do sheetmetal, but have a vendor who does.

For one customer I mark up all quotes 100%, another 50%

In both cases I'm still cheaper then the sheetmetal shops they typically use. Plus the turnarounds of the guys I use are much quicker.
 

michiganbuck

Diamond
Joined
Jun 28, 2012
Location
Mt Clemens, Michigan 48035
Subbing out to shops that you can trust for quality gives a good backup for when the market turns down and you need more work. Likely making 5% would be ok for that reason..10% + icing on the cake.
 

doug925

Titanium
Joined
Nov 21, 2002
Location
Houston
You're going to sub $560k?
Buy a machine and do it yourself...you are now in control

All said and done, the quote was not 560K, but only 448K.
I would love too, but it would be a large Horizontal, Bullard VTL, and a lot of tooling & fixturing.
Not economical for this application.
 

CarlucciWelding

Plastic
Joined
Oct 30, 2022
Hey guys, this is my first post here but i think this is an interesting topic to discuss. My business is a structural steel and Misc metals fab/erection shop but we have a simple - full machine shop.

I never go below 10% net for marking up subcontracted work. Materials at this cost I would mark up 5% typically.

It really depends on your requisition schedule and payment terms, if you need to lay out your own money, if you need to use a credit line to float the job etc…

If it’s money in money out I’d say 10% base - if your using your own money to float add prime interest rate plus a few points. Credit line? add projected credit line interest plus a few points.

Cover any of your administrative time dealing with the sub/coordination separately.

Sometimes it’s easy to think you’re making money when you’re burning it on interest.
 

doug925

Titanium
Joined
Nov 21, 2002
Location
Houston
Well, I hope this on works out.
The 'shop' in question is owned by a member of the Godwin family, part of Knust-Godwin LLC.

As I could be on the hook for my own money, I went 17% with the following terms:
20% at PO, 30% due upon receipt, 2%Net30. (<-- typically 2%Net10/Net30)

If they opt for actually paying within 30 days, I will gladly give up 2%.

This customer always pays, but is running an average of 29.5 days late for 2022 to date, and 49 days late during the last and this quarter.

If I get it (and it works out) the company can make a nice profit.
Given it is my life, I will probably end up just breaking even due to some !#%#&@(* problem or other..... LOL

Doug
 

Ox

Diamond
Joined
Aug 27, 2002
Location
West Unity, Ohio
Oh, wow.... :eek:
Count me out... :o
I would not have been above 15% on the outside....

Looks like someone else will be going fishing in stead of me.... :bawling:


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Think Snow Eh!
Ox
 








 
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