contractor's discount

paleblueFebruary 16, 2013

HI.......just curious. Anyone have an idea of the discount
a contractor gets versus the retail cost of building
materials?

thanks

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M.compton

I don't think there's a magic number as many variables would apply.

Some examples:
Supplier margin on product.
Quantity purchased (over time)
Payment method.(Cash at the check out gets you a better deal than Visa or time payment)
Promptness of payment.

I don't think i'd be far wrong to say
5 - 15%

    Bookmark   February 17, 2013 at 12:26PM
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sjerin

But if the contractor buys it for you, he/she will generally add on a percentage, so the discount becomes moot.

    Bookmark   February 17, 2013 at 1:24PM
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Cynic

I'd have to say most of those variables are moot. I would say that margins are going to be fairly close in the supply field unless you're talking about competing businesses but when they can give a bigger discount, they usually have a bigger margin, leaving out sales and special purchases so it wouldn't likely impact the standard discount much.

Promptness of payment will seldom apply. A run-of-the-mill contractor certainly can't beat up a supplier like a W place or something can, demanding razor thin margins and then stall payment for 6+ months. I don't even see anything like a 2%/10 option anymore. If contractors are successful enough to get credit accounts and don't pay on time, they're generally at minimum put on COD immediately and often COD+ (COD plus a percentage, even 100% of what's owed) if they want to keep buying there. Few vendors play credit games anymore. Not all corporate/commercial accounts are given credit lines. Small accounts are generally COD status at least for quite a while until you qualify for credit but that's really not that big a deal for most. They simply can't afford to take too many risks factoring in all the risks including the percentage of bankruptcies in small businesses.

I don't know of anyplace that discounts for cash and it would only apply to a one-horse operation most likely. A medium sized or larger contractor certainly wouldn't be giving temp labor thousands of dollars in cash to buy materials and the owner won't be taking an armored car to various places to buy the materials for the crews. Also consider, given the increase in counterfeiting, cash isn't the safe transaction it was at one time. Taking large amounts of cash is also a risky proposition and has its own inherent costs.

A credit card is the small business credit line, and once the charge is approved it's cash to the vendors' books and the card charge is merely an expense. "Put it on my account" is a phrase that's gone away for many. Credit of course has its problems too, like cash or checks and each business weighs the risks and sets its policies what to accept.

The biggest variable is going to be the size of the contractor. Simply put, if they purchase a lot, they'll be in a better position to negotiate a better deal. Sometimes there's minimum order sizes to even write a discounted sale.

Actually it's possible for many people to get commercial accounts at certain places. You don't necessarily have to be a contractor to get one. Sometimes it's worth the hassle, sometimes not. It can give you other perks too depending on the place, for instance checks (or even Canadian "cheques") can be more readily accepted on a commercial account where they might not be as willingly accepted otherwise.

5%-15% is a good guess for conversational purposes but there's no set number industry-wide so it could be less or more.

    Bookmark   February 18, 2013 at 3:15AM
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