Parts Markup
Definition
Parts markup is the percentage added to the wholesale cost of a part to set the retail price the customer pays.
What Parts Markup Means for Your Business
What it means
A $40 wholesale capacitor marked up 150% becomes a $100 line item on the invoice. That $60 covers the time to source it, stock it, carry it on the truck, handle returns, and contribute to overhead.
Why it matters
Parts markup is a legitimate profit center, not price gouging. Shops that fail to mark up parts are giving away the cost of their parts room, truck inventory, and buying expertise for free.
How contractors use it
Typical markups range from 100% to 400% depending on part cost and trade. Low-cost items carry higher percentage markups, high-cost items lower percentages. Good software auto-applies tiered markup from the price book.
Real-World Example
An HVAC shop reviewed its parts markup and found it was averaging 65% instead of the target 140%. Updating the price book across 2,800 common SKUs added $215,000 in annual gross margin.
Related Terms
Price Book
A price book is a standardized catalog of labor and material tasks with pre-set flat rate prices that technicians use in the field.
Flat Rate Pricing
Flat rate pricing charges a fixed amount for a specific task, regardless of how long the technician actually takes to complete it.
Cost of Goods Sold
Cost of goods sold, or COGS, is the direct cost of labor and materials required to deliver the services you billed, excluding overhead.
Gross Margin
Gross margin is revenue minus the direct cost of labor and materials, expressed as a percentage of revenue.
Stock Keeping Unit (SKU)
A stock keeping unit, or SKU, is a unique identifier assigned to every distinct part, product, or service in an inventory system.
Put This Into Practice with Free Software
Kaldr Tech handles parts markup and everything else you need to run your shop. $0/month, 3.5% + 30¢ per transaction.