Guide
If the customer buys the parts, you lose your material markup and pick up warranty and delay risk instead. Here's the worked maths on what your labour rate needs to become to stay whole.
A lot of tradespeople think customer-supplied materials is a simple swap: drop the materials line, keep the labour line, done. It isn't. On most jobs your materials markup isn't a nice-to-have, it's doing real work in your overall margin. When the customer removes that line, you don't just lose the markup on paper — you lose actual profit dollars you were counting on to cover your overheads. Nothing else about the job gets cheaper for you. You still show up, still diagnose, still fit the part, still carry the liability if it goes wrong.
There's also risk you didn't have before: wrong parts turning up, parts arriving late so you're standing around, parts failing with no manufacturer warranty because the customer bought them from a marketplace seller with no paper trail. All of that lands on you unless your pricing and your terms say otherwise.
Say you normally quote a job at $2,000 total: $800 of materials, $1,200 of labour. You buy materials at cost and mark them up 25% before passing them on, which is a fairly typical range for trades (many run 15-35% depending on category — see the markup and margin calculator if you're not sure what yours works out to).
That 25% markup on $800 of materials at cost means your customer price for materials includes roughly $160-200 of margin, depending on whether you're marking up from cost or targeting a margin percentage. Take $200 as the round number.
Now the customer says they'll buy the parts themselves. You quote just the labour: $1,200. Looks the same on the labour line. But you've lost that $200 of margin you were relying on to cover admin time, callbacks, insurance, the odd wasted trip. If your actual profit on the labour component was, say, $600 after covering your true hourly cost, that $200 loss is a third of your profit on the job — gone, for doing the same physical work.
Put another way: if you were charging $75/hour and billing 16 hours of labour for that $1,200, you need to find that $200 somewhere. Spread over 16 hours, that's $12.50/hour. Round it up for the risk you're also taking on (delays, no warranty recourse, wrong-part trips) and you land closer to $85-100/hour — a 13-33% increase on the base rate, which matches the industry-common range of raising labour 10-20% for customer-supplied jobs.
| Item | You supply materials | Customer supplies materials |
|---|---|---|
| Materials (cost) | $640 | $0 (billed by customer separately) |
| Materials markup at 25% | $160 | $0 |
| Materials charged to customer | $800 | $0 |
| Labour charged | $1,200 | $1,200 (before repricing) |
| Total job price | $2,000 | $1,200 |
| Margin lost vs. original job | — | -$160 to -$200 |
| Labour rate needed to recover margin (16 hrs) | $75/hr | ~$87-100/hr |
If you'd rather keep a flat $75/hour rate and not touch it, the alternative is a flat handling and verification fee on the invoice — commonly $75-150 depending on job size — to cover checking the parts are correct, chasing missing items, and the admin of coordinating delivery timing with your schedule.
There isn't one right structure. Pick based on how much you trust the customer to source correctly and on time, and how much cash you can afford to have tied up.
If you're quoting jobs regularly and want to see how each structure moves your bottom line before you commit to a price, run the numbers through the job profitability calculator rather than guessing. And if you haven't nailed down your true hourly cost including overheads, start with the hourly rate calculator — the repriced labour figure above is only as good as the baseline rate it's built on.
Repricing the labour is half the job. The other half is what's written on the quote or work order, because the disputes on customer-supplied jobs are predictable and preventable in writing.
Keep it short and factual, not defensive. Something like: "If I supply the materials, the price includes a markup that covers sourcing, handling and warranty backup — that's the $800 in this quote. If you supply them yourself, I'll charge $95/hour instead of $75, because I'm taking on the risk of wrong or late parts without the margin that normally covers it. I also can't warranty parts I didn't supply, and any return trip for a parts issue is billed separately." Most customers who are trying to save money by sourcing their own materials will understand the trade-off once you put a number on it.
Customer-supplied materials aren't free labour for you to price at your normal rate. You're giving up margin and taking on risk, so the labour rate has to move — typically 10-20% higher, or a flat handling fee of $75-150 if you'd rather keep the headline rate unchanged. Decide your cash structure (you buy, they buy, or deposit-first) based on how much float you can afford, and put the warranty, return-trip and waiting-time terms in writing before the parts show up.
The Small Business Operations Kit ($19) turns guides like this one into fill-in-once worksheets: rate card, quoting sheet, job costing, payment terms and follow-up templates. Built by the same people who write these guides.