What is “standard markup” for purchases which need to be passed on to the client?

Question

Let's say I'm designing a site, and Client and I agree that I'm going to purchase a slideshow to use on Client's site. The slideshow code costs $30.

I will mark this up to compensate me for my time in finding the slideshow, testing it, and learning how to use it. Is there a standard number for the markup? (Assume U.S. designer and client.) I've seen 20%, 25%, and the oddly specific 17.65%.

Answer 1

I don't know that there a "standard." I think it's whatever some people feel they can get away with.

I use 20% here. But that 20% covers only the money out of my pocket. Time in finding, editing, and/or testing are all billable hours to me. Above and beyond the actual cost of the product.

Answer 2

The common practice around these parts is to add 20%, but there is no standard amount. Having said that, I don't ever mark something up; it just goes straight through to the client. I like it better when I'm being compensated solely for design work, and I've never felt comfortable marking stuff up. Perhaps that stems from having spent too much time at the other end of things, managing a budget.

The way I see it, if I buy stock photography or code for a slideshow, I'm not adding value just because I bought it, so I don't add to its price, either. Research time is either built into the original quote or (occasionally) billed at an hourly rate.

Where the purchase is printing, I bill (or factor into the project quotation) the time I spend working with prepress or doing press checks, but even in cases where I've picked the printer and made all the arrangements I will usually have the print house make their financial arrangements with the client directly, rather than being a middleman.

For other expense items, I bill the client the expense immediately and separately from the project fee if it's more than a few hundred dollars, in which case, depending on the client, I may wait until I'm paid before proceeding with the purchase. These terms are always clearly laid out in the contract.

The only thing I consistently add are finance charges, such as when the payment is by credit card.

Answer 3

I don't know that you can have a "standard" markup that applies in general.

If you bill an hourly rate, you can roll the learning/integrating/testing aspects into your hours. Then you only have to markup whatever your financing is worth to you.

If you bill a flat rate without an hourly provision, you can't include the hours so you have to quote the client a rate that includes the cost of goods in addition to your hours.

Other factors are your client's payment terms and your cash position. If it's a relatively small purchase (like the example), you probably don't have to dip into a credit line and your exposure is low. Shouldering the cost is not likely to put you in a bind. You're also not put in a terrible position if the client can't/won't pay.

This scenario changes dramatically if you have to exercise credit, the client has extended credit terms, or the widget is expensive. In these situations, I typically quote the inclusion as a separate job with very short payment terms. If I have to shoulder the financial cost and risk, I weigh that situation on its individual merits and charge up accordingly. I don't (intentionally) deal with risky clients or extended payment terms, so usually I end up in the 15-20% range for this markup.