I have just extended the villa in Lund, cost about 900,000 SEK of which materials were 150,000 SEK. The materials were purchased by the builder himself at his nearest large hardware store. He recommended it because they "have the best prices." When I was to pay the builder's invoices, I received a copy of his material costs. He added 12% to all purchases.
Here's a price example. The extension was built with large h+h blocks, they cost 72 SEK + VAT each in the store. I bought 600 of them. On the invoice, they are priced at 68 SEK + VAT + the builder's 12% markup.
I thought it felt incredibly expensive. A large builder should have low prices, 20-30% discount? If he also buys 600 of the same item with direct delivery, the price should be another 10-20% lower?
So for fun, I emailed another hardware store in the same chain but in Malmö. On their quote, the price was 54 SEK + VAT + delivery cost.
I believe that the construction firm and the hardware store have some kind of deal, the builder gets a bonus on the side on every material purchase without me, the customer, knowing about this. Either that or he has been taken for a ride by the hardware store, which overcharged him.
Does anyone have an opinion on my theories?
Here's a price example. The extension was built with large h+h blocks, they cost 72 SEK + VAT each in the store. I bought 600 of them. On the invoice, they are priced at 68 SEK + VAT + the builder's 12% markup.
I thought it felt incredibly expensive. A large builder should have low prices, 20-30% discount? If he also buys 600 of the same item with direct delivery, the price should be another 10-20% lower?
So for fun, I emailed another hardware store in the same chain but in Malmö. On their quote, the price was 54 SEK + VAT + delivery cost.
I believe that the construction firm and the hardware store have some kind of deal, the builder gets a bonus on the side on every material purchase without me, the customer, knowing about this. Either that or he has been taken for a ride by the hardware store, which overcharged him.
Does anyone have an opinion on my theories?
It's like when you're buying a washing machine and the salesperson in the store recommends a certain brand. Then you can be sure that the store has the best margins on just that brand.
So a craftsman who recommends a certain building supply store likely has a deal with the dealer that benefits the craftsman and not you.
So a craftsman who recommends a certain building supply store likely has a deal with the dealer that benefits the craftsman and not you.
Are you sure that a major contractor and a larger building supply store can have a "deal" that channels money back from the construction company to the contractor without the customer knowing about it? That's what I want an answer to. If so, I will dispute the invoices. It also sounds illegal?
There are different ways to manage it. One option is for the craftsman to pay a high price that appears on the invoice to the customer. Then the craftsman receives a bonus from the builder's merchant. It's a bit like when you shop with an ICA card, except the difference is that instead of a percentage bonus, it might be anything from 10 to 50% in bonus.
I seem to recall that there are threads on the forum about this. I believe, for instance, Ahlsell's bonus system has been discussed.
So, I'm sure it occurs and is relatively common.
I seem to recall that there are threads on the forum about this. I believe, for instance, Ahlsell's bonus system has been discussed.
So, I'm sure it occurs and is relatively common.
Yes, it's a common setup with kickbacks. Hard to tackle. If you argue about it, the builder can quite honestly claim that he doesn't know how much bonus he gets for your specific items. It's entirely based on how much he buys overall during the year, and often it also follows a complicated model with different percentages for different product groups and brands.
For example, the building supply store Ekesiöö here in Stockholm openly says they don't give any discounts to builders or anyone else either. But a builder can negotiate for an annual bonus instead. A setup entirely aimed at ripping off the end customer. If I, as a private person, go to another professional building supply store and want to buy a relatively small volume, but large enough to try to negotiate a bit, my experience is that they immediately offer a 15 - 20% discount, without more negotiation than just asking.
A builder I hired, whom I trust completely, had 20 - 25% (different product groups) discount at a building supply store. It's entirely conceivable that he might have had an additional percentage in annual bonus as well. But with the prices I got, it was on par with Byggmax for comparable goods. So in that case, nothing to fuss about.
For example, the building supply store Ekesiöö here in Stockholm openly says they don't give any discounts to builders or anyone else either. But a builder can negotiate for an annual bonus instead. A setup entirely aimed at ripping off the end customer. If I, as a private person, go to another professional building supply store and want to buy a relatively small volume, but large enough to try to negotiate a bit, my experience is that they immediately offer a 15 - 20% discount, without more negotiation than just asking.
A builder I hired, whom I trust completely, had 20 - 25% (different product groups) discount at a building supply store. It's entirely conceivable that he might have had an additional percentage in annual bonus as well. But with the prices I got, it was on par with Byggmax for comparable goods. So in that case, nothing to fuss about.
Even though it's quite tragic that it often happens this way.
It's about two parties deliberately cheating the third. A craftsman who is aware of this and still presents these inflated invoices to their customer to snatch a difference that the customer has no idea about is, morally speaking, not much better than a thief.
It's about two parties deliberately cheating the third. A craftsman who is aware of this and still presents these inflated invoices to their customer to snatch a difference that the customer has no idea about is, morally speaking, not much better than a thief.
It often works exactly as you describe here, but it's not just a deal, it's an extensive discount culture maintained by many suppliers in collaboration with each other.Svein Eriksson said:
A search tip for thrilling reading;
http://www.byggahus.se/sokresultat/...223:yqyi6vo-amm&cof=FORID:9&ie=utf-8&q=påslag
Optimize below, go ahead. There is info on the website on how it works. The builder earns points for every krona he spends, which can then be redeemed for something fun.
Did you regulate material prices in the contract in any way? If not, it will be difficult to pursue the issue.
Otherwise, the distribution of labor vs. material sounds disproportionate. It sounds like a lot of labor with little material. Of course, it depends on the type of work effort.
Otherwise, the distribution of labor vs. material sounds disproportionate. It sounds like a lot of labor with little material. Of course, it depends on the type of work effort.
One must keep in mind that hiring craftsmen is because you either can't do the work yourself or don't have the time, you can't expect low material prices. In an ideal world, the hourly rate would be 900+VAT and the materials would be purchased net by the builder. But that's a long way off!
I can explain exactly how it works when a company purchases building materials if you want.
Example 1 - Discounts
Bygg AB is going to buy 50sqm of tiles, these tiles cost 100kr/sqm, he gets a 10% discount, he pays 90kr, if he buys 150sqm he might get 20% so he pays 80kr/sqm. Here, he can choose to use open invoices or not, if he opts for open, he shows the discount and usually marks up 10% which should include costs for fetching the material, etc. If he goes for closed, he only shows that the tiles cost 100kr/sqm, and if he is stingy (which 90% are) he also adds 10% for costs to fetch the material, etc. Usually, companies that turnover 0-5 million get these deals.
Example 2 - Kickback
Bygg AB has agreed/signed an agreement with a building supply store where if he buys for, e.g., 1 million, he gets a 5% kickback at the end of the year, which then means the company owner gets a nice bonus of 50,000kr just in time for Christmas. Here, the builder usually uses closed invoicing often with a 10% markup for fetching material on the invoice, and he tells his employees to buy EVERYTHING at the building supply store he points out since it usually states in the agreement that if he doesn't reach 1 million, he gets nothing back in kickback. Usually, it's companies that turnover 10m+ per year that have chances for such deals.
Example 3 - Discounts & Kickback
Bygg AB is going to buy tiles costing 100kr/sqm, he gets a 15% discount as he has between 5-20% discount on everything at the building supply store. He has also signed an agreement that he gets a 5% kickback at the end of the year if he buys for at least 3 million during the year, if he only buys for 1 million he gets only 1% and below that no kickback. He pays 85kr/sqm for tiles and invoices the customer 110kr/sqm as this should include overhead costs. By Christmas, he gets 150,000kr so he and his family can stay in the mountains during the holidays. Usually, companies that turnover 30m+ get these deals.
Source: I work with this every day.
Now how much companies turnover can vary greatly as there's favoritism (nepotism) in these circles (Bygg AB might only turnover 5 million but gets a really good deal as their dad has a truck that usually drives for the Building supply store, etc., use your imagination).
But this is my perception of how it usually is.
Please feel free to check your current company TS on allabolag.se, see how much they turn over and see if it matches.
Example 1 - Discounts
Bygg AB is going to buy 50sqm of tiles, these tiles cost 100kr/sqm, he gets a 10% discount, he pays 90kr, if he buys 150sqm he might get 20% so he pays 80kr/sqm. Here, he can choose to use open invoices or not, if he opts for open, he shows the discount and usually marks up 10% which should include costs for fetching the material, etc. If he goes for closed, he only shows that the tiles cost 100kr/sqm, and if he is stingy (which 90% are) he also adds 10% for costs to fetch the material, etc. Usually, companies that turnover 0-5 million get these deals.
Example 2 - Kickback
Bygg AB has agreed/signed an agreement with a building supply store where if he buys for, e.g., 1 million, he gets a 5% kickback at the end of the year, which then means the company owner gets a nice bonus of 50,000kr just in time for Christmas. Here, the builder usually uses closed invoicing often with a 10% markup for fetching material on the invoice, and he tells his employees to buy EVERYTHING at the building supply store he points out since it usually states in the agreement that if he doesn't reach 1 million, he gets nothing back in kickback. Usually, it's companies that turnover 10m+ per year that have chances for such deals.
Example 3 - Discounts & Kickback
Bygg AB is going to buy tiles costing 100kr/sqm, he gets a 15% discount as he has between 5-20% discount on everything at the building supply store. He has also signed an agreement that he gets a 5% kickback at the end of the year if he buys for at least 3 million during the year, if he only buys for 1 million he gets only 1% and below that no kickback. He pays 85kr/sqm for tiles and invoices the customer 110kr/sqm as this should include overhead costs. By Christmas, he gets 150,000kr so he and his family can stay in the mountains during the holidays. Usually, companies that turnover 30m+ get these deals.
Source: I work with this every day.
Now how much companies turnover can vary greatly as there's favoritism (nepotism) in these circles (Bygg AB might only turnover 5 million but gets a really good deal as their dad has a truck that usually drives for the Building supply store, etc., use your imagination).
But this is my perception of how it usually is.
Please feel free to check your current company TS on allabolag.se, see how much they turn over and see if it matches.
Thanks for the interesting info! Funny phrasing "At Christmas, he gets 150,000kr so he and his family can stay in the mountains during the holidays." My construction company closed as soon as my job was finished, and the boss and his wife went away for 3 (THREE) weeks to the other side of the world.
I will not give up on this. This system is completely unknown to me, and I am still 50 years old and have renovated and built villas for myself for 25 years. I will try to get this into a major newspaper, it must interest quite a few people who hire craftsmen.
I will not give up on this. This system is completely unknown to me, and I am still 50 years old and have renovated and built villas for myself for 25 years. I will try to get this into a major newspaper, it must interest quite a few people who hire craftsmen.
This is not news and it's the same in many industries.
For me, it's completely uninteresting what discount I get through a builder or what markup he has. What matters is how much it costs me.
Therefore, always ask for an example of what you would pay the builder for materials like plasterboard or tiles. Then decide if you want to buy the materials yourself or through the builder.
I also work in the "craft industry". My suppliers give me whatever discount or bonus/kickback I want.
If I want a 75% discount and a 50% bonus/kickback, they just set the prices according to those terms. It's not more complicated than that.
For me, it's completely uninteresting what discount I get through a builder or what markup he has. What matters is how much it costs me.
Therefore, always ask for an example of what you would pay the builder for materials like plasterboard or tiles. Then decide if you want to buy the materials yourself or through the builder.
I also work in the "craft industry". My suppliers give me whatever discount or bonus/kickback I want.
If I want a 75% discount and a 50% bonus/kickback, they just set the prices according to those terms. It's not more complicated than that.
If it's only a 12% markup, you can be happy.
I had a plumber who marked up 100-300% on purchased goods. When I pointed it out, he got really mad. When I wrote about this here in the forum, I got a whole bunch of tradespeople here against me.
One miserable mafia.
I had a plumber who marked up 100-300% on purchased goods. When I pointed it out, he got really mad. When I wrote about this here in the forum, I got a whole bunch of tradespeople here against me.
One miserable mafia.
I have done the following for my house renovation.
1) I went to the two nearest lumberyards and said that I am going to fully renovate a house, with everything that entails. What discounts can I get? I got 15% straight off at one + up to 25% on certain items (paint etc.) and 10% at the other. Guess which one gets my purchases.
2) When I have tradespeople at home, I ask them to use the lumberyard I have hired and charge by the hour when they pick up materials.
I get the invoice for the materials and have full control over what is purchased and what is used, plus I get my discounts. Also, I get incredibly good service at the lumberyard because they know it works well. All I need to do is notify the lumberyard that person X is coming and shopping on my account for two weeks and this is roughly what they will buy. Has worked great!
1) I went to the two nearest lumberyards and said that I am going to fully renovate a house, with everything that entails. What discounts can I get? I got 15% straight off at one + up to 25% on certain items (paint etc.) and 10% at the other. Guess which one gets my purchases.
2) When I have tradespeople at home, I ask them to use the lumberyard I have hired and charge by the hour when they pick up materials.
I get the invoice for the materials and have full control over what is purchased and what is used, plus I get my discounts. Also, I get incredibly good service at the lumberyard because they know it works well. All I need to do is notify the lumberyard that person X is coming and shopping on my account for two weeks and this is roughly what they will buy. Has worked great!