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Pricing a Routing (not plasma) Job

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Capstone
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Pricing a Routing (not plasma) Job

Postby Capstone » Fri Aug 28, 2015 7:27 am

So some of you know that I have a customer that wanted me to convert my table for doing routing with a specific job in mind. I was excited about the prospect of new avenues of revenue so I made the investment and tooled up my plasma table so it is now truly a dual purpose table. And, I'm pleased to say I came out the other end with my first order ready to deliver. But... I was so wrapped up in just accomplishing the job, I didn't think about how to charge for it and frankly if I could make money.

How would you charge? By time or based on inches cut? I am using a router, which can't go faster than 27ipm.
After considerable experimenting, that was the max speed, which meant that each single job set takes about an hour from the moment I got the material on the table until it's completed.


Since the job is totally custom, I know I'll charge for one time design fees, which I feel should be $75 an hour, but should I also charge for the cost to build the custom hold-downs which can only be used with this specific job as a separate line item, knowing I'll likely get additional orders, or would you roll that in to the cost per set somehow?

2015-08-27 09.17.32.jpg


Thanks as always for any advice.

Phil

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Re: Pricing a Routing (not plasma) Job

Postby rdj357 » Fri Aug 28, 2015 10:31 am

I wish I had some advice, I've set my table up dual purpose also. I don't think you can do much on the hold-downs but design and cutting yes. I know in the plasma world I'm used to pricing per inch so it's a function of table time. I just don't see that working in the milling world as some of these jobs take quite some time. I want to sell some lithophanes and they can take 5 hours to run..... I'll have a hard time selling a 5x7 lithophane even if I build a pretty frame & box with backlight for the table time price of $600!!! :lol: :lol: :lol:

I'm thinking this is going to have to be based on the final product. Maybe the sum of material cost and machine run cost/hour marked up to a desired gross margin plus labor charges for actual time spent for design, bit changes, & finishing. I'm sorry I don't have more answers as I'm plowing the same row..... I priced and sold a 24"x30" sign cut from birch plywood (cost $20), painted letters, oil finish, and poly for $150. It's about 1.75 hours machine time and 3 bit changes. Design took me about 20 minutes.
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Re: Pricing a Routing (not plasma) Job

Postby acourtjester » Fri Aug 28, 2015 11:47 am

I try to keep things simple you are running a business and your time is just as important doing routing or plasma. So for time charges that should be easy for you to figure. I also think if you had to use special hold downs that is just another expense for materials. Either you give them to customer to hold if they will be needed for another of their projects. Or you just show them as part of the material cost but not explained unless they want an itemized bill. You have set yourself up to offer both services to your customers all time and material should handles the same.
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Re: Pricing a Routing (not plasma) Job

Postby Shane Warnick » Fri Aug 28, 2015 2:52 pm

Is this a business or a hobby??? If it's a business, then I say charge for table time, as well as general fab time. I don't see why you would hesitate to charge for custom hold downs, yet don't seem to hesitate to charge them to do the art / CAD time for the job. The art is a one time fee, unless they want major changes made. Same on my end. The hold downs are no different. I would charge for materials for the hold downs, with a reasonable markup on them (you have to acquire the material, pay for it, move it, etc, I usually use 30% on things like that) unless its a pain in the ass, then it's more. Smaller items get marked up at a higher percentage than large ones as well. I would also charge for labor for constructing the hold downs. The job could not have been completed without them. I charge $100 / hr for machine time MINIMUM. I usually get $60 / hr for general shop labor (cutting metal on the band saw for frames etc, laying parts out for drilling, etc), and I get $85/hr for welding. That covers the gas, wire, abrasives etc. All material gets marked up, just depends on how big the job is, how much they are using, and also if it's plate cutting on the table, how thick it is. I don't mark 1" steel up 200%, but some stuff I do. I would rather just run the machine all the time, but I am a one man band, so as of now I get to do it all.

You mentioned something about eating the cost of the hold downs in the hopes of getting additional orders. Good luck with that. You can't give stuff away, hoping people will come back. You have INCREASED your work load, and DECREASED your profit. Your profit on the first and second job may look good on the invoice, but at the end of the month, the money for the hold downs came from somewhere, as did the labor you used. LABOR TIME that could have been used cutting other things with plasma and making more $, or chasing new business, or cleaning the shop, or????. You have just essentially caused your own price erosion, and you have also set a precedent with a customer, who will now want that treatment all the time. Hell, if you want to just be busy, I can farm work out to you, you can cut it cheap, and pay the shipping back to me, and I will deliver. DEAL??

I would charge based on material at a given markup, plus machine time. You have to recover not only the time you spend doing it, but enough to justify and PAY for the conversion to make it a dual purpose table somehow. I would charge for the hold downs, and ask the customer if he wants me to keep them (I would only offer this IF it was a good customer that was always returning for business, and I thought I would be using them a lot) or I would include them when the material was picked up and let them keep up with them. If they need more in 1 week or 18 months, and can't find the hold downs, they will be buying another set from you.

You can't expect a customer to pay for capital expenditures for your shop, IE you wouldn't charge a guy for a hydraulic press brake just because he wanted some parts cut and needed 50 of them bent, HOWEVER if you decided to go ahead and buy one and have it, to expand your capabilities, then you WOULD charge enough to pay for the new equipment in a reasonable amount of time. It's not uncommon to charge $3-4 per bend on parts like that. You have time in handling them, risk exposure (they have to be bent right or you get to redo them) as well as a piece of equipment to pay for, that will eventually need maintenance or replacement.

I assure you I struggled with pricing for quite a while. I finally came to two conclusions. First, it's a business, not a hobby. There is nothing wrong with charging a FAIR price, and doing quality work. Nice won't buy your groceries nor will it pay the electric bill.

Second, (this one makes me feel better when pricing, especially when I look around at all the money invested), it's not necessarily WHAT it costs you to actually do a certain job, but WHAT it costs you to BE ABLE to do the job. How much $ do you have in welders, air compressor and system, table, plasma power supply, drills, drill presses, paint guns, drill bits, abrasives, computers, shop and space, utilities, etc? Not to mention, EXPERIENCE. How much of you time was not necessarily WASTED but was spent gaining experience (learning by making mistakes etc and throwing stuff away and starting again).

Or, you could go with what an old friend told me. If you price it, and they go "Cool " and pay, you left money on the table, too cheap. If they go "HELL NO" and walk, too high. If they bitch and kick and scream and whine, act like they just caught you with their wife, but then still pull out the wallet and pay, you are just right. Probably still cheaper than down the street. He also liked the following quote:

"If you think it's expensive to hire a professional to do the job, wait until you hire an amateur." - Red Adair

Hang in there, and value your time. If you don't, neither will anyone else.


Shane

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Re: Pricing a Routing (not plasma) Job

Postby Capstone » Fri Aug 28, 2015 6:19 pm

Shane, you really gave me the business. LOL pun intended. And, I really appreciate it. I have a good amount of insecurity, not about my skill set or capabilities, but with losing business to bigger outfits. I do have quite a lot of high-dollar tools and equipment; way more than the average DIY hobbyist, even without the CNC Plasma/Router Table so I am able, like a lot of others here, work more than one type or in some cases ALL types of jobs rolled into one with welding, fab, cutting, finishing etc. I checked with a buddy who now has two HAAS vertical mills and has been doing machining as a one-man-shop for 5+ years and I'm constantly pinging him for price checks as well. He's at the $100 an hour rate pretty much the second the spindle fires on a machine not counting materials, but the tooling and machine repair costs are crazy! I'll go in fair with my pricing, and will for sure charge for the hold-down jig stuff.

Thanks again
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Re: Pricing a Routing (not plasma) Job

Postby Gamelord » Fri Aug 28, 2015 6:29 pm

I figure if you are going to be doing it for free, you may as well do your own stuff and tell everyone else to take a hike. :)

Charge for ALL your time and for your tools. As you do projects for others, your tools are wearing out. You need to recover those costs so when it is worn out you have something left in your wallet so you can replace it.
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Re: Pricing a Routing (not plasma) Job

Postby rdj357 » Fri Aug 28, 2015 7:40 pm

I've been in business for myself for almost 20 years and had up to 17 employees in a $2MM/year business. I agree that there are several functions of price not the least of which are the return on your investment, repairs, consumables, etc. Of course time is very valuable no matter whether it's machine or human labor. That said, if you have not run a router/mill on a CNC table there is a serious consideration for the amount of time the job will take. Plasma is blazing fast (for most common material) and the cuts are a one pass and done process. Milling is, well, absolutely not. A good bit will long outlast consumables so if your table rate includes consumables then that expense doesn't belong in the table rate for millwork. I also find that although I need to be present for a bit change, I can be finishing or otherwise working on other projects or parts of the same project while the table mills its task at hand. I hope my comments were not interpreted as some advice to not charge for time, only that the rate will be adjusted based on the actual costs, equipment depreciation, overhead, and desired profit. I won't be charging $600+ for a 6 hour lithophane, it won't be 'hobby' cheap as I can't tie up the table for no hourly profit but I am now doing enough to be able to estimate the actual milling hourly cost and anticipated overhead compared to the plasma process so I can come up with an hourly rate that meets my overhead and profit requirements and will still be a price that the market will bear for the product produced.

I struggled in business to get my competitors to charge what they were worth and quit dragging the prices down in the HVAC business. The price erosion process is real and dangerous. At the same time, some business models are more efficient than others and expenses, overhead, and profit numbers are variable so pricing is something that everyone should always check often against actual costs.

One of my favorite things to pick on is people who think their margin can be obtained by multiplying their cost on something by a factor (i.e. 40% = multiply by 1.4) and selling for that price.... Let me explain in case this is your method. If you find that your expenses for all overhead is 30% of sales and you want to make a 10% net profit you might calculate this way: Direct job cost - $100.00 so multiply by 1.4 = Sell for $140.

Here's the problem:
$140 Sell price
- $42.00 Overhead (30% of $140x.3)
- $100 Direct Cost
-------------
<2.00> Net Profit

Uhhh, you went in the hole. To correctly figure margins from cost you MUST divide. The factor to use is 1 minus the desired gross profit. So for a 40% markup you must take 1 minus .4 so your divisor is .6 Now take the same example at $100 cost so 100/.6=166.67 .

Now,
$166.67 Sell price
- $50.00 Overhead (30% of $166.67)
- $100 Direct Cost
---------------------
$16.67 Net Profit (The 10% of selling price desired)
Robert Johnson
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Re: Pricing a Routing (not plasma) Job

Postby wilber » Fri Aug 28, 2015 11:40 pm

I charge $100 a hour for my cnc router time plus setup and design. I dont have the best one but it is a CNC Shark and I can run it 90ipm and get great results.

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Re: Pricing a Routing (not plasma) Job

Postby Capstone » Sat Aug 29, 2015 2:41 pm

Thanks guys for the replies. Robert, in my previous life in sales for another company, it was bored into my brain that margin is always figured through division, so that's second nature to me. If I want 40% margin and my cost is $100, then I divide 100 by .6 for a sales price of $166.66. Since I would already know my cost for everything I sold though, backing into GP$/margin based on my market knowledge was pretty straight-forward and my commission was a percentage to a year Gross Profit Goal. But that was Gross...it's very different now, obviously.

The real challenge is keeping track of time somehow and coming to a fair value to assign for my personal rate. Like Shane, assigning different rates to tasks seems fair. I have to figure out a way to stop "spit balling" work even though it's not yet consistent enough to really put me in the black yet for all of the cost of equipment so far this year. I'm at that awkward "odd job" stage where I don't yet have enough business to turn anything down if it's something I can accomplish and so am still looking at each job for the total value rather that the margin of profit.

I'll get there.
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Re: Pricing a Routing (not plasma) Job

Postby motoguy » Mon Apr 17, 2017 10:19 am

Good info here. Thanks guys.
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