[jackson]

Always better to over Quote than to shoot your self in the foot later

[handlewanker]

Hi Jackson, better be carefull on the over or under quoat bit.
If you over quote then you'll always be wondering why the other guy gets all the work.
If you under quote, (you poor fool, thinking you will get all the work and still make it pay) then you will be forced to tread the downward spiral of crusts of bread on the table, paying your work force peanuts, employing schoolkid labour to just get a break even situation, and when all else fails just lowering the standards of workmanship and eventually doing it yourself.
The scenario is this, Anyone out there costing up a job will not necessarily take the lowest bidder, it depends on your RELIABILITY!
You can charge like a wounded bull, if you have a good reputation for quality and delivery.
One thing is for sure, engineering covers a broad spectrum and you can't hope to do all the jobs with your set up, whatever it is, and you also can't expect to be a jack of all trades.
In the end if you try to pick up every and any job that is going, by under quoting, you'll soon lose credibillity.
How many people fail when the lead time blows out and an irate customer is treatening to excommunicate you.
As far as quoting is concerned, you must cover your costs, labour and material wise to break even.
This does not mean crusts on the table.
Decide what YOUR minimum hourly rate will be, add the cost of materials, add some for taxes, add the overheads, insurance. workshop rental/mortgage/loans/ outsourcing and when you get paid for the job the labour part is what you will have left to play with.
The rest will go to paying the bills.
Now try and underquote on that, the only loser is yourself as your rate of pay gets smaller and smaller.
The other cost will remain the same.
There are some jobs that you don't touch and those generally fall into the " can you weld a bit on the bottom of my trailer" type, only worth a dollar to the "customer", but take you two hours to do.
Make a rule of $50 for the first hour and pro rata therafter, and if the customer jumps up and down, just continue to read the paper.
Better to do nothing for nothing than sweat for an hour or two for nothing.
When you've finally arrived and are putting out the work regularly to a client base, then you can re-evaluate your cost structure, but you must be giving value for money,AND ON TIME.
Ian.

[jackson]

Hi Jackson, better be carefull on the over or under quoat bit.
If you over quote then you'll always be wondering why the other guy gets all the work.
If you under quote, (you poor fool, thinking you will get all the work and still make it pay) then you will be forced to tread the downward spiral of crusts of bread on the table, paying your work force peanuts, employing schoolkid labour to just get a break even situation, and when all else fails just lowering the standards of workmanship and eventually doing it yourself.
The scenario is this, Anyone out there costing up a job will not necessarily take the lowest bidder, it depends on your RELIABILITY!
You can charge like a wounded bull, if you have a good reputation for quality and delivery.
One thing is for sure, engineering covers a broad spectrum and you can't hope to do all the jobs with your set up, whatever it is, and you also can't expect to be a jack of all trades.
In the end if you try to pick up every and any job that is going, by under quoting, you'll soon lose credibillity.
How many people fail when the lead time blows out and an irate customer is treatening to excommunicate you.
As far as quoting is concerned, you must cover your costs, labour and material wise to break even.
This does not mean crusts on the table.
Decide what YOUR minimum hourly rate will be, add the cost of materials, add some for taxes, add the overheads, insurance. workshop rental/mortgage/loans/ outsourcing and when you get paid for the job the labour part is what you will have left to play with.
The rest will go to paying the bills.
Now try and underquote on that, the only loser is yourself as your rate of pay gets smaller and smaller.
The other cost will remain the same.
There are some jobs that you don't touch and those generally fall into the " can you weld a bit on the bottom of my trailer" type, only worth a dollar to the "customer", but take you two hours to do.
Make a rule of $50 for the first hour and pro rata therafter, and if the customer jumps up and down, just continue to read the paper.
Better to do nothing for nothing than sweat for an hour or two for nothing.
When you've finally arrived and are putting out the work regularly to a client base, then you can re-evaluate your cost structure, but you must be giving value for money,AND ON TIME.
Ian.

Well thank for the thought but im pretty sure i know how to quote, or this company wouldnt still be in buisness making the amount of parts we make and the amount of money we make, and another thing to consider is if you quote a job and the first time you run it and you dont nesaserly home run the job the next time you should grand slam it, and most of my customers will say "hey your to high on this" so i will see if i can do any better on the quote if i cant well i cant they understand that but 9time out of 10 no one else can do it for what i can either so i usualy end up with the job cause my quality is exelent and i dont miss delevery dates and there is my reputation.

[ImanCarrot]

Handle has a good point on the "too high" vs "too low" conundrum. I always follow up a quote with a phone call to assure the prosepct that although others' lead times may look more attractive.. mines are set in concrete and WILL not change.

I have won at least 2 jobs that I was at least 25% more than the competition merely because I pointed out the technical difficulties and solutions to the problems that the others hadn't seen... when the prospect phoned the others to see if they had cansidered this they said "erm... actualy... can we re- quote" lol.

Then again, if I think we are just getting used as a "quoting house" (and everyone's had these) I shall "no bid"- even if they keep phoning... you get a feel for these things.

Jackson is right in saying reputation is important- a satisfied customer will tell 3 of his friends, a dissatisfied one will tell around 11.

[jackson]

Handle has a good point on the "too high" vs "too low" conundrum. I always follow up a quote with a phone call to assure the prosepct that although others' lead times may look more attractive.. mines are set in concrete and WILL not change.

I dont know how it is there, but i get jobs in to quote and they give me a yearly quanity or say a one time run quanity and i quote that. Now if the quanity changes so does the price more parts i buy my material so if cost of material goes up so do the parts. So i cant say my price will stay the same.

[jetski]

Shop rate is shop rate. If you had 2 customers and had one on each machine would you cut both of them a break on cost? (the correct answer is no). Now if you have a good customer who pays well and gives you work because of trust and he has been with you a while. I would cut him a slight break. But you are still paying for your machines running. And cutter wear and machine wear. You are also paying for the down time when only one or no machines are running. And the next time when you are running only one machine the price is higher and he will think you are screwing him over because the price jumped. I chager the hours for each machine and stay consistant. By the way I run a shop myself.

[jackson]

Shop rate is shop rate. If you had 2 customers and had one on each machine would you cut both of them a break on cost? (the correct answer is no). Now if you have a good customer who pays well and gives you work because of trust and he has been with you a while. I would cut him a slight break. But you are still paying for your machines running. And cutter wear and machine wear. You are also paying for the down time when only one or no machines are running. And the next time when you are running only one machine the price is higher and he will think you are screwing him over because the price jumped. I chager the hours for each machine and stay consistant. By the way I run a shop myself.

Yeah you have to have a minimum shop rate and you can keep it the same, what im saying is once a price is set for say you quote 1,000 ok your material cost go up after a couple of runs do you pay for that or does the customer?"the customer"!!! now say they drop the order to 500 do run them for the same price per part as you did the 1,000 "no" you increase, so you dont loose that machines "Hourly rate"

[CNCPROMAN]

The purpose to be in business is to make money. If you are running 7 machines and you are the only one that’s great but you do need to cover your time and machine ware and tare on all machines plus tool ware, electric, gas, water, material costs and your $50 per hour, per employee.

Hope this helps
CVV

[thkoutsidthebox]

I'm working on this:
http://www.cnczone.com/forums/showthread.php?t=44490
and would like input/comments.

Please remember its at an early stage so don't be too harsh!

[handlewanker]

Hi THK, most of the people I had dealings with, either working with or competing against, just do it the hard way, that is cost of material, as near as dammit, using up all the bargain bits under the bench, time spent plus a bit here and there, general cost of running the show, which all adds up to a dollar cost per hour for as long as it takes the job to be done.

How do you cost up a disc grinding wheel that is used for most of the jobs on and off?
Nobody takes note of the hours a disc will last, or for that matter how long the disc grinder will last.

Then you check to see what the others are charging, try and cut a bit off and quote with the hope that everything will pay out OK in the end.

Most of the time the hours just blow out, so the original quote gets a bit hazy, and in the end the payout just gets smaller.

I've only come across one person who had a formal costing system, and that was for steel tubing fabrication jobs.
Even then the hours were an estimate, based upon how long it was thought the job would take.

At the end of the day, if you covered your costs you could bet your boots that the others would undercut you no matter what you did to balance out, so the hourly rate paid was always under what you would like to get.

The biggest unknown, unless you are doing a regular continuous production job, is the time factor, especially on one off jobbing work, which doesn't pay anyway.

Material cost are fixed to the current supply and delivery charges, that leaves the overheads, which comprise the rentals, rates, electrics, vehicle cost and weekly payroll.

If you are working alone and rent or mortgage a factory, before you even do a stroke of work you have a rent/mortgage, electric, rates and transport cost to meet.

You have to cover this cost plus the cost of material for the job, and add your hours for the week that you have spent in the factory or running around on work related items, eg delivery or quoting.

You can spend a 100 hours a week just working, but the job will not pay the 100 hours if it's trivial waste of time.

In the end the cost per hour rate, which is $65 per hour approx for 2007, for engineering jobbing work, shrinks to $30 per hr, and there is still a tax factor to take in consideration.
The tax man is not interested if you spend 100 hours a week 52 weeks a year, no weekends off and no holidays.

You will be required to pay the tax from the net profits, and that ultimately hits your hourly rate down.
So in the end you could be working for $15 per hour take home pay, hardly enough to put food on the table.

larger organisations have an accounting department that is well versed in costing and can carry a non productive staff as part of the overheads.

So, who will use the system?
Someone who is very meticulous and saves bits of string and counts the paper clips each night.

Someone who is an accountant and not really on the shop floor, with a complete database of currently used items at their fingertips, or who would have the mental capacity to search out the hidden costs, and who has the time to sit and worry about the pennies and tuppences instead of hacking away at some metal on a machine.

Looking at it in the cold light of day, you could spend 1 or 2 hours on a computer per quote, searching out the costs and quantities to be used, filling in all the particulars to get the cost just right, but this has to be added to that particular job, and so from the start you are behind the next guy's quote.

I think if the system is simple enough to apply, then it just takes having a database of all the known cost items that are allied to your line of work, without having to do a majour search to find the odd item not used before, or a cheaper alternative.

Most people will balk at having to fill in forms, even on a computer, where the information is not at hand, the income tax return for a one man business is a typical example.
Ian.

[handlewanker]

BTW THK, the charge for quoting on a job is currently about $50 per quote up front, and this cost is waived if the customer accepts the quote and goes ahead with the job.

This cuts out all the time wasters, as it takes about 1 hour to properly estimate a job, without a five minute wild estimation that puts most customers off anyway.

I instituted this method at my last place of employ, as we were getting dozens of requests for $5 jobs that took 2 hours to do.
Ian.

[thkoutsidthebox]

Thanks for the comments Ian, constructive criticism is always good.

I've been using a basic version of this database for the past year and it takes about 10minutes to do up an accurate quote for a job using it.

Yeah, there's time involved in inputting your items and their price initially, but this is spread out by entering the prices for a sawblade today and a grinding wheel tomorrow etc. It only takes a few seconds at once, and after a while your left with a fairly comprehensive database of items you use and their costs.
To do up a job you simply run down the list and punch in the amount of each that your going to use.

A workbook in a database program is just what it's called....a workbook. You could do the same thing by recording your costs in writing with a paper workbook, and referring back to them, but that takes longer, requires more 'donkey work' to do calculations on your part (Which takes longer again), and ends up not being used, or books get lost or damaged or torn/worn etc.

Yeah you estimate for hours, but no matter how your pricing a job, your always going to have to estimate for hours involved. Sometimes it'll be accurate, and sometimes it'll all go arse end up and be way off. This program doesn't miraculously pull perfectly accurate hours out of thin air, you still have to estimate yourself and enter the amount, but thats not a drawback.

No I dont count paper clips or save bits of string! lol But I do try to be as accurate as possible if I'm pricing work, and using this program makes that easier and quicker for me.

Plus, having your item prices databased means if you do find a spare few minutes once a year you can go back in and look at where your buying different items cheaper or more expensive. Its not rocket science, it just saves you spending hours going back over the years receipts to do the same thing. How you use this information is up to yourself.

I would contest that larger organisation's accounting departments are non-productive. Yes, organisations often become more beureaucratic as they grow, but plenty of them constantly monitor the bottom line, and make sure that they don't carry unnescessary overheads.

"Looking at it in the cold light of day, you could spend 1 or 2 hours on a computer per quote, searching out the costs and quantities to be used, filling in all the particulars to get the cost just right, but this has to be added to that particular job, and so from the start you are behind the next guy's quote."

"I think if the system is simple enough to apply, then it just takes having a database of all the known cost items that are allied to your line of work, without having to do a majour search to find the odd item not used before, or a cheaper alternative."

I'm not sure what you mean by this? This program is a database of items, but instead of having the database sitting there and scribbling values on a piece of paper, it uses the database to get the maximum benefit. What do you mean about the major search for that odd item? If you buy an odd item, just put the price and name in the database, if you use that item a year later then just select it in the database to be priced for this job. If you don't want to include it in your price for this job then dont bother.....

"Someone who is an accountant and not really on the shop floor, with a complete database of currently used items at their fingertips, or who would have the mental capacity to search out the hidden costs, and who has the time to sit and worry about the pennies and tuppences instead of hacking away at some metal on a machine."

"....just do it the hard way, that is cost of material, as near as dammit, using up all the bargain bits under the bench, time spent plus a bit here and there, general cost of running the show, which all adds up to a dollar cost per hour for as long as it takes the job to be done."

I started on this because I don't have employees, I just work away by myself, and as such I wanted to maximise the amount of time I could spend 'hacking away' and minimise the time drawing up quotes. There's no mental capacity involved, that also saves time, you simply save your items and their price as you buy them, then next time put in the amount of them your going to use. The program does all the brain work.
Why should I 'do it the hard way' when I can price a job more accurately and quicker this way?

...oh yeah....

How do you cost up a disc grinding wheel that is used for most of the jobs on and off?

Stick in a nominal cost of about 10c for each job. How long does it take to type " .1 " (Excluding the "" !) ?

Ok, so your not perfectly charging the exact amount for each wheel on each job, but at least your not charging way too little or way too much. All those grinding wheels add up after 1 or 5 or 10 years......especially if your charging too little or not at all!

Most people will balk at having to fill in forms, even on a computer, where the information is not at hand, the income tax return for a one man business is a typical example.

The whole point of this is that the Information Is At Hand!

But hey, it's probably not for everyone, especially not at this point....

For example, at this point if you have employee's it probably wont suit you because I don't have detailed calculations in for that yet.

Also its based more toward the wood insdustry at the moment because I don't really know anything about the metalworking/engineering insustries.


....Then there's the people who just don't like computers, and prefer to spend hours by hand doing what takes a few minutes on a screen, fair enough.

Then there's the people who prefer to do things 'The way I've always done things' just because its the way they do things and that's it....these people usually go out of business in the long term because they're unwilling to adapt to changing market environments.

Then there's people who won't try something because their competitors are not doing it, they usually don't get a competitive advantage, and they're almost as bad as the people who do things just because their competitor IS doing it!

Anyway, I use this and it works for me, when I've finished Version.1 I'll be offering it to anyone else who wants to try it, it won't break the bank, about $20. If you want it well and good, if not that's up to you. Undoubtedly your more experienced than me, and if you have a system that works and your making a profit then I applaude you 100% (Im being genuine).

Incidentially Ian, how would you like a free copy? I think you'd be the perfect person to tell me what to change or add when Vers.1 is nearly finished. I'd definately like comments on how to account better for businesses with employees. PM me if your interested.....it'd be for free!:cheers:

L8rs.

[Bowman]

I think your best bet is to decide now that your gay so you will have lots of disposable income to spend on equipment. From the looks of your list your going to need lots of it. lol j/k but once you get into wine and women your $$ will be much less then you think.

Good luck,

Bowman

[thkoutsidthebox]

I think your best bet is to decide now that your gay so you will have lots of disposable income to spend on equipment. From the looks of your list your going to need lots of it. lol j/k but once you get into wine and women your $$ will be much less then you think.

Good luck,

Bowman

Are you referring to me?

If so, Im a happily married man...and yes my 'wife' is a woman. And I spend my disposable income on many things, including wine and....wife....

[handlewanker]

Didn't get the gay part, but what the hell it's a big world.
Some of my best friends are hillarious, not gay, but just happy.

Anyway, THK, I'm retired now so I don't have a lot of use for cost factors, but I don't see why the system shouldn't be very usefull.

Reading your post carefully, I think if you keep adding the items you use as you buy them, and the current cost and competitors prices, you would be able to have the information at your "finger tips" keyboard wise that is, without paging through hand written lists in notebooks, and a search capability to find the items would make life that much easier.

I can see where the advantage lies for someone who is on a small planet and needs to get a quote without the scratching through drawers for leaflets and brochures that come through the door daily.

Before I retired I was employed to update the tooling database for tool requirements for every operation of every job and on all the possible machines that could be used.

This is like your system in a way, and I can see the distinct advantage of having the information centralised and at hand.

I reckon $20 is a pretty fair price for a system for co-ordinating costing, and I agree that where you have an item that lasts for weeks and is used on a daily basis, it is better to add some of it's value to all jobs, thereby covering the cost that norrmally just nibbles away at the profits unseen.

The assumption is that everyone has a computer and knows how to use it, those that are still in the stone age will die a natural death anyway.

Over a period of time the database would get streamlined, and the more you use it the better it gets.
This is a characteristic of all spreadsheets, and certainly beats the pencil, notepad and calculator path.

I think in addition that the costs for constant used consumables, such as odd strips of emery cloth, bought on a bulk roll and use randomly, and other items that have a varied life such as a bandsaw blade or grind stones and coolant supplies could be lumped together and applied to a quote at a fixed percentage factor price, thereby covering as well as spreading the load.
This means each and every one of the variables is added to the successfull quotes at a percentage price.

The more jobs you succeed in performing per year means the customers are having a smaller and smaller "shared cost loading" added to their bills.
I don't think anyone would feel ripped off if they had $1 added to their bill if this is what it cost for all the odds and ends spread over the year.

You still have to pay these costs up front, whether you are a big producer or just a one man show, and they will have to be paid by the customer in one way or another anyway.

Incidently if you are earning the money, what better way to spend it than on wine, women and song, beats Butlins and sandwiches.
Ian.

[thkoutsidthebox]

Thanks for the comments Ian,

I didn't get the gay part either! lol

Anyway, I think a search feature is a great idea, although I'm not sure that it would be needed until each individual subsection in the database reached more than maybe a hundred items. But I'll look into it also.

The information is at your fingertips and up to date, and you can update it annually or whatever you want to keep pace with any supplier price increases.

L8rs.
L8rs.

[handlewanker]

Hi THK, as I used to be a numbers person with the tool databases I worked with I would like to see a universal product/item description, similar to the ISO codes that are used for carbide tooling, which is internationally recognised.

I don't propose that you should produce a major work to identify all items used in the manufacturing industry, otherwise you would trip over your beard by the time it was up and running, but as an idea that I once used to identify tooling types.

For example, if abrasives were coded as 12, with paper as -1 and cloth as -2and sheet as -3 and roll as -4 etc and a further grade type as -1,-2, -3 etc, with abrasive medium as a further -1 -2 -3 to cover carborundum, silicon carbide or diamond etc, and then when you access a suppliers website you just fill in the code instead of trying to think what the product would be called, thereby getting the information as to the stock level and current price.

This would look something like:- 12-2-4-3, which means the suppliers computer recognises that you want a roll of carborundum abrasive cloth with a grit size of 120, otherwise if you requested "emery tape" you might get something entirely different.

The system could be divided by alpha/numeric coding whereby the first prefix is A for abrasives, B for rotating cutting tools, C for hand held cutting tools etc etc.
I know for a fact that if you want a TNMG type carbide tip you will get a specific tip no matter if you are an eskimo using it for a necklace or a CNC programmer tooling up for a rocket motor, it's a universal tooling Esperanto.

The advantage is anyone and his dog can generate the part description accurately that a computer will recognise, using a few alpha numeric symbols from an internationally recognised part description, whereas a computer would not know what a floggle toggle was even if it was a common tool used in Brazil and UK mining sites since Brunels days.

This system exists for parts, but it is unique to each firm that makes them, and is not recognised by any other firm. I may be wrong on that one, but if it already exists internationally, good oh.

I think the millitery has a code that has an enormous number content, so if you get one symbol out you get bed pans instead of rocket launchers for the troops in the front line.
Ian.

[thkoutsidthebox]

I'll have to look into that one. Not for this version, but definately for future. Programming the system to accept codes (Or not) wouldn't be technically difficult. If there's a standard internatinal designation for most of the item types it'd be great, but If not I'm sure we could figure something out.
Thanks Ian,
L8rs.

[marshfeet]

If Joe down the street has a machine that will produce 2 or 3 parts an hour and you are producing 2 parts per hour on two machines, then to be competitive you should only be charging for one machine + your setup time. You rarely can charge the customer for either your lack of skill or up to date machinery. Skill level (expertise) and the difficulty of the job should be a major part of your quote. Sometimes I miss on my quote and it will take me 15 hours instead of 10 or 7 hours instead of the 10 quoted, In either case I would charge for the 10.

Marshfeet

[john_rabbit]

i would charge them 3 times the pay of my machinist this pays for the machine some for transport and setup and a little for me the rest goes to the goverment lol