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x39
08-22-2007, 10:26 AM
I was curious how much you mark up the price of materials, assuming that :
a.) The customer has made no down payment
b.) You finance the materials.
c.) The job isn't a favor for a friend, strictly a business deal.

Thanks.

J.Ramsey
08-22-2007, 10:35 AM
Time and materials, figure what your time is worth, on materials are you getting any kind of deal from your supplier? If not I would tack on at least twenty five percent .

platypus2020
08-22-2007, 10:45 AM
I agree with J. Ramsey, time and material (with mark up on materials to cover waste and shop supplies) but I also throw in a charge for the equipment use, about additional 5-10% of the time and material cost (overhead).

jack

pcarpenter
08-22-2007, 11:19 AM
Maybe I have no right to contribute here since I am a consumer of services and not a provider, from the commercial machining standpoint, but I am not going to let that stop me:D

I am generally sick and tired of getting "fee ed" to death. Buy a car and they try to tack on an "advertising fee" of several hundred dollars for ads they run that I don't get anything out of. The ads are for their benefit, not mine. I never bought a vehicle because of an ad...either in print or on TV. I do my own research on what I want to drive. Why not a lawn mowing fee for mowing the grass in front of the dealership or a floor mopping fee for keeping the floors clean?

Just quit. Figure out what you have to charge per hour to make your desired profit and charge that. Quit nickel-and-diming people to death. If you want to make money off people, man up and just say "this is what I want to do the job. I'll get the material at my cost and the rest is for my time....whether that time includes acquiring materials, setting up the machines, laying out the work, or making cuts".

Treat people fairly and they will be repeat customers.

Whew.....I can hear it coming now:D

Paul

lynnl
08-22-2007, 11:58 AM
Paul I feel your pain! My wife does the bill paying, but if I ever take a look at the phone bill I'm in a bad mood for weeks!!

But I think the proper way to view the earlier comments is that they're really just describing a formula for arriving at a reasonable price to cover all costs and a fair profit. Certainly equipment use (wear/tear/etc.) are real costs for the service provider, that have to be spread out among the customers.

I agree, in many instances it would be better if the consumer never saw those charges mentioned. And I'm sure in some cases they REALLY ARE just a gouge, presented in what's hoped to be a more palatible way.

platypus2020
08-22-2007, 12:01 PM
Whew.....I can hear it coming now:D

Paul

I generally agree you, every one wants a good job at a fair price, but if you are trying to turn a true profit, really turning the shop into a profit center, there are many hidden cost, that people forget, wear and tear on the machinery, welding material cost, misc nuts and bolts, heat and lights, to name a few. This is the diffence between a hobby and a business. The jobs that go through my shop are generally in the $150-200 range ard rarely above $300, and will never pay off the investment I made in the shop, nor did I plan or want it to, I'm not looking for another job, I do it because I want to, and make a few buck toward the next tool purchase.

Jack

pcarpenter
08-22-2007, 12:17 PM
Certainly equipment use (wear/tear/etc.) are real costs for the service provider, that have to be spread out among the customers.



I certainly don't begrudge a business owner charging whatever it takes to make a profit with *all* costs of doing business considered. However, I have a problem with setting a price for work and then also marking up raw materials and then presenting that as part of a separate "materials" cost. I would just hope that a good business person would be interested in not leaving his customers with the impression they were going to get the shaft as often as possible. It shouldn't be hard to figure out the costs of operation and and profit ratio and just charge that amount plus materials. I agree that you don't have to show your customer your math, but the fee factor is just a reason to go elsewhere.

If one leaves ones customer with the impression that you are working to gouge them as many ways as possible, they may look elsewhere. I think this is one reason that stuff goes overseas. A final price is negotiated and there are no surprises--except perhaps for the poor quality or lead paint:D .

This brings up another pet peeve...."Well....the price of (fill in the blank) has gone up so we have to charge you 25% more" When the cost of (fill in the blank) actually went up 10%. If you BS your customers, the smart ones will figure it out and look for someone with integrity to do business with in the future.

paul

Mad Scientist
08-22-2007, 12:26 PM
Time and material plus the really “tricky part”, what is the job worth to the customer? If you figure a quote a $100 to make a part and you are pretty certain that customer does not want to pay that much, now what? Do you still charge him a $100 because that is your rate? Of course by doing so you could lose the job and any future "better" paying jobs from him.
All you can go on here is your gut feeling.

Evan
08-22-2007, 12:39 PM
I always charged a standard $50 per hour in my computer store. I also informed the customer that I didn't charge for the time the computer spent twiddling it's thumbs, such as doing a long defrag. For parts I had a standard set of markups that I applied regardless of who was buying. No other "fees" or other nonsense.

I detest the extra fees such as "shop supplies" "lot charge" etc. When I bought the PT Cruiser they tried to add on another $100 for some sort of lot charge or something. I looked Darryl (salesman, part owner) in the eye and said "Not if you want to sell me this car". He had already quoted me a price and that was what I had agreed to pay, not a penny more. We bought the car at the agreed price.

TGTool
08-22-2007, 12:41 PM
I certainly don't begrudge a business owner charging whatever it takes to make a profit with *all* costs of doing business considered. However, I have a problem with setting a price for work and then also marking up raw materials and then presenting that as part of a separate "materials" cost. I would just hope that a good business person would be interested in not leaving his customers with the impression they were going to get the shaft as often as possible. It shouldn't be hard to figure out the costs of operation and and profit ratio and just charge that amount plus materials. I agree that you don't have to show your customer your math, but the fee factor is just a reason to go elsewhere.

If one leaves ones customer with the impression that you are working to gouge them as many ways as possible, they may look elsewhere. I think this is one reason that stuff goes overseas. A final price is negotiated and there are no surprises--except perhaps for the poor quality or lead paint:D .

This brings up another pet peeve...."Well....the price of (fill in the blank) has gone up so we have to charge you 25% more" When the cost of (fill in the blank) actually went up 10%. If you BS your customers, the smart ones will figure it out and look for someone with integrity to do business with in the future.

paul

I agree on the pricing strategy, Paul. It always annoys me when I'm comparison shopping for stuff, find the actual prices, then find that shipping adds 40 percent more. I know what the thing weighs and I know what shipping costs are. I also know it costs something for shipping materials and labor for picking and packing but it always seems like the quoted price is a lowball to sucker me in, then they'll actually collect as much or more than the next guy. So on adding material costs to jobs I try to figure the actual cost including any shipping and expect the hourly shop charge to cover overhead.

Auto shops usually charge from the manufacturers' flat rate tables which act as an averaging factor for individual cases. Sometimes I could get the job done in the flat rate time and sometimes not, but unless there was a real reason to charge more any customer could expect to get charged about the same for the same job. I did have one Audi customer who quarreled with the charge since he said he timed the job while I worked and it hadn't taken the hours shown on the job sheet. We explained how it worked by he was adamant that he wasn't going to pay for hours that weren't put in. Okay, if that's how he wants to work, when he's got a frozen bleed screw and it takes another hour to get it loose, he gets charged for all the extra time. But usually it works to the customer's advantage because he doesn't pay extra because some green or dumb mechanic took twice the time to do some simple job.

That's not directly applicable, I know, but I think the principle is the same as a marketing strategy to avoid giving the customer the feeling that he's being nickeled and dimed into the stratosphere.

FWIW

platypus2020
08-22-2007, 01:05 PM
This is very touchy subject, I know 2 different manufacturers, that have told me they make up to 25% of their total profit on shipping and handling charges. He said they get special low rates for shipping, because of the volume they do, and they charge the customer by the piece and not by the weight. Look at the TV ads, the products are questionable, but what the really want is the S&H, buy one and get one free, just pay seperate S&H. If S&H was really all that much of an expense to the seller, how can Enco offer free shipping every month.

Do you offer your customers an itemized bill?, mine are very basic, one part at this price, no break down what so ever.

Jack

Tinkerer
08-22-2007, 01:20 PM
I was curious how much you mark up the price of materials, assuming that :
a.) The customer has made no down payment
b.) You finance the materials.
c.) The job isn't a favor for a friend, strictly a business deal.

Thanks.
Ok not a friend... strictly business. First thing I'd do is look at needed part figure out materials and time needed even if it's a WAG and tooling then add together and present cost to customer. Now if the materials/tooling out weight labor ask for that cost up front... if labor out weights other cost ask for 50% of cost down. If they balk at the down stroke they will balk at the bill at the end of the job and you'll be out of all. Remember it's a custom part... you can't readily sell it to recover your loses if they cut and run.

As for mark up on materials... at least 10-15%.

So to recap
a.) The customer has made no down payment
Then you don't have a commitment to buy at completion and no incentive to stop them from shopping after they tell you OK make it. No money down no work.

b.) You finance the materials.
You a bank. (see above)

c.) The job isn't a favor for a friend, strictly a business deal
Then treat it as so % down balance COD. Else you'll get heart and flowers about how the baby needed new shoes. :rolleyes:

Scishopguy
08-22-2007, 01:40 PM
A very old and dear friend of mine, who ran a family machine shop business successfully for many years, told me that the way to stay in business is to study the job carefully and estimate how long it will take to make the part. Price the materials out, keeping in mind that you often have to buy mill lengths of stock, and figure in any cutting tools and supplies that you will use up and have to replace. Come up with a number and then double it. That is the quote. He said that sometimes you will make a profit and other times it will not be near enough, due to unforseen problems. It must have worked as his business started in the early 70's and is still being run by his son. Of course, you may have to adjust your rates to friends and neighbors depending on whether or not you ever want to see them again. ;)

AZSORT
08-22-2007, 03:05 PM
If you think doubling your costs is bad, When I used to be in the aircraft avioncs business, the standard at our company was to charge 5 times cost. The trick is to have a product that is in demand with hopefully something about it that is proprietary and not be competing at cost. They used to joke about getting in bed with the customer with a good up-front deal then screwing them. Until you get into a line of business that is special in some way, you will always have trouble with problem customers, trouble paying your expenses, losing work overseas, etc. Give to your customers something special so they will be willing to give you a fair price, or be like the masses having to give them a cut-rate price to get the business.
Greg

DR
08-22-2007, 05:06 PM
I give the customer a price per part. No itemization, unless they insist. (Recently I did a job with quite a bit of brass, customer initially asked if the price was same as last time, yes, except for extra charge reflecting increase in brass. That job I itemized because total was twice previous because of brass increases.)

Materials are typically marked up 20% over my cost. The time for ordering/pickup, etc are regular man hours.

If the material comes only in 8' lengths and the job uses 6' I keep the extra 2' unless customer asks for it. Either way he pays for the 8'. Most customers aren't interested in getting the rem back. I used to only charge for the amount used, but I ended up with a ton of rems I paid top dollar for.

Overhead for machinery, "standard" tooling, rent, utilities, etc, etc are included in an hourly rate. Special tooling unique to the job is charged at cost + 20%. I've found it a good idea to forewarn the customer about the special tooling costs, sometimes they're fairly substantial.

I have no magic formula for computing the hourly rate. IMO, the only good way to determine your hourly rate is to pick a reasonable rate and try it for 6 months. At the the end of 6 months, look back and see if it worked.

BTW, I don't do work for individuals, or at least rarely (too hard to deal with). One thing individuals like to do and some industrial customers is go to the scrap yard and get a chunk of unknown material for their parts. I learned long ago not to machine customer material unless i know exactly what it is.

mochinist
08-22-2007, 06:59 PM
I give the customer a price per part. No itemization, unless they insist. (Recently I did a job with quite a bit of brass, customer initially asked if the price was same as last time, yes, except for extra charge reflecting increase in brass. That job I itemized because total was twice previous because of brass increases.)

Materials are typically marked up 20% over my cost. The time for ordering/pickup, etc are regular man hours.

If the material comes only in 8' lengths and the job uses 6' I keep the extra 2' unless customer asks for it. Either way he pays for the 8'. Most customers aren't interested in getting the rem back. I used to only charge for the amount used, but I ended up with a ton of rems I paid top dollar for.

Overhead for machinery, "standard" tooling, rent, utilities, etc, etc are included in an hourly rate. Special tooling unique to the job is charged at cost + 20%. I've found it a good idea to forewarn the customer about the special tooling costs, sometimes they're fairly substantial.

I have no magic formula for computing the hourly rate. IMO, the only good way to determine your hourly rate is to pick a reasonable rate and try it for 6 months. At the the end of 6 months, look back and see if it worked.

BTW, I don't do work for individuals, or at least rarely (too hard to deal with). One thing individuals like to do and some industrial customers is go to the scrap yard and get a chunk of unknown material for their parts. I learned long ago not to machine customer material unless i know exactly what it is.Pretty much exactly what I do except I only give a price per part on high quantities.

That last part couldn't be more true, pain in the asses bring in some beat up piece of mystery metal and want you to make a part that they over toleranced:mad: and then they balk at the price.

Weston Bye
08-22-2007, 07:16 PM
Perhaps doest't apply, except for the bigger outfits, but wait for the time when the potential customer sends his auditor in to look at your books and TELL you what the job should sell for. Happens sometimes to those of us that deal with automakers.:mad: Course, we're usually dealing with 100's of thousands of parts and millions of dollars in business. Still don't like it.

IOWOLF
08-22-2007, 07:35 PM
I get $35 per hour plus materials , 1/2 down if I don't know you.

I do get a lot of trades/Barter work but that is just for time they do pay for all material. Do I get rich ? No, But keep in mind I walk 120 feet to work,All machines are paid for,and when I don't feel like working I don't,I get 3 day weekends most of the time and I am the least stressed guy you know(without Meds.).

Oh and even I dont touch anything It is a 15% markup for ordering it.

Locksmith
08-22-2007, 09:17 PM
I can tell you that, in my business, we often have catalogs that have the "List" price in them so we can show them to customers, and a varying discount when we buy it at wholesale.
Usually, the parts are itemized and the labor is added in as a seperate amount. Depending on the job, the labor can be made up of flat rates for each item installed, totalled together, or just an hourly rate figured for the estimated time. Since most of the jobs tend to be small and short, the labor is rarely more than an hour to an hour and a half.
Those of you who are adding 15-25 % to your material cost might be interested to know that the markup on many things is 80-100%. If the going rate for something is $50.00 and I pay $25.00, I'm not making a $25.00 profit. There are numerous costs involved in getting it onto my shelf and then into your house. No one is screwing anyone; a person is quite welcome to buy the same item at a home center for $40.00, if they sell it there.

What I find curious is that people who don't charge for their time like a locksmith or plumber or machinist, don't seem to realize the value of their own time. Example: I live in a fairly large city and I mail a lot of packages. I use the automated postal machine whenever possible, but some times I have no choice but to stand in a long line. I sometimes converse with people who will wait in the line to check the weight of an envelope so they can make sure to put enough postage on it. Think about it: If it was me, I'd add another stamp or two and leave, rather than stand in line for 15 minutes. Since the hourly rate is $85.00 for what i do, is it worth $.82 cents to save 15 minutes? Are the people that are waiting realizing that they are giving their time away for 3 bucks an hour?

J.Ramsey
08-22-2007, 09:54 PM
I get $35 per hour plus materials , 1/2 down if I don't know you.

I do get a lot of trades/Barter work but that is just for time they do pay for all material. Do I get rich ? No, But keep in mind I walk 120 feet to work,All machines are paid for,and when I don't feel like working I don't,I get 3 day weekends most of the time and I am the least stressed guy you know(without Meds.).

Oh and even I dont touch anything It is a 15% markup for ordering it.
IOWOLF
You and I have much in common,I charge $40.00+ per hour and walk ninety feet to the shop:p ;)

x39
08-22-2007, 11:04 PM
Gentlemen, thank you all for your varied and interesting answers. I've been charging 20%, but I thought it would be interesting to see how that compared with others.

wierdscience
08-22-2007, 11:12 PM
Normal stocking markup here is 2x cost on stock items(inventory tax and stocking costs) and 1.3x on special orders,unless I have to order 20 feet to get the 4 feet that are needed,then it depends on the job/customer.

Shop rates are $40/hr on my calender,$80/hr if it's a rush or overtime and $120/hr on weekends.

J Tiers
08-22-2007, 11:57 PM
In defense of teh "fees"......

There are two reasons, aside from making a profit, that make those reasonable to separate.

1) for fees or surcharges that vary, such as fuel costs for a delivery service..... a separate surcharge allows you to change the cost without changing the basic rate card, and potentially having costs to re-print rate cards etc.

2) The "fee" or surcharge allows you to have a stable LOW cost "visible" to your customers. It shows (supposedly) what YOU are charging. the surcharges etc are (supposedly) "outside costs" that are imposed on your business and passed along.

Now, in many cases that is BS. Like banks..... A surcharge to be served by a live teller, AND an ATM "fee", gotcha no matter what you do.....

rbregn
08-23-2007, 02:04 AM
Raw materials are doubled, other supplies I Divide by .7 and shop rate is $40. hr unless I have to turn on the Argon then it is $45 hr. I am the cheapest around. (montana!)

tattoomike68
08-23-2007, 02:13 AM
At work it is $60 and hour, thats $1 a minute so making out the bill is easy. (tell the customer that and they dont stand around talking all day.)

Metal is marked up 10%.

TECHSHOP
08-23-2007, 11:18 AM
It is better to say no than underprice yourself.
Wanna suck all the enjoyment out of your hobby?
Underbid a few jobs and pretty soon everything will suck.

I usually "feel better" about any job when the customer places "the market value" cost of the material(s) in my hand before I do anything.

gregl
08-23-2007, 04:31 PM
One thing I took a long time to learn is to set your prices and stick to them. The client who tries to talk you down is usually the one who will be a PITA all the way along, whining and complaining even after the job is delivered. A wise old man once told me that he never gave discounts. He either charged full price, or he gave it away accompanied by an invoice listing the full charge and marked, “Paid by the pleasure of your friendship.” This was, he said, his way of letting folks know how much his work was worth.

IOWOLF
08-23-2007, 04:49 PM
Ummm,I charge the 15% for a reason , as stated above and Phone calls, CC charges,and no one but you have complained (read Bitched about it) yet.


I have to get 20' when the Customer wants 5' who eats the rest? I do.
And if you have a business, run it your way, I will do the same.

Not an attack, Just an observation.:o

tattoomike68
08-23-2007, 05:06 PM
Ummm,I charge the 15% for a reason , as stated above and Phone calls, CC charges,and no one but you have complained (read Bitched about it) yet.


Nothing wrong with selling steel. Thats easy money. If you can sell truckloads then more power to you.

My brothers shop stocks bronze bushings ,driveline and PTO parts, cross kits, bearings,auger flighting, pulleys, chain and sprockets too. You end up getting the job of boring and keying sprockets and pulleys, keying shafts and any other labor you can get to get the customer fixed up fast.

Farmers are as happy as a pig in mud if you stock what they need. ;)

IOWOLF
08-23-2007, 05:18 PM
Agreed, But I live too close to a big City or I would stock it too.