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  • Question for those who do paid work in their shops...

    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.

  • #2
    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 .

    Comment


    • #3
      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
      jack

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      • #4
        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

        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

        Paul
        Paul Carpenter
        Mapleton, IL

        Comment


        • #5
          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.
          Lynn (Huntsville, AL)

          Comment


          • #6
            Originally posted by pcarpenter
            Whew.....I can hear it coming now

            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
            jack

            Comment


            • #7
              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 .

              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
              Paul Carpenter
              Mapleton, IL

              Comment


              • #8
                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.

                Comment


                • #9
                  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.
                  Free software for calculating bolt circles and similar: Click Here

                  Comment


                  • #10
                    Originally posted by pcarpenter
                    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 .

                    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
                    .
                    "People will occasionally stumble over the truth, but most of the time they will pick themselves up and carry on" : Winston Churchill

                    Comment


                    • #11
                      shipping and handling

                      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
                      jack

                      Comment


                      • #12
                        Originally posted by x39
                        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.
                        Wow... where did the time go. I could of swore I was only out there for an hour.

                        Comment


                        • #13
                          What To Quote On A Job

                          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.
                          Jim (KB4IVH)

                          Only fools abuse their tools.

                          Comment


                          • #14
                            screwing customers

                            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

                            Comment


                            • #15
                              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.

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