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  • Trying to improve my business but....

    I am trying to increase the size of my home micro business by adding a few new items and ideas etc. I make garden ironwork, house name plaques and so on.

    Since building my small CNC plasma table, my ideas have got bigger and better and I have made some lovely work on it.

    This got me to looking at my pricing, currently just going on stock costs and pulling the rest out of the air as I go along.

    I have a spreadsheet that works out pricing for plasma stuff based on material+50%, number of pierces and distance cut but when trying to find sensible numbers to fill it in with I also sent a sample file out to a couple of pro shops for a quote to see where I stand.

    The first one to return was for less than I could get the steel sheet for alone, before any cutting or finishing etc, the second was even lower by a large amount.

    I can not get full sheets of steel, too big, too heavy so I get them cut to fit my machine which is a 1/8 sheet size or longer with indexing.

    How do you find your prices stack up against others?

    Am I doing something wrong or just looking in the wrong area??

    Any tips?

    Thanks




    For your information, a sheet of 625x625mm 4mm HRS I pay £27ea inc vat and delivery to me if I order 8 pieces, the quotes for the part I sent were £24 ea and £17 ea - both including the plasma cutting and delivery, this makes my price about double the rate, which might explain why i am not overloaded with orders

    I had a chat with the steel stockholders and even if I ordered 50 625x625mm sheets, it would only drop to £18.70ea and would take me years to use up.
    If it does'nt fit, hit it.
    https://ddmetalproducts.co.uk
    http://www.davekearley.co.uk

  • #2
    Yours is a common problem. My friend did similar work, garden decor etc. and finally went out of business because stores where selling the same type of goods cheaper then he could buy the steel he used. It all comes down to large scale production quantity costs (China these days) vs small lot buying. You can't compete with that. The only way to survive is to make goods that are not available elsewhere or do high quality work, that Joe average can't afford, that will draw high end customers . Become a artist working in metal.
    Last edited by loose nut; 10-10-2014, 10:54 AM.
    The shortest distance between two points is a circle of infinite diameter.

    Bluewater Model Engineering Society at https://sites.google.com/site/bluewatermes/

    Southwestern Ontario. Canada

    Comment


    • #3
      Can't speak for other areas, but around here in Milwaukee we have out-fits that help each other
      and others that would jump on any opportunity to destroy all competician.

      Among the guys with the white hats, are a few that will use each/other's resources and strong points
      to advantage, like shared buy~ing, or storing a portion of an order, in exchange for say
      high~end cad-cam pathing etc. etc.

      The secret is to make and nurture as many good connections as you can in your transactions.
      I've even worked in a small tool & mold shop that traded personel as needed on difficult molds,
      or machine-time, or the other outfit has a much better dock, facillitating a better trucking situation.

      Perhaps you can find a white-hat opperation that has a need, you can bolster up,
      in exchage for help with your challenges. Incredibly valuable and rewarding relationships
      can grow out of these things.
      Phil

      Comment


      • #4
        A friend does similar work as the OP. He has the same problems of larger shops eating him up on pricing. There's really no way a home built plasma can compete with industrial grade machines and the larger shops buying power.

        What he did as a solution was to not compete at the same level as the big guys. He added other services like bending, machining, welding, etc, etc. In other words, follow on process services the bigger shops didn't offer to their customers.

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        • #5
          What I did was to find a niche or 2 that aren't too crowded and market to that group. My main business is making prototypes of new inventions. I also make production tooling for other local shops and have developed my own line of shooting accessories for those who shoot in competitions. A good field is sports or hobbies. One company is now doing well making paintball guns and equipment. Some are making model engines and other models for sale.

          Find something you can do well that has a large group of other people involved and sell to them.

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          • #6
            I have to agree with loose nut. In a small shop you can NOT compete with large shops/companies or the Chinese. The biggies have a railroad siding which was paid for 50 years ago and they get materials by the box car or flat car full. Forget wholesale prices, they get factory prices and they probably beat the heck out of the factory for the privilege of supplying them. It is surprising how much leverage you can have if you buy millions of dollars of anything each year. And they have the equipment to handle it and to cut it into smaller pieces ECONOMICALLY. It is all in their favor.

            As loose nut says, you need to make something that is NOT AVAILABLE elsewhere or that is significantly higher quality or has snob appeal. Smaller market, but it can be yours, not theirs. If you do develop a product that interests the biggies, then be prepared to lose the business when they get geared up to make it. And move on to the next product because legal actions are too expensive to worry about. I look for products that are somewhat limited so the biggies are not tempted to copy them.

            Forget patents unless it is a billion dollar item as they have lawyers on staff and you have shallow pockets. They will wear you down.
            Paul A.
            SE Texas

            Make it fit.
            You can't win and there IS a penalty for trying!

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            • #7
              What loose nut and Paul said, regardless how nice it is or that it is hand made (and so each one is one of one, to some degree) something like your wall brackets are going to be like or very similar to...10 000s but you could make a version that is very much more complex or special for each individual but then the concern becomes how large a market is that going to be where you are at or how far afield can you go looking to get more clients?

              The guy I get most of my steel from dabbles with custom stuff since there are periods of each month that are "down", one of his more recent projects was a trap door for a custom built home owner who wanted access to a lower level but did not want a traditional set of stairs, I guess from a safety/legal standpoint, this trap door had to be a certain way, size, load carrying etc. etc. it turned out well but, more to your question, how many of those are there going to be? He has also made very elaborate features of a water garden, but again, that is one of one. Great if you have time to spend looking and working with those one off clients, great from an artistic and design stand point but very time consuming, hourly rates often end up pretty low...

              Locally there was a period of history where a lot of homes had wrought iron work of some sort, fencing, gates, light posts that sort of thing but who builds like that anymore? If someone here wanted to do that, I suspect they would have to get nearly 100% of all that sort of work each and every year since so few want that expense anymore. A homeowner wanting a big fancy driveway gate here is very unlikely to find someone whose business that is but is going to have to spend time trying to coerce a welding shop to take on the task (and likely loose money) or leave it to the home builder who will then have to do the same thing (lots of money to find someone who is maybe capable but more, willing)
              Last edited by RussZHC; 10-10-2014, 02:14 PM.

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              • #8
                Thanks all, some excellent suggestions as expected

                Ok, so forgetting about what the "big boys" can do, what I need is a good pricing model or strategy for plasma work. As I said, I have a spreadsheet that works out pricing for plasma stuff based on material+50%, number of pierces and distance cut but is that a "sensible" model?

                Should you charge markup on materials or use a higher price for the actual cuts and only cost on materials? Or do it all at cost then add a markup on the whole sum?

                I like the idea of charging as per the spreadsheet as that seems to make some sense but could be a bit too heavy?

                So it's basically some suggestions on pricing models I guess?


                Btw, over the pond, how much would you pay for a full sheet of 4mm HRS (2500x1250mm) just for interest.
                If it does'nt fit, hit it.
                https://ddmetalproducts.co.uk
                http://www.davekearley.co.uk

                Comment


                • #9
                  It sounds like 50% is a magic number (It's just made up). What you need to do is create an accurate accounting of your costs, including time, material, % of mortgage costs, insurance, depreciation, etc.

                  Comment


                  • #10
                    At a blacksmith conference a number of years ago, the question came up on how much to charge.

                    The smith that was putting on the Q&A session told us this:

                    "You first off have to deicide how much money you want to earn in a year. Add all your expenses, not only business related, because when you are self employed there is little distinction between personal expenses and business cost.
                    Figure all your insurance, your phone bills, internet access, car payments, food... everything.

                    When you arrive at that number, divide it by 1000, which is likely the number of available yearly hours you will have available for production in a one man shop. That will be the minimum that you can charge per hour to survive. Don’t forget to figure your taxes in there..."

                    As this will be a figure that is likely to be much higher than the cost that items can be purchased for at mass marketers, you will need to cultivate clients that want the hand made items that you can produce.

                    In the case of blacksmiths for instance, we have work that primarily falls into three classes, Traditional, using only hand powered or turn of the century processes, traditional appearing, in which modern methods are used but they are cunningly disguised, and fabrication, in which no effort is made to conceal the construction method. There is nor inherent difference in value except in the eye of the purchaser. The ethical part is not to miss-represent your work. The high end stuff is what people pay more for.

                    You have the ability to act quickly on requests for custom work and you may find this is the only type of market that is going to be profitable in the long run. As Black Forest has said " It's easy to become a millionaire, start with 10 million dollars and start a business."

                    You can mark up the material, but the metal cost is usually going to be a small part of the final cost in crafty type stuff, so even doubling the cost will not have much impact.

                    The price of the plate you mentioned works out to about 440 dollars at out 'Metal mart' type store

                    paul
                    paul
                    ARS W9PCS

                    Esto Vigilans

                    Remember, just because you can doesn't mean you should...
                    but you may have to

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                    • #11
                      Even big businesses go under when they fail to account for all costs. Could be some of your local competition are doing exactly that or they are getting a huge break on materials and passing that along, just to get the business. It may seem like a simple answer to say, "Stick to unique products and the type of service a big company can't or won't offer.", but that's part of being a niche business.

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                      • #12
                        deleted
                        Last edited by Black Forest; 10-11-2014, 09:49 AM.
                        Location: The Black Forest in Germany

                        How to become a millionaire: Start out with 10 million and take up machining as a hobby!

                        Comment


                        • #13
                          What do the "pro shops" near you do? Not do?
                          What is their lead time?
                          What are they charging for the design work if a customer walks in with a pencil sketch?
                          If a "pro shop" quotes the work you are doing at less than your costs for materials, consider having them do it for you. Value add to that work by grinding, deburring or such.
                          Think out of the box, talk to farmers, mechanics, builders, hobby machinists & welders in your area. Take a variety of examples to car boot sales. Once stimulated by the availability, many people have an idea they want to make. Very few have the ability to cut out the parts from large thick sheets of metal.
                          Partner up with a hobby machinist in producing some sort of kit.

                          The key is to know the per inch cost to operate, maintain and replace the equipment. Including computers, software, ventilation, heating & cooling, transportation, insurance, taxes, etc. Your labor for fabrication is keyed to the per inch costs. This includes traverse times, loading & unloading, pre & post processing. Design work is more difficult to quantify. How quickly can you turn a pencil sketch into G-code? Is your software adequate, comparable to pro shops; or is it cumbersome, slow, lacking features? What about client consultation?

                          Be sure to print up some contact cards. Your number on a napkin or scrap of paper is too quickly lost. I had one woman call me almost 5 years after I gave her my card.

                          service, added value, accessibility; those are the keys

                          Comment


                          • #14
                            Dave

                            I wok for myself doing pretty much what you do...small ornamental ironwork. In addition to that I also do welding and machining and when I get my plasma up and running (which will not be all that long - maybe a week at tops) I will use that as well.

                            I spoke to a place where I use to work and asked them what are there pricing details and it was surprising cheap. However, the work I do and the people I cater for are the low income people that can't really afford the qualified people to do stuff. In other words if a bigger machine shop said no to someone who wants a small part welded or machined (in which the setting up time is longer than the job itself) they probably refused to do it. I do the quick welds, make a small part by machining and I do not charge any setting up time. I pretty much make a price at the time of the job. For example, I could do say a 1 weld job for 3 different people but the price would never be the same. In addition to this, extremely low income people and people who are pensioners I do not charge labour at all. If someone wanted a 1 or 2 weld job I would do it and not charge them at all. When I do this I do have a very long customer list who keep coming back time after time and the people who pay what I ask have no questions at all with my pricing. In addition to this, 1 person may come back 3 or 4 times with a quick welding job and that too would never be the same price as the previous time. Everyone I cater for are very happy with the service I provide. I could even do small jobs all day long and make some good money, and other times do the same and make not much at all. In the end it all "evens" out at the end of the day.

                            Word has got out about what I do and with the "word of mouth" thing I have got going has been really good for me. I do however have a "normal" job which I work in a winery for the vintage season which for me take up about 8 months of the year. The other time I work for myself (even when I am doing vintage work) and it keeps me in front financially when the work is not there.

                            Hope this helps in some way.

                            Mtw fdu.
                            Last edited by Mtw fdu; 10-10-2014, 07:07 PM.

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                            • #15
                              I think I might have the solution, plasma cutting isn't expensive neither is laser or water jet, therein lies the problem, selling the service won't make any money, period.
                              However selling a product that includes any of the above will, as was once told doing some work for a firm making combs and dog leads ( diverse!) if you don't make something you won't make nothing.
                              You need a product, a physical entity you can sell, just selling cutting won't cut it (pun is painfully apparent )
                              Think of a product, then make it, whether it needs plasma cutting or not is irrelevant, having the ability to do so is useful, but not vital, it's like having a trowel, what can I build?, the answer is anything.
                              Last pile of metal I sold was builders profiles, easy to make, just 40 mm tube some turnbuckles and bingo as it were.
                              Another batch to do time permitting, retooling after burglary takes a bit of effort, avoid farm gates! You will never be able to make them cheaper than they are available, but saddle racks are good, I found they sell better in stainless!
                              Mark

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