New Rookie in Town!

Hello guys! I am 10 years old on the dials and I am just now trying to start my own shop. I don't want to be the new HooK-- in Town! I have 2 cnc lathes w/ barfeeds. I need advice on costing jobs and quoting competitive rates. The lights and the phone are the overhead and I work for another manufacturer full time in the higher 20s. From the threads I have read you guys are real and I can appreciate that! Thanks in advance for any advice, Jon

APMJBREWER said:

I don't want to be the new HooK-- in Town!

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Good.

APMJBREWER said:

I need advice on costing jobs and quoting competitive rates. The lights and the phone are the overhead.....

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No they're not.
If you think lights and phone are your only overhead you might be in for a rude awakening.
There are lots more expenses that you need to add in NOW, even though you have a day job.
You have just hit on the most difficult business question...how to quote a price, get the job, and make a profit. I don't know if I can answer your question except to say that I now charge 50 percent more than icharged when I wasn't making much


1: Do not qoute a "competitive" price just to get the job.
Get what the market will bear.
Sure it's good to know your cost and then add on little for profit. But guess what ? Even the most experienced owners don't always know their costs, much less the cost of unexpected things(crashes, losing lease, moving).
Read some previous posts about "cost based pricing" and "value based pricing".

2: Your customers can pick only 2 of the following...
A Quality
B. Fast turnaround,
C. Low price
You will not be able to give them all 3 no matter how good you think you are or how low you think your overhead is.

3. Get some accounting advice NOW. Set things up like a full time business up front even though you have another job. Get out of the work at home mentality.

Sounds like you are off to good start. You have the know-how, the space and the machines. Thats what I had. But the business part has been the hard part and it still is.
Keep us posted.

SM

After 56 years in the shop, I still have a tough time quoting how long a new job will take.

Listen to what SlicerMan is saying. There are a lot of hidden and unexpected costs. Keep good records.

Read all the others in here who have gone thru this. Tons of good advice.

Good luck.

APMJBREWER said:

I don't want to be the new HooK-- in Town!

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Ditto, good!!,

The lights and the phone are the overhead

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Ditto again. APMJbrewer, you have no idea. Honestly thats my only overhead, plus rent, both me and my partner should be putting 10k in our pocket each month. Sadly that doesn't happen. Its scary howmuch it costs to run a business and how much goes into running a job.

1st) you bought machines, you need to get paid back, if you don't think so, maybe you should have bought your day jobs employers machines so he could pay you a wage.

2nd) guessing garage or home shop, same thing as the machines.

3rd) repairs, time to research and order tools.

4th) support equipment, grinders, sanders, inspection stuff, computers, software, a fricken stuffed shirt(accountant).

5th) Billing and book keeping is overhead, and is far from insignifigant, 20 phone calls a week to get paid needs to get priced into every job.

6th) office supplies, fax machine, extra phone line, new copier/scanner, file cabinets to keep track of all this crap.

7th) sweeping and mopping(mop buckets aren't free), and putting fresh toilet paper (or asswipy's if you're a good employer) into the bathroom.

8th) maintenance and fluids, coffee, waylube, coolant, propane and hydraulic for the forklift. GoGo juice for the delivery truck.

It adds up, it adds up quick. If you are smart you can control it, but you can't eliminate it, by saying that phone and electricity is your only overhead, you either want to get rich in a week (tell me THAT secret), or you are itching to undercut and be the whore.

Slicerman has some VERY good advice. I couldn't have said it better myself, but since I'm sick of running parts on a Friday night, I'll expand a little.

One phrase that has worked wonders for me, "what is your target price?" Every buyer has an idea what it will cost, they may already have prices from other vendors or a bid history on what they are competing against. This can save you time on something that you are out of your league on, or it can keep you from losing your ass. Never be afraid to say, weather you know their target or not, "I don't think I can be competitive on this".

Since it sounds like you are job shopping, price alone doesn't mean much, the customers that will cut a faithful vendor to save a nickel aren't worth having, they'll just fuck you too. It may be the quick buck you are looking for to get a leg up, but its no way to keep going as a small guy. As queer and PC as it sounds you need to develop good relationships with your customers.

When your buyer calls and is freaking out about XYZ, you can tell them you sent 14 LMN to heat treat yesterday, then it goes to Cad plate, XYZ goes on after assembly and paint, the material is in and already cut, it will be there long before you need it besides you only need to ship 3 assemblies and you have 4 XYZ on the shelf, I bought the material already heat treated, I'll throw in the film lube for free, don't worry, YOU WILL MEET YOUR DEADLINE. They sigh a bit of relief, and the world is good. Next week 20 tons of material show up on a big truck at YOUR shop, and then they ask for a quote, they know you will take care of them.

I have 2 customers like this, and its not because we are cheap, its because we are full service. Its knowing their products and what is involved and what they need first, also engineering, solid modeling and FEA analysis, they get a bit for free so they get the job, then we whack them. We go into heat treats if we have to, coatings, passivation, paint, riveting, some fab, some welding, and assemblies(<--- big money here). We'll bend over backwards to meet their needs, for the right price.

I'm not doing it for free, this game is fun, but its not fun if you're losing your ass.

As one old man that taught me a lot once said, "I can go just as broke sitting on a beach drinking margarita's"

Price accordingly.

Bob,

Your posts are always right on the mark! All ye who enter would be wise to pay attention to your thoughts of wisdom.

You should write a book on how to own and run a machine shop.

greg

Quite a bit of $ goes to the little stuff, more so when starting out. Machines themselves aren't half of it. You will have the constant consumables like inserts, taps, drills and all the tools that are needed for that one job. About 1/3 of what I bill goes to overhead and I'm just a 1 man shop. Then 1/3 for government, and pretty lucky if there's a 1/3 left for me. Note that if or when you become self employed aka no more day job, food and everything you use, consume(your life) becomes your overhead so that last 1/3 gets eaten up pretty quick too.

As to quoting. Make a price and see how that works out. I used to take a lot of time to quote even the simplest things, now it has gotten a fair bit faster. Unless its a large project with hundreds or thousands of parts as being off a few seconds quickly adds hours or days to a job. Its also very important to know what equipment some of the other shops you're competing with have, their usual production process and such and what they likely are making it for. How long would it take you if doing it in their shop, vs your shop?

And I still turn away over 1/2 of the drawings I see, some of it isn't worth touching. Some of it I don't have the tools to do and can't justify it.

A little more info.

Hey guys, I'm starting out with a Mori and a Wasino from the barn. The tooling has been adding up for quite some time. DAMN drills Inserts.
In that respect I have a lot of overhead I was more referring to no shop rent, added labor, or machine payments.
Thanks Guys,
Jon

You absolutely cannot underestimate the cost of perishable tooling, secondary equipment, inspection tools, etc., etc.. You will find that this is a huge expense. If you think you have a lot of stuff already, expect that it will be only a small fraction of what you will need.

rockfish said:

You absolutely cannot underestimate the cost of perishable tooling, secondary equipment, inspection tools, etc., etc.. You will find that this is a huge expense. If you think you have a lot of stuff already, expect that it will be only a small fraction of what you will need.

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I learned this the hard way. YOU will never have enough tooling, tools accessories, tool grinders all the neat little gadgets that make the machine shop go. The stockpile you have is great but then when you run another job all of a sudden you need a new tool It never ends. I worked turning wrenches and I couldn't tell you how many times I had to go out and buy a tool just to do a job.

If your machines are already paid for thats a plus for you. If you own the building thats a plus for you. Obviously you have a computer or you wouldn't be here. But associated software is a bitch and expensive. Pending on the parts you do you might need a CMM and a optical comparator. Big bucks here, Office supplies for invoices and to track orders. Stuffed shirt to track all your expenses and pay your taxes.

Its something to really think and plan out. Give it lots of thought and write down everything you need and quote it out, Write down the things you already have and about what you paid for them. This is investments you would like the return in cash on. So as we speak now since you have the 2 machines and tooling your technically in the red. Metaphorically speaking this is the investment you want to make money back on. Then tack on the regular expenses maint. building and machine/ lube/ property taxes/ tele/net/fax/ utilities. Tooling and inserts all the goodies that come in every month and have no way to avoid. Expect the unexpected, machines aren't perfect they do break down. if you can fix them yourself your in luck. If not repair techs can get expensive.

Best of luck and if you don't rip your hair out. Frustration may lead to another expense.... Just for men gel.

Stay off the phone....as much as possible. Stay off the internet...as much as possible (except pm therapy)

and most importantly tell your buddies to stay the heck away from your shop. Once I did that I started making money.....If you can't stand to be alone for long stretches you're in for a rough ride.....