Need advice on quoting!

I'm completely new to quoting and accepting jobs. I have my own lathe and mill and place to work so I've been advertising and cold calling and I have my first request for a quote. If it was just for a single piece I wouldn't be as worried as I am but this is for 1000 pieces. I'd have a lot of time and a little money invested in material. My questions are 1. How do >you< quote jobs normally? hourly rate x hours estimated for work + material? Do you add sales tax separately or include it into the price of the job? 2. Do you ask for a percentage of money in advance? And/or do you have some time of form signed like an invoice for work to be completed with the final price and other details on it? Any advice pertaining to quoting and the process of accepting a job is appreciated. Thanks.

Hi SharkTamer:
I built a spreadsheet in Excel that I use to quote the work we do, and I've found it very worthwhile even though my business partner scorns it and prefers to guess differently than I do.

I have a bunch of one-time costs that I estimate, and a bunch of cycle time costs that I estimate.
Since I have the important ones written into the spreadsheet I tend not to overlook them, and I can name and estimate every operation separately if I think it's necessary.

Some operations will kill you if you don't watch it, and I've become aware what they are; for example lots of drilled and tapped holes always take longer than you think, especially if they are on several part faces and are several different sizes.
Ditto for tight tolerances between features that are created in different setups; for me going through all that makes me more aware of what I'm up against; especially when the part run sizes grow and I'm trying to compete with marginally competitive equipment.

Some costs are amortized into the run; setup, programming, fixtures, custom tooling will typically fall into the amortized cost category and the spreadsheet divides them into the total part run.
Others are individual operation times and they get tabulated per part.
Materials are estimated separately and added per part.

The grand total comes up and the spreadsheet is structured so I can simply change the part count and the spreadsheet updates automatically.

I lock the cells, the sheets and the workbook with my operation breakdown hidden so the customer can't see my time estimates, and then send a copy to him.
He can see how much ordering a hundred will cost him and how much a thousand will cost him by editing the one number that is still editable, and that's the run size.

It's useful to me because I tend to overlook a lot less doing it this way, so my quotes seem to me more accurate than they were when I just guessed at an overall price.
Keith prefers to say..."how many days to make this job", and quotes that way.
Sometimes I'm higher and sometimes lower than his guesstimates, and sometimes I'm closer and sometimes he's closer to the actual time a job takes.

I notice though, that when he has a boner to do a particular job, his quotes get more optimistic than when he's not that eager.
I pretend to myself that my quotes are more balanced and sober, but I'm probably just bullshitting myself.

After all, it's all just a guess, and my method is no exception; I just guess in smaller bites than he does.
We all win some and lose some and we have to accept that.

With regard to job acceptance I do two things.
1) my quote describes EXACTLY what I undertake to do for the price I'm agreeing to, and specifically excludes in words, which bits I do not offer on this job, like anodizing or special packaging or whatever.
2) I rely on the customer's purchase order as his commitment to what we have agreed, and will not normally begin work until I receive one.
I do have a few customers of very long standing whom I trust and like; they get some slack on the formalities but only because they've earned it.

Cheers

Marcus
Implant Mechanix • Design & Innovation > HOME
www.vancouverwireedm.com

Run a search, this subject has been talked to death here and frequently. Keep sales tax separate, most likely if you are a job shop most customers will be exempt from sales tax.

Thanks! This is very informative. I tend to be on the more organized side of things so I'll replicate your spreadsheet and work with that. This is a pretty specific question but when you send a quote would you specify that you're not responsible for shipping costs? And if you did specify that, when you received a PO from the customer would you expect it to match your quote's details in the regard? So say you send a quote specifying you're not doing a process specified on the print, and you're not paying for shipping costs, would the PO from the customer have that specified as well?

SharkTamer said:

I'm completely new to quoting and accepting jobs. I have my own lathe and mill and place to work so I've been advertising and cold calling and I have my first request for a quote. If it was just for a single piece I wouldn't be as worried as I am but this is for 1000 pieces. I'd have a lot of time and a little money invested in material. My questions are 1. How do >you< quote jobs normally? hourly rate x hours estimated for work + material? Do you add sales tax separately or include it into the price of the job? 2. Do you ask for a percentage of money in advance? And/or do you have some time of form signed like an invoice for work to be completed with the final price and other details on it? Any advice pertaining to quoting and the process of accepting a job is appreciated. Thanks.

Click to expand...

First thing is, you need some edumacation on the business end of it.. I'm sure you'll get it, one way or another.
I'm saying this because you are asking about sales tax. I'm offering no advice, since I know just enough to keep
myself out of trouble, but I suggest you seek out some competent advice so that you stay out of trouble.

Quoting.... I just take an educated guess. The educated part comes from getting jobs and not getting jobs,
and running jobs, making money on some, losing on others..

You can sit around and calculate times and costs all fricken day long, and it all really boils down to
"perceived" value. If it looks hard its going to cost more, if it looks easy, it will go for less. If
it looks easy and its made out of aluminum, don't even bother.

By "looks easy" I mean the print looks simple. If a print is complicated the price goes up, even if its
actually easier to make than the "simple" print. And I don't mean just my price, everybody's price is going
up and that needs to be taken into account.. And of course this comes with experience.

Lack of experience quoting.. You DO have to start with how long is it going to take you and how many tools
are you going to eat up.. I would assume you have machining experience? While figuring this stuff out on
YOUR machines, think how long will it take on others machines, your competitions machines..

For instance my lathe is SLOW, she's not a spring chicken, she takes a while to change tools, and her
rapids are slow... If I'm trying to cost her out, I can't calculate her at $75 an hour and be competitive,
so I figure her at about $45.. Guy down the street with a faster machine is going to take an hour, he bids
$75, its going to take my old girl an hour and half, so we are pretty close on price.

The good thing is that there are only 3 possible outcomes, 1) you don't get the job, 2) you get the
job and lose money, 3) you get the job and make money. You also don't want to be totally out of the
ball park, either high or low, then you look crazy and they don't come back to you.

1000 parts sounds like a lot but really isn't

This is how I have done things for years and it works for me

Right down you method of ops in a vertical column

This helps you figure out how you are actually going to make the part, and mentally think of any roadblocks to your plan

Include a step for making any fixtures or a setup if needed

across the top of the page write volumes

10 25 50 100 etc

in the 10 column[or 100 whatever the lowest is] assign a time to each step

for instance first step might be 'cut stock' and might be 15 minutes for the ten pieces, then you decrement the individual time as you go across, so the top row would look something like 15 30 45 90. Do the same for the next row, maybe that is mill feature one. fill out the entire grid

add the columns until you have your time in a row at the bottom. Focus on this as it is your actual profit,

multiply by your shop rate and ask your self 'do I want to make those for this amount?'

The lowest volume is going to be the one you are most likely to have a handle on the accuracy of. The higher volumes it is more difficult to judge by your gut whether it is correct or not

If you think the low volume is too high, you can adjust down, but really only adjust the higher volumes upward, the risks are too high that you will be working for free.

Try to focus on the volume you think you are likely to get, frequently in the middle of the range.

Once you have a labor number, figure the stock cost, and any other fixed costs[plating, external labor, packing, shipping]

mark everything up to give yourself room. I mark my stock up 20 percent. Remember it costs you time and money to buy things.


Add your labor number to your stock/fixed cost number and look at the lowest volume number and ask yourself both will I make it for that and is that a xx dollar part.

Most people under quote in the beginning. Both through under estimating their shop rate and underestimating time. The pain of working for free will fix that for you.

The guys above have posted good info.

I say don't just look at the trees, see the forest. Take time to make a mental estimate of how many of these things you will realistically crank out (ie., 'handle') in a day. It is not just about tool-in-the-cut time, there is a lot of potential wasted moments, and when you multiply those moments x 1000, that adds up to a lot of time you may forget to cover in your quote. You may choose to eat some time, because you are not well set up, but it is best to know going in that you stand to make a bit of coin, rather than wrapping each piece in a $5 bill as you send it out.

Being as this is your first big job, I'd probably ask the customer to risk all the material costs up front. 1000 parts is a lot of parts, and it may take a while before you do the invoicing. You might be comfortable with risking your labor, but don't risk the stock cost as well.

Bobw said:

First thing is, you need some edumacation on the business end of it.. I'm sure you'll get it, one way or another.
I'm saying this because you are asking about sales tax. I'm offering no advice, since I know just enough to keep
myself out of trouble, but I suggest you seek out some competent advice so that you stay out of trouble.

Quoting.... I just take an educated guess. The educated part comes from getting jobs and not getting jobs,
and running jobs, making money on some, losing on others..

You can sit around and calculate times and costs all fricken day long, and it all really boils down to
"perceived" value. If it looks hard its going to cost more, if it looks easy, it will go for less. If
it looks easy and its made out of aluminum, don't even bother.

By "looks easy" I mean the print looks simple. If a print is complicated the price goes up, even if its
actually easier to make than the "simple" print. And I don't mean just my price, everybody's price is going
up and that needs to be taken into account.. And of course this comes with experience.

Lack of experience quoting.. You DO have to start with how long is it going to take you and how many tools
are you going to eat up.. I would assume you have machining experience? While figuring this stuff out on
YOUR machines, think how long will it take on others machines, your competitions machines..

For instance my lathe is SLOW, she's not a spring chicken, she takes a while to change tools, and her
rapids are slow... If I'm trying to cost her out, I can't calculate her at $75 an hour and be competitive,
so I figure her at about $45.. Guy down the street with a faster machine is going to take an hour, he bids
$75, its going to take my old girl an hour and half, so we are pretty close on price.

The good thing is that there are only 3 possible outcomes, 1) you don't get the job, 2) you get the
job and lose money, 3) you get the job and make money. You also don't want to be totally out of the
ball park, either high or low, then you look crazy and they don't come back to you.

Click to expand...

Rather than re-write what Bob did, I'll just quote it. I don't know why - but I'm almost always on the same page as that schmuck.


I doo want to add tho - that bit aboot sales tax....
Who are you targeting related to tax? Are you fixing 1000 lawn mowers?
Unless this is for retail sales - it's not taxable - yet.
1000 pcs of something are likely going to be "resold" and prolly a few times yet before the end customer hasta pay tax.
I've been at this <30 yrs and have never collected sales tax.
I don't even have a Vendors License.
Simply N/A.


Also - I want to stress the part above about "knowing how others would process the part".

You kan't expect to land a job quoting against someone with all the proper tools for the job, at the same $/hr, if you have less efficient tools. With that said tho - don't think that _ that means that you will make less $ on the job. It may just be that the other guy(s) need more jobs before they break even for the month.



One other thing - it will take quite some time, but eventually you may get that 6th sense when you know they aint gunna ever give you the job, but just want your numbers to beat down the current supplier.


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Think Snow Eh!
Ox

I dont have the extensive experience the guys above me have, I have only been in business since 2013. One man shop.

I know its inefficient but I program every quote. My cad/cam gives me a cycle time. I know its off about 20% so I add that ( rapids, tool change etc ). Then add in quoted matl cost, estimate tooling, ( especially if it take something special ) and set up. Multiply shop rate times cycle time and setup time and add tooling etc. Divide by number of parts.

I dont count saw time, I saw while running.
I program/quote/order matl etc all while running if at all possible. Yes sometimes I am running hard to get things done.

Sometimes I will use a higher shop rate and not add tooling. Havent really settled on whats best there yet.

I have, on more than a few occasions,just looked at a part and threw a price on it and did really well on all of them. Try it. You're just starting out how bad could you get burned. This will also start to give you an idea of what parts are worth.

Another method is to just ask the buyer what kinda price range they are looking for and if you meet their price will the job repeat to you or will it go out to bid again. If they say it will repeat to the vendor then there is value in that. If they tell you they go out for quote every time then just stick a nice price on it and be done with it. Like I said; how bad can you get hurt?

I would first try to figure out why the OP was asked to bid, given that he's a startup with no history. If it appears the company is looking for a cheaper source, pass on it. No matter how low you bid somebody will beat it.

Click to expand...

I dissagree completely.

What other premise would they take a chance on a new start-up, short of knowing the guy's experience at a previous job, or him being someone's BIL or drinking buddy?
(Never understood the drinking buddy thing? Is that REALLY who you want to be passing work off to?)

Someone hasta be the low man on the totem pole. If he is new and nothing else to doo - unles he's trying to run bearing bores in $1000 SS blocks for $200 (gross labor) than how can he "lose his butt"?

Even if he only makes $10/hr gross labor, if he has good parts and on time, then he at least has some 2 way experience with that customer. Maybe next time he can figger out if he missed the quote, or maybe he knows that he needs to inve$t in a whiz/bang to make a better rate, but wants to get through the first job or 5 before ponying up?


This is a one-man start-up.
Not a fella trying to sell work for a 10 machine / 6 man shoppe and needs to pull in a profit to make [someone elses] payroll every week. In that case - maybe better to lay-off than to run the $10 job. But that's not this guy.

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Think Snow Eh!
Ox

There'a a ton of good advice. I would start with the things that can put you out of business. 1) Not understanding what the job is. 2) Not being able to make the part to specification. TOLERANCES ARE EVERYTHING 3) Having a "time is of the essence" clause and then not getting the job done in time. 4) Allowing design changes without updating the contract. 5) Finding out the customer has not been paying bills or paying late. 6) Underestimating your fixed costs such as materials and tooling on a really big job.

I suggest you tell the customer that you want to build a prototype to make sure the result is satisfactory to them and so that you can accurately build a cost and duration estimate. If you get a prototype in the customer's hand promptly, you are a step ahead of the competitor bids. They will generally wait for your bid and then give you a chance to negotiate if necessary. The reason you ask for permission is that they may have a patented item and you can't make it without permission. Also, they are less likely to take someone else's bid while you are working on yours. Good luck.

watch out

[, every new business will get the deadbeats who are waiting to try to give you an education, the new shop will get a lot of these would be customers, first ask why they need a new supplier ;ye

jahjahjah said:

There'a a ton of good advice. I would start with the things that can put you out of business. 1) Not understanding what the job is. 2) Not being able to make the part to specification. TOLERANCES ARE EVERYTHING 3) Having a "time is of the essence" clause and then not getting the job done in time. 4) Allowing design changes without updating the contract. 5) Finding out the customer has not been paying bills or paying late. 6) Underestimating your fixed costs such as materials and tooling on a really big job.

I suggest you tell the customer that you want to build a prototype to make sure the result is satisfactory to them and so that you can accurately build a cost and duration estimate. If you get a prototype in the customer's hand promptly, you are a step ahead of the competitor bids. They will generally wait for your bid and then give you a chance to negotiate if necessary. The reason you ask for permission is that they may have a patented item and you can't make it without permission. Also, they are less likely to take someone else's bid while you are working on yours. Good luck.

Click to expand...

huh, Deja vu?