Charging for Design and CAD

I have found that I spend A LOT of time in front of my computer drawing stuff. Almost all of my customers are "designers" not engineers. I often get drawings on napkins, copy paper, screen shots, and an occasional sketch-up. Too many times I have drawn up a complicated weldment or part that resembled the original drawing as closely as possible, only get a "Ummm...., well...., thats not exactly what I'm looking for. Can you change...."

So, I have decided that I need to charge separately for this service. At first I was thinking that I should charge a set rate for the initial cad model and then again for changes, but theres to big a difference between a complicated weldment assembly and a simple solid part.

How do some of you handle this?

I set an hourly rate with customers. I take their sketches and draw all that I can with the information they provided. I explain that the better their information is, the less time I spend trying to figure out what is missing. After a few projects the process usually improves.

I charge for every minute for small customers because of the same issues you bring up. Large customers get at least some CAD time as a free service, but generally all that is is adding radii to a model or other easy changes. I rarely deal with walk-ins, but when I do, they are informed that they're on the clock as soon as we start talking.

Imho, .. as an ex-consultant in similar work ..

It depends, hugely, No Right Answer.
Most medium to large customers are ok with some charges.
Most small customers are ok with some smallish charges.

Who does the work (and how high end they are) is important more to Your profitability, but also to the customer.

A top guy, doing "some stuff", at 100$/hr (to whatever $$$+/hr) x5, is often seen as ok, but "joe" at machining is not seen as ok.
This is wrong, of course, but the customer perception is more important (and more wrong) than the reality.

Anecdote:
For 25 years I have been rising my prices, and my results have gotten better, by all metrics.
My addressable market has been getting smaller.

The critical path in this case is sales / customer relationship.
If they think things are done "well" for reason "n", it´s ok.

Neither price, hours, worker, or delivered-quality, actually matter.
Really, they do not.
Customer-perception is everything.

This is why, unfortunately, a lot of "stuff" happens.

You can charge any way you want but what is most important it that you describe clearly what the customer is getting for the money.

For example: include the drafting time, two revisions and related meetings and describe the tasks clearly. If it takes three revisions explain what the additional cost is for before you do the additional work. If it takes less revisions then discount the cost accordingly. In a way you are conditioning the customer to be efficient with your time while he viewed you to be responsible with his money.

Good communications builds trust.

I charge $75 an hour if they place the machining order with me $120 otherwise. Smaller guys less because they are usually flexible and not stupid tolerances and radii they just want to work and be competitive.

The laser shop charges about $75 to prepare a line drawing, which is pretty simple, so I do the same, since I'm the one doing the CAD because then they don't charge for CAD. But that sort of part is about as basic as it gets.

For more complex stuff, it is difficult to define how to charge. One way is to look at what else you are not getting done in the shop because you are doing CAD. There is no good reason to take a pay cut because you can't cut metal at the computer.

For value to the customer, I've already experienced how lame it is to actually make stuff from napkin drawings that were never properly scaled or thought out. That is a giant waste of time to get part way into a job and then find it isn't going to work/fit. Then the customer is paying for 'real work' but also getting no value.

It is always the best and cheapest way to have a CAD drawing or model that makes logical sense, taken in the context of how it fits in an assembly. Any shortcuts from this are false economy. If the customer cannot agree to this up front, then the project is not begun. I generally work in 'day units' from there: half day $300, full day $600 and so on. He has the option to get some software and really work on the thing himself if he wants to, but for the most part, general customers cannot design worth a shit, so the savings for DIY are questionable.

I charge the same amount per hour for drawing/ modeling/ programming/ as running machines.
If I am on the computer, I am not cutting metal. I don't want to lose money on the deal.

Having said all that, if it a good customer that needs some "tweaks" to a drawing he has supplied, then I do that for free.
I guess it depends upon you, your customer, and their needs.

Doug.

I would try to get in the practice of including it in your quote if possible. For example, as the lead (only) machinist here at current job, I tell the boss "Ok I need 2 hours to draw/model part, 2 hours setup, 30 minutes to run." All just example numbers pulled outta my rear. I realize probably not so easy to do when dealing with 'some' people. I have found it really drives home the fact that alot of times, it is just minimally more expensive to get 10 parts compared to one.

Also, we should be educating people that not every job can be - take napkin sketch, goto bridgeport, mill and drill, =$30.

It is sooooooo easy to get "sucked" into doing this as "freebie" and chalk it up to overhead. We are in EXACTLY the same position as the products we sell have gone from purchased by companies who know what they're doing (better than we do) to almost an average "Joe" working out of his garage who most definitely does NOT know what they're doing. We have to spend a lot of time helping them with their design and we don't charge for it (at least up front as an NRE). We do tend to charge those customers more but a large part of that is the nature of their product (lower volumes, more material, etc.).

One thing we are working on is to create a design guideline for customers who are relatively uneducated could use to basically ensure their design is complete. Something like this would only work if your product is more of a commodity than not (if you're building anything and everything you couldn't do something like this but if you mostly built custom hydraulic manifolds then it would), Here's the advantage:

1. Put this on your website and you have "content", stuff your customer can use.
2. Gets you out of answering lots of piddly questions and/or doing a free design.
3. You use that freed-up time to do more selling or whatever else is more important.

I think the thing you have to answer is this: are my customers willing to pay for design? If so, then work to where you have someone on staff to do just that (at least on a part time basis). Or find a local CAD person who you can farm the work out to. If they aren't willing, then you either have to build it into your overhead or publish something that will allow these customers to figure it out on their own. In our case, the customers have engineering capability, they've just never designed what we manufacturer (code wheels and scales) and so they don't know all the nuances.

Now, having said all that, for short little answers, I'd still call them freebies.

Good luck,
The Dude

mach2 has got it right: clearly outline and explain all that is included/expected, right down to the number of drawing revisions and/or consultation sessions. This needs to be in writing, and signed by the customer before any work begins. We have a lengthy terms and conditions sheet that also accompanies every estimate, that further clarifies more subtle and less obvious points (this is a full page long). A conversation isn't good enough, even for small jobs. Lay it out in writing, and get it signed. If a client won't commit to that, then you don't want the work.

ECJ

I bundle it all up as NRE. If you charge by the hour for the cad work, then your customer gets the crazy idea that they then own the drawing.

Simple changes are free, but a major change requires more NRE.

Something to think about. If you do the drawings and the part were to fail you will likely find yourself in a legal position much worse than having only machined the part from someone elses drawing. I only bring this up because I got sued because someone got hurt on a COPY of a machine I built and it cost me 15k to prove I wasn't at fault. Not to mention I also lost my job, because the lawyers sued everyone and my employer being a startup let the corporation take the bullet and closed up shop.

At first, one could think... What to charge for CAD work?

Seems simple. Doesn't require much capital equipment 3-6K in PC and software plus annual subscription. Hmm maybe $35-45/hr seems reasonable.

Then you have to look at the opportunity cost of the situation. Every hour you are spending on a $35-45/hr revenue stream, it is keeping from running your $75/hr Revenue stream. Therefore, to me, $75 an hour is the ticket unless you a have labor that can handle it that doesn't detrimentally affect your $75/hr revenue stream.

Maybe I would wash a certain amount of it under the rug as "A cost of doing business", but if you do to much of it, it may cost you "your" business.

Quick drawings I use for myself I incorporate into setup time. If I am expected to verify scale, intermingling with mating parts and use...I make upfront charges at shop rate.

If customer is unsure of what they want...I make sure they know what my time will cost per hour and add what changes will cost. I'll also recommend they make mock ups and/or scaled drawings ( graph paper, quick online app) something to figure out what they want before using my time...cause even when I charge...I never charge enough although they think its too costly. But I talk and answer questions before and after...then a few more minutes here and there.

Maybe my view is too simple but if you do something and don't get paid (one way or another) then it isn't work, it's a hobby.

Bigger shops could run the books so that you calculate two different burdened labor rates. One for the office and one for the shop floor.

So the office labor rate bucket would contain all your IT costs, labor, office floor space, etc... and the shop labor rate bucket would contain all your machines, tooling maintenance, labor, shop floor space, etc...

Though, all that accounting is probably not worth for a small shop. I'd come up with one burdened labor rate to cover all your activities and then adjust that accordingly if you're having problems with profitability or acquiring customers.