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Plastic
- Joined
- Oct 30, 2011
- Location
- Northeast U.S.A.
I am a co-owner and I have several debates with the other owner about costing work and determining hourly rates. My way of thinking is more focused on determining what our direct costs/overhead costs are and then determining profit and final pricing from there. The other owner sticks to that it should be based on an hourly rate.
My apprehensions to basing purely off of a hourly rate is how should this be determined. As an established shop shouldn't the hourly rate be determined off of the past years history or should it be determined like, well machine shops are charging around $75/hr and our shop is sort of like theirs so we should also charge $75/hr.
How does the 75$/hour get calculated? Shouldn't it be based on the number and size of machines we have and the number of employees and the benefits we offer and our site costs? Just because company A down the street charges $75/hr maybe they can because they got better deals or have inferior equipment. Maybe we should charge $100/hr.
I understand that jobs requiring specialized machines are costed on a case by case basis but how should the meat and potatoes machining be costed?
I did a quick search to see if any other topics existed and couldn't find any.
If I am asking the age old question, I'm sorry. I'm just looking for feedback from other owners who have to go through this. We have several jobs that we lose money on. Of course we're fearful of losing the business but I like to go to sleep at night knowing our pricing is fair and if our customer expects us to lose money then we need to find new customers our start planning to close. I like to look the customer in the eye and show them all the costing and say "we have to raise our price 5 - 10% to at least break even or make a tiny bit of profit and here's why we don't think you can get this job done anywhere else in the area for this price". Of course we get beat out by shop just looking for sales revenue then the customer sometimes comes back after they realize that we were telling the truth.
Thanks in advance for any replies.
My apprehensions to basing purely off of a hourly rate is how should this be determined. As an established shop shouldn't the hourly rate be determined off of the past years history or should it be determined like, well machine shops are charging around $75/hr and our shop is sort of like theirs so we should also charge $75/hr.
How does the 75$/hour get calculated? Shouldn't it be based on the number and size of machines we have and the number of employees and the benefits we offer and our site costs? Just because company A down the street charges $75/hr maybe they can because they got better deals or have inferior equipment. Maybe we should charge $100/hr.
I understand that jobs requiring specialized machines are costed on a case by case basis but how should the meat and potatoes machining be costed?
I did a quick search to see if any other topics existed and couldn't find any.
If I am asking the age old question, I'm sorry. I'm just looking for feedback from other owners who have to go through this. We have several jobs that we lose money on. Of course we're fearful of losing the business but I like to go to sleep at night knowing our pricing is fair and if our customer expects us to lose money then we need to find new customers our start planning to close. I like to look the customer in the eye and show them all the costing and say "we have to raise our price 5 - 10% to at least break even or make a tiny bit of profit and here's why we don't think you can get this job done anywhere else in the area for this price". Of course we get beat out by shop just looking for sales revenue then the customer sometimes comes back after they realize that we were telling the truth.
Thanks in advance for any replies.