# Labor costs?



## sortafast (Sep 25, 2010)

I did a run of parts for my FIL's business and am left unsure what to charge them for it. I have no idea what the going hourly rate is for machining. Don't want to rip them off (going to be doing more of these same parts at some point) but at the same time I don't want to sell myself short. Especially since I am trying to purchase a few big ticket items. So what is the going rate for garage based machinist hacks like myself? Total parts time was around 200minutes and set up, once all the tools were made and I had the process dialed, was 15minutes total. They were very simple parts, just a lot of em. Any help would be much appreciated as I need to get paid.


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## mototraxtech (Sep 25, 2010)

I honestly dont know what the rate is but last time I had work dont it was between($60-$80) depending on what machines were used etc. BUT I think that home shops should charge HALF of what a normal shop charges.

The reason is big shops have a lot of overhead like keeping a large building heated and lit up even when no work is done as well as many tools and machines that cost a lot even though many aren't making money all the time(aka sitting).

The beauty of a small home shop is that you don't have these cost and can pass that to your customer. Then with how cheap you are compared to the BIG shop you will get a lot more word of mouth jobs.

With that said the big shops have their place as well. When you need BIG parts or maybe large runs and sometimes VERY specialty items as well then the big shops are there to take your money.

From my experiences big shops "generally" don't like small jobs and give ridiculous quotes to get out of doing them. But there are a few who are reasonable as long as you have a couple hundred buck worth of work and these are the ones that are listed on my phone for when I need parts made.

Just my 2 cents worth and I sure others will chime in as well!


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## unterhausen (Sep 25, 2010)

car mechanics are charging $90/hr in big markets, I can't believe businesses are charging $60 for machining. But sillier things have happened I guess.


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## mototraxtech (Sep 25, 2010)

Car maintance is retardedly expensive. I worked at a powersport shop and we charged $70/hour. Lets put it this way I would NEVER take a bike to a shop again if I didnt personally know the tech working on my stuff and I couldnt do it myself. The way shops charge is rediculus. For example a tech has to put on a new winch. Puts it all the way on and then forgot a part at the beginning and has to redo it. The customer pays for an extra half an hour.

Sorry for the rant but honestly they charge WAY to much. Especially since all the tools I used cost me around $300. They dont even supply them and they are still get $70/hour and then pay me $10/hour.

Ok guys, Ive cooled down.


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## precisionworks (Sep 25, 2010)

In my small town, one race car shop charges $100/hr and another charges $50/hour. Both the auto machine shop & I charge $60/hour plus materials.

On portable welding, one local shop is at $50/hr, another is at $60/hour, my rate is $120/hour (plus materials & supplies). They both complain that they aren't making any money ... wonder why, as they are just barely covering their costs. All three of us do more portable welding than we want.



> big shops "generally" don't like small jobs and give ridiculous quotes to get out of doing them


I quote long lead times for people that make me uncomfortable ... can't really explain that feeling, but I know as soon as they describe the job that I don't want to do it. A 90 day lead time usually sends people on their way.

My backlog is currently over 30 days, with another major project in the bid process. If that job happens, and it may, it goes to the front of the line & my backlog changes to 45 days :sigh:

Charge enough today to still be in business tomorrow :twothumbs


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## mototraxtech (Sep 25, 2010)

precisionworks said:


> In my small town, one race car shop charges $100/hr and another charges $50/hour. Both the auto machine shop & I charge $60/hour plus materials.
> 
> On portable welding, one local shop is at $50/hr, another is at $60/hour, my rate is $120/hour (plus materials & supplies). They both complain that they aren't making any money ... wonder why, as they are just barely covering their costs. All three of us do more portable welding than we want.
> 
> ...




I totally agree with you if your are in business to pay the bills.

I was referencing toward a small side job make some extra cash to buy more toy type of thing but in you case I say charge as much as you can while keeping enough customers. I guess Im not sure what kind of business you are running.


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## unterhausen (Sep 25, 2010)

precisionworks said:


> Charge enough today to still be in business tomorrow :twothumbs


This is what a lot of business people don't understand. I deal with one guy I keep telling to charge me more; I want him to make enough to make it worth his while. I've asked people how much something will cost and had them offer me a discount. If it's my money, I usually don't explain that I just wanted to know how much cash to bring.

In the case of the fil, it really depends on whose money it is. If the costs are being passed through, then it should be priced at a reasonable shop rate. This is rarely the case, and I would hope you have enough rapport with the FIL to discuss the rate. "How much can I charge you before you're motivated to hire a pro?"




precisionworks said:


> On portable welding, one local shop is at $50/hr, another is at $60/hour, my rate is $120/hour (plus materials & supplies). They both complain that they aren't making any money ... wonder why, as they are just barely covering their costs. All three of us do more portable welding than we want.
> s


I wonder if they realize how much money they are leaving on the table, just doesn't make sense. My boss used to try to get me to quote $50 an hour for consulting, going rate for a Ph.D. mechanical engineer is well over $100 an hour. People who hire engineers are probably more perturbed by an outlandishly low rate than a high rate. Of course, they prefer to get the work done free, which is why I've never done it.


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## mototraxtech (Sep 26, 2010)

just curious why you got a PH. D in ME. I am currently working at my ME,EE, and CE degrees right now but don't think I would ever want to get a PH. D in any of them.

The reason for all three is they are all interesting and I want to be a VERY knowledgeable person in the future of engineering. AKA I want to be the boss and have some clue of what my employees are doing and telling me.


I actually had a science professor who said that MOST science and engineering PH. D's are looked at very oddly by companies because if you wanted to be an actual engineering you would have got a job after getting you BE. Of course this doesn't account for if you go back to College after getting a job.


Just curios!


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## sortafast (Sep 26, 2010)

Well, I will throw out the $60/hr fee and see what he says. I know how much this job made them and being that I like my FIL and his biz partner I don't feel that I should take a large chunk of it. But when it comes down to $2 per finished part is a number that is little easier to swallow. I do know that they talked to a couple machining outfits and they wouldn't touch such a small order, plus they would have had to come up with prints and all that crap. I just kind of came up with everything on the fly and it worked out great. Really though I probably spent 5-8hrs doing everthing, making tools, figuring out the set ups, how to run the operations and and actually doing the work. Not to mention the clean up :sick2: .


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## mototraxtech (Sep 26, 2010)

just a though you might just give him the $2 per part quote first. If I was getting some work done I would rather hear them say $2 a part which seams cheap than $60 an hour which seems expensive.

As a side note I always get a FIRM QUOTE before have machine work done. The reason is a few summers ago in high school I had a shop mill some 1 inch holes in four pieces of aluminum plate that would take bearing in a press fit manner. I bought the bearing from them that I was using and handed them over to him. Two weeks later I get a call saying that it was $400 bill which I though was VERY high for the job and after I build the project I went to "press in" the bearings and they fell right though. So not only did I pay alot more than what I expected(they said maybe two hours of work) the parts were useless anyways.

So now I ask for a firm quote and decide if I am willing to pay that for it.


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## precisionworks (Sep 26, 2010)

> Not to mention the clean up :sick2:



The customer pays for the clean up on their job. That way, the shop is ready for the next job & the customer *only pays *to clean up their particular mess. Someone always pays for clean up, either the customer or the shop owner :huh:



> totally agree with you if your are in business to pay the bills.


OK, let's say you run a part time "for fun" shop as opposed to a "for profit" shop.

Both shops pay for electricity.
Both pay for materials.
Both pay for tooling.
Both pay for heating or A/C.
Both pay when a machine (or tool) breaks.
Both use roughly the same time to finish a job.
Both have to clean up the mess.

The "for fun" shop doesn't have a $250/month commercial insurance premium, nor a $100/month advertising bill. Other than that, both shops have similar expenses & should charge a similar rate.



> I'm not sure what kind of business you are running.


In shop welding, including general repair & fabrication. Portable welding, which covers any job that can be done with my truck mounted engine drive ... mostly mild steel or aluminum. Any job, anywhere, day or night, hot or cold ... pretty typical of a shop that offers portable welding.

Machine shop services include design work, fabrication, repair, prototype, etc. Same as any other small job shop.



> I wonder if they realize how much money they are leaving on the table


I don't think they do. They both state "no one will pay more than $50-$60 per hour for portable welding", and no one will ... in their view.

To do a portable welding job involves the drive out to a job, lay out of the cables, grinding through who knows how much dirt, grit, rust and junk, etc. Then the welding itself is done. Then putting all the equipment back on the truck & driving to the shop. Usually the cables are nasty filthy dirty, so each cable has to be unrolled *again*, wiped clean, and rolled back up. Grinders are often so clogged with dirt & mud that I wash them first with with the water hose, blow the grinder dry & set it on the bench.


I won't put the key in the ignition for $60/hour :nana:


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## gadget_lover (Sep 26, 2010)

I find it odd that people think work is worth less if done in a home shop. If an equivalent product is produced with the same quality in the same time frame, then it should have the same value to the buyer. In the case of custom work, the hand built item is often prized far above the commercially available ones.

If I do something for a friend, I reduce the price to just cover the price of the consumables. If it's something I want to do as practice, I often do it free. If I don't WANT to do something, or if it's for a friend of a friend, then it becomes a business deal and I charge about what the real shops would charge.

If you are doing this for your father in law's business, then you should consider the transaction as a business deal and charge business prices. Otherwise you are (in effect) making a gift to him of the value of your work.

Daniel


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## mototraxtech (Sep 26, 2010)

I guess the way I look at it is machining is a hobby and I like to do it. So if someone wanted me to make some basic parts(meaning I would not have to acquire special tooling or anything) I would be completely flattered to get $30 for making them. I know my tooling and machine cost cant be that high as some far I have never even chipped a carbide. Of course with harder materials and other parameters it would get more expensive and would get charged accordingly.

See what I have always hated is when I ask shop to do a job that is very basic and requires minimalist tools to do it. Say chuck some aluminum in a lathe and make some spacers. The job takes 1.5 hours for all and I pay 100 in labor and $2. Then another guy has a complicated part milled that used many different expensive tools and he gets charged the same per hour.

Basically they are barely breaking even on his job and making bank on mine. I am a firm believer in pay for what I am getting. Not paying for someone else stuff. Which brings me back to getting firm quotes. If they cant give me a firm quote then they wont get my business.



While I agree parts of equal quality should be worth the same think about this. I have you make some spacers for me, say 100 of them. It takes you 10 hours to make them and 100 in materials you charge 10 hours at 60 an hour plus 100 in material adding to 700.

I call up the cnc shop and they say 200 setup fee and 100 an hour after that. It will take 2 hours to do them all and 100 in material.

So for you to make them it cost 700 and the cnc shop to make them cost 500. So should you lower your quote to match theirs.

I guess what I am saying is charge what they are willing to pay with a threshold of about half of a normal shop since a normal shop has alot more overhead.

They other thing you must thing about is a lot of LARGE shops have specialty tooling that we can only DREAM of to make their job easier and faster. So they might be charging 90 and hour compared to you 60 and hour but can make similar parts twice as fast.


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## unterhausen (Sep 26, 2010)

what I've found is that even my own jobs get boring very quickly, and I just want them done. So someone better pay me enough to make it worth my while. Have to admit I would work for less in my hobby shop, if it became a real job things would definitely change. A production job is worth somewhat of a discount. For one thing, you'll almost surely learn how to make it faster

I never want to be the low price bidder, that just attracts the worst customers. They don't know what they are doing and they don't know how much something should cost them.


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## mototraxtech (Sep 26, 2010)

True but in today's market it almost always seams like its the low bidder who gets all the work. 

Of course I think people are starting to realize that to bid so low they had to cut corners and quality is suffering.


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## unterhausen (Sep 26, 2010)

How do you get paid for these jobs? I know a lot of municipalities are really strapped for cash and if they figure out you're running a side business they are going to start nickel and diming you to death. Same with states.


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## precisionworks (Sep 26, 2010)

> even my own jobs get boring very quickly, and I just want them done. So someone better pay me enough to make it worth my while.


+1

I usually don't turn down portable welding jobs on Saturdays or Sundays, as $4/minute is a decent paycheck when the job averages two to three hours. Total time includes driving to the job, setting up, completing the job, tearing down, and driving back to the shop.

If the caller has any hesitation about my fee structure, I wish them a good day and hang up. If their problem isn't worth $4 a minute to get fixed right away, it isn't worth my time to debate the issue :nana:

FWIW, most people are happy as a clam to find *anybody *who will fix it now, and price becomes a non issue. I should probably charge more :devil:


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## precisionworks (Sep 26, 2010)

One of my race engine builders stopped by today to pick up a set of Arias forged pistons. He buys them knowing the compression ratio will be too high, cc's the combustion chamber, has me mill off what we feel will be the correct amount (based on doing this dozens of times) and then cc's the modified piston. 

Got lucky & took the correct amount off the first time around. Got really lucky that I didn't take too much off & trash an $800 set of pistons :huh: Took the same amount off the other five pistons in the set so that the amount removed from each one was no more than +/- 0.1 gram from any other one. Had all six done in 2.5 hours, including cleaning up aluminum chips that were thrown ten feet.

The point of this rambling? All the business from this customer is the result of one "cold call" where I stuck my head through the door of his shop & asked if he had a need for machining or welding services. Business is out there if you simply look for it and ask for it. It may not be related to making or modding lights, but it usually pays pretty well. Sometimes enough to buy a Ti light from one of the makers on this forum :devil:


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## gadget_lover (Sep 26, 2010)

mototraxtech said:


> See what I have always hated is when I ask shop to do a job that is very basic and requires minimalist tools to do it. Say chuck some aluminum in a lathe and make some spacers. The job takes 1.5 hours for all and I pay 100 in labor and $2. Then another guy has a complicated part milled that used many different expensive tools and he gets charged the same per hour.
> 
> Basically they are barely breaking even on his job and making bank on mine. I am a firm believer in pay for what I am getting.




By that logic, the pricing should be based on it's cost to the manufacturer, not based on the value to the customer. That makes no sense at all to me. If you buy a used car from a guy who inherited it from his dad, you don't expect to get it for free, do you?

In essence, when you pay for the value of the part instead of the cost of making it, you ARE getting what you paid for. 

The cost of equipment is a red herring. I joke with my wife about the $500 deck chair. The first part I made with my lathe was a new cap for the hollow leg of a chair. If that was all I made, it would have cost more than $500 in tools. In a shop that has a $10,000 lathe they will use it day in and out. Eventually, it will have earned more than it cost to buy. 

There is a saying in software development. The first one that needs to cross the bridge pays for it. The rest of the projects reuse that code for free. It does not work that way in a shop.

The point about CNC is a good one. The part it does not mention is that you will go with CNC only if it can deliver on your schedule and produce equivalent parts. If the job is small, you may find the per part cost is much, much higher. Then you'll wish the manual shop was still in business.

It pays to keep good craftsmen in business. 

Daniel


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## gadget_lover (Sep 26, 2010)

I almost forgot to mention....

When paying for work, you are paying for the other person's
time
knowledge
equipment
consumables
overhead
lean times.

The electrician who did a side job for me bid high. I offered him 1/2 and he took it. He mentioned that this might be the only work he had this month, so he had to make a profit while he could. That's how it really works.

Daniel


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## mototraxtech (Sep 26, 2010)

Thats not what I was saying. I was saying there should be a percent of profit for the job. Also this relates to doing work and not buying and selling. For instance if your dad gave you a car and you were selling it you would blue book it and decide if its worth more or less than that and go from there. But custom parts have no real value only to the customer so you can not set prices this way. I realize that it would be very time consuming to figure out what percentage to charge based on all of your expenses but I think it should be done this way. OR at least I would LIKE it to be done this way.

Of course this is why I bought a lathe in the first place. I was tired of paying people a lot of money to make the parts I could easily produce for much less money. And I STILL leave all the difficult parts to the shops with the know-how and tools to do it.

Also it would have been more appropriate if you compared what I said to labor as that is what it is.

Example
I need someone to clean up my shop(I don't have a shop). The mechanic down the street works for $20/hour at the shop using all of his skills and tools. He mentions that he would help on the weekend cleaning the shop. Should he be paid $20/hour to clean my shop just because he makes that much anyways or should I pay him $10/hour because the fact is that anybody could do the same job with the same results.

That was the point I was trying to make. When making very simple parts using very cheap equipment it doesn't really make since to pay for everything else in the shop as well.

Example Two(Real life)
The shop I use now has a cnc waterjet, cnc lathes, cnc milling machines, and about every other machine you can think of. When I get waterjet parts cut is $90/hour machine time, when I get lathe done it is $60, cnc milling is around $110/hour and so on. That is why I use them for almost ALL of my machining even though they are 350 miles away. They charge me for what I get and not for the super expensive portable line boring machine which I could care less about.

To me this is very clear and appropriate logic. I could come up with many more examples but I really don't see the need. If I am getting a simple part made I should get a simple machine price. 

As far as the original post goes as I said that is the beauty of have a small specialty shop. You don't have a lot of machines and cost therefore your profit margin is better. But of course economics would say get the most you can and still have customers BUT that applies to actual for profit business and not necessarily hobbies that happen to bring in money as opposed to just spending it.

As far as the comment on CNC I agree but you forget. CNC is just advance machinery. If you were making 100 of one part you would also get very good at it and make them fast as are original thread starter mentioned he did.

Lastly I am not trying to get under anyone's skin just telling you what I think.


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## precisionworks (Sep 26, 2010)

> that is the beauty of have a small specialty shop.
> 
> You don't have a lot of machines and cost _therefore your profit margin is better_.



Small shops, by and large, are under capitalized. There's not a lot of money in an emergency account to get them through slow times. Fixed expenses like utilities, insurance payments, machinery payments, etc., are due every 30 days ... no matter what. Many go under within the first two or three years.

Material costs are higher for a small shop because they miss volume discounts. My steel supplier delivers free as long as my minimum order is over $500 - if only two or three sticks of hot rolled flat bar are needed, shipping is added to the bill.

Cycle times on smaller machinery are longer, as horsepower is often limited, so parts take longer to produce. 

Most businesses operate for one reason - to make a profit. That means charging every penny possible, and then some, on every job.



> its the low bidder who gets all the work


Bid jobs are tough, & I used to consistently lose money on each one. I'm happy now to get two or three out of every ten, knowing that some other shop wants the low bid "junk" work. 

I bid a job recently at four times my shop rate & got the job. The project manager said my rates were reasonable & felt confident that the job would go well (which it did). Probably would have lost that bid if my price had been much lower or higher. 

I always bid high as there are always surprises in every job. Bidding low almost guarantees losing money. And I try never to bid at all, preferring to price by time plus materials. If a customer insists on a bid, I estimate time plus materials, double that number & add a safety factor. Bid jobs are now my best profit maker :devil:


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## PEU (Sep 26, 2010)

I think the best way to price your work is to honestly know how much is a good pay/hour for yourself, from there is always easy to estimate.


Pablo


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## mototraxtech (Sep 26, 2010)

PEU said:


> I think the best way to price your work is to honestly know how much is a good pay/hour for yourself, from there is always easy to estimate.
> 
> 
> Pablo



I absolutely agree.

The most important thing is being happy with what you are getting paid. I know someone that traded a average trailer for a crappy tractor and a Need some work boat. The trailer was worth maybe a grand and the other stuff was worth a couple grand. Both were plum happy over the deal even though it was really unbalanced I that is what has to happen. If both people are happy then you are at least in the right direction and you can go up or down from there depending on the variables.


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## waddup (Sep 27, 2010)

sortafast said:


> I did a run of parts for my FIL's business and am left unsure what to charge them for it..



i always negotiate the money before i do anything. 

and get 40% up front :thumbsup:


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## southland (Sep 27, 2010)

Charge what you think is a fair price, if you overcharge you won't get any repeat business, they will go elsewhere. I have been gouged in the past and I will never use that business again for the rest of my life and neither will any of my friends or family. People won't tell as many people about a good business experience as they will about a bad business experience. Screw one person and 100 people will know about it. The worst experience I had was I took two truck rims and two truck tires to a store and had them mounted and balanced, charged me $40, 4 times the cost I payed at another store I later used. Took them all of 5 minutes to complete. 

_On portable welding, one local shop is at $50/hr, another is at $60/hour, my rate is $120/hour (plus materials & supplies). They both complain that they aren't making any money ... wonder why, as they are just barely covering their costs. All three of us do more portable welding than we want._

This is a good example, when business is good great but when the welding jobs dry up, this guy will be the one hurting. Anybody would be stupid to pay double the price for the same job. Lets see $60 x 8 hours = $480 per day. $120 per hour would be $960 per day. I know a lot of welders and none of them make anywhere near that kind of money, hell I know doctors that don't make that kind of money. If you are serious when you say you have all the work you can do and don't just work a few hours a week, let me know what city you live in and you will be out of business in a couple of weeks or working for me.


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## precisionworks (Sep 27, 2010)

> I know doctors that don't make that kind of money


That's why I'm a welder & not a doctor 



> you will be out of business in a couple of weeks or working for me


Sorry, I have too much work to go out of business, and you certainly wouldn't pay me enough to go to work for you :nana:

For whatever reason, 2010 has been the best year since the shop was opened (in 2003). Doesn't make any sense to me, as unemployment is at record high levels & consumer confidence is lower than the belly of a snake. There are probably a couple of reasons for the increased business ... low prices & fast response.

More & more new customers come here because they're referred by existing customers. Some use my shop since my rate is low ($60) compared to the shop up the street ($100), and jobs are turned around in days instead of weeks. My shop rate is probably a little lower than it should be & I'll take a close look at margins when taxes are done early next year. Guessing it should go up at least 10%-12%.



> Anybody would be stupid to pay double the price for the same job.


I've never forced anyone to use my services, never held a gun to their head or water-boarded anybody  Trouble is, there are only two shops within a 50 mile radius that answer the phone 24/7/365 ... and my shop is one of those two. Want my next "high paying job"? Give me your phone number & I promise to call you at 2:00 a.m. on a cold & rainy night to weld a brake cylinder underneath a semi trailer ... while laying in the mud next to the interstate. No one ever complains about $240/hour under those circumstances, as the trucking company is losing many times that amount because they can't meet a delivery appointment. 

I got a phone call a few years back from a railroad contractor with a busted up clam shell bucket. The call came in at 3:30 p.m. and he told me his location (45 miles away). I suggested he call the welding shop in that town & he said that no one answered the phone when he'd called:shakehead Turned out to be a six hour job, knee deep in mud & cinders, but it paid well.

A call came in at 10:00 p.m. from a trucker who'd lost his ICC bumper. He first called my friend up the road (who had other commitments) and my friend gave him my phone number. My shop rate is double his, and my estimate reflected that. The job was a pain, and it took until 3:30 a.m. to complete, but he was happy.



> Charge what you think is a fair price


+1

Every customer pays the same rate. That's the only honest way to do business.


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## Lyndon (Sep 27, 2010)

No, I think he's right regardless. Charge what the market rate is for your skills. If you want to give someone a discount, that's fine, but don't start out by charging half what everyone else does for the same thing.

I find that when I quoted people bargain basement prices for electronics design work I was less motivated, but I still had to deliver the same quality and I ended up feeling resentful working for pennies. My strategy is to plan the job at $100/hour and then decide if I should discount the total depending on any number of factors.

@OP: There is an excellent little book called _How Much Should I Charge_ By Ellen Rohr. She gets right down to business and gives an great overview of what you should consider when coming up with a price for your service (she got started with the idea trying to figure out why her husband's plumbing business was losing money) or product. Definitely worth the money!




mototraxtech said:


> I totally agree with you if your are in business to pay the bills.
> 
> I was referencing toward a small side job make some extra cash to buy more toy type of thing but in you case I say charge as much as you can while keeping enough customers. I guess Im not sure what kind of business you are running.


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## Lyndon (Sep 27, 2010)

Not to belabor the point, but I'm an engineer and I like my job. But if they stopped paying me tomorrow, they'd never see me again.

I enjoy my hobbies, machining being one of them, and I'll do small jobs for friends for free or cost of materials. But if you're running a business or somehow making money from the work I give you, friend or not, you'll pay me market rate or close to it. I did exactly that last week with someone who wanted some simple software written. If it was just for his hobby or for fun, I'd have done it for free since it took less than an hour. But this was for a business venture, so he had to pay and was happy to do so.




mototraxtech said:


> I guess the way I look at it is machining is a hobby and I like to do it.


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## precisionworks (Sep 27, 2010)

Pricing work is as much art as science. People who make little or no profit tend to price low, thinking that's all a customer can afford. But, to be fair, shop owners know (or think they know) what they are worth & charge accordingly.

I try hard not to play God, Who would know to charge poor people less & rich people more. The orthodontist who earns $1,000,000 a year pays the same hourly rate as the guy who changes my oil at Fast Lube ... although I often lose track of time for the Fast Lube guy & bill him half my normal charge  Everyone needs a break at some point in their life.

Some shop owners seem to think that PROFIT is a four letter word, but it's the primary reason that most people in the trades do what they do. There are far easier ways to earn a living than what we do.

FWIW, my friend who charges half my shop rate had net earnings (calendar year 2009) of $21,000. He averages 60 hours per week, working almost every Saturday and some Sundays. Do the math ... it works out to $6.73/hour. That's less than the Federal minimum wage of $7.25/hour. Greeting shoppers at WalMart would have paid him more 

If the people serving burgers & tacos make more than you do, you're not charging enough. Every time I raise my rates, about 20% of my customers go elsewhere. Funny thing is, that's the same 20% that accounts for almost all the headaches, so they will not be missed. 

Honest people expect to pay for quality work


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## mototraxtech (Sep 27, 2010)

I still really think most of you missed my point but that's OK. I think we can all agree that if the customer and you are happy and you are making enough to stay in business that your are probably in the right area at least.

If any of you have taken a basic micro economics class(I'm sure most of you have) its pretty basic. Charge more and get less customers and charge less and get more. Find a spot in the middle and you will make the most. 

You can never please everyone so there is no point in trying.

Also I still stick with my original idea that parts made on cheaper machines(to buy and service) should cost less than parts made on the expensive stuff and therefor I like to make sure I am not the one paying for the expensive machines as opposed to the ones who are benefiting from them.

Also I think if you work on the weekend or really bad hours you should charge ALOT more. Mostly because people just need a break and when you interrupt them you should compensate for it.


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## RADDWURX (Sep 27, 2010)

Wow 

I have a small garage shop and have had a few jobs since posting on craigslist etc. And im only charging 20-30 per hr., i figure its better than working for someone else making only 15-17/hr. 

I buy all my tools and as much as i can off ebay to keep costs low. Just wish id have more people calling me up to do stuff... 

I figure if i charged close to regular shop rates id never get a job.

good post have to rethink costs etc.


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## precisionworks (Sep 28, 2010)

> charging $20-$30 per hr., i figure its better than working for someone else making only $15-$17/hr


It all depends :thinking:

I'm thankful to net 50% (after taxes, insurance, advertising, utilities, phone, repairs, tooling, noncollectable debts, etc.) If you net 50% of $25/hour, you really make only $12.50/hour.

The friend I mentioned in a prior post billed out just over $100k in 2009 and took home $21k, for a 21% net. Not unusual in the first year or two, even the third or fourth years can be tough. Problem is, he's had 10 years to figure this out. Doesn't charge nearly enough, so no surprise that his shop is covered up with business. He does not need more equipment, more employees, or more customers ... he does need to raise his rates.




> ... parts made on cheaper machines (to buy and service) should cost less than parts made on the expensive stuff ...


I must have missed that session of Econ 101 

Call up LeBlond & try to order parts for an older machine ... most of the parts are 20 to 30 years old, made when stuff cost less, by machinery that was paid for during WWII, yet they want an arm and a leg. Or call Dake & order some parts for a Johnson Model J band saw from the 1940's ... same thing, except they want both a hand and a foot 

What something cost to make or how it was made has zero relationship to the selling price. Some of the cheapest parts today are cranked out by the highest dollar CNC machines. The best local NC shop is Rix Enterprise http://rixenterprise.com/index.html - here's his equipment list:

3 Mazak Lathes / Nexus QT300M, SQT28M & QT28N


4 Mazak Machining Centers / VQC 20/50, VQC 15/40, V414 & V515


Lagunmatic CNC Kneemill


Welding Equipment / Miller 250A MIG Welder & Miller 150A TIG Welder


Manual Machines / 3 - 4 Head Drill Press Tables, 1 - 8 Head Drill Press Table, Manex Kneemill, Clausing Engine Lathe


*Waterjet - Omax 55100*


10" Automatic Saw


Digitzer Table


15c Stormvulcan Crankshaft Grinder

All the NC equipment is either new or recent model. The owner was a Mazak field service rep before he opened the shop, hence the heavy use of Mazak equipment. And he always quotes lower than the other two comparable shops. It isn't because his parts are made by machines that are cheaper to buy or service.

Stay with me here, this is not OT. Everyone on earth knows this face (unless you've been off the grid for the past 30 years):










Gene Simmons is the co-founder of the rock group KISS ( I have every one of their albums ) He was once quoted as saying "Anyone who tells you they got into rock n' roll for reasons other than girls, fame and money is full of ****. If they don't want the money they can send it all to me. Either people want something, in which case they pay for it, or it's just two guys sitting around having a discussion, which means nothing. That's not a business model that works. I open a store and say, Come on in and pay whatever you want. Are you on crack?"


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## mototraxtech (Sep 28, 2010)

I was actually talking about econ 202. Not that it matter as you are correct in say that it doesn't matter what it cost to make it is all supply and demand. 

But econ unfortunately hasn't quite established a human factor. The morals a getting so much money for so little work is not included in econ. I know moral men usually don't get rich but the way I have been raised is to take what you have earned honestly. For example my grandpa had a power line in one of his hay fields snapped off in the middle of winter. The power company came out and they couldn't get to it as there was about 3 feet of snow and 1ft or so of mud. So my grampa started up his OLD D-4 and hooked the chokers(cables used to skid logs) to there bumper on there very large post hole digging truck. It took him 20 minutes to get out and an hour for power company to fix and then 20 minutes back. All in all 2 hour out of his day and maybe 3 gallons of diesel.

Three weeks later the power company sent him a check for $500. He called them up and said he couldn't except it as it was WAY overkill and sent it back.

Now he could have taken the 500 and made $250 an hour to drive a dozer but he didn't feel he earned it. I guess this is really were my whole argument comes from is not taking to much as a moral responsibility. Of course everyone idea of morals are different and I absolutely agree that you have to charge enough to stay in business and I see no problem have a VERY profitable business as that is the motive for most businesses. BUT at the same time gauging(sp) because you can just seems wrong.


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## gadget_lover (Sep 28, 2010)

I guess it boils down to whether it's more moral to charge someone as much as he is willing to pay, or whether it's more moral to refuse to pay a living wage to a person who works for you.


My definition is that it's not gouging as long as the buyer has a choice. You NEED medicine. It's NICE to have new footpegs. As long as you are not preventing others from providing the product you are not gouging on luxuries.

Brings to mind a story of a manager I worked for. He interviewed 20 workers. Offered the job to 10 of them, un-successfully. "Damn. I don't know what's wrong with them. Not one of them would accept market rates."

Daniel


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## mototraxtech (Sep 29, 2010)

Nope still not getting it.

I said it was fine to take a normal wage. Just when you charge ALOT more than it cost you. Some people have higher cost involved. Some people don't. Some people are MUCH more efficient with there time and some people are slow. To many factors in my opposition to charge a shop rate for everything. So I get parts at a more or less retail price. I go in and ask them how much it will cost to make said parts. They return me an hour figure and cost per hour I say I want a firm quote or nothing.

You keep making in sound like I am saying you shouldn't make ANY money at all but what I'm saying is if it cost you very little time and money to make you shouldn't charge an arm and a leg.

But that's the great part about capitalism. I can decided who gets my work and how doesn't. I there are quite a few shops who have already lost my work. But that ones that have treated me well get my jobs religiously.

Its like all of us who complain about gas prices but you are no different. They know we will pay for and and so do you so you charge it anyways.


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## ramlytz (Sep 29, 2010)

Mototraxtech,I understand your point regarding machinery cost vs. hourly rate. When I was involved in a large production shop we definitely had a higher hourly rate for expensive CNC equipt. vs. older, less expensive manual or cam driven machinery. It was based on a capital recovery time period. Other factors, such as how many machines an operator could manage, came into play as well.

My rate for machining in my home shop is $45/hr. If special tooling is required (custom mill cutters, taps, reamers, etc.) the customer pays for the tooling, but I keep it after the job. So far all of my customers have been agreeable to this term.

Hope this helps a bit,
ramlytz


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## mototraxtech (Sep 29, 2010)

Ya I know many shops that do that as well. Which I think is fine AS LONG as the customer knows ahead of time.

I realize many larger companies have things done all the time and money is know abject but for the little guys out there like me when a service is supposed to cost around 200 and then you come back to get it and you have a 500 bill it is a bit distasteful.

Which brings for back to the point I have been stressing and that is I like FIRM quotes. That way if the shop messes up on it and has to redo it I am not paying for there mistakes. Also if they need something special that would be OK(probably) but I want to know ahead of time.

The best shop I have ever worked with is located in Bend, Oregon. They are a VERY well equipped machine shop. They can do anything from welding to cnc lathe, milling, and water jetting. I use them primary for there good price on water jetting and the occasional lathe, mill work as they don't seem to mind my small orders. But my favorite part about them is that they can almost always give me a FIRM quote on what I want. Its also nice because I can get a quote and if it is going to be expensive I can change my design to a lower cost one. They are also very friendly to work with and don't seem to have an attitude like alto of our local shops.

The first time I ordered some parts on the jet he made me pay in advanced because he didn't know me and I was only 16 at the time(I was working close by is how I found them). Know I tell him what I want and he just does it and I just call in my card info.

The importance of this is that I live in northern Idaho and he is in central Oregon and I still use him over locals because he provides a fair price and good service. In fact once I finish my product design and start to market it he will more than likely still do a lot of my work which at that point will be VERY large orders. So since he stuck with it and was willing to work with a 16 year old he has earned a very happy customer.


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## precisionworks (Sep 29, 2010)

> the point I have been stressing and that is I like FIRM quotes.


That all depends ... here's an example that happened last week.

A contractor from Chicago phoned & asked me to go to a job site, evaluate the work, and submit a proposal. I normally charge $120/hour for portable welding, but raised that to $160/hr to cover some of the unknown. I figured that the job can be done in 16 hours, but used 32 hours in the estimate, again because of the unknown.

Firm quote (labor only) $5120

If done on a time & material basis, *roughly *$2000, perhaps as high as $3000.

He felt that $5120 was more than fair, and said that was about what he thought it would cost. Scheduled to start that job in two weeks 

When any shop quotes an unknown job, they bid it sky high to cover the risk ... and sometimes still lose money. The more complex the job (or the part) the higher the risk of under bidding. I've lost thousands of dollars in the past on bid jobs, and on FIRM quotes, and cannot afford to do that again.


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## gadget_lover (Sep 30, 2010)

mototraxtech said:


> In fact once I finish my product design and start to market it he will more than likely still do a lot of my work which at that point will be VERY large orders.



I suspect that your vision of a "fair value" will change when you start to market your product. I suspect that you will want to make enough to live on no matter what your expenses are. That's only natural.

When I started consulting, the standard wisdom was to figure out how much money you need to take home, then figure out expenses and how many hours you will be able to bill. The rate you chose needs to include the fund that you set aside for future equipment replacement. It needs to be enough you fund a nest egg for dry times. Fail to do that and you won't last a year.

When determining prices for products, keep in mind that if it's a good product there will be knock-offs and competition. You need to recoup your investment when you still have a healthy market. 

Good luck

Daniel


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## PEU (Sep 30, 2010)

gadget_lover said:


> When I started consulting



And you added a completely new dimension to labor costs, to put a tag on intangibles, I mean knowledge.

A few days ago, while I was delivering a CNC machine I sold (btw Im happy to be drifting from the welding alloys business to selling cnc machines and services) the customer told me that he wants to automate a machine they are building using the same CNC control the machine uses (mach3, pc based) 
I told him where to download and also where to read/ask to learn and he replied that his time would be wasted if he had to learn from scratch, OK I said, I can help you with the machine, give me a call when you are ready.

How do you quote knowledge that was acquired from years of learning and can be transmitted in one day or less? By the hour? By the 4 hours? By the job?

I consider myself good at selling goods, but I suck at selling knowledge because I like to teach/tell friends & customers how to do things.


Pablo


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## mototraxtech (Sep 30, 2010)

No I doubt that my aspect will change. I have mostly came up with my pricing strategy as it is the same as almost every other motor sport company. The difference is that when I put my product on the market and I will either make money and sell products or not make money and go out of business. Sometimes going out of business however is not a bad thing. The world market weeds out the bad producers. Just because one idea fails does not mean the next one wont be very successful. As far as knockoffs go my product will have a few patents(a least pending) before ANYONE other than me and my wife see it. Have you ever seen a dirt bike have a cheap knockoff made(didn't think so).


I have edited this out as it was a bit rude(sorry)

Now on to the new turf of KNOWLEDGE
This is what I have come up with from the help of a friend. First off KNOWLEDGE in itself is free. There is no real tangible cost in knowing anything or everything. BUT on the other hand education, that act of transferring knowledge from one person to another is very expensive. Just look at my collage bills. So basically you need to decide what your TIME is worth transferring that knowledge. YOU cant actually charge for the knowledge in a tangible way but you can your time. Its like saying I have to pay 1000 to know Algebra(Doesn't really make since). But if you figured out how long it was going to take to teach Algebra to me then decided what your time was worth that would make since.


As a side not I personally think knowledge is the most valuable thing a human can posses(actually the only REAL thing a human can posses). When the $hit hits the fan and you lose everything having knowledge can bring it all back. Its something you can not lose or be taken from you.


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## precisionworks (Sep 30, 2010)

> How do you quote knowledge that was acquired from years of learning and can be transmitted in one day or less? By the hour? By the 4 hours? By the job?


At work, we use the services of an excellent IT support group. Like you, they sell their time & their knowledge.

Their rates are pretty low, $100 for the trip charge (50 mile round trip) plus $150/hour while on site.

Before them, we used a group out of St Louis, 280 mile round trip. $500 trip charge plus $250/hour.

It depends on what others in your area charge, but something in the $150-$250/hour range is not unusual in the USA. I guarantee, if they hire a consultant to do this, they'll pay 2X or 3X as much.



> From the sound of you are doing business very inefficiently.


Well said, coming from a person who has yet to run a small business, much less make a profit (or suffer a loss) 

According to the US Census Bureau, most small businesses employ between 1 and 4 employees. http://www.census.gov/epcd/www/smallbus.html

Buy in large volume to get discounts - no.

Participate in group health insurance plans - no.

Provide paid vacations (just like the big companies) - sometimes.

Get hit with huge work comp increases when just one employee has a lost time accident - yes.

In other words, small businesses are inefficient by nature and often make tiny profits. Not to mention the fact that, more often than not, there is zero profit for the first few years.



> a small shop needs to charge as much as a big shop in order to turn a livable profit.


No, a small shop needs to charge *more than *a big shop to try to offset some of the costs that they have to pay.



> a home shop should have a lot less overhead with its much lower capabilities. Meaning you SHOULD be able to make decent money without charging near as much.


Perhaps, if you live in a third world country, pay no utilities, pay no insurance premiums, and run a foot powered lathe. Then you could earn just a much money as any Chinese factory worker ... 



*$2.25 ... per day *


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## mototraxtech (Sep 30, 2010)

Ouch!

You seem to have a lot of cost of doing business!

Just curious are you working for the rent or for a hobby(hobby business tend to be inefficaint as they are for fun)


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## mototraxtech (Sep 30, 2010)

I must admit something:naughty:

I do actually agree with most of the ideas represented by my competitors(for lack of better term) on the last few posts.

If you don't have a choice that would be gauging. If you do have a choice that is not gouging.

Also many small business must charge more to turn a profit. Not all but most certainly MOST of them do.

I still hold my ground that a small shop(meaning low budget with low budget machines) should charge less than a large shop(meaning high budget with very expensive machines).

The biggest thing is you have to decide if you are going to be a hobby or and actually self sustaining business. Remember business make money while hobbies many times will report loses.

This is a very informative topic and a lot can be learned from it.


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## precisionworks (Sep 30, 2010)

> You seem to have a lot of cost of doing business!
> 
> Just curious are you working for the rent or for a hobby


My CPA calls that "cost of goods sold" meaning all the operating costs that go into a product. They can be high for a one person shop.

Opened the welding & machining business in 2003 & ran it full time until 2007. Earned WalMart wages & SWMBO suggested that I get a full time job to supplement the shop  My employer went into Chapter 11 Bankruptcy Protection in 03-2009 and I now work at my "real job" only on Monday, Tuesday & Wednesday.

That worked out perfectly, as the shop business immediately picked up. 2009 was a good year, but 2010 (year to date) is the best year since I opened the doors. My employer may come out of Ch 11, which is OK as I'd go back to 40 hours - my suggestion will be four days, ten hours per day, which leaves three days for shop work.

I'm also looking at joining the welder's union, which would provide some amount of steady work plus some benefits. It has both pluses & minuses ... decent pay (scale is $32/hour here) but the work can be extraordinarily difficult. Have to wait & see.


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## gadget_lover (Oct 1, 2010)

When paying for skilled labor, you are really paying for the specialized knowledge/skill that is provided. You are not paying for someone's education. An degree/certificate does not necessarily translate to knowledge or skill any more than the lack of a degree translates to incompetence. 

When you are paying for unskilled labor you are paying for their time.

It reminds me of the old story about a railroad expert being summoned because a brand-new diesel locomotive would not start, no matter what the engineer did. The railroad was losing big money. After a short time studying the situation, the expert gave the locomotive a light tap with a hammer. It started right up. When the railroad received the expert's bill for $1,000, they asked him to itemize it. The reply came:
Hitting the locomotive with hammer: $10
Knowing where to hit it: $990


That's one of my favorites.

Daniel


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## mototraxtech (Oct 1, 2010)

true but if you charged for the value of the education my collage bill would be about 20x what it is now. It kinda like a priceless piece of art. If its truly priceless than it has no value as you are to proud to sell it making it valueless.

But I agree education is expensive.


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