Full Version: Pricing Module Tool
From: Laura (ELLEMD628) [#1]
14 Apr 2005
To: ALL
Okay, so I'm a huge number cruncher and try various pricing methods all the time (probably like most newbies.) I've taken accounting and business classes but I can rarely apply the traditional formulas in a manner I understand or feel I can use in my business. I've come up with something that at least makes sense to me....now I need the rest of you to let me know if I'm crazy or actually on to something. :)
This module is supposed to help tell you what you need to charge depending on what you want to pay yourself (and an optional employee) based on how many *billable* hours/days you want to work. The end hourly rate should cover your salary, an employee's wage and your somewhat "fixed" monthly expenses. This DOES NOT take material costs into consideration, so that would be added on separately (i.e., if you charge 3x your cost or whatever.)
I know we typically have an hourly rate for the laser, another for setup/labor, etc., and I do, but this gives me an idea of the minimum amount I need to take into consideration during production hours based on how much I want to work and how much I want to make - it's a dreamer's tool! (Hey Chuck - this way you can take into account all your pool parties!) :)
Obviously, I need as much pricing advice as the next person so please give it a try and let me know if I'm at least on the right track. (You can enter your desired salary on the left and all your expenses on the right. There's room to add other expenses if they're not listed. Input data in green shaded cells, everthing else figures itself.)
Thanks!
From: LaZerDude (C_BURKE) [#2]
14 Apr 2005
To: Laura (ELLEMD628) [#1] 14 Apr 2005
Laura,
Are pool parties tax deductible?
From: UncleSteve [#3]
14 Apr 2005
To: LaZerDude (C_BURKE) [#2] 14 Apr 2005
From: LaZerDude (C_BURKE) [#4]
14 Apr 2005
To: UncleSteve [#3] 14 Apr 2005
I could host an EE live and could all show our wares :)
From: UncleSteve [#5]
14 Apr 2005
To: LaZerDude (C_BURKE) [#4] 14 Apr 2005
Works for me.... grin!
MaiTai's in a coconut shell topped trophy..
From: Laura (ELLEMD628) [#6]
14 Apr 2005
To: LaZerDude (C_BURKE) [#2] 14 Apr 2005
Pool party? *Ahem* Don't you mean networking event? Of course it's tax deductible! :)
And now I am kicking myself for selling my pool!
From: LaZerDude (C_BURKE) [#7]
14 Apr 2005
To: Laura (ELLEMD628) [#6] 14 Apr 2005
From: wizzie (DSMITH) [#8]
15 Apr 2005
To: Laura (ELLEMD628) [#1] 15 Apr 2005
Laura,
There's a simple little program called 'Profitwatch' which you can download free from www.estimatesoftware.com that works costings similar to your spreadsheet version.
David
From: Doug (JDOUG5170) [#9]
16 Apr 2005
To: Laura (ELLEMD628) [#1] 17 Apr 2005
I don't understand why you want to charge a different rate depending on if you're running a laser, engraver, table saw, or an accounting program to bill the customer.
In my business, my time and the basic overhead of the shop is the same for every hour I'm planning to be there....40 plus a week.
Doug
From: Harvey only (HARVEY-ONLY) [#10]
16 Apr 2005
To: Doug (JDOUG5170) [#9] 16 Apr 2005
My time charge stays the same, my equipment time charge varies. Lasers are very expensive to repair when necessary.
When I go to another order my time stops for the first order, if it takes 45 minutes on the laser, that is charged as laser time. Being from a industrial manufacturing engineering background, I tend to get knit-picky about those things. I really should not.
[I usually analyze things to death.]
From: Doug (JDOUG5170) [#11]
16 Apr 2005
To: Harvey only (HARVEY-ONLY) [#10] 16 Apr 2005
Harvey...yes...I agree you are maybe a little too nit picky, but, if it works for you....great.
I personally don't relish spending a great deal of time to quote jobs rather than working them...I have found it easier to just factor in an experienced number for machinery repair based on previous years...some years I may win a few bucks, others...it may cost me a few.
Having run a shop with 3- CNC Routers that were in excess of $100k to purchase and where the spindles ran us upwards to $15k to replace...I understand the expense of equip breaking. Even with the expense of these machines, we were able to work very competitvely at $50 per hour and were making a good living at it...it is truly a matter of how you make use of the time when the machine is working....keep your hands doing something else that you are charging for...not watching and marveling at the task the machine is doing.
Of course...this is all well and good for those of us that have survived a few years of business...not sure how to advise a new business....although it seems that we all have the about the same level of expected return for our labors....after all...overhead is not all that different around the country for those of us that need more space than a garage and therefore are in commercial settings.
Doug
From: Harvey only (HARVEY-ONLY) [#12]
16 Apr 2005
To: Doug (JDOUG5170) [#11] 17 Apr 2005
The big trick is to get enough business to keep busy. That in itself lowers the necessary shop rate due to capacity utilization.
If you are only diong 10% of capacity you must make 10X the overhead on those jobs to stay afloat.
Then again, if you have employees, it can be cheaper to loose some money on a job when really slow. If it pays for material costs and part of the employee's salary, you are that part ahead. (Not good if it happens often.)
From: LaZerDude (C_BURKE) [#13]
16 Apr 2005
To: Harvey only (HARVEY-ONLY) [#10] 17 Apr 2005
[I usually analyze things to death.]
You sound like my wife
From: UncleSteve [#14]
16 Apr 2005
To: Doug (JDOUG5170) [#9] 17 Apr 2005
From: Laura (ELLEMD628) [#15]
17 Apr 2005
To: Doug (JDOUG5170) [#9] 17 Apr 2005
Quite honestly I don't want to charge different prices and have to keep track of what task I'm working on. I try to figure three different things: material cost, laser time, labor time. My "hourly wage" and overhead remains the same and I generally don't break it out as far as if I'm running the laser or the computer.
The pricing module I am testing determines a flat minimum rate I should charge for any billable time no matter what I'm doing. So, let's say the module gives me $50/hr as my minimum. That will cover my hourly wage and overhead. According to many people on the forum running a laser $50/hr is quite cheap so I would figure production time at $50/hr and add the laser time at $x/hr and marked up material costs. That should cover all my bases.
I'm still new and learning with each job. We'll never all agree on one perfect pricing strategy. As long as my customers are happy and I make a decent living doing what I love, I'll be happy.