Another Wholesaling Price Check

[Capstone]

I want to establish the importance to a new customer of the "value" I'm adding to his operation, but don't want to give him sticker shock either.

He's been developing aftermarket products for a performance vehicle that currently involves a lot of manhours to fabricate and he's asked me to produce a bracket which should reduce the time it takes to manually shape this bracket on a magnitude of probably 20x. Meaning in the time it takes for me to deliver 20 of these, he could only make 1, and that's not counting the wear and tear on drill bits and their bodies. He's welding these pieces up and selling an entire product with I assume a hefty profit.

Here's the specs on the pieces I'm cutting.
17.8in per piece with just 3 pierces, in 3/16in hot rolled.

I spent about an hour on the CAD, then cut 5 test pieces to prototype for proper cut quality and sizing, so they are "dialed in" and he knows they will work. He's asked for 20. I would give them to him after knock off the edges and dip them to get the mill scale off, so not much finish work.

Using the default pricing on the pricing worksheet, at $0.20 per in, just for the cutting/90 pierces, I came up with $12.56 each (based on 20+ purchased in bulk). This seems high, so I'm wondering how you would make the argument that this is a great deal for him? (EDIT) I need to fix the Original Post by saying that this price is indeed too high because I was giving the spreadsheet BAD data. I used the total number of pierces (90) for the entire job, instead of per piece (only 3) so my gut reaction to the price was correct. The corrected price came in around $4 each and the customer had no problem with that pricing, in fact, he was so pleased with the result and anticipated time saved, he actually paid me $5 for each part just because the math was easier and he was happy to put his employee to better use. WIN WIN!! .


Would you lower your price, keep it the same, or even raise it up?

[Corfabrication]

If he is making them by hand currently,he will be more than happy to pay a reasonable price (as you have) for a nice and consistent part. My .02

[acourtjester]

I think you should stay with standard pricing you are both in business to make money. And if you give him a special price and he talks to another customer of your that may cause a problem for you. His profit does nothing for your business.

[Capstone]

Thanks guys for the prompt and considered responses. I've already worked a little this morning on cutting more and ran into snags with consistency, which means I have to run smaller batches and take more time.

This seems like a over-hashed subject, but I still wanted to figure out something with help from those fellow "spiders" that are already doing business.

The issue I really have is with this "Standard pricing" model for per-inch-pricing in the worksheet. Where did this price table come from? The form was last published in 2013 so I have to ask, has anyone worked these numbers from the opposite end as far as their per hour pricing or on a profit "margin" standpoint? Does it really matter if it's "wholesale or retail"?

I know certain industries adhere to certain markup, like clothing is 100%, but for others, like resellers, the margins are much skinnier. I'm just trying to understand how this table aligns with our general industry with regards to markup in related fields like machinists, welders, powdercoaters and the like. Eventually I plan to go after some Federal Contracts and it would be good to get in the habit of using pricing I can easily publish and defend.

[Corfabrication]

the pricing jim colt discusses on occasion puts me in line with some of the lazer shops in my neck of the woods. The spread sheet i have from here always works out to be much higher pricing.

[Capstone]

Well... It's always a good thing to double check your figures....


I went back and saw that I was putting the total number of pierces for 30 of them into the eaches price.

Good thing I went back and looked again before talking with the customer. I would have asked for a rediculous amount and he would have been pissed.

[tnbndr]

That pricing worksheet is based on the original posters prices for consumables, shop rate, CAD rate, material cost, etc.
You have to adjust those numbers to fit your shop, there is no one size fits all.
I would purchase cold rolled steel to eliminate the need to clean mill scale and save time.

[CDNblacksmith]

I am new to the cnc plasma world, but i once took a course from a smart guy and we were talking business. He told me one thing that often puts my mind at ease. "Don't make financial decisions for your customers". It makes a lot of sense. If you charge a fair price then that is the price. Special deals always end up backfiring... Frequent customers aside.,..

[Corfabrication]

I am new to the cnc plasma world, but i once took a course from a smart guy and we were talking business. He told me one thing that often puts my mind at ease. "Don't make financial decisions for your customers". It makes a lot of sense. If you charge a fair price then that is the price. Special deals always end up backfiring... Frequent customers aside.,..

The last statement couldn't be more true.

[natewelding]

Was the $5 including material cost? I don't exactly know what you're cutting without seeing it, which I don't need to really, but to be honest I think $5 is pretty damn cheap for something that is saving him a ton of time. I'll run something on my software and see what my price would be just to double check, maybe im charging too much . Just my thoughts.

[Capstone]

The item I'm cutting is very small. only 17ins with 3 pierces. A bracket that's part of a larger fabricated part. I had the material leftover from another project so that wasn't a cost, so I guess I should have charged a little more, but I still made out ok. As more of these deals go through, I'm sure I'll be more confident in my pricing. Thanks to everyone for sound advice and input.

[RevvedAC]

I build Pro-Touring Muscle Cars for a living so I've got some insight from the other side of the fence. I got into the CNC plasma world for exactly the reasons you are describing... I find myself fabricating brackets, odds, and ends that I can now draw out and cut faster, cleaner, and with better consistency then having to hand build every time. The point was made in previous posts how you need to make sure your pricing pays you as well as cut costs for your potential client who is already looking at this as a cost and time savings measure by having you pre-fabricate the parts for him and I agree 110%. You give the 20:1 example of his time savings by having you CAD and cut the parts so for example if you are truly saving him that much time, you should probably bill your time at a 10:1 ratio where you are making your money and he his making his. After 20+ years in this industry I can vouch for the fact that he will be overjoyed to see that much of a savings in his expense that he can pass along to his customer and you by padding your profit margin will be able to cover the real expenses of what we incur by CAD and cutting these products. It's easy to tell our wives we "just CAD and cut" a part but everyone here knows the reality of the amount of time, consumables, materials, maintenance, every other unmentionable COGS that goes into a product that we put into a customer's hand. Don't ever feel like you are "making too much" when you are already providing your customer with a huge cost and time savings by giving him your services.


Consider the fact that the average "custom car shop" is going to bill their labor at $60-$90/hr and pay their fabrication level mechanics at $20-$30/hr. An average simple bracket or gusset is going to take about an hour to cut, drill, clean up an be ready to install/weld in. So his cost on a "fabricated bracket is going to be roughly $25-$35 a piece... if you could cut the same for him at $15-$20 that he could have as a part on the shelf to source, bill and install without having to fabricate everytime it would be an easy money maker for everyone.

Perfect Example.... The suspension fabrication world is proliferated with people offering "suspension tabs" which are simple tabs with bolt holes for shocks, suspension mounts, etc that probably use about $0.50 worth of 1/8" or 3/16" material but sell for $5-$10 a piece that could yield 100 per 2x2 sheet. Easy money maker that saves 30 min worth of fabrication time.

My......$0.02

[Capstone]

Thanks RevvedAC! I really appreciate the breakdown and confirmation of the value we all have control over. In my other career, I have very clear COGS and can simply add my margin, this type of business has a lot of gray areas as far as cost.

[vmax549]

Instead of Cut inches consider cut TIME as it will take in all the variables such as feedrates. You should first establish a cost of operations for your cutting machine. Here I use $100 per hour for machine cutting. There IS an art fee IF it is not to be a return business part. You will NEED to perfect your Cad drawing as to time to draw. IF it is a repeat part I forgo the drawing cost and absorb it into the cost of doing business. HAVE you tracked teh actual cost per pierce or just guessing ? You need to actually track it for a whiel to know exactly what it reeally is. SheetCam can do that for you. and MACH3 can do it better as it actually sees ALL the pierces. you can track how many pierces you actuall get from each consumable(electrode and nozzle). THEN you know .

Then you have a prep charge that is calculated by Square inches, same with paint cost. Pierces can be charged BUT for the most part it is a cutting cost and is figured into the machine cost per.

Without having a KNOWN cost of Business you have ZERO idea if the part is making you money or costing you money.

With supplying the metal your PART cost was WAY LOW to be able to make any real money.

That process will tell you the Cost of making the part. THEN you add in your profit margin. Custom Art parts CAN draw more profit margin. Wholesaling you have to remember the value of what you are selling and leave profit for the reseller.

Custom one off parts always cost more than repeat parts as you HAVE to recoup the total cost for each part produced.

ONCE a part proves to be a repeat part the cost to produce lowers and you profit margin raises for that part.

I use a part costing PLugin for Sheetcam to do the part costing. Plugin in the variables into its database and IT does the calculations AND that tends to keep you from fiddling with the cost . It IS what it is. Trust it once it proves itself.

It tracks material cost per item in Square inches , Machine time per sec , Prep cost per Area(Sq Inches), paint time per Sq Inches( same as powercoaters do) and spits out a cost per part. This way you cost to produce is covered then you can fiddle with teh profit margin IF you choose to.

Just a thought, (;-) TP

(;-) TP

[Capstone]

Thanks VMAX, really appreciate the thorough response. Lots of good info. I don't see in my plugin listing on SheetCAM anything for Parts Cost. I have a fully licensed copy so how/where is this Part Pricing Plugin added?.

[vmax549]

You will have to talk to Les over at SheetCam. I created it as a proof of concept to see IF it could be done. Less would need to refine it a bit for general use.

BUT it does work very well AND it does not get wishy washy when calculating the true cost it just spits out the cold hard facts (;-)

[vmax549]

Here is a Screen shot of the plugin.

[vmax549]

Here is a sample output of the cost report.

[TJS]

Been very new at this and have not yet cut anything cause I am still working on my machine. I have been welding and fabricating for a while though. I have a pretty full shop of machine, welding and cutting tools. I will say this, your formulas are pretty good but you must remember Joe Schmo cannot do what you guys do. I.E. , art, design, reverse engineer and even know how to use the software and machine. In the Corporate world this is called intellectual capital. You need to charge for this.

I had a lady customer contact (well worth the sight I might add) me in regards to making an industrial looking picture frame for a BAR she is opening. She came to my shop and could not believe how organized my shop was and the equipment I have. Anyway, we talked about her requirements and then she asked me the price. I gave her the estimate and she balked a little but I explained to her about not anybody can do what you require that is why you are here. She now completely understands. To the OP. 4 bucks each seems kind of low. Are you making a profit. It sounds like you guys are just covering costs and not putting a profit into this. Hey the person selling that automotive part I am sure is making a larger profit now that you are doing the parts, because now his guy is free to make or do something else more productive this is called opportunity cost. You need to now reap profit on your side as well. If you guys are just covering costs you might as well turn all your machines off and go watch the stupid TV shows on the couch.

[tnbndr]

and MACH3 can do it better as it actually sees ALL the pierces. you can track how many pierces you actuall get from each consumable(electrode and nozzle). THEN you know .

Care to elaborate on how to track this in Mach 3? Send PM if you like.

Regarding your costing output from Sheet Cam, do you then put that data in a spreadsheet for final costs with markup, etc.?

Thanks

[Capstone]

You will have to talk to Les over at SheetCam. I created it as a proof of concept to see IF it could be done. Less would need to refine it a bit for general use.

BUT it does work very well AND it does not get wishy washy when calculating the true cost it just spits out the cold hard facts (;-)

This is HUGE!! I don't know if this plugin was ever mentioned before on other threads, but I will definitely be following up with Les for more info on next steps for use of this plugin.

Customers IMO are much less apt to argue with a price tied to a print out showing all of the actual data points than with a number seemingly pulled out of a hat. Also, someone interested in creating a definable price list that's published can then possibly take a huge step closer to subbing out Fed contracts with larger integrators which is a real goal of mine.

Thanks again.

[tnbndr]

This is HUGE!! I don't know if this plugin was ever mentioned before on other threads, but I will definitely be following up with Les for more info on next steps for use of this plugin.

I am also interested in this, did not know it was possible.

[Capstone]

Dennis, et al,

I have already sent an email to Les @ SheetCAM with an inquiry on this plugin. Maybe the community can convince Les (with VMAX's endorsement) to roll this out as a BETA to Plasmaspider Elite Members

[vmax549]

Here are a few more Plugins for SheetCam. And there are more(;-)

The dxf and part veiwers are great . They allow you to veiw your dxf files for the one you want. Great if you have many 100s of files. Same with part veiwer it allows you to VEIW the part that you have already created but can't find cause you forgot what you called it. You can just arrow down or up through the directory or change directories.

The Many OPs is a time saver. Here I basically do only 3 OPs inside offset,outside and NO offset. Just use the button of choice to create the operation . EACH op is et up exactly how I want it to be.

Many Post does the same with posts

Feeds and Speeds are for router type use allows you to calculate the best feed speed based on material and tool type.

(;-) TP

[vmax549]

For Mach3 here is an example of the consumables monitoring. It can be done several ways. The example show a screenset modified to include DROs for teh values and a reset button. also there is a report section that displays totals and cost per pierce calculations.

It is driven by a script in the M5 Mcode (torch off). each time it runs it increments the count by 1. When you are ready to change out the Consumables it can write a report based on the COST of an electrode / number of pierces = cost per pierce.

It is the SAME for nozzles each are tracked seperately.

It can let you know QUICKLY if your consumption is getting out of hand and you need to review your cut process.

AND there are more goodies as well.



(;-) TP