Billing customers

10 X if they insist on watching. 20 X more if they insist on HELPING and do not understand what go away means.
A humorous anecdote, on a Saturday, (Never Leave The Door Open On A Saturday) this is when the hobbyists (by hobbyists I do not mean hobby machinists but every hobby including every cheap bugger that thinks that they can fix their 30 year old Maytag washer) and cheap people prowl about.
The shop owner left the door unlocked and lo and behold some guy walked in with fairly detailed drawings for a lathe part, 1 part only.
Steel
The Shop Owner shows me the drawing and asks how long will it take, I tell him that we have the 2"+ material in stock and the part is 2" max diameter x 3" long so 3 hours max.
The customer was not buying $12.00 worth of material.
I brought the material says he, it was a nasty rusty 5" diameter X 5" long piece of unknown steel.
He did not understand that turning a 5" diameter blank to less then 2" would take a good deal of time even using a CNC lathe not including drilling, boring and threading a hole in the center an a few other features.
My employer told him to go away. Which I found nice after 30 years of dealing with these people when I owned my own shop.
I tell the I don't know what material it is and won't use it,because I don't know how hard it is. If they like it,there is the door (polite as possible off corse ).
 
Charging time and materials would seem to be the most fair way to bill, especially on one off jobs. There are some considerations however. In my experience, the first part takes twice as long as the second part and maybe three times as long as the third. There is no comparison, efficiency wise, of a large part done on a 6" lathe and and on a 15" lathe. IMO, it would be unfair to the customer to bill at the same hourly rate. Hourly rates are often assigned to machines because in a production shop, an idle machine isn't earning money. The objective is to keep the machines running as close as possible to full time operation. A large VMC might command a hourly rate in the hundreds of dollars while the small manual lathe only in the tens of dollars. Materials should be billed at a rate comparable to the cost of replacement rather than the actual cost. Most production shops stock materials in bulk in order to have stock on hand and to take advantage of volume pricing. I would think it reasonable to bill the customer what it would cost ordering the necessary material from McMaster Carr or Online Metals Don't forget to add in wear and tear on tooling. For off the wall jobs that require some experimentation or additional preparation to fulfill, that would be a legit add on. Finally, would be the "need it yesterday" jobs. Of the customer expects you to wirk through the night to meet his need, he should also expect to pay for that additional service.

As for my own situation, I am not expecting to make money from any jobs. I retired from working five years ago and do not feel compelled to re-engage. I will do jobs for friends and neighbors. When they ask me how much, I tell them,"you can't afford to pay my rate, so no charge. Pass the favor on to the next person." I look at it as building my credit so if there is a time when I need a favor from them, I don't feel guilty about asking. The exception is if there is a significant amount of materials required, I would ask them to either provide them or pay for the materials.

In the end, each individual has to decide for himself what is fair. If you are undercharging, you won't stay in business very long. If you are overcharging, customers will gradually drift away. A few years back, our company was dealing with a startup job shop. The owner didn't have much in the way of equipment and so lower operating costs and his rates were on the low side. He also took on jobs that other shops deemed too small to bother with. This would have been ten years ago. The last few times that I have stopped in, his business has been growing by better than 50% aq year. He now has three VMC's and a CNC lathe, as well as a number of manual machines and this last year, opened a second shop in California in addition to the Wisconsin operation. He took a calculated risk in pricing attrasctively and taking on jobs that weren't that profitable to build a loyal clientele base which has served him well.
 
Charging time and materials would seem to be the most fair way to bill, especially on one off jobs. There are some considerations however. In my experience, the first part takes twice as long as the second part and maybe three times as long as the third. There is no comparison, efficiency wise, of a large part done on a 6" lathe and and on a 15" lathe. IMO, it would be unfair to the customer to bill at the same hourly rate. Hourly rates are often assigned to machines because in a production shop, an idle machine isn't earning money. The objective is to keep the machines running as close as possible to full time operation. A large VMC might command a hourly rate in the hundreds of dollars while the small manual lathe only in the tens of dollars. Materials should be billed at a rate comparable to the cost of replacement rather than the actual cost. Most production shops stock materials in bulk in order to have stock on hand and to take advantage of volume pricing. I would think it reasonable to bill the customer what it would cost ordering the necessary material from McMaster Carr or Online Metals Don't forget to add in wear and tear on tooling. For off the wall jobs that require some experimentation or additional preparation to fulfill, that would be a legit add on. Finally, would be the "need it yesterday" jobs. Of the customer expects you to wirk through the night to meet his need, he should also expect to pay for that additional service.

As for my own situation, I am not expecting to make money from any jobs. I retired from working five years ago and do not feel compelled to re-engage. I will do jobs for friends and neighbors. When they ask me how much, I tell them,"you can't afford to pay my rate, so no charge. Pass the favor on to the next person." I look at it as building my credit so if there is a time when I need a favor from them, I don't feel guilty about asking. The exception is if there is a significant amount of materials required, I would ask them to either provide them or pay for the materials.

In the end, each individual has to decide for himself what is fair. If you are undercharging, you won't stay in business very long. If you are overcharging, customers will gradually drift away. A few years back, our company was dealing with a startup job shop. The owner didn't have much in the way of equipment and so lower operating costs and his rates were on the low side. He also took on jobs that other shops deemed too small to bother with. This would have been ten years ago. The last few times that I have stopped in, his business has been growing by better than 50% aq year. He now has three VMC's and a CNC lathe, as well as a number of manual machines and this last year, opened a second shop in California in addition to the Wisconsin operation. He took a calculated risk in pricing attrasctively and taking on jobs that weren't that profitable to build a loyal clientele base which has served him well.
Excellent post, RJ!
 
I take on jobs and normally calculate based as such:

- Material cost (includes time to order, pick up and any taxes and freight charges. Also applies if I am using off-cuts or scrap)
- 1.5 X estimated hours X hourly rate (I also add the time it takes for the customer to explain what they want)
- Cutting tool wear (about 15% - 30% depending on the size of the job)

I also add to the cost if the job is after hours and double time on a Sunday. My hourly rate has the wear of the machines / lubricants calculated into it and the electricity cost as well.

This prices me on the high end of one-off jobs but these are normally the ones they can't get anyone to do because the big shops are not interested. The last job I did was a prototype sensor mount for a venturi flow meter and I charged that out at $175 an hour because it was needed next day and I had to work on it after hours. It took me 4 hours total as it had a difficult set up. In the end I billed the customer for $750 because it also included materials. The customer was overjoyed as their old supplier would need a 2 month lead time to slot the work in-between production runs. They were able to demonstrate their prototype to the customer next day so they were very pleased.

The thing is that I don't run a shop to make money as I have an engineering company for that. This puts me in a position to only take jobs that either pay very well or I find interesting. I also do freebies for folks who can't afford to pay and need some help so it's not always strictly business.

Paul.
 
I am a hobby machinist, pure and simple. I have turned down quite a few paying projects, simply because I would rather be working on my own projects. Still, if I was to do paying work, it would likely be $X for the work, $2X if you watch, $3X if you help...

We have a similar rate at our shop!
Some mechanics over the years just stop working if a customer decides to watch.
 
Back
Top