How Do Pros Determine Prices?

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As a hobby welder this isn't something I have to worry about but I'm tossing around the idea of taking a one year course and going into it as a business.For the pros out there, how do you decide what to charge for jobs?An hourly rate?Hourly rate + materials?If so, how do you calculate material costs?  On straight stick I'm guessing it's relatively easy, figure out what rods cost and keep track of how many used on that job.  If running a wire fed process, how do you figure amounts of wire?  What about gases if using any?What about really small jobs?  Is there a minimum fee you establish just to show up and fire up the machine?Any other points appreciated."These instructions are at our present level ofknowledge. Legal requirements do not exist.Technical issues subject to change."_________________________________________Lincoln MIG PAK 180Lincoln AC-225
Reply:Your best bet is to go work for a shop for a couple of years after finishing school to develop your skills, learn the business and hopfuly the owner/forman can answer these questions as u workTiger Sales:  AHP Distributor    www.tigersalesco.comAHP200x; AHP 160ST; MM350P,  Spoolmatic 30A; Everlast PowerTig 185; Thermal Dynamics 60i plasma.  For Sale:  Cobra Mig 250 w/ Push-pull gun.  Lincoln Wirematic 250
Reply:Lot's of ways to do it.  Take a business management class at a community college.  There are a lot more variables than you would imagine.  Insurance is very expensive for a welder.You have to figure out your fixed costs and break them down to an hourly amount per employee.  Say your liability insurance, rent, financed equipment payments, truck payments, utilities for the shop, electric bill, average monthly machine repairs, and employee health insurance comes out $25k per month.Take four employess x forty hours per week = 640 hours worked in a month.  Divide your overhead by your man hours and you have almost $40/hr just to keep the shop running, not including employee wages.Add your employee's wages to your $40/hr = $70/hrTake your material and consumable costs and get that down to an hourly amount for the length of the job, then add that to your running total.  $70 + $12.50 = $82.50Then you take your projected profit goal for the year, break that down into an hourly amount and add it your running total.  $150k / 2k hours = $75/hr.  $75hr + $82.50 = $157.50So, in this instance, $157.50 is what you have for an hourly amount to charge.  That's around where our numbers are but YMMV.
Reply:Experience can tell me what I can bid a job for, after you lose money a couple times you get good at estimating I can usually tell by walking on a job if it will be flat rate or T&M.Disclaimer; "I am just an a$$hole welder, don't take it personally ."
Reply:Originally Posted by HardwareAs a hobby welder this isn't something I have to worry about but I'm tossing around the idea of taking a one year course and going into it as a business.For the pros out there, how do you decide what to charge for jobs?An hourly rate?Hourly rate + materials?If so, how do you calculate material costs?  On straight stick I'm guessing it's relatively easy, figure out what rods cost and keep track of how many used on that job.  If running a wire fed process, how do you figure amounts of wire?  What about gases if using any?What about really small jobs?  Is there a minimum fee you establish just to show up and fire up the machine?Any other points appreciated.
Reply:Originally Posted by TozziWelding, after you lose money a couple times you get good at estimating.
Reply:In the bridge busness we take off all materials , weld weight , sq/ft paint , trucking and the hardest thing man hours per piece , cost per pound  and escalation . John
Reply:If you don't know up front what your costs are you might as well throw darts blindfolded, what ever you hit that's your price. One needs to break out as many items and price them I break out safety glasses and dust masks. I know how much electricity 1-2 and 3  machines running 8 hours is going to cost me.  I check the commodities pricing every morning, if oil is up and I have a bid I know I need to honor 45 days from now.... Details is the name of estimating.
Reply:I always set up a minimum price.  Otherwise you get inundated with the "it will just take a few minutes" jobs that keep you from making money.  There is such a thing as setup/cleanup time that a lot of people don't understand. Originally Posted by HardwareWhat about really small jobs?  Is there a minimum fee you establish just to show up and fire up the machine?
Reply:We break up estimates into labor, equipment, material and subcontractor costs. A lot of smaller shops probably just use labor and material w/ some overhead built in. We bid a lot of seven figure jobs, so our mark-ups are small compared to others.Labor will be hourly wage(take home) plus benefits package, Fica, Futa, Suta, worker's comp and liability insurance. The last two are just a percentage multiplier.Equipment will be operating cost(repair, maint), depreciation, fuel, etc.Material is cost plus maybe 5-10% depending on whether job is tax exempt (alot of our's is)Sub will be cost plus 5-10%Tack on any applicable bond costs(bid, performance and maintenance) usually 10% for bid and 1-1.5% for perf/maint.We then mark up labor/equip about 17% for overhead/burden and then decide on a profit mark-up depending on time of year/workload. Varies between 5-15%.Alot of guys out there probably figure higher markups for everything I've listed. What I showed just reflects the market conditions for the field we are in. If I could get higher ones, I'd do it in a second.I've been running construction work for 21 yrs.
Reply:Lots of good info.  Thanks guys!"These instructions are at our present level ofknowledge. Legal requirements do not exist.Technical issues subject to change."_________________________________________Lincoln MIG PAK 180Lincoln AC-225