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Shop rate. How do you determine it?On the Facebook plasma groups and Blacksmith groups it is common for someone to ask how much to charge for an item or service. The standard answer from many members is:(Hrs x shop rate) + materials + materials mark up, etc. What is not clear to many is how these other businesses or people came up with the actual shop rate they charge. The typical answer seems to be in the $100-125 an hour range. Why is it that number? There was a recent post on one Facebook group about how there was a govt report showing standard rates were at that range, therefore the poster argued, all shops should charge that rate. New members, hobbyists, Side gigs like myself may not have the overhead a full time stand alone business charges. I keep track of every mile driven and every small widget I buy.I also use the standard home office deduction ony taxes. Sent from my SM-G996U using TapatalkLast edited by psacustomcreations; 15 Hours Ago at 12:01 PM.Millermatic 252 MIGMiller Dynasty 200DX TIGMiller Spectrum 625 PlasmaAltas 12x36 Metal LatheBridgeport Milling Machinewww.psacustomcreations.com
Reply:On the Facebook metal art or Blacksmith forums it is common to see the answer or calculations listed above.I always argue from an artist perspective, that does not always work. Production shops, whether in blacksmithing or in metal art, always answer with that calculation. Some have seen the items I post in my scrap metal thread. There are times it might take me 2 hours to make an item. If I use that calculation, it should cost $200 - $250. There are times I know I can sell the item as an art piece for $700-1200. Other times, I also know I can only sell it for $150.Sent from my SM-G996U using TapatalkMillermatic 252 MIGMiller Dynasty 200DX TIGMiller Spectrum 625 PlasmaAltas 12x36 Metal LatheBridgeport Milling Machinewww.psacustomcreations.com
Reply:Tough call for a non commercial situation. A lot will depend on method of payment and whether or not ( I realize most cases.. not) you are registered as a business and need to collect sales or goods and services tax. Even though I sold my businesses and am retired with no business name, I as an individual must collect and remit taxes as I have rental properties. That said, I would say posted shop rate should not be under $100 per hour in order for anyone to take you seriously. It is important to establish and not devalue your personal worth up front. Sent from my iPad using Tapatalk:
Reply:
Originally Posted by psacustomcreations
Some have seen the items I post in my scrap metal thread. There are times it might take me 2 hours to make an item. If I use that calculation, it should cost $200 - $250. There are times I know I can sell the item as an art piece for $700-1200. Other times, I also know I can only sell it for $150.Sent from my SM-G996U using Tapatalk
Reply:
Originally Posted by Lis2323
I don’t follow anything on Facebook etcI obviously follow your posts on the scrap metal thread and I think you are on the correct path. Fine tune as you grow and evolve. The situational pricing you posted above is a good example of give and take. Make a fair price on some items, windfall on the unique items when appropriate. Sent from my iPad using Tapatalk
Reply:Slightly off topic but related. I frequently have people ask me how much to weld or fix something I ALWAYS tell them it would be best to contact a REAL shop as I am NOT a pro ( as Welder Dave and John T will confirm
)I will even give them contacts of shops if they want. Doing work for friends or acquaintances is a no win situation. You take extra time to do a job properly and give them a bit of a break and they still think you charged too much for a "buddy"I will find other ways to supplement my limited income but I realize others are in different situations. Sent from my iPhone using Tapatalk:
Reply:All my work was quoted. Used formula which work for doors. But big pain some just look at you and work and give a price. My father used 2 tons a day. Had one for painting 🖼 too. They work OK till we start doors.Today I would do everything by hour and give a estimate only (Best guess).Dave
Originally Posted by psacustomcreations
Shop rate. How do you determine it?On the Facebook plasma groups and Blacksmith groups it is common for someone to ask how much to charge for an item or service. The standard answer from many members is:(Hrs x shop rate) + materials + materials mark up, etc. What is not clear to many is how these other businesses or people came up with the actual shop rate they charge. The typical answer seems to be in the $100-125 an hour range. Why is it that number? There was a recent post on one Facebook group about how there was a govt report showing standard rates were at that range, therefore the poster argued, all shops should charge that rate. New members, hobbyists, Side gigs like myself may not have the overhead a full time stand alone business charges. I keep track of every mile driven and every small widget I buy.I also use the standard home office deduction ony taxes. Sent from my SM-G996U using Tapatalk
Reply:I think there are two approaches to determining your shop rate. I don't have a shop rate since I'm mobile, but it's just semantics. I know you mean labor rate.The quick and dirty way is to see what successful businesses of your type in your area are charging (DON'T compare yourself with new startups; they have no idea how to price their work), figure out what the highs and lows are, honestly compare your skill and speed with your competitors', adjust within that narrowed range by how hungry you are, set your rate and forget it for awhile. The 'correct' way to do it, which almost nobody actually does, is to figure out your expenses, both variable and fixed, then add profit onto it, and there's your rate. The kicker is that you have no idea what your working hours will be in the beginning (even 16 years into doing this on my own, I still have no idea what the next year will bring) and so it's nearly impossible to come up with a solid number. I can tell you that in my particular business, I expect to see at least $30k and as many as $50k worth of annual expenses including materials, fuel, etc. And I focus on repair which is relatively light on materials expenses. A production shop will necessarily have much higher gross expenses and gross income than I do. If there are employees, you've got to add their labor and associated overhead costs in. For easy figuring, this year I had my accountant figure on me paying myself $100k a year before taxes. That comes to $7440 worth of state and nat'l taxes I owe each quarter, or about 2 weeks' worth of work each quarter that goes to taxes. If I make more than that, I'll have to pay extra in on April 15. I've had to pay as much as $10k extra on April 15 before; I don't like to, but I will if I have to. So your labor rate had better have enough cushion in it so that you can put some $$ in savings as well.But truthfully, I don't think very many people actually pioneer their own labor rate. I think the market kind of increases along with the big players' increases, and the rest of us keep pace while lagging slightly behind on our increases.The real deciding factor on your rate should be an honest look at where your abilities fall in the continuum of others' rates. If you're as good as the best, and as fast as the best, then you need to be charging like the best. If you're a beginner, you should fall in the lower established rate range. Don't charge for what you can't provide. Businesses expect to pay several times what they pay their own employees for external labor rates, so don't apologize for it; they understand the costs associated with running a business. This is actually my main gripe with residential customers and why I don't go after them; they think that if a guy in a welding shop is getting paid $25/hr, then so should a person who owns their own welding business. I can't remember the last time that someone complained about my labor rate or questioned it. But I'm established now, and I'm able to defend it if I need to. I can point out multi-million dollar installations that I'm responsible for; they weren't built in a day, but I did the bulk of the building and still do the maintaining. My rate during that time increased by about 25%, but we all understand what I'm able to do and what the economy has done in the intervening years. So no complaints.I put as many numbers in this post as I could in an effort to be useful. Most guys won't do that, and I wouldn't have either back when I had my company name as my signature and a picture of my truck as my avatar. Too recognizable, and indeed I was once approached when getting out of my truck by someone who'd seen its build on WW. But these days I keep a lower profile, so I hope this additional honesty helps some.
Reply:I have quoted jobs with over 50,000 hours and did jobs over 15,000 hours. It is the art of quoting Dave
Originally Posted by psacustomcreations
Shop rate. How do you determine it?On the Facebook plasma groups and Blacksmith groups it is common for someone to ask how much to charge for an item or service. The standard answer from many members is:(Hrs x shop rate) + materials + materials mark up, etc. What is not clear to many is how these other businesses or people came up with the actual shop rate they charge. The typical answer seems to be in the $100-125 an hour range. Why is it that number? There was a recent post on one Facebook group about how there was a govt report showing standard rates were at that range, therefore the poster argued, all shops should charge that rate. New members, hobbyists, Side gigs like myself may not have the overhead a full time stand alone business charges. I keep track of every mile driven and every small widget I buy.I also use the standard home office deduction ony taxes. Sent from my SM-G996U using Tapatalk
Reply:I spent about 10 years figuring out how to price IT services for companies like IBM. This is honestly is pretty analogous to figure out the "shop rate". What I would tell you is the price for a job or service is best based on the value the customer derives from the service, not your cost inputs. The minute you go to cost inputs, you become a commodity that people can shop for like milk or eggs. I get that it is a common practice to use a shop rate, but I think people leave money on the table when they do this. Figuring out the value to the customer is more art than science. But just something to consider. Happy to discuss further in PM rather than hijacking your thread.Miller Multimatic 255
Reply:
Originally Posted by tbone550
I think there are two approaches to determining your shop rate. I don't have a shop rate since I'm mobile, but it's just semantics. I know you mean labor rate.The quick and dirty way is to see what successful businesses of your type in your area are charging (DON'T compare yourself with new startups; they have no idea how to price their work), figure out what the highs and lows are, honestly compare your skill and speed with your competitors', adjust within that narrowed range by how hungry you are, set your rate and forget it for awhile. The 'correct' way to do it, which almost nobody actually does, is to figure out your expenses, both variable and fixed, then add profit onto it, and there's your rate. The kicker is that you have no idea what your working hours will be in the beginning (even 16 years into doing this on my own, I still have no idea what the next year will bring) and so it's nearly impossible to come up with a solid number. I can tell you that in my particular business, I expect to see at least $30k and as many as $50k worth of annual expenses including materials, fuel, etc. And I focus on repair which is relatively light on materials expenses. A production shop will necessarily have much higher gross expenses and gross income than I do. If there are employees, you've got to add their labor and associated overhead costs in. For easy figuring, this year I had my accountant figure on me paying myself $100k a year before taxes. That comes to $7440 worth of state and nat'l taxes I owe each quarter, or about 2 weeks' worth of work each quarter that goes to taxes. If I make more than that, I'll have to pay extra in on April 15. I've had to pay as much as $10k extra on April 15 before; I don't like to, but I will if I have to. So your labor rate had better have enough cushion in it so that you can put some $$ in savings as well.But truthfully, I don't think very many people actually pioneer their own labor rate. I think the market kind of increases along with the big players' increases, and the rest of us keep pace while lagging slightly behind on our increases.The real deciding factor on your rate should be an honest look at where your abilities fall in the continuum of others' rates. If you're as good as the best, and as fast as the best, then you need to be charging like the best. If you're a beginner, you should fall in the lower established rate range. Don't charge for what you can't provide. Businesses expect to pay several times what they pay their own employees for external labor rates, so don't apologize for it; they understand the costs associated with running a business. This is actually my main gripe with residential customers and why I don't go after them; they think that if a guy in a welding shop is getting paid $25/hr, then so should a person who owns their own welding business. I can't remember the last time that someone complained about my labor rate or questioned it. But I'm established now, and I'm able to defend it if I need to. I can point out multi-million dollar installations that I'm responsible for; they weren't built in a day, but I did the bulk of the building and still do the maintaining. My rate during that time increased by about 25%, but we all understand what I'm able to do and what the economy has done in the intervening years. So no complaints.I put as many numbers in this post as I could in an effort to be useful. Most guys won't do that, and I wouldn't have either back when I had my company name as my signature and a picture of my truck as my avatar. Too recognizable, and indeed I was once approached when getting out of my truck by someone who'd seen its build on WW. But these days I keep a lower profile, so I hope this additional honesty helps some.
Reply:When quoting large or small jobs, the number is never right unless it is a production job where all known costs are easy to know.Here is a good example of bidding a job for a good rate vs good profits.Say you are driving a tractor trailer from north Dakota to Texas. It takes 1 full tank of fuel to get from start to finish. Both ND and Tex fuel prices are $10 a gallon. You bid the job at $11 per gallon which covers the minor things like oil changes. Well trucking outfit B realizes that in the middle of the trip, fuel only costs $6 a gallon. So trucking B bids the job at $9.75 a gallon and they are making a huge profit because they realize where the deal was. You look at that price and say that's loosing money, I'm not that stupid.In reality, knowing where all your costs come from and understanding them are huge factors in bidding.Sent from my SM-G960U using Tapatalk
Reply:Just out of curiosity. Do you know how much an hour it costs to stand in your shop and do absolutely nothing say for a month? Could be your house or a shop.You have to know that number. This will be your base number. That's the first step.Lincoln 330 MPXModified TombstoneLincoln LN-25X-TVTMagnum PRO 250LX GT Spool Gun¼ Ton of Torches OFC-A / OFG-ASMAW FCAW GMAW Air Carbon Arc Gouging#Freebird Welds
Reply:
Originally Posted by Freebirdwelds
Just out of curiosity. Do you know how much an hour it costs to stand in your shop and do absolutely nothing say for a month? Could be your house or a shop.You have to know that number. This will be your base number. That's the first step.
Reply:What I imply and what I do may be slightly different. I often bid on value. What makes me one of the best is I am a little slower and finish well. I dont get a case of the fukkits. If I make a mistake I finish it right anyway. They can think I am too high but cant complain about the quality. I dont bid on the shop rate most of the time.www.urkafarms.com
Reply:If I was paid what I was worth I would most likely be homeless.
Sent from my iPhone using Tapatalk:
Reply:Get a beginners accounting book on "cost accounting"There's lots of ways or things to include in overhead |
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发表于 2022-1-21 15:51:18