Determining price for large job

[dave hensley]

Hey all,

I've had my laser for a little less than a year and most of things I've done have been small jobs. I just recently had my largest order of engraving 35 large spoons! :)

Up to now, I've been charging a 'per minute' rate, but I have someone who is asking for between 300-500 ornaments for Christmas. I did a test engraving today and it took 10 minutes per ornament (two sides), but my laser software estimates it will take about 1.5 hours total to engrave 21 ornaments in a single run. If I only do 300, it will take around 42 hours and that's a huge sum going by my current rate. So my question is how the rest of you determine your price for large orders? I know there's not a single correct answer for this, but I hope to get some ideas on how to figure a price that is both reasonable and also representative of the time it will take to make these.

Thanks!
Dave

[Joe Pelonio]

That's the trouble with that kind of work. I found that people are unwilling to pay more than $5 retail for them. Correct me if my math is off but that sounds like 8 minutes each. At $5 that's like $35/hour which is below my wholesale rate so I would not do it. The customer will most likely want to pay less than that in order to re sell. It's really not a practical application for the laser to do that many of something that they could probably get for $1 each in China, but if he has no contacts there and is in a hurry, I'd hold out for at least $7.50 each. I'd be surprised if he'd do it for that.

[dave hensley]

Thanks Joe! You're very close with 8 minutes each. The customer is not re-selling, she's giving them out to her clients (she's an orthodontist and does something like this each year). She had several ideas and this was the most complex one. I guess I'll just inform her of how much it would likely be and she'll probably choose a simpler option.

[Rich Harman]

Since she is giving them out to 300+ people perhaps there is an opportunity for advertising your services, and thus a reason to discount the price.

[Rodne Gold]

Time based costing is not the best way to cost , For eg , you have a $25k laser that can cut 1/8th inch acrylic at 1/2 the speed of my $5k one , I can beat you anyday on time based costing as my operating cost per minute is VERY low. On large jobs you need to cost per item , and often a good rule of thumb for this is 4-5x the cost of materials.
Costing depends on your business model and business itself. I have many staff which I pay whether I have work or not , so any profit on a job is worthwhile. If I had to pay the rates for MY time , those jobs would maybe not be viable. I have a different mindset in that I will cut my price to get market share and to keep my workshop running at full capacity.
A lot of the setups here are owner run/operated which means that you have to factor in the cost of the "bosses" time for the run and that can work out expensive. If I were in that position , I would work like a dog to launch the business and once there is some workflow , would hire a low level/paid worker to run the technical side of things and use your time to market and design. Let the worker do the "dog" work and you do what you do best , run the business , look for new clients etc.

[Jiten Patel]

I completely agree with Rodne. Would you rather turn job down and get 0 income while the laser sits idle, or accept the job, and take a hit on your rate, but still have money in your pocket which it something at the end of the day. As long as it covers materials and running costs, and you make a little on top, then I see no harm. When I first started, we took whatever we could get, just to pay everything off and that meant working like animals 18 hours a day, 7 days a week. We are still doing that, but the order we get warrant that sort of work time. We will be hiring staff soon to do the "Dog" work as Rodne puts it, so we can concentrate on expanding the "empire!". Price it on what you are happy with and what covers your bases (for now) and try to get away from the per minute model...only until you get a more steady income and your have the ability to be more choosy on what jobs you take on.

[Tim Bateson]

Since she is giving them out to 300+ people perhaps there is an opportunity for advertising your services, and thus a reason to discount the price.

This will produce .0000000001% in new sales. On a good day .0000000002%. The only time I find resells is such things as trophys that I slap a label on every one. Even then I get 1 call for every 200-300 I sell.

[dave hensley]

ok, thanks everyone. That's helpful advice. I'll work up what I need to make to per item and pitch that to her. All of my jobs in the past (and I am doing this strictly as a very small, very part-time business at this point) have worked out with the per minute rate, but I can see why that's not the way to go now. :D

[Mike Null]

Dave

Consider another idea. Try "happy pricing". That is set the price so that you are happy with it and would be glad to have new business at that price. In your circumstances you'll not be able to ascertain all your costs and the rate at which you want to get paid will be substantially higher than in a situation like Rodney's where near minimum wage worker are involved in production.

[Chuck Stone]

. All of my jobs in the past (and I am doing this strictly as a very small, very part-time business at this point) have worked out with the per minute rate, but I can see why that's not the way to go now. :D

Keep your minute rate.. that's just not the way to go WITH THIS PARTICULAR JOB. For one-off,
custom work you will still want to use your per minute rate to help you price jobs.
But once the work is done and you're simply repeating it 300 times, you can afford to let
go of the per minute rate that would normally be associated with setup, graphics etc.

[Martin Boekers]

Make sure you have optimized your settings.
If you haven't done any testing at other settings, try that.
See how fast you can get it to run and still look good.
You may find that you can cut your time in half.

Some questioned my sanity awhile back when I took on a pen project
for a few hundred wood pens. Between design and run time I had 2 hours
invested. 300 wood pens Cost $1.25ea, I sold them $2.25ea. $150 an
hour for my time. Not bad. It can work but you have to
have your ducks in a row.

Some jobs still, are made to be subbed out, this may be one.
Try to give your clients alternatives to cut costs. Sometimes
just a slight difference in size can save much on material costs.
Ex. I by wood sheets in 4" widths if the client requests 4.125"
I see if 4" will work.

[Mark Conde]

Plus 1 for Rodne. The issue of pricing is always delicate. I am always a bit confused when I hear folks discuss that they price by how long it takes the machine to work. Customers dont care how ling it takes a machine to run. They want a desired product at a fair price. Others will price products based on a cost plus basis--- (cost to make product plus a profit margin). I am a FIRM believer in setting prices per the market. Yes, this is not easy. It takes some real effort to know your individual market and products. I know. I know. Someone is going to say if I price it to be competitive within my market, I will lose money on the job. Guess what...that's not acceptable either. Find a better way to be efficient. I have a love-hate relationship pricing products. I love it when I hit right. And hate when I price it wrong.

[David Fairfield]

The per minute of machine time thing works really well for me, for small stuff. For big stuff, I discount off my per minute rate, because one big thing is less labor intensive than a bunch of smalls.

[Rodne Gold]

Mike, I pay excellent salaries , not even near minimum wage , they just a lot less than MY salary. I am too "expensive" to load and unload lasers and to babysit long jobs.
One has to remember , we are not prima donnas in that we operate and design using lasers and can't demand money for this , lasering is not rocket science at all , all we put out is a product like a zillion other folk do, pricing has to relate to the product.

[Mike Null]

Rodney

Here is it far more common to be closer to the minumum wage than a lot higher than minumum. I know a a handful of people who are in the $20 per hour bracket as employees but more who are lower.