How to determine the cost per project

[Alex Andjelkovic]

Hi Guys,

Because I use my laser cutter for an extra income, how do I determine the what to charge per project?

any ideas, formulas etc?

Thanx

Alex

[John Lifer]

I have a formula, start off with what you want to make per hour. Co2 laser makes it relatively easy to time your item. From there I think it depends on what you are making and what your market will bear. I'm actually struggling with pricing my fiber laser. It runs fast on a lot of small items, say 2 seconds, it takes my multiples of that to set up and change parts, and I cannot do multiples​ a on time due to size.

[Michael Henriksen]

I've set an hourly rate on the laser run time - DKK 200 (app. USD 30). I usually add 10-20% to the actual cutting time to cover setup, material swap and packaging. In addition I charge for material cost. Again I add a markup to the basic cost of materials to cover the time it takes to order, cut to size etc. If I need to do any work on files that are not laser ready I charge DKK 200 per hour for that work.

Make sure you factor in all operating costs - rent, electricity, maintenance, depreciation etc.

[Kev Williams]

worst part of this job is figuring out what to charge. It's easier with charging businesses, harder with street biz...

If you're a business relying on this work for a living, you need way more money per hour to cover op costs than one doing this for extra income...

That said, even with this business being my only income-- If I can get a machine to generate an honest $1 per minute- all in, including materials, in/out/unpack/repack/etc times- then I'm happy. I'm always happy with more, but I definitely shoot for no LESS.
I do have one job I do every year that nets me all of $40 an hour. But it's a job that runs unattended for 1 hour stretches and typically ends up being a $500 to $700 job. MY actual work time is about 4 or 5 minutes every hour with the changeover. So even though overall time is only netting $40 per hour, a $700 job only requires about 90 minutes of my time. (materials are factored in to the $40 net)... Not bad considering I can run other machines while I'm NOT running that one :)

Learning to estimate job time is a neverending process, getting close is all you can ask for... ;)

[Don Corbeil]

I estimate based on my desired hourly rate, too. I find the tricky part is when customers don't have 'laser ready' files. Very few drop in customers do, unless they are return customers. So my graphics work time is where the costs can really pile up, and I have to weigh my compensation against losing the job.

[Michael Henriksen]

Kev makes a good point. You normally have time on your hands while the machine works. Now that I have 2 machines, I can do my own design work and test cutting while the other machine does production work. I only need to spend a few minutes now and then on taking out parts and putting in a new sheet. If I have a rush order, both machines can be pressed into service.

[Neville Stewart]

I estimate based on my desired hourly rate, too. I find the tricky part is when customers don't have 'laser ready' files. Very few drop in customers do, unless they are return customers. So my graphics work time is where the costs can really pile up, and I have to weigh my compensation against losing the job.

Very true for me also. Something I neglect to do sometimes too is, when I figure out a piece price on a 50 unit job eg, I should round up and instead of 485 I should just make it 500 as some little thing will go wrong...

[John C Cox]

Its tricky. Is this a hobby or is it a business?
Do you need the job to continue paying for the equipment or is it paid for and its gravy?

Do you think the job is an interesting/fun one or is it going to be a lot of hassle? Include your appraisal of the customer hassle in the hassle factor. For example - is this customer trying to cheap out and is going to argue with you and try to beat you down on everything? Is it going to be a super demanding PITA customer who wants to bother you every single hour for the next month? Is it a customer who wants 1,000 changes and wants you to foot the bill on all of the changes? Is the customer going to go over your work with a jewlers loupe?

One company I dealt with had a written (and heavily enforced) policy that every time YOU called and they had to get a tech to find and look at your work to answer your questions - it would go back to the end of the queue... If they called you - it was different... But that policy was enacted because of customers who would incessantly bug them and demand to speak with the technician.

I dont think its unreasonable to charge extra for YOU having to create their art for them.... Its a time consuming thing and it requires a lot of customer interaction and back and forth revision... And most likely - there will be additional changes after the approval is granted... Its not unreasonable to charge for that...

[Scott Shepherd]

I must be in the minority. We charge what the market value is for the item we're engraving. If "Things Remembered" charged $35 to engrave something, and it takes us 5 minutes, why would we charge $5 for it and leave $30 on the table? If the market value is $35, we are going to charge around $35. If my competitor doesn't have my years of experience at making things, why should I make less because I can figure out a better way? If I'm using my skill set to do things my competitor isn't capable of, then why should I drop the value of my services?

If the value of the part is $35, and I do it in 1 minute, 35 minutes, or 60 minutes, what does it matter? That's not the customers business. I quoted a price of $35, you accepted it. Now, once you accept it, it's my JOB to figure out how to do it in the most efficient manner. The better I do my job, the more we make.

Using the price per hour model is a disaster in my opinion. If I have a machine that takes 60 minutes to do a job and the customer pays me $60 and I invest $50,000 in a new machine that can do the job in 20 minutes, I'm supposed to invest $50,000 in equipment and cut my price to $20? If that's the case, it would work in my benefit to work slower. I should stake the room full of Chinese lasers and let them run slow, then I can charge $90 for the the same item because it's now taking me 90 minutes?

That model makes no sense to me. We quote jobs based on their value. If customers accept our quote, we run it. If they don't, then they don't, but it's not been many times that customers have told us we were too expensive. I could probably count on 1 hand in the last 5 years how many times.

Just my opinion.

[Michael Henriksen]

I don't tell the customer the cutting time. I just use it as the basis for working out how much I should charge as a minimum. Now that I have a laser with more power that cuts faster my margin has increased, even factoring in the cost of the laser. I use the cutting time on the slower machine in the calculation. I'm fortunate that I have no competition but I try to keep my price fair.

[Scott Shepherd]

I try to keep my price fair.

Fair is a relative term. If my price is competitive with everyone else, then I consider that a fair price.

[John C Cox]

I think also in many cases - its worth having a minimum job cost. This is the price for a onsie. This takes the programming, fixturing, setup, tear down, clean up, and post processing into account.

A 5 minute job never takes 5 minutes. It probably takes an hour to do 1 or 10 units because of programming, fixturing, setup, fiddling around, cleaning, packaging, calling the customer, and chatting for 20 minutes about this and that... This minimum rate considers all that stuff....

The only time a 5 minute job takes 5 minutes is if its a standard piece where you are doing a large volume. The individual pieces take less than 1 minute each - but you have jig and fixture time, programming time, machine setup and teardown, and all the rest.

[Chuck Phillips]

I'm with Scott 100%. We charge what the market will accept. Recently we doubled our production speed. Did we half our prices? Of course not.

Charge the market price or slightly higher for everything you do. You owe it to yourself and the market you complete in. If a *few* customers say you are too high, you are probably priced about right. If you get every job you quote, your'e too cheap. It does not mater if your equipment is paid for or not, if your'e a hobby or not, etc.

[John Lifer]

I understand your point Scott, and I'm trying to get good handle on the 'market' Which actually can mean anything. I've got a job coming in next week that is the first for my fiber that'll pay me.

Simple, put a single digit in two places on one side, and put two more different digits in same locations on opposite side. Several hundred. It takes the fiber about a second to engrave each digit. Single engraving would take me a couple of hours to engrave, move, engrave etc. then do opposite side. I'll make a jig that will handle 4 to 8 at a time. yes longer to place 8 but it will take 15-16 seconds to engrave 8, so I'll save a bunch of pick and place time. So about an hour of my time. maybe 15 minutes laser time. But how to price? Time, no way, what the market will bear? They accepted price, it's fair in my opinion, but I pulled it out of the air...... could I have gotten more? How can I tell? And this is first time customer has done this also.