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Joni Campbell
09-12-2007, 10:54 AM
Hi all,
I need some help ...how do you figure out pricing for a laser project. This company wants me to cut 1/4 oak and cherry wood for them, they make maps that are 6 layers high of our surrounding lakes and it took me 54.8 minutes laser time to cut all six layers. How in the world to i figure out the pricing. we live in northern wi and it is kind of a depressed area, so in order to get the job I have to keep the price reasoable, but i dont want to undercut myself on this since it is my machine and time :)
anyways your advice is appreciated
Hugs too you all
Joni

Joni Campbell
09-12-2007, 10:56 AM
http://www.whiteriverstencilco.com/fpdb/images/Kitchi-gummi_3.JPG

Phyllis Meyer
09-12-2007, 11:17 AM
I sent you a PM, have a great day!

Phyllis:)

Joe Pelonio
09-12-2007, 12:35 PM
Joni,

Sometimes it's hard to balance what the market will bear with making a profit.
There are always less expensive alternatives to what we do on the laser and there are times when the customer has to choose one of those due to budget concerns. Still, you have to make money so there has to be a line over which you don't cross, unless it's for family or maybe your favorite charity.

Of course it's always best to agree on a price before doing the job. If you double the material cost and charge $1 per minute that product (without knowing the size) is likely to price out at $75 each. If it's wholesale, and they are reselling it, you have to negotiate between that and say materials x 2 plus perhaps $0.50/minute to allow them to make a fair profit.

Gary Hair
09-12-2007, 2:21 PM
I always start with total material cost * 3 and $2.00 per minute laser time. You should be getting a minimum of $110 in laser time alone or you are seriously shorting yourself. Anyone who sells their laser time at much less than that better be doing it for a hobby because you can't survive in business like that.

Gary

Al Mutairi
09-12-2007, 3:07 PM
There are a few missing details in order to give a better answer :

1- Did you have to do any software outline work for the cut out pieces?
2- Who will supply the material ?
3- Who will be assembling the cutout pieces of the project , you or the company ?

Al

Joe Pelonio
09-12-2007, 4:01 PM
I always start with total material cost * 3 and $2.00 per minute laser time. You should be getting a minimum of $110 in laser time alone or you are seriously shorting yourself. Anyone who sells their laser time at much less than that better be doing it for a hobby because you can't survive in business like that.

Gary
I wish I could get that much. I wonder if you are in a different situation than some of us, Gary. You area has what must be close to 20 times more population than where Joni is. There's probably no competition, but with much less business and that small a place there are not likely to be people willing/able to pay those prices.

Here where I am, including the whole Seattle metro area is much larger than where you are, with a ton of business and industry, but then we have a lot of competition for laser and other services. For example, there are 261 businesses in this area that sell signs in one form or another. There are 86 that offer engraving.

Even the big companies won't pay for laser work if it's beyond their budget. I do some work for Microsoft, and did a sample/quote for a project for them recently. They passed on it and went to a simple, screenprinted item because their budget for it was not enough at the price I quoted on the laser work and I wouldn't drop it.

Joe Pelonio
09-12-2007, 5:34 PM
Here's an example of a negotiated wholesale price that just came in. The customer provided a vector file and the material, 1/4" clear acrylic. There are
204 pieces 5' x 3". On my laser they take 90 seconds to cut, so at $1/minute that's 1.50 each or $306.00. I managed to get $1.75 each for a total of $357.00. All I have to do is box them up and they will pick up, paint and whatever they need for completion.

I'd like to see what others would have charged for this. To me it's a decent profit for just changing material every 27 minutes while doing other sign work.

Mike Null
09-12-2007, 10:16 PM
I just finished a wood job with material about the same size but with engraving as well as cutting. I charged $6.50 for 165 pieces. I also had to radius the edges on the router. It was 1/8" cherry. It took about 3 and a half minutes.

Stephen Beckham
09-12-2007, 10:57 PM
Jodi - nice picture - cost?!?!?

Well - if you dropped it to $.50 per minute they would love you and buy many more. This would get you about $30 a pop or about $180 a day figuring on six a day. Yea - not going to buy you a BMW - but would cover the minimums.

So - if you took only $.75 then your looking at closer to $240ish a day. A $1200 week for me is pretty darn good if they are buying that many.

Do you know how much they are selling them for? If they are selling them for $180 each - then I'd charge them the full $1 per minute. They shouldn't be making dollars per sale and then paying you only pennies. If they are selling for under $100 - you won't sell many of them if you're charging more than $35 (about a 1/3 ratio that we pay for our products to retail - they shouldn't be expected to pay more...)



Joe - I'd say good price for you - I figure you did them all in one day and made over $300... Well above a projected minimum day in my book.

Mike Null
09-13-2007, 6:46 AM
Steve

I believe the price that her customer sells the item for is not her concern. If they can sell it for 10 times their cost, more power to them. The issue is, at what price can she make money.

Joni Campbell
09-13-2007, 6:50 AM
oops :) ok they supply the material and assemble it all I do is cut them out. they alreayd have the files in order, so I really only cut and then they will pick them up. Thank you for all the help, I do appreciate it. So we are looking at laser time only for this project.
Hugs
Joni

Stephen Beckham
09-13-2007, 9:49 AM
Mike - I agree in general, but feel there are exceptions. What if they're selling them for $50 each? I know unrealistic but exagerated for effect. She'd never get her $54 at a $1 per minute rate. Hence - can't do it for the price. Even if they're going to sell them for $100 - their costs for parts and finishing plus the cost of lasering makes it almost unaffordable if she charged $54.

If they are selling it as a fund raiser for local community, environment or church - I might lower my rate to give back to them so their fund raising event is more effective for the cause.

If it's a retail chain that's going to pump these out like rabbits - I'd stick to my full rate. The more they order, the more work you have to perform.

If they're willing to pay her only $25 per item but sale it 10X their cost... I wouldn't do business with them - within that 10X profit margin - they can afford the full rate. I guess I didn't mention that we don't deserve 1/3 of their profit no matter the cost - what I meant was that if they are making a gross profit - they shouldn't pinch pennies on my price. IF they aren't making a gross profit - I try not to take much more than the 1/3rd.

I was turning pens for a whiskey dealer - selling them the set for $15 (pen plus case made from stave from their wood) in their gift shop. They sold them for $75 a set then complained that they weren't going fast enough. They further requested that I lower my price so that they could lower theirs so they'd sell faster. Needless to say, I'm not making them anymore. Honestly - was it their right to expect a 5X profit margin? Yes - and the end result was slower sales. But their right to make 5X doesn't have any bearing - as you correctly state - on my right to make a minimum amount.

I'm just less likely to bend so easy when it's a gross difference - I call that greed on their part. Hope that gave you a better understanding why I like to know what their plan is...

Mike Null
09-13-2007, 1:58 PM
Steve

Not to belabor the point but after a lifetime in marketing I can tell you that there are a lot of dogs that ultimately sell below cost or not at all. One with any marketing expertise will maximize their margins at every opportunity to compensate for the times when their judgment was less than perfect.

There is never enough margin.

Stephen Beckham
09-13-2007, 8:19 PM
Mike - I appreciate it and enjoy the good clean conversation discussing both sides. Again - I agree with you - never enough margin sums it up.


But....




Just kidding :D - no buts here... I'll let it go until next thread...

.

Michael Kowalczyk
09-14-2007, 1:26 AM
Joni,
First thing you have to do is figure out what your time is worth and then what your area will allow. Have you looked at the customer's website and see what they are selling for? Have you asked them what their budget is?

I like mine to be a "WIN WIN" scenario but if you don't know what your minimum hourly rate is to cover ALL your overhead, you are not only hurting yourself but also us (other laser business') because your low hourly rate becomes an expectation. Don't try to low ball to get the job. Sell your quality, quick turn around and attention to detail or what ever else you excel in.
A scenario I use often is would you rather pay an Attorney $125.00 an hour to right up a contract that he/she has had little experience in and works out of a an executive suite or a $300.00 hour attorney with 3 people as support staff and specializes in this area? Most people's first inclination is to go with the low price but if you ask a few more questions and find out how long it will take and there's a big difference. 125.00 says it may take 15 to 20 hours and 300.00 says they will have it in 6 hours. Now if 125 can do it on the low side they come out about even but most likely it would be the high side and may not have all the protection clauses in the contract that the experienced 300.00 one included. So sometimes the higher hourly is actually less overall and experience counts for alot.

Remember you are the expert!

You only make money when your laser is running so if is not running 8+ hours a day you may not actually be making a full days pay when you factor all your overhead in.

So please don't under sell yourself. Be fair and think of repeat business from them. If you are happy getting 40.00 to 60.00 per hour (wholesale rate) for a laser only job don't worry about how much they will make. Remember they take the risk and your job is done and paid for. A very wise and successful friend that has owned many retail stores told me never to set a MSRP on my products that I want to wholesale and do not worry what they sell them for because if they make a good profit from it they will push it more but make sure you have your costs and profit margin covered and fair. This way it is a "WIN WIN" sales transaction.
Hope this helps.

Mike Hood
09-15-2007, 10:00 AM
I'd agree that you don't want to undercut yourself, and that you need to know what your market will bear. I charge $2.00 / minute for laser time and cut a LOT of lite ply and balsa for a local UAV engineering & prototype shop. I can do this because I am willing to be flexible and work closely with their designer engineers to fix small problems as they come up.

Frankly, I think you should look at what price you're willing to stand in front of your machine for and then go up from there. You deserve a fair wage, and laser profit comes up from there. I'd sooner leave the machine turned off than work for less than my employer will pay me to sit at a Catia terminal on a Saturday morning. :)

Gary Hair
09-15-2007, 12:28 PM
I wish I could get that much. I wonder if you are in a different situation than some of us, Gary. You area has what must be close to 20 times more population than where Joni is. There's probably no competition, but with much less business and that small a place there are not likely to be people willing/able to pay those prices.

Here where I am, including the whole Seattle metro area is much larger than where you are, with a ton of business and industry, but then we have a lot of competition for laser and other services. For example, there are 261 businesses in this area that sell signs in one form or another. There are 86 that offer engraving.

Even the big companies won't pay for laser work if it's beyond their budget. I do some work for Microsoft, and did a sample/quote for a project for them recently. They passed on it and went to a simple, screenprinted item because their budget for it was not enough at the price I quoted on the laser work and I wouldn't drop it.

My town is something around 185,000 in population, not large by any means. There is some competition here but I target my market to avoid competition as much as possible. There is really nobody who does things quite like I do so I can get a little more than "the competition". I never sell my services on price, I sell on anything but price... If you know how to find a way to give them something that nobody else can provide then price won't be an issue. On the occasion where I do need to be competitively priced, I am within reason but never the cheapest, and I usually get the job because I'll figure out some way to show them why they should pay me more.

Find out what your competitors are doing and don't do that. Find something they are not doing and be the best at that. That may sound trite, but it is what really sets us apart from the others in our area - we do things others won't, or can't, do. Just an example - someone called the other day wanting a crystal vase engraved. Nobody else would do it, she said. I asked her why and the best we could figure is that they were afraid of ruining her $250 waterford crystal vase. It was a fluted vase with compound curves and they wanted 3 lines of text aligned with the top rim - all three were over a section of the vase that had a different radius.. It was very tricky creating a mask to follow the compound curves of the vase and have the text look right, but I did it and charged her almost $200 for less than 45 minutes of work. She had a georgeous retirement gift and I was her hero - she didn't bat an eye at the price ~ nobody else could do it so price wasn't an issue ~

No matter where you are located there are always reasons (excuses) why you can't be successful - too much competition, not enough customers, too few businesses, bad economy, etc., etc. You have two options - leave and find the ideal place to run your business or stay and figure out how to make those things non-issues.

Being in business is tough but we tend to make it harder on ourselves than it should be.

Gary