How to price or compete...

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davek0974
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How to price or compete...

Post by davek0974 »

I am trying to increase the size of my home micro business by adding a few new items and ideas etc. I make garden ironwork, house name plaques and so on.

Since building my small CNC plasma table, my ideas have got bigger and better and have made some lovely work on it.

This got me to looking at my pricing, currently just going on stock costs and pulling the rest out of the air as i went.

I looked at the excellent spreadsheet on here and have converted it to metric and piped in some of my numbers but also sent a sample file out to pro shops for a quote to see where i stand.

The first one to return was for less than I could get the steel sheet for alone, before any cutting or finishing etc.

I can not get full sheets of steel, too big, too heavy so i get them cut to fit my machine which is a 1/8 sheet size or longer with indexing.

How do you find your prices stack up against others?

Am i doing something wrong or just looking in the wrong area??

Any tips?

Thanks




For your information, a sheet of 625x625mm 4mm HRS I pay ?27 inc vat and delivery to me, their quote for the part I sent was almost a full sheet and they quoted ?22 ea
Shane Warnick
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Re: How to price or compete...

Post by Shane Warnick »

Seems to me that maybe your cut fee for the steel and delivery is eating you up. Larger guys are having large loads of steel delivered, have less waste and no cut fee in the sheets. Probably delivered free too. However, most of the large operations don't want to deal with smaller orders / custom one off stuff, eats up too much time. No reason you can't get all that business and price it so you make money, the customer either wants it or they don't. I doubt you are going to take business from the big boys without reorganizing and retooling your current setup though. Just my 2 cents worth.
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davek0974
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Re: How to price or compete...

Post by davek0974 »

I did have a chat with the suppliers today, even if I ordered 50 sheets (my size) the price only dropped a few ??, the cut fee is pretty reasonable though, it's about ?8 for a full sheet to be cut to my size.

Delivery is a bit steep though at ?30 per order, not much chance of ordering enough to get round that though.

The idea of getting some quotes was not to undercut or compete as such, more a way to find out how far off base I was.

I was expecting a bit of difference of course but so much was surprising.

I'm really trying to discover a suitable pricing model for plasma stuff, many different ways of doing it, just need to find the right one ;)
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wilber
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Re: How to price or compete...

Post by wilber »

i am glad i have a truck. delevery prices would kill me.
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beefy
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Re: How to price or compete...

Post by beefy »

I've heard this type of thing before and the answer always seems to end up the same. Our advantage is one-off CUSTOM designs. The big shops probably can do that but do they want to ? Our problem seems to be getting paid for our time overall, which includes chatting, design/cad, loading, cutting, etc.

See if the mob you checked out would do a custom design for you, just like you would do for a customer. If they are not interested or their price goes up a great deal from just doing a cut from a supplied file, then you know that is where you have an advantage.

Customer ignorance is another advantage you may have. Would customers search out big commercial cutters who are not shouting out custom design (i.e. advertising) or will they come to the guy like yourself who is.

Keith
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CNCCAJUN
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Re: How to price or compete...

Post by CNCCAJUN »

Sorry for the long post . . . . . .but to many people beating themselves up when they realize they can not compete with large established shops . . . you have to look at your investment & your skills & experience . . .

I live between Baton Rouge & New Orleans, a very heavy industrial corridor . . .

We have an easy dozen+ CNC XY tables withing 15 miles of me.

Everything from 4X8 to 10X30 . . . plasma, waterjet & laser . . . some shops have all three . . .

Those are just the ones I have found.

Anytime I hear of a CNC XY table of any type, I go & visit.

Most are friendly, some are not . . .

They all pretty much agree that if you want a mailbox topper, man cave art, fireplace/fence insert, jeep/tractor part,
they either don't want the business or their start pricing at $150.00 if you have a ready to cut file.

Since most of these guys have idiot proof big iron they are really not sure what they need.

If you say DXF or AutoCAD 3 or 4 times they tend to light up like you are now speaking their language . . .

But for the most part they try to run you off with price (minimums & set-up fees, etc. . ) or ridiculous delivery dates.

There is a shop in Baton Rouge called LA Cutters . . . I have never been there when a truck was not unloading steel or picking up cut parts . . . When I say truck, I mean tractor trailer . . . .

He is actually the nicest of the bunch & will cut for anyone, but you have wait for lulls between "real" customers. Even with that, I can not imagine someone paying $150.00+ for a mailbox topper . . .

Point here is simple . . . the big boys are not your competition & you are surely not theirs . . .

Figure out what your equipment can do, what you can do (skills) & GO AFTER THAT CUSTOMER . . .
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davek0974
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Re: How to price or compete...

Post by davek0974 »

Excellent replies, thanks.

I love the idea of asking the shop to do a one-off quote, I will do that this week, should be educational.

I was not really trying to compete, I can't as I have a day job and my micro business is run from home. I was merely trying to establish gap between costs for comparison. This gap turned out to be the size of the Grand Canyon ;)

It seems over in the states the opportunities are wider - we don't have mailboxes to put toppers on, we rarely have the "welcome" lawn stakes, we don't have ranches to put signs over the gates :D and in general it's damn hard to get people to buy anything at all most of the time.

I have had a couple of sales of house number plaques but equally lost some when I quoted for a special job - people over here seem to want the earth for pennies all the time even though they are getting a unique and stylish house plaque for very little money.

My hanging planter brackets sell slowly but steadily, I invented a corner one that sold really well, now a major supplier has copied it and my sales have dropped as they are way cheaper and my product is no longer unique. These also contain no plansma work as they are all hand scrolled iron so pretty time intensive and I still have to sell them cheaply.

I have just made some lovely stuff on the plasma for mum, this is why I needed a pricing model, they are slow to make and I need to see if they could be viable to offer for sale, they have plasma cutting , welding, finishing and spray painting and are physically quite big, but are unique.

It's tough over here ;)
beefy
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Re: How to price or compete...

Post by beefy »

CncCajun,

thanks for that input, that's at least a bit of hope for us guys that worry about this type of thing.

Dave,

I'm wondering if my homeland (UK) has the same problem as here in Australia. Chinese goods have massively decreased the perceived value of many products. Seems there are too many people that relate ANY product to something Chinese mass produced sitting on a shop shelf, even when it's a one-off custom design. Your mission is to find the remaining ones that don't think like that.

Others with more real life selling experience may chip in, but have you tried marketing what you do in more affluent areas. Not "rich" areas, many say they don't like to pay for anything LOL, but just areas where they have a lot more disposable income and have more appreciation for the value of things. Perhaps make a website which uses subtle means of getting the word across of what's involved in getting the customers custom metal art to them. I can see it being a bit of a mind game, and potential customers need to be "educated" about what they are getting, in order to increase the perception of the value. I see a lot of scrollwork iron gates in these more affluent suburbs, big double automatic ones, but in the less affluent suburbs, hardly any, they are probably a lot more price conscious.

Seems doing OK in business is about scaring away those who are not willing to pay your price, and attracting those who are. Some guys have put up websites and tried with pricing and without. They said without prices there was a lot more enquiries but a lot of price shoppers (i.e. people wasting a lot of your time and making you feel crap). When they put prices on their website, they got fewer calls but a much higher % of those calls turned into sales, many of those had obviously already mentally accepted a certain price.

In my excavation business I used to do work for cheap out of desperation but the price for doing that is high. You can't pay the bills, pay for your equipment upkeep, you can't make a worthwhile profit, and most of all it leaves you damn right degraded. A job would be much better. Now I actually say things to quickly get rid of any potential customer trying to knock my rate down, I just want nothing to do with them, and focus on the ones who realise I'm running a business and not a charity. Go on business forums where there's people with marketing experience and tell them your problems. They may be very analytical in a business sense and can offer some good advice. Marketing is one of the biggest and hardest parts of business. As one guy said: "Making stuff is easy, selling it is the hard part".

Keith
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davek0974
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Re: How to price or compete...

Post by davek0974 »

Trying to verify a little pricing app I have written in VB,

I have attached a DXF file of a job I'm working on and have also priced it up myself. Is it possible someone with a couple of spare minutes could also run a price for it, specs are:

Qty - 1 off,
Material - 2.5mm /12ga bright mild steel.

To save time the details are:
Total pierces = 30
Total cut length = 16,686mm
Width = 422mm
Height = 341mm

Many thanks, much appreciated.

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SeanP
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Re: How to price or compete...

Post by SeanP »

I to have been trying to work out a consistent pricing formula, it ain't easy!
Dave the part size of the dxf is 204mm x 340mm and 15 pierces.
Based on that with the drawing provided and I was using 3mm hot rolled my price comes to ?23-50
For say 4off I would be looking at ?60,,,,,,,maybe to cheap?
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davek0974
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Re: How to price or compete...

Post by davek0974 »

Sorry, the DXF was made 2-up in sheetcam but the specs were as listed.

It does seem complicated, i had some spare time in the day job today so i've been researching and modifying my app to some new figures.

This model seems to work in a fashion that i like...

Take the material cost, add VAT (if not VAT registered) and delivery then double it, then work out the cost per sq cm, I'll call this A
Come up with a pierce cost, i am trying 15p, this is B
Find the linear cut length of the job, this is C

The cost is then
Job Area x A
plus pierce count x B
plus C x A

If i run that job I posted it gives me ?23.36 or 29.59euro, your cost (converted) gives me ?18.54 so they are reasonably close. Run time was about 15mins allowing for loading the sheet too so that gives me a possible ?93 per hour running stuff like that, don't forget I'm only a home hobby-shop.

One of the reasons I like this formula is that it allows for the thicker material costing more to cut (CxA).

It's an interesting thing to mess about with.
Shane Warnick
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Re: How to price or compete...

Post by Shane Warnick »

Well, I scaled the drawing to your dimensions, it looks squished but thats what you said you were going to cut it at. I would be right around $30 for that.

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Re: How to price or compete...

Post by davek0974 »

:) No it wasn't scaled, it was just made 2-up in sheetcam, the cut specs were correct though:-

Total pierces = 30
Total cut length = 16,686mm
Width = 422mm
Height = 341mm


Dave
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Re: How to price or compete...

Post by davek0974 »

Written a little app in VB that seems to be creating sensible prices now.

I think I have all the important options covered...
Image

Just need to finalise my price options, but I think this will assist me greatly, produces a printed report too.
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Re: How to price or compete...

Post by vmax549 »

hIYA Dave nice app. But something to think about. You r pricing needs to be made on TIME TO CUT instead of cut inches. With TTC it factors in all the variables such as feedrate and thickness as thicker plate runs slower so it automatically will cost more to cut.

Here we use $100 per hour for cut time. Pierces/consumables are a cost of operation figured into the Machine time.

So you have things to price such as

Drawing time @ $30 PH
Setup time @$30 PH
Cutting Time @ $100 PH
CleanUp Time @ $XX.XX per square inch
Painting/coating @ $XX.XX per square Inch

May want to add a section to calculate the true profit margin after you are donme working on it and have tracked the time accurately. THIS is the bottom line the profit margin. This tells you IF you are actually making money on the deal.

Here the process HAS to make a minumum 30% Profit MARGIN . Otherwise we are doing it for free(;-)

Pricing has to be very selective as to final price as it all depends on what you are cutting. Industrial parts, artsy parts, etc.

(;-) TP

Just a thought, (;-) TP
davek0974
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Re: How to price or compete...

Post by davek0974 »

Thanks for that, yes I can see the reasoning behind it, my cut distance does tend to take the thickness etc in as thicker metal is generally more £ and my system is limited to about 8mm so not much variation anyway. Plus the more expensive materials are also taken with my method - brass, stainless etc.

Don't forget also that in a home-shop guy, this is as much for hobby as it is for £, I have no bottom line really, as long as I'm not losing cash then im ok.
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