Charging for your time

[raynerd]

I`ve been asked to do some work. It is a simple job but it takes quite a bit of time and it is repetative. I bet you are talking 45 - 60mins per part and I need to make 30. The cost of materials per part is very little, probably £4 so i really don`t know what to charge on top for my time!

I do appreciate for many of you time is so precious that you would price yourself out of doing it! I suppose I want to know what people think would be a "good" price for me per hour. I`m not needing the work but I just want a price that is slightly on my side!

I`m guessing some of you may be engineers and so what price per hour would you work at?

Chris

[krv3000]

hi well when i was working me pay was £14 a hawer ther is things you need to put in plase as standerd such as electricity cuting oil tooling for egasampel you is gowing to be using a parting off tool with a removebel tip and the tip cost £5 the price of a new tip shud be in the price even if you don't replase it you will have the cost cuverd for a new one the work that i have dun in the past mostley for pepel in the BMW club is £8 per hawer most jobs don't last longer than 4 hawers

[raynerd]

Thank you for the reply KRV, sounds reasonable!

Chris

[Jasonb]

Couple of people that I know who take on small work in their home workshops charge £25-30 per hour

J

[raynerd]

Yes, maybe I`m a tight arse but I already have a full time job so this would be in my free time, infact, more to the point it would be taking up my project time. I think at £25 an hour I`d be happy to work and use this time as it is a significant enough amount - any less and I`d rather spend it doing what I want to do.... 

[krv3000]

yep if i was working my prises wood go up as im in reset of state benifit i must dekler all ernings i think im not a lawd to mack more than £15 a week

[Dean W]

Chris, how much do you suppose each part is worth?  When you're in a home shop situation where much of your work
is centered around doing one operation, then moving onto another operation with tool changes and setup changes
in between, your time is is not worth so much to your market.  It is worth the same to you, but your customer doesn't
care how much work you put into something as long as they get it at a price they consider good value for money, what-
ever that price may be.

If each part is worth $15 to your customer, then you are going to end up earning $15 per hour considering each part
takes one hour to produce.  If you can live with that, start making parts.  If you don't like the amount the customer
is willing to pay, you will be better off putting in for a few hours of overtime at your regular job to earn your mad money.

If you just want to do the job because you would like to help someone out, and they can only pay $5 per part, you
will have to be satisfied with $150 for 30 hours work, and in knowing you made some useful items for someone.

For what it's worth, in my own shop I often do work "by the job".  I.E., 30 of these things for $200 no matter how long
it takes me to make them.  I do not depend on my shop income for my living.  It is just pocket money, as I have a
retirement income.  If I were in business, my shop rate would be $60-$80 per hour, but I would also have my shop
tooled up to make money at that rate while putting out substantial production.
The place I worked 10 years ago was a welding/machine shop.  I worked in both sides of the shop.  There were about a
dozen guys working there and the shop rate was about $120 per hour.  We put out an enormous amount of product,
and the shop was tooled up for most any job.  Just put a couple men on the lathes and one on a mill and parts flowed
out of the shop like water.  That only works in a production environment.  One guy alone can up his production by
using form cutters, numerous drill chucks for the tail stock, or a turret, and quick chucking setups, along with making
good use of various depth stops and jigs.  If you are going to try to make a run of parts and be economical with your
time, you need to make use of those kind of things.

[andyf]

Chris,

If (without spending much time on jigs and stops) you can make a prototype and time yourself doing it, that will be better than taking on an order for 30 items with a price based on guessing 45-60 minutes per component, then finding you are spending 75 mins on each one.

Also, you can show him the prototype to check he's happy with it. No point making 30 off and then finding he's dissatisfied with some aspect, leading to him asking for a reduction or refusing to pay anything at all.

Andy.

[Lew_Merrick_PE]

Chris --  Welcome to life on the cutting edge of capitalism.  There are no easy answers.  One of the things that few small shop owners know how to calculate is the cost of having their equipment sitting on the floor of their shop.  My observation is that close to 70% of all small shops that fail do so because they do not understand what their overhead costs are.

The question I get all the time is, Why are your rates so high?  The answer is, Skill, understanding of the problems, and professionalism.  I am watching one company getting set to lose a rather large contract because they think that hourly-cost is all that matters.  I bill drafting and documentation time at $50/hour.  I have done work for nearly 400 different companies and government agencies across three continents and the number of people who are faster than I am at developing a concept, fleshing it out, doing the analysis, and reducing it to formal engineering drawings and specifications can be counted on fingers.  There is no savings in getting a $15/hour draftsman who is going to take 5X as long to complete the task -- but try selling that point of view to some bean-counter.

The other thing to remember is that you can always come down on your price, but once you have named a figure, you can rarely (never, in my experience) raise it.

[gmac]

"The other thing to remember is that you can always come down on your price, but once you have named a figure, you can rarely (never, in my experience) raise it."

Bingo!!!    +1 on this fact. If you're happy to work for cheap, you'll have lots of customers - but you won't make any money.

Cheers Garry

[raynerd]

OK, cheers guys. Just a few responses.

Lew_Merrick_PE - I haven`t got anything like your CV but I know I can make the part he wants, make it to a high standard and the buyer can`t. No idea what my overheads are like you said!

AndyF - yep, prototype done, sent and he is more than happy with it.

Dean - not sure I`m with you here

:palm:If each part is worth $15 to your customer, then you are going to end up earning $15 per hour considering each part takes one hour to produce.  If you can live with that, start making parts.  If you don't like the amount the customer is willing to pay, you will be better off putting in for a few hours of overtime at your regular job to earn your mad money.

 
If each part it worth $15 to my customer then I can`t do it for him. His value of $15 is irrelevant if it takes an hour for me or anyone else to do it because I can`t work for that price. If someone else can then he can go to them... like I said in my original message I`m quoting him a price that I WANT to work for, not necessarly what he wants! As a buisness that would be stupid as I just wouldn`t be competitive, but I`m not too fussed about the work! I think my reason for asking this question was just to get an idea of the sort of prices I could ask for that were within a reasonable scale - I didn`t want to rip him off but then wanted a price that favoured me! If I don`t get asked to make them, so be it! Like I said, crazy crazy model for someone earning a living off it, I`m sure!

[Dean W]

Dean - not sure I`m with you here

:palm:If each part is worth $15 to your customer, then you are going to end up earning $15 per hour considering each part takes one hour to produce.  If you can live with that, start making parts.  If you don't like the amount the customer is willing to pay, you will be better off putting in for a few hours of overtime at your regular job to earn your mad money.

 
If each part it worth $15 to my customer then I can`t do it for him. His value of $15 is irrelevant if it takes an hour for me or anyone else to do it because I can`t work for that price. If someone else can then he can go to them... like I said in my original message I`m quoting him a price that I WANT to work for,

Chris, this is just what I was saying.  The $15 per hour was just a figure.  It could be $5 or $200 per hour.  What ever
that figure is, if it is something you can live with, you are in business.  If it's not, just work some extra hours at your
regular everyday job.  Weigh it against what you make at your job, and decide if making the parts has enough entertainment
value for you to take less than your regular working wage.  I mention your regular working wage because you know
what it is, and that is what your time is truly worth at this point.
You didn't tell us what you were thinking in the way of a reasonable hourly rate, and we don't know what the parts
are actually worth. 

[John Rudd]

Chris,

FWIW here's my take on it......

You have a day job that pays the mortgage ( if you have one...I dont..!) and supports a wife and children and all of your living expenses, then what you make on the side is yours...
I used to run a tv/video repair business and it folded because I didnt charge enough...

I got into machining through the technical apprenticeship I followed...I've done some jobs on the side as a result..and made a few bob..
Recently a guy who ran a business on Ebay selling cnc gear knobs asked for help with his cnc machine...I charged him £30 for my help getting his machine back up and running..After spending something like 4 hours on the electronics..(Working out what does what....)

What I'm getting at is how much do you value your expertise in a given field versus how much you value your 'me' time.... It is a delicate balance between supply and demand..

You need to discuss with your client after you have arrived at what you consider a reasonable rate for your time........
Not much help I'm afraid.......

[fcheslop]

Hi, another thing to watch for get the customer to supply/ pay for the materials than at least if they are slow paying on completion or dont pay you have only lost a bit of time. Iv had my fingers burned a few times.
Another is be careful how they pay cash is the only way as you dont want a visit from the tax man and yes it happens
good luck
kind regards frazer

[narrowgauger]

Hi Chris

in response to your question regarding a "charging rate" perhaps the following comments may assist:

- I own a custom model train manufacturing business and many years ago stopped thinking about an hourly rate for the models we produce.  why; well simply because if we were to truly test the achieved hourly rate I would be in tears and probably be working for MacDonalds at 3 times the hourly rate.

- when pricing a model I look at what the average customer would spend on a similar commercial product.  once I get a feel for the commercial figure we value the cost of materials & machine usage, to which a mark-up is added.  This will generally come up with the final figure, which is then tested against the commercial product.

- lastly (vitally) it is important that you look at the production of a "product" not your own hobby efforts.  This ensures that you maintain a commercial stance towards the product and do not get cuaght up in "enhancing" it to your personal standards.  If you fail to do this many hours will be added just because you want to add your own "touch"  I speak from experience having spend countless. non-paying hours, painting & weathering models to my personal standards instead of simply offering a quality commercial standard.

so what's the bottom line:  keep the job simple; look at it as a income to fund your hobby and keep it simple without enhancing it beyond the standard required.

Hope this helps
Bernard
narrowgauger

[Dan Rowe]

Bernard,
Thanks for that perspective. I found it very helpful.

Dan

[sparky961]

Hey guys,

I haven't chimed in here in a while due to the business/busy-ness of life, but this one peaked my interest.  My current view on this is that as long as you're enjoying the work and you have full time paid employment then it might be acceptable to cover the true costs and only break even (material, supplies, electricity, machine & tool wear, consumables, etc).  It would be impossible to get an accurate figure, but if you are any good with spreadsheets then some reasonable ballpark estimates can quickly yield a reasonable hourly rate for a project given that you have a pretty good idea how much time it will take.  Simply put, add up all of the costs then divide by number of hours.  You may want to calculate material separately, but you get the general idea hopefully.

On the flip side, if you're looking to make a profit then the whole thing changes.  Get ready to put together a much more complex spreadsheet and make some pretty big assumptions until you have enough data from past experience to fill in the gaps.  It would be much better if you were able to compare to someone else successful.

The biggest difference between the two is accountability.  If you're making a profit then you're much more likely to dip into that profit to make a person happy when something goes wrong.  If you're just breaking even and the "customer" knows this, you're unlikely to be expected to lose money on the deal.  Different price levels imply varying degrees of expectations from the customer.  If they know you're charging a premium they will expect a premium product and complain when the slightest thing is wrong.  Conversely, if they know they're getting a steal of a deal they have very little to complain about.  "Really, what did you EXPECT for that price?  Did you not do your homework and see how much MORE everyone else would charge??"  Obviously somewhere in the middle is where you want to be and everyone goes home happy at the end of the day. 

To give some perspective on this side of the globe, you can't get much done that involves any sort of machinery or specialty for less than $60/hr CAD (about 38 British Pounds at today's rate).

-Sparky

[NickG]

Chris, so much advice here I can't really add anything other than it'd be useful for others when it's finished to know what you did charge and whether both parties thought it was worth it!

Nick

[Lew_Merrick_PE]

A number of years ago I worked a project with a very fine machinist who had retired from Freightliner.  His house was paid for.  His tools were paid for.  His pension and benefits made him independent to the point where he only took on work that interested him.

He thought I was nuts.  He was perfectly happy charging $20/hour for his expertise and time.  What I pointed out to his was that this price was unfair to those were were trying to earn a living while acquiring tools and growing a business.  At the time in question, a new Bridgeport #2 turret mill with the 44 inch x-axis travel was a $15,000 proposition.  Add in tooling and maintenance over the (US government required) 7-year amortization of cost and assume 1700 billing hours/year and you have an hourly cost burden running in the $8/hour range.  At the time in question, the total taxes paid on self-employment income ran in the 45% range (they are currently about 32%).  That meant that the post-tax & post-cost net ran (about) $3/hour for a $20/hour billing rate!  (Minimum wage at the time in question ran in the $6-$6.50 range.)

Yes, I understand that a retiree may only be looking for entertainment that does not cost him anything.  That is all well and good.  But the flip side is, What would he have done if, as an apprentice or journeyman, he had to compete with such retiree's?  That is the symmetric morality question that has disappeared from the discussion.

Non-Sequitor:  In the U.S. today a Prime Federal Contractor is allowed to bill the taxpayers up to (just short of) $1300/hour for every person they have working on a Federal Prime Contract.  If the work is to be done in a zone of active hostilities, that billing rate increases to something close to $5200/hour.  (I know the exact figures for 2005-2007, and they have increased twice since then.)

[sparky961]

I think you hit on exactly what I was trying to point out in my long-winded way.  The thing is that there is lots of work out there that this person would not have been interested in, and those that need to make money often need to take on work that doesn't interest them.  Ok, sometimes they even need to do work that outright sucks!  Trust me because I am not yet in the category of people that doesn't need to make money.

I don't believe that the few people out there willing to work below the going rate have the capacity to take business away from larger shops.  There is a staggering amount of work to be done out there.

-Sparky

His house was paid for.  His tools were paid for.  His pension and benefits made him independent to the point where he only took on work that interested him.

<snip>

[Jonny]

I don't believe that the few people out there willing to work below the going rate have the capacity to take business away from larger shops.  There is a staggering amount of work to be done out there.

What no one has picked up upon is theres a massive difference between hobby/model engineering and production.
What you have to base the costing on is how long would it take for much bigger suitable machinery and equipment to do the job. IE if only have a small machine it could well take 60 mins to do a part, decent machine could well be seconds at £50+/hr, thats the difference.
Therefore have to go in at market price or walk away.

To prove a point i took an order for Australia last week, posted off yesterday. 5 axis cnc would have taken 16 mins for one part, doing by repetitive multi operations manually i planned on 40 to 50 mins each at a much lesser hourly rate, i dont have overheads like rented buildings or £300,000 plus tooling to recoup!
What it boils down to is based on £50/hr could well be £70/hr but i sold for 66p each less than could have done out for and thus a loss. As it was i can now have three weeks off next month laughing all the way to the bank. About time i had some smooth work.

Unless specifically asked by customer you have to go in at the price structure of how it would be made. So as £25/hr mentioned earlier, way too high with no overheads i feel it should be closer to £15. Proper legit engineering companies charge from £30/hr, thats roughly £10 to the actual person doing the job, the rest is overheads and ancilliary items.

Another way of looking upon it is charge your £25/hr each part takes 50 mins plus materials so looking at £24.83 each. Engineering co at £50/hr works out at £4.83 each because they make in one minute, call it 2 mins so £5.66 each.