working out hourly rate

[Alan m]

hi there.
I'm a site carpenter mostly but am trying to move towards workshop based. I'm trained in the workshop.
I know how to price up my hourly or daily rate on site etc because I know all the variables.

I'm struggling to think of all the variables and how to fairly work it out.
things like cutter life and breakages,
electricity used on the machine with dc ,pc vac table etc
building special clamping jigs if needed,
design time
work on the cnc and work off it and how to integrate it into one formula.



right now all I can think to do is
do a basic rate for the basic workshop with basic electricity ,insurance etc
then add on a rate for each machine separately
divide this into a few different categories like quick cuts , medium volume cuts and constant use so that I can try to charge for blades at different rates etc (lets say I was using a chop saw a small bit I might add 1 euro an hour but if its constant I would add 10 euro an hour or what ever it worked out at. )
how else would you allow for the different costs on using each machine. . to run the planer for an hour would cost a lot more that a drill press or chop saw.
it would be a very complicated way of doing it but fairly accurate. hopefully.
how do you work it all out.
I'm more worried about the cnc side of it because it can get very expensive fairly quick with bits and all the electricity etc

[chiloquinruss]

First off I do not run my Bot as a business, I am retired and enjoying it. However I will do some contract custom work if requested. My hourly rate is $75 per plus all material costs including substrates and finishes. This is for any of my time whether running the Bot or doing the artwork or whatever. I am a single person shop so my rate is actually pretty low. If I was making shop payments, labor force, etc., it would necessarily be much higher. I only do custom / specialty items and signs. I try and not compete with any locals that are feeding their families off their respective businesses. Russ

[Brian Harnett]

I don't charge by the hour on my work, most is one off or small quantity runs, I give a bid. I figure my material and get an idea of time and the complexity of the job. A simple but time consuming run on the machine if I do not have to babysit it and can make money on something else I am working on in the shop that job will be bid cheaper than if I have to stay on the machine feeding it pieces.

Also the value of the work, is it complex that most shops can not do or have the experience those can have a premium price tag in the long run I think biding on jobs is much more profitable.

Bits and electricity are my smallest expenses.

[Alan m]

I don't charge by the hour on my work, most is one off or small quantity runs, I give a bid. I figure my material and get an idea of time and the complexity of the job. A simple but time consuming run on the machine if I do not have to babysit it and can make money on something else I am working on in the shop that job will be bid cheaper than if I have to stay on the machine feeding it pieces.

Also the value of the work, is it complex that most shops can not do or have the experience those can have a premium price tag in the long run I think biding on jobs is much more profitable.

Bits and electricity are my smallest expenses.
how do you put a value to each piece. is it that looks like 100$ job the next is a 300£ job

what other expenses have you despite insurance etc

[Alan m]

First off I do not run my Bot as a business, I am retired and enjoying it. However I will do some contract custom work if requested. My hourly rate is $75 per plus all material costs including substrates and finishes. This is for any of my time whether running the Bot or doing the artwork or whatever. I am a single person shop so my rate is actually pretty low. If I was making shop payments, labor force, etc., it would necessarily be much higher. I only do custom / specialty items and signs. I try and not compete with any locals that are feeding their families off their respective businesses. Russ

did you work that out or just decide its a nice easy number . I am hoping that this will be part of my income so it has to be worked out fairly acccurate

[jTr]

You first need to establish whether you're vertical or horizontal.
Gene, who sells wooden table ware, has repeatedly shared with this community how formulated his processes and pricing are, and he's very successful.
I am horizontal - one month it's a kitchen, the following it is a custom piece of furniture with an entirely unique set of processes. This is where I thrive mentally - the variety keeps me happy, and I am constantly learning, updating and honing new skills. However, this makes the process of accurate pricing much more challenging. One person operations like us seem to suffer the same struggle - we give away more hours than we care to admit.

I do keep a time card, though seldom refer to it except to tally hours and see how I did. A few years ago, I altered the form to include a description of processes. What did I do all afternoon? Analysis of this is what helps me to make corrections in calculating cost of any given process. My pricing has improved since doing so.

Establish continuity of sub categories, such as drawers. I have graduated to a point that all I use is dovetail drawers, be it a kitchen, built in or free standing piece of furniture. I've also committed to a single style of high end, under mount drawer slide. I've realized they pay for themselves in savings over the cheap stuff. Every time I try to shave costs by using cheaper hardware, I loose it in extra time fussing for a good fit. Goal here is predictability, so every process you can formulate as a sub-category is a step towards accurate pricing technique. Bonus: nothing screams top quality furniture like a smooth, quiet drawer operation.

Wish I could tell you this can be done before you start your first project, but it really is something that takes time and evolution. Your business is going to be as unique as yourself - How swiftly do you work? Are you a perfectionist, or can you accept a realistic level of sufficiency?

I try to look at it this way: If the house cleaners are commanding $40 to $50 an hour, and the glass guys are pulling $75-90, you should be able to stand your ground as a custom designer/builder at least somewhere in that range.

best of luck on your new direction,

jeff

Remember: If it was easy, everybody'd be doing it.

[chiloquinruss]

"did you work that out" I have had my Bot for some time so I am very comfortable with it and especially Aspire. I have very little waste in either materials or my time. I usually work on job layout in the evening for an hour or two and then cut the next day for around 4 or 5 hours. That gives an equivalent to an 6 to 8 hour day, job dependent. So around $450 to $600 a day. During the summer months I work 3 or 4 days a week and much less in the winter. With less work in the winter my utilities are much less. Most of my equipment is 220v so is energy efficient. Electricity is expensive in Oregon so . . . . I am retired from regular work but the Bot keeps my wife and I very happy and allow us lots of opportunities that our retirement income would not allow. My shop and the purchase of all of the equipment was paid for within about 4 years using this $75 hourly rate. Early on I spent more time in the shop so had higher income. Also make sure you account for your time getting materials, transportation, and possibly installation if required. Installation can sometimes be the largest costs associated with the job. Hope this helps a little. Russ

[jTr]

I replied earlier today, but system said must be approved by moderator before posting, and is not showing up. I replied way before Russ, yet it's still not showing up. Lets see if this one works...
Jeff

[jTr]

Okay, since that worked this time, I'll try to respond again:


You first need to establish whether you're vertical or horizontal.
Gene, who sells wooden table ware, has repeatedly shared with this community how formulated his processes and pricing are, and he's very successful.
I am horizontal - one month it's a kitchen, the following it is a custom piece of furniture with an entirely unique set of processes. This is where I thrive mentally - the variety keeps me happy, and I am constantly learning, updating and honing new skills. However, this makes the process of accurate pricing much more challenging. One person operations like us seem to suffer the same struggle - we give away more hours than we care to admit.

I do keep a time card, though seldom refer to it except to tally hours and see how I did. A few years ago, I altered the form to include a description of processes. What did I do all afternoon? Analysis of this is what helps me to make corrections in calculating cost of any given process. My pricing has improved since doing so.

Establish continuity of sub categories, such as drawers. I have graduated to a point that all I use is dovetail drawers, be it a kitchen, built in or free standing piece of furniture. I've also committed to a single style of high end, under mount drawer slide. I've realized they pay for themselves in savings over the cheap stuff. Every time I try to shave costs by using cheaper hardware, I loose it in extra time fussing for a good fit. Goal here is predictability, so every process you can formulate as a sub-category is a step towards accurate pricing technique. Bonus: nothing screams top quality furniture like a smooth, quiet drawer operation.

Wish I could tell you this can be done before you start your first project, but it really is something that takes time and evolution. Your business is going to be as unique as yourself - How swiftly do you work? Are you a perfectionist, or can you accept a realistic level of sufficiency?

I try to look at it this way: If the house cleaners are commanding $40 to $50 an hour, and the glass guys are pulling $75-90, you should be able to stand your ground as a custom designer/builder at least somewhere in that range.

best of luck on your new direction,

jeff

Remember: If it was easy, everybody'd be doing it.

[Alan m]

Okay, since that worked this time, I'll try to respond again:


You first need to establish whether you're vertical or horizontal.
Gene, who sells wooden table ware, has repeatedly shared with this community how formulated his processes and pricing are, and he's very successful.
I am horizontal - one month it's a kitchen, the following it is a custom piece of furniture with an entirely unique set of processes. This is where I thrive mentally - the variety keeps me happy, and I am constantly learning, updating and honing new skills. However, this makes the process of accurate pricing much more challenging. One person operations like us seem to suffer the same struggle - we give away more hours than we care to admit.

I do keep a time card, though seldom refer to it except to tally hours and see how I did. A few years ago, I altered the form to include a description of processes. What did I do all afternoon? Analysis of this is what helps me to make corrections in calculating cost of any given process. My pricing has improved since doing so.

Establish continuity of sub categories, such as drawers. I have graduated to a point that all I use is dovetail drawers, be it a kitchen, built in or free standing piece of furniture. I've also committed to a single style of high end, under mount drawer slide. I've realized they pay for themselves in savings over the cheap stuff. Every time I try to shave costs by using cheaper hardware, I loose it in extra time fussing for a good fit. Goal here is predictability, so every process you can formulate as a sub-category is a step towards accurate pricing technique. Bonus: nothing screams top quality furniture like a smooth, quiet drawer operation.

Wish I could tell you this can be done before you start your first project, but it really is something that takes time and evolution. Your business is going to be as unique as yourself - How swiftly do you work? Are you a perfectionist, or can you accept a realistic level of sufficiency?

I try to look at it this way: If the house cleaners are commanding $40 to $50 an hour, and the glass guys are pulling $75-90, you should be able to stand your ground as a custom designer/builder at least somewhere in that range.

best of luck on your new direction,

jeff

Remember: If it was easy, everybody'd be doing it.

thanks jeff.
its the variability that's creating all the variables. if I was making one thing the whole time day in day out then it would be straight forward.
I'm hoping to be making all kinds of things both on the cnc fully and partially on it.

[dlcw]

$1 per minute retail for cutting time. All other aspects of the job are $60/hour with a minimum of $30. I do offer some hourly rate diswcount for wholesale customers depending how long I've been working for them. If the job is big enough I will price in a bit or two. For large wholesale customers I do it by the job after figuring out how long it will take to cut a sheet. I give them a break off the $1 per minute run rate of the CNC. I have a spreadsheet that I can use to plug in different discount rate percentages depending on how large a run the customer will be doing. It's worth the time to put this spreadsheet together for larger jobs.

[raymond.clark]

Alan,
Are interested in relocating for a full-time position?

[Gary Campbell]

To Alan the OP...
Until you get a good database of experience, it will be difficult to know all the variables, I guess near impossible. But if you keep good records you will start to get good with time.

To your original question: In many cases the price may already be set and it will seldom be hourly. This has been discussed ad nauseum on this forum and others. Take this analogy:

A 10 cuyd load of gravel is a fixed price. The gravel pit will load it for $10 in your truck/trailer. Takes a few minutes for a $100/hr loader. That's a buck a yard. Now consider a guy with a shovel, or a guy with a spoon. Should the guys with the small slower equipment be entitled to $100/hr? Same thing with CNC machines. In most cases an adjustment must be made. Take the Desktop vs a full sized Alpha. Should they both charge the same hourly rate? How about the job shop down the street that has a $300K big iron machine? How about a ten year experienced user vs. one with a month or two?

If the guy with the big machine cuts 100 ping pong paddles an hour and charges a buck apiece, then cutting them is worth a buck. The Alpha may get 25-50 an hour the desktop only a dozen. Lesson is that you cannot set an arbitrary rate without a lot of information about the product and local conditions. You would be better off selling a product with machining included, or attaching a "value" for cutting than you would be to set an hourly rate.

I can tell you that the range (looking back with good jobcost records) My machine would get between $.50 and $250 per hour, depending on how quickly I caught on to the variables associated with the job and how many mistakes I made (or didn't make)

[bking1836]

I am about four months into trying to make a viable shop-based business with the CNC as the backbone of my efforts. Many have told me it's unlikely that I will be successful, and they may be right. Or wrong. Time will tell, and I honestly don't know yet. But it's an uphill climb for sure.

Here are a few early lessons:

1. As you are ramping your way up the learning curve, everything is MUCH MORE EXPENSIVE in dollars and time than you think it will be. I doubt you will find a consistent hourly rate, especially since the vast majority of people are going to want to pay by project/total cost and not hourly. You have to be prepared to stick out the expensive learning curve.

2. There is serious downward pressure on your hourly rate and much of it is out of your control. If your market is direct to consumer for furniture or functional wooden items like trays, even if you can reach high end consumers you are still competing with mass production pricing models. My current example is a 48" ash bench that I designed and am making for a customer. The iconic Herman Miller platform bench is $1200 in maple, so that's likely the upper price boundary. My bench runs about $100 in material cost, not including overhead and consumables like electricity, sanding pads, bits etc or spray finishing costs. Let's just say I have $150-$200 in actual costs. Could be more. IF I can sell the bench in the future at a retail price of $700, then my time would be valued at $500-$550. That time includes customer communication, CAD and CAM tweaks to account for differences in wood size from job to job, trips to the lumber yard, production, sanding, assembly etc etc. To make $50/hour I have to do all of that in 11 hours as a one man shop. It's possible, especially if you are lucky enough to have multiple orders and the efficiencies that would afford. But it's also possible that it ends up taking longer.

3. The kind of CNC person you want to be will have a big influence on your eventual hourly rate. Do you want to be a creative designer or are you happy to just crank out parts? The combination of CNC and CAD creates amazing and seemingly limitless possibilities. If you're like me, you might want to design and make really cool, complex stuff. And you can. But that might be better as a hobbyist, as I fear the real money is either in totally niche work and/or in relatively simple, repetitive work (by simple I mean simple for a CNC, but NOT simple for the human hand). Right now, in all seriousness, my design that might be the quickest path to a profitable product is a stupid little keychain cut in the shape of a particular lake out of 1/4" walnut. I can get a piece of 8" x 96" x 1/4" walnut for $19, sand it, chuck up a little 1/8" bit and let the machine crank away at 116 of them at a time while I work on something else in the shop. Then I can literally spray the entire piece of stock before removing the tabs with a table saw or bandsaw. Add a ring. Sell to the local gift shop for $4 each so they can sell at $7.99. Less than $50 in cost and maybe an hour of my actual time. $464 of revenue. That's a lot better than $50/hour. Repeat for the next lake market. But if all I do is make little walnut keychains, I might as well sell the bot...That's my problem. I didn't understand this before I bought a shopbot and signed a lease on a shop.

I realize my thoughts might seem to have veered from your original question about hourly rate. But I think that question and these issues are necessarily intertwined. Good luck and keep sharing!

[woodshop]

We totally agree with bking1836 above...

"There is serious downward pressure on your hourly rate and much of it is out of your control. If your market is direct to consumer for furniture or functional wooden items like trays, even if you can reach high end consumers you are still competing with mass production pricing models."

That pretty much says it all.

1. Downward pressure on hourly rate.
2. Out of your control.
3. Can you reach high-end consumers?
4. Competing with mass production pricing models.

I would add one more to that formula...

5. The "Maker Revolution" all over America is a Force To Be Reckoned With.

[dlcw]

All these discussions make me realize that I might be choosing the right time to look at scaling back my cabinet/furniture shop and taking up semi-retirement.

I don't have the money, ambition or energy to purchase a bunch of new high-tech machinery and hire operators so I can compete today. I'll have to say, it has been a great 52 years of traditional woodworking for me. I've enjoyed every second of every day I've been in the shop making sawdust. After all, a bad day in the shop is better than any day in an office (did that for a few years). All but 18 years of that were hobby woodworking. I will continue woodworking, but on a limited basis and doing only projects I want to do.

I think I'm going to use my energy to try and help the current generation of high school kids before they are a write-off. After all, eating laundry detergent (or whatever the latest craze of stupidity is) can't be doing to much good for their brain cells. Kinda of like the kids from the 60's and 70's frying their brains on drugs.

I've got about 6 months of orders to finish up, then I'm going to go kayaking, camping, hiking and 4-wheeling more.. WOOHOO!!! :)

[guitarwes]

I'm working on working out an hourly rate also with plastic parts-production I do from other people. $65-75/hour looks to be right where I need to be to be profitable going forward. I do alot of custom doorhangers and wooden signs which don't pay as good but I try to do them in batches to spread the cost over several items.
My time is very valuable to me and my family. I do the Bot thing part-time and work as a healthcare professional full-time so I don't want to work all day and them come home and end up working 3-4 hours for $8/hour. It ain't worth it to me for that.