Machine rental pricing?? Charging comeone else to use your machine.

[odulfst]

I operate a Shopbot (PRT Alpha 96x48) for large organization, and am trying to work out personal use of the machine. They are considering my proposal but need to know some kind of industry standard for machine rental pricing.

What is a fair price for letting someone else operate your machine, assuming they supply bits and handle all operations? This machine has a PC router so I suppose replacement brushes, bearing, collets, etc. should be taken into consideration.

Thanks for your opinion,
Tony

[harryball]

I can't help with the actual pricing but I can offer some information for you to take/leave/mull.

I've found that "renting" complex tools from a friend, family member or anyone with whom a continuing relationship is necessary rarely works out for the best. Using a tractor as an example, if I rent it for $300/day from Patrick Rental and the transmission quits working I give them a call and ask them to pick this one up and bring me one that works. Renting my neighbor's tractor for $300/day and having the transmission quit is a whole other ball of wax. I will likely either end up participating in the repair if I wish to keep the relationship... or give him his $300 and end the relationship with the neighbor.

In your case this is your employer. I don't know them or you but make sure you are prepared to buy them a new router if the one you are renting blows apart on your watch. Fair is fair, if it happens to die while you are renting it and you did nothing wrong, rent is rent and they should fix it. But the potential for hard feelings and you without a job are real.

If you do it I wouldn't be bashful about putting the rate and responsiblities in writting. You know yourself and employer best so it's your decision but I wouldn't feel right not saying something after reading your proposal.

/RB

[knight_toolworks]

great advice for sure.

[odulfst]

That is good advice. It is definitely good to cover all circumstances before entering into an agreement. I'll have to discuss that with my company before embarking, but I don't think there will be too much of a problem seeing as I built, maintain, and operate the machine for them. And they're reasonable people :-)

Any input on pricing? I should have mentioned sooner that I will probably be using this thread as part of my proposal. So please try to stay on topic, and e-mail me directly if there's something else you'd like to add.

Thanks!
Tony

[rcnewcomb]

FYI, I'd always bring my own bits AND collets if I were using someone elses system.
.....

Setting a rental price:
All of this assumes that the machine would be idle if it is not being "rented". It also assumes that you are trusted and knowledgeable.

A quick search on the web show that something like an industrial bandsaw has a monthly rental of about 10%-12% of the purchase price.

We can turn that into an hourly price by dividing by 160 (work hours in a month).

If the Bot, computer, software, etc. is worth $20,000 then:
(20,000*12%)=$2400/month
$2,400/(160 work hours/mo)=$15.00/hr

(fyi, if you rented it for 1,340 hours you just paid for the machine)

Even if we double it to $30/hr it is still pretty cheap.

Would I let a stranger "rent" my Bot for $15 or $30/hr?
No Way!

Would I let another Bot owner in town use my system off-hours because his was down and he had a job he needed to finish? Yeah, if it didn't interfere with my production.

[bleeth]

Tony:
In my shop if I have an employee who wishes to build something for themselves ar someone close to them I tell them to go ahead. If I have an employee who has a business on the side I tell him to leave it at the door. If I have an employee who plans on doing side work that is going to keep him going 2-4 more hours a day on a very regular basis I show him the door.

Although I have no experience in renting out or renting a cnc I do rent scissors lifts on a regular basis and they cost 150/day or 450/7 day week.
If your profile is up to date I am surprised that:
1. Old Dominion would want to go through the liability exposure for letting someone rent their equipment.
2. They would wish to go through the bookeeping necessary.
3. They don't give you a reply similar to my policy above.

That being said I would make them an offer based on the value of the work. If you use the machine as part of in-house facility maintainence that seems to be the limit. But supposing you offered to use it on the side as part of a non-credit elective for engineering students and therefore enhanced educational opportunities and got to keep the product in exchange?

[jhicks]

Lots of interesting input here but maybe this is an option. Subcontract the work to your employer. So you give them an order, they produce it to their standards and schedule. Meanwhile you are actually doing it and being compensated by them. So the net difference between what you pay them and what it costs them in labor and material plus all other overhead is in their profit.
Then you can deduct what you are being paid for running your own order and thats your net cost.
Mark it up and sell it from there.
Everyone wins assuming you wish to live with the margins you net from such a price/cost relationship.
Just an idea. hope it helps.
No matter what, the answer always lies in the numbers so both they need to think of /treat you as a customer and you think/treat them as a supplier. It just happens that you work there and are bring them more work so maybe everyone will be happy.
Good luck.

[chodges]

As a business owner with a ShopBot, I would be opposed to this arrangement. From my perspective, it looks a lot like you are wanting to do work that should belong to the business on equipment that does belong to the business, maybe even on time that the business is paying you for already, and using the building, insurance, and electricity that the business is paying for - all so YOU can profit.

If I had an employee who proposed this, my first feeling would be that he wants to be paid for competing with my business, and I would certainly question his loyalty.

Just my 2¢.

[odulfst]

Randall,
I like that analysis, and the main incentive for the university to rent the machine is indeed to pay down the cost, because the thing isn't profiting. There isn't time or really a drive for the people in charge of handling shopbot contracts to make it happen either, so it just sits most of the time. A part of my job there is to handle all aspects of shopbot jobs besides the paperwork. My angle is that I'll put the machine in use, handle all the paperwork, and pay an hourly fee to start pulling a profit. It's a tricky situation because I am an employee, and the only way that we (being my boss and I, this is very comlpicated) could think to propose it was rental.

Jerry, subconracting was the original idea, but there was too much red tape that way.

While I do intend to profit, my intentions are not completely selfish. I am trying to find a way to bring in revenue for the company (yes ODU) while still having an incentive for me to work hard. I'd also like a taste of the business side of this world as I've considered buying a machine myself and starting my own business.

This is not a full production cabinet shop, or a model shop, or any type of shop. It's a wind tunnel operated by ODU professors that has a shop and a Shopbot. The Shopbot is used for small jobs around there, projects within the university (almost no profit), and the occasional small profit side job, all of which are done on my hours there when I'm not busy with wind tunnel related work.

I know this proposal seems a bit odd, especially to those who use a Shopbot in their business, but I think it's a good one, and I'm looking for some guidance on how to approach it. I certainly don't want to offend anyone, so it's good to see how you all have reacted to help me gauge how they will.

Any different feelings after knowing my situation a little better?

Has anyone ever actually rented their machine out?

Again, what's the magic number?

[jhicks]

On Charlies observation, I get his point but on the other hand I would view your proposal and intent as the opportunity to GAIN from more work which is not necessairily to be viewed as COMPETITIVE, but rather ADDITIVE.
This opinion assumes that you would be bringing in work they would otherwise not be involved with UNLESS of course its part of your job to SELL that capacity.
I really dont see anything wierd or complcated here. You bring in new bsiness, they quote, procure, produce, and invoice it at a profit back to you (regardless if its at an hourly rate or a more comprehensive sell price.) In fact it seems to help them justify your position on an otherwise underutilized asset and employee.
Therefore everyone wins. Whats competitive about that? Wouldnt every business owner want their employees actively engaged to the point of them all bringing in new business? They should think about it as an incentive based performance reward for bringing it in. Who cares if the employee also makes money? Its America and few companies take in employees future anymore so whos suppsed to worry about that? YOU are!
Feeling threatened about that just doesnt make sense to me.
WHATS THE MAGIC NUMBER?
No such thing for ALL circumstances except the one that works for everyone. So stand back and put your employee hat on,
ask what would you do if I or someone asked you to produce parts? How would you price all the cost and sell aspects of the job. This is the price your company would sell it for.
Can you afford to buy it at that price and sell it for a profit? If yes, whats so complicated?
Just take the order from your wifes company (pretend for a moment its not yours from a business perspective) and off you go.
Now to make it perhaps more attractive to your superiors how about making something for them, their employees, their awards, or just great signs for the shop and wind tunnel area identification? Show them what can be done simply as part of your job so they can see a benefit/GAIN, and maybe it will stimulate ideas for their applications.
Maybe there is something about your customer base or other industry related wind tunnel folks you can produce as a product and dovetail their best interests with yours and develp a product for your industry?
Maybe a customer appreciation plaque?
You get the idea.
While some may feel threatened by the seemingly competitive nature of your inent, I see it as an envolved employee who is excited and seeks some level of empowerment and wants to maximize the opportunity for a win/win situation.
I love that type of desire and motivation and think it should be embraced.
The reality is every firm has competitors. Big deal. The company that gets their employees involved, motivated, and focused on winning is the one that wins. The one that holds all their cards close to their vest is the one too insecure to think outside of the box and fear competition is holding them back. These are the ones that struggles to stay alive and blame others for their lack of success.
Be flexible, be nimble, be creative, try new ideas, and get everyone around you involved to greate a winning atitude and environment.
Life is much more rewarding when folks work together on a team for mutual rewards. The swat shops are just that. The open companies are better managed, have more productive employees, generate more new ideas, and thrive in spite of competition.
Make it happen. If educators, business managers, owners and free thinkers dont get that, consider moving on.
Go get em!

[tkovacs]

I like Randall's thoughts and here is another example. I just rented a cement mixer at $42/day.
The mixer purchase price is ~$700 so 42/700 = .06 or 6% of the purchase cost per day. Further assuming that one rental day = about 8 hrs of machine time then doing the same for a $20K shopbot:

$20000*.06/8 = $150/hr

Which seems to me a lot more appropriate.

[jhicks]

Terry, I understand your calculation but rarely is a piece of capital equipment depreciated over 12 months. So dont forget to divide by number of years to get a realistic number

[tkovacs]

Jerry,
I'm not pretending to be an accountant but I would think that if one were to factor in the deprecation cost one would need to do it on the mixer rental example too and it would factor out in the final result.

In any case I think a significant issue is that this is not a long term lease agreement or a cost of equipment calculation but an hourly rental cost and they are very different.

Here is another take:
How many hours would it take a skilled worker to to what the bot can do in one hour? If we assume $30/man-hour then the $150/bot-hour would translate to 5 man-hours/bot-hour. I would guess that in most all application that a factor of 5 is conservativly low.

[jamess]

http://www.sawdustshop.com/CNC_ShopBot.asp Go look here this might help!

[tkovacs]

James - Interesting numbers. They do come with some conditions though:

Restrictions:
The ShopBot CNC Router is intended for non-commercial use. This basically means we don’t want you using it to mass produce items that you then sell, or use it to start your on side business as a sign maker or cabinet shop.

[jamess]

Terry, this is true I was just putting it out there to show what others where doing...

[tkovacs]

James - I did not mean to imply that the numbers are not useful. Actually after re-reading the original post and considering that Tony runs this machine routinely I would say that the $45/hour is quite relevant.

[odulfst]

Thanks James,
This looks like it says they are willing to rent the machine at $45/hr for short term use. I'm not sure what they mean by 10-hr/30-day member I guess that applies to the whole shop time usage, and then you tack on $15/25/45 for shopbot time. I guess you have to tack on some extra since I'm pulling a profit, but something in the %50-100 range is looking reasonable.

Jerry, Thank you for the supportive words! I like lots of those ideas, especially a customer appreciation plaque

[myxpykalix]

You know i've been reading all these calculations and estimates and they all have their own merit but Tony hasn't told us and no one has asked what he is making on the bot.

It only stands to reason that if you have a product that takes one hour to produce, and you sell it for $25.00 you would be crazy to pay $50.00/hr for time on the bot.

So my first questions would be:

How long does it take to produce this part?

How much profit (deducting material cost only) do I make on each piece?

You now have a subtotal of your profit margin.

Take your profit margin and deduct whatever percentage you think is fair where you make a reasonable profit for your work. I would calculate 10-20% for the use.

[odulfst]

The reason I haven't talked about exactly what it is I intend to make is that I have future plans for making different thinks and I don't know how representative this run will be.

I suppose a good place to start would be profit/hour, and then go from there. I'm haven't quoted this job yet, so I'm sure on profit/hour....but I'll figure that soon.

[myxpykalix]

Keep in mind that if you set a "per hour" fee you will be locked in to having to make only things that will give you that "per hour" profit needed to reach that goal and we all know that profit margins vary widely depending on the product. I can make some wainscoting and make $100.-$200.00/hr or more profit or I can make a lithopane and make $10.00/hr profit.
Whatever way you figure it I hope it works out for you...

[jhicks]

Fun to see all the ideas and perspectives. The thing one should also consider is the entire scope of the project and the entire shop time needed. For example, I just cut out some letters that took 3 minutes per letter. Thats actual machine run time. Is that what we are renting?
Or are we renting the warm up time, file/pc space, design software, sand, maybe paint, clean sort and pack parts.
Thats about the minimum time to actually get that 3 minute part from concept to ready for delivery.
Or are we not sing the PC and shop for these functions. If I rented straight machine time, i would be absolutely fully prepared to slap down stock, load my bit, run, clen up and leave. That aspect is perhaps only 1% to 5% of what it willake to get the part ready for sale and delivery.
So no matter how one calculates the nances and details, I still submit the simplest way is to sub it out.
So another way to check this is to send your parts out to quote, or ask a few folks to see what they would charge, use that number to gauge fairness and viability of this idea.
Maybe you will find you can buy it beter than make it.
i would be interested in whatever you finally work out as many have similar situations that can become very complex.