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supersmurf666 09-03-2010 09:51 PM

Starting new shop/how much do I charge?
 
Hello guys.Im just starting a little hotrod garage and need to no how much to charge an hour.Its just me with very little overhead.Any advice would be great.Thanks

OneMoreTime 09-03-2010 10:06 PM

In order to stay in business you need to get enough to cover the rent of the building..how much would it cost you for a comparable building on the open market? Monthly utilities and phone bill. how much for consumables used in the shop? Advertising? cost of office equipment? Add all that expense up for the year and divide by 2000 and that gives a figure for projected expense of operations and do not forget the shop truck in that budget. Then figure your labor rate which is the expense of an employee (you) considering your hourly wage plus state labor and industries. social security taxes and unemployment insurance and then when you have all this together then a shop fee can be determined..

Sam

MARTINSR 09-03-2010 11:13 PM

Quote:

Originally Posted by supersmurf666
Hello guys.Im just starting a little hotrod garage and need to no how much to charge an hour.Its just me with very little overhead.Any advice would be great.Thanks

I opened a shop with the knowledge you have, ZERO, it didn't go too well. :pain:
Listen, you REALLY need to get some business education. Because you can do the work out in the garage only means you are a guy who can do some work out in the garage, it doesn't make you a BUSINESSMAN which is what you need to be!

Forget what you THINK you know about business, you know NOTHING. Get some knowledge, take a course or two in your local community college. Read some books, do something! But don't think because you can work on cars you can run a successful business.

I struggled for 13 years before I went out of business. I have since gotten a lot of info thru following jobs (working for the man :rolleyes: ) and think how valuable this knowledge would have been about twenty years ago when I had my shop!

You are going to be running a "time factory". You need to sell time for more than you paid for it, that is the basic of a service business. You then have to cover overhead and the like. Now, if it is just you and very little overhead just set you hourly labor rate at a dollar an hour, right? NO, but that is what you are asking.

You need to be paid for what you are worth, you need to know what similar shops in the area charge. You need not to sell yourself short. If there is one thing about a service business there is ALWAYS work. If you are doing restorations, you can have a friggin shop FULL of restorations, it isn't hard to find work! So don't give away the farm! Charge what the going rate is, I don't give a crap if you are making 500% GP that is what you SHOULD be doing, getting as much as you can.

Believe me, if you give away the farm, the "image" of your farm will be small.

Brian

supersmurf666 09-03-2010 11:13 PM

Wow
 
Thanks for the info but I still dont no what to charge.....heavy thinking right now.lol.

MARTINSR 09-03-2010 11:14 PM

Quote:

Originally Posted by supersmurf666
Thanks for the info but I still dont no what to charge.....heavy thinking right now.lol.

Have you called the local shops and see what they charge?

Brian

supersmurf666 09-03-2010 11:18 PM

Thanks Brian
 
I use to own and run an 18 wheeler so i no a little about buisness but thats a whole nother kind of work.I can use some of that buisness sense at my shop but its way different.I new what it cost to run my truck so ill use that logic with the shop.

MARTINSR 09-03-2010 11:20 PM

Quote:

Originally Posted by supersmurf666
I use to own and run an 18 wheeler so i no a little about buisness but thats a whole nother kind of work.I can use some of that buisness sense at my shop but its way different.I new what it cost to run my truck so ill use that logic with the shop.

That is the first thing you need to forget, this business is NO different! Business is business, I don't care if it's a parts store, a cat house or farm, business is business.

Brian

supersmurf666 09-03-2010 11:22 PM

Ya ive called around and i no some people who have regular auto shops.they charge anywhere from 55 to 85 an hour.

joe_padavano 09-04-2010 06:35 AM

Brian's advice is dead on. Most states and counties have a small business economic development office. These offices usually have seminars or classes about starting a business. The costs of operation to consider are many. In addition to the usual overhead costs (rent, utilities, etc) there are also the non-obvious costs like business license, any EPA or environmental compliance costs, the cost of your accountant, legal advice, insurance, etc. Don't forget the investment in tools and equipment and depreciation of that equipment. There are consumables (parts cleaner, hand cleaner, paper towels, etc.). There are disposal costs for "hazardous waste" - which is just about everything these days. There's certification costs.

You need to start by understanding exactly what costs will be incurred over a year, then figuring out how you plan to allocate these costs to a particular job.

Oh, then there's always the issue of how much you pay yourself.

OneMoreTime 09-04-2010 06:41 AM

It will be some heavy thinking..I have a small parts business that I do and I have to think of all of the expense in that in order to keep it running. Accounting and bookeeping is another thing to work on as you do need good books in order to tell just how well you are doing or not doing..

Sam

jetnow1 09-04-2010 07:26 AM

One More Time has hit a lot of the basics- but don't forget to add profit.
Too many guys figure that the hourly rate covers that but if you could
make as much or more working for someone else than why take the risks
working for yourself. Remember that risk equals reward so figure that you
need to add a markup for profit at the end of the numbers to compensate
for it. There is a reason that shops charge so much- the costs of doing
business are much more that most people realize- and they are going up
all the time as the states look at business as a cash cow and raise the
fees and business taxes all the time, Get a good acountant to go over
all the needed license's, permits, and insurance costs- then figure that
the will increase by 50% over the next two years. Just one of my
government fees doubled last year and there are changes to the law
dealing with lead paint that will probably cost me somewhere between
1200- 1500 in imediate costs plus about $5000 a year in additional
costs. Jim

TubeTek 09-05-2010 03:54 PM

No one has mentioned the skill level factor so far, and its a major factor if this is something you've never done for money in the past. Equipment is another, as it influences the time it takes you to get the job done.

Lets say you're charging $70/hr as an average of the high and low rates you've found in your area. To do that, you'll need to have several years applicable experience and a shop that's very well equipped for the type work you're doing. Without both, you'll be grossly overcharging, and probably spend as much time arguing about charges as you spend working.

The best way to get around this is to work on fixed estimates as much as possible. The customer knows up front what its going to cost, and you don't have to worry about keeping up with every minute you did (or didn't) work on his project. When you quote prices up front its pretty easy to tell where you are realtive to the competition. If you get every job you quote, you're too cheap. And if you don't get any of them, good chance you're a little high. You do want to keep an accurate account of the time you spend on each job, not for the customer's benefit but for your own. Over time you'll likely find you make a lot better hourly rate on some types of jobs than on others. This is common in all types of similar businesses. Keeping up with the time allows you to adjust those lesser paying jobs upward when you quote similar ones in the future.

Obviously some jobs are going to have hidden problems that can't be estimated until they're uncovered. That's why any work agreement needs to spell out exactly what's being quoted, and what's excluded from the quote. If a problem is found, the customer needs to be notified asap so he can decide whether he wants you to fix it as well, or if he wants you to just complete the originally agreed to work and let him worry about the hidden stuff later.

And then there's the ones where its near impossible to work any way but on an hourly basis. Someone drags in a frame that's been rusting since the 50's and wants you to turn it into a rolling chassis. If you were starting with a new pair of rails, and fabricating all the crossmembers, etc from new material, then you could quote a firm price. But starting with something 60 or 70 years old means any up front price will involve lots of guessing. Is it twisted? Is it cracked? Is there massive rust between the inner and outer rails? Will the riveted joints be loose as a tambourine once the frame is blasted? Will blasting show up spots where you can see daylight thru the metal? The list goes on and on, and the likelihood of the repair bill being substantially more than the cost of going with new (assuming its something where new is available) is high. That's the place where you have to be up front with the customer about possible costs, and let him bear the risk if he wants to proceed.

All that said, you'll find you can get a lot more work by quoting fixed prices rather than hourly rates in any case where the work to be done is well defined. I've been in various phases of the metalworking business for 30 years, and if I have some work I'm looking to sub out to someone, and a drawing or other good description of the work involved, then they're wasting my time and theirs if they think they'll get me to bite on an hourly rate and give them the job. If a man isn't familiar enough with the work to know what it's worth, the he surely isn't familiar enough with it for me to open the wallet and trust he'll do me right.

MARTINSR 09-05-2010 05:07 PM

Quote:

Originally Posted by TubeTek
All that said, you'll find you can get a lot more work by quoting fixed prices rather than hourly rates in any case where the work to be done is well defined. I've been in various phases of the metalworking business for 30 years, and if I have some work I'm looking to sub out to someone, and a drawing or other good description of the work involved, then they're wasting my time and theirs if they think they'll get me to bite on an hourly rate and give them the job. If a man isn't familiar enough with the work to know what it's worth, the he surely isn't familiar enough with it for me to open the wallet and trust he'll do me right.

You know, I never thought for a second in this thread that we were not simply talking about how much to charge an hour. Your "hourly rate" is merely that, what you charge per hour. It doesn't mean that every job is an open check and how ever many hours you work on it you will be paid. I too feel sorry for the poor dolt who would turn over a project to someone without so much as an estimate as to how much it will cost.

However, this doesn't change the fact that you need SOME KIND of idea what your "hourly rate" is before you give that "fixed price".


Brian

TubeTek 09-05-2010 07:26 PM

1 Attachment(s)
Quote:

Originally Posted by MARTINSR
You know, I never thought for a second in this thread that we were not simply talking about how much to charge an hour. Your "hourly rate" is merely that, what you charge per hour. It doesn't mean that every job is an open check and how ever many hours you work on it you will be paid. I too feel sorry for the poor dolt who would turn over a project to someone without so much as an estimate as to how much it will cost.

However, this doesn't change the fact that you need SOME KIND of idea what your "hourly rate" is before you give that "fixed price".

Brian

Very true Brian. My point being we don't have enough information from the OP to even begin to guess where his shop rate needs to be.

Pic below is a pair of parts I make and sell. For size reference, the largest diameter is about 2 1/4". The two parts sell as a pair for $45, and represent $3 worth of material and a total of 9 minutes of time on a cnc lathe.

The same parts can be made on a manual lathe in about an hour apiece, using the same $3 worth of material, but they're still only worth $45.

My theoretical shop rate on these parts would work out to $280/hr, while the shop rate for doing the same thing on a manual lathe is $21/hr. In reality, I can gross between $200 and $225/hr on these because there's always something here or there that eats up time. Because there's 2 dimensions on each part with a +/-.0003" tolerance, they'd likely have an actual gross more in the range of $15/hr on a manual lathe due to increased scrap rates.

The price of admission to make the jump from $15 to $200+ is $100,000 worth of machine and tooling. The real question becomes how much CAN I charge rather than how much SHOULD I charge. The answer in this case is $45/pr because I own about 90% of the worldwide market for this relatively low volume part. Doesn't matter if someone else spends 6 hours making the same thing, because your competition sets your price, and I'm the competition for this item regardless of where you're located. The OP is faced with the same problem of prices set by the competition, so he really has to look at what the competition charges for various jobs and work backward from there to see what his rate would have to be to make himself competitive based on his own skill level and available equipment. For any of us to make even a halfway guess at a competitive rate, we'd need to know more about his skill level, equipment, and the type of work he plans to seek out. Unfortunately, there's no flat rate manual for what I do or what he's planning to do.

MARTINSR 09-05-2010 11:35 PM

I may be missing something you are trying to say. But the flat rate would be the very same between you and the guy on the manual lathe. The difference would be, he took longer to make the same part. You on the other hand make it faster thus earning more in the same time. The cost for that higher efficiency is the cost of the CNC. If you can't make enough of them to pay for the higher efficiency you might as well have made it on the manual lathe.

A body shop in town with one little booth and no trick equipment has the same shop rate as the shop I work at with two down draft heated booths a computer controlled squeeze type resistance welder, laser measuring system, etc. They don't do it as fast, thus we make more GP on labor. Hopefully we do it fast enough to pay for the equipment. :mwink: But the fact is, we still have the same shop rate per hour.

Brian


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