general pricing for prototype machining

[timmydabull]

Can someone please help with some general pricing guidelines for creating prototype parts.

in this application the customer has supplied me with basic drafting which i have to convert to solid model,apply toolpaths machine prototype and make adjustments to the final drawing in regards to any last minute changes before production run.


in a production environment i try to remain between $60-$100 rate,but i am finding creating a prototype for the customer to approvebefore production (100pcs) is consuming a lot of time that i am unfamiliar how to price.

i have had one person tell me they charge $10k to deliver 1 prototype part then it is up too the customer to implement into high production.

i have had others say it is the cost of doing business to get the customer in the door and there repeat business.

what is the proper way to handle billing in this situation?

thank you for your replies.

[timmydabull]

to further elaborate i have several days involved in programming, machining, ordering tools $100 for job,machining prototype for approval,2 more hours revising drawing.

is it customary to charge for this time seperately? or do i add it to the 100 part order?

thank you

[dertsap]

Originally Posted by timmydabull i have had others say it is the cost of doing business to get the customer in the door and there repeat business. s

that doesn t make sense
what happens if they go elsewhere for production or its a failure of a product ,
its not worth the gamble ,if they aren't willing to pay the costs for developing their product then they won t be willing to pay when it comes around to production either


charge an hourly rate at cost plus ,cost being the hourly rate and the plus being for tooling ,materials etc
charge for all of the time you spend on the job

this will cover your bases and protect you , so that you don t have to shell out any money and lose your hard earned money on someone elses hair brained idea

[Geof]

Originally Posted by timmydabull .....i am finding creating a prototype for the customer to approvebefore production (100pcs) is consuming a lot of time that i am unfamiliar how to price. i have had one person tell me they charge $10k to deliver 1 prototype part then it is up too the customer to implement into high production.....

Charge what is necessary to meet all your costs plus a profit, and remember that your hourly rate goes into the costs it should not come out of the profit.

Divide your monthly costs; rent, electricity, amortization of machine cost, etc., by something like 200 to get an hourly cost then add 50% because you do not work on customer jobs all the time but your costs continue all the time. Now add what you think your hourly rate should be, and remember to include all the payroll taxes, etc., that an employer pays. This gives you your basic hourly shop rate to which you add some percentage for your profit.

Estimate how many hours the job will take without having to doing any rework or modifications; this should include all the time you expect to put in, drafting, building fixtures, programming, machining, etc.; this gives you the job cost.

If the prototype casn be built successfully based entirely on what the customer provided that is it. If you underestimated the time it would take that is your tough luck.

But if you get part way through and the customer suddenly comes up with a change that means everything so far has to be scrapped they pay for the time taken to get to that point and then you restart with the new specifications, and maybe with an adjustment to the cost if the new specs make things more or less complicated.

Remember it is not your place to subsidize your customer's R&D costs.

[timmydabull]

thank you

that is what i need to know.

[harryn]

Hi, as someone who has purchased these kind of services before, I can also tell you that there are a lot of products that never get off the ground because the people with the "ability" to do the transition from a "print" to a "reality" tend to be a bit - narrow minded sometimes.

Please wait - I am not trying to start an arguement here.

I will admit that in the past, I have grossly underestimated the amount of work it takes to go from a "print" to a "proto part", and this clearly needs to be compensated.

At the same time, there is also the potential to develop a long term business relationship with a customer like this, and make money on it. If you customer is at all sophisticated business wise, they will understand that you cannot work for free. Itemize out the work you expect it to take to make the prototype, and apply real value to each item on the list.

Offer to take the payment in cash at one price, and part cash, part ownership of his company (in the form of stock) at a higher price. (the stock value can be difficult to measure). If the customer is a REAL business, it will have stock shares. If it is a guy just playing, then go for the cash.

Once you are a part owner, you can start to have influence, and capture any fraction of the business you want.

[Alvin32]

I have been in busness for over 20 years and have seen a lot of ideas go through my shop, I have always given 110% to my cusotmer and his ideas. I have never come out ahead by giving away my time knowlege and effort. I feel for the customer that just wants to make his dream come true but at who's cost. I have learned dearly from my mistakes and will not repeat them. If a customer wants to develope an idea the total cost of the project belongs to him. Remeber he came looking for you not the other way around. Give him an honest days work for an honest days pay. You have invested a large chunck of your time and energy to build a business and he needs to pay for your expertees and know how. Remember, PROFIT IS NOT A DIRTY WORD.
I wish you great sucsess in the future.

[timmydabull]

thank you for your replies they have been very helpful,definately not a hobbiest project,this is a patented part/prototype for a serious company.

i want to be fair as i need work right now and i want to establish relationships in a fair manner.

thank you
tim

[little bubba]

Timmy, since you're dealing with an established company not some dumb ass on the street, try the words "whats your target price?". That simple phrase can get you a lot of work.

Maybe bargain that the first article PO also has a line item on it for the production run. A lot of our Gov jobs are like that. First article for 10X and 50 at X on the same PO.

Don't give your work away, if it was so easy they would do it themselves.

[timmydabull]

Little Bubba,
that is a great idea,
a short story here,,,, spent the last 20 years running a business in the new housing industry and one of the things that got me most of my work was asking the same question,what is your budget?,anytime i could work with them on there existing budget i would get the job(most of the time they were having problems with there services from other providers)

of course in dec 07 that industry collapsed and i am finding the only way i can make a living is by freelancing my other talents.

i have taken a huge paycut from $5k week(construction) to $500 week making parts,up until now i have had my own product line which has barely kept me above water.

recently i have went looking for recurring contract work as i realize this is where the living is.

thank you for your suggestion i think that will get me started down the path of redemption and i will certainly learn more as i go.

thank you all for your replies.

[Geof]

Originally Posted by timmydabull .....up until now i have had my own product line which has barely kept me above water. recently i have went looking for recurring contract work as i realize this is where the living is.....

This is interesting: I started 28 years ago and 24 years ago decided that contract work was not where the living was...and was lucky enough to find an opportunity to develop my own product which gives me, and several other people a very nice living.

Different strokes for different folks? I guess there is no single correct way.

[highspeedmazak]

Nothing is free anyone who comes to you wanting cheap prices or freebees for prototype work is not worth the time. All I do is prototype work and let me tell you it is very expensive and time consuming. Just keep in mind that you must only take on jobs that you are equiped to do in a timely manner, This will insure both sides buyer and builder are being treated fairly. Good luck.