Determining Shop Fee for Commissioned Work?

[Archie Zietman]

Hello.
So, I have started taking commissions in earnest in my ironwork business (called Ironfish) and am having to think about shop rate. How do you all determine it?
Thanks a bunch,
Archie

[Rikadyn]

labor+materials+overhead+profit=price

I follow this formula mostly for my chainmaille work, Figure it'll apply the same:

How to Price your Chainmail Masterpieces

Just adjust the numbers to apply.

[Glenn]

There have been several threads on the subject of pricing on IForgeIron. A search should locate them for you.

[David Einhorn]

Setting a price on your work:
http://www.iforgeiron.com/forum/f7/how-do-you-set-price-your-work-11287/

[Mark Emig]

Don't forget that after figuring in all your costs, you also have to look at how many ACTUAL work hours you have in a week for production. After dealing with client,writing estimates,contracts,ordering supplies,picking up materials and such things I am lucky if I get 30 hours of actual work in a 40 hour week. But, I work way more than a 40 hour week. The other thing about setting prices and figuring estimates, is that I usually estimate how long a job will take and then DOUBLE that figure. When you are starting out, there is almost alwas something that will take way longer than you thought, such as cleaning the railing before painting it, or even worse, a step you forgot in your estimate. It is the non productive time that will eat up all your profits, such as visiting a client to get work etc. I have now started charging clients for all time spent with them. If a lawyer,engineer,mechanic,plumber does-why shouldn't I? I am a skilled individual and deserve to be compensated for my time.
Good Luck!
Mark Emig

[beth]

i agree with mark - its tricky but you should be charging for your time in the same way and along the same lines initially as any skilled self employed person in your area - your time spent with a client or even the time you spend thinking about/planning the job (which actually there is no limit to) should be paid for in your quote. i find the whole thing very difficult as someone starting out. Your hourly rate should not even be in the same conversation as somebody who is not self employed! good luck!:)

[Ted T]

Archie
Bidding a Job

I suggest that you keep an accurate timeline/activity log of what you actually do.
Your notes should be accurate and include the following, but limited to the following.
As you are just starting out, I suggest you should take the following into consideration if you want to be in business for very long.
It will take a little of extra time and effort to itemize just how you operation works.
BUT, if you do not include and understand all costs involved in your operation, you just may wind up doing your work for practice and not for profit!
You will need to understand the impact of the following on your end product!
1. Moneys spent for all materials.
2. Every minute in spent in designing.
3. Communicating.
4. Picking up material.
5. Cost of materials specific for the job.
6. Tool depreciation.
7. Actual shop costs, direct and indirect (overhead) such as permits, licenses, tool tax, training, tax record keeping costs and time, vehicle use costs, insurance for your structure and vehicle. Work bond costs, and material storage.
8. Include all background supportive production costs such as electricity, heating or cooling your shop, and shop maintenance.
9. Background supportive office hours for billing, material acquisition, and actual hours spent from start to finish in production right on to delivery or pick up.
10. All costs of obtaining Perishable Gases and Fuels used for production such as coal, coke, propane, argon, oxygen, and acetylene.
11. Perishables such as grinding wheels, sand paper, welding rod, flux, washers, bolts gloves, safety glasses, ear plugs, and respirator filter replacement cartridges.

That is not meant to be a complete list by all means.
But is only an example of a short list of a few of the quick and dirty aspects that is always un-seen in the background of the end product when you give your bid price.

I suggest that you search for other posts where Glenn and several others have broken down the business end of how to calculate your cost v. profit.
Don

[Mike Ameling]

This all reminds me of the business card my one uncle made up for his "retirement" business.

Tired Iron

A not for profit business - altho it did not start out as such


That last line was half joke and half prophecy. But it was his retirement business - something to keep him busy, and occasionally make a little extra beverage money.

Francis Whitaker had a little note in his Cookbook about shop hours. He said that for every billable hour you spend forging/working on a project, you have at least another ... non-billable ... hour associated with it. So you have to adjust things on any bid/quote to accommodate that extra "overhead" time spent tending the shop, repairing/sharpening tools, replacing inventory, and doing all that book work.

And somewhere along the line, it also helps to add in a little ... profit ... for your own pizza/beer.

Mikey - that grumpy ol' German blacksmith out in the Hinterlands

p.s. My big failing point is that I tend to charge what I would like to pay for the same thing instead of what I really should be charging.

And friends always get upset no matter how much or little you charge - they always want it cheaper - for a "friends" deal!

Edited July 20, 2009 by Mike Ameling

[Jim Poulmas]

Also consider a development fee. I charge a $250 development fee that is non refundable but is deducted off the final price. This is so I don't sit around for an entire day designing something only to have the person decide that they want a wood gate instead.

Personally, I always take money in installments. X amount up front, x midway and x upon completion. This will guarantee that you have money coming in regularly so when you hit that light switch you'll have power. This is especially useful for things like quarterlies, insurance payments etc. This can also allow you the option of taking a check every week as opposed to the feast or famine method. I've done both and getting a weekly is better for paying bills. No waiting. Plus, if July and Sept. are busy but Aug. is dead you'd get the completion payments for and July and some up front money for September and you won't starve during the month of August, for example.

To finish or not to finish.... ha ha. I have the equipment but the thought of acetone, xylol, naphtha, lacquer thinner, corrosive patinas, and other mind altering vapors makes me sweat. Charge extra for this type of thing.

Be prepared to educate clients. Most people don't realize that metals are a publicly traded commodity and are expensive. Metal is ubiquitous so people think it's cheap. When they balk at a figure it helps if you explain the nature of the business to them.

That's just my .02

Best of luck.

[Dodge]

On the subject of material cost; Do you charge your cost of materials or do you mark up a specific percentage. I can't remember where I read/heard/learned but I recall that a 20% mark-up on your material cost is appropriate. Is it? I believe this was to cover your cost for going and getting the material or shipping cost if you order it or have it delivered. Don't know if its worth 2 cents but its just a thought
Scott

[Mike Ameling]

On any large project, materials costs and changes can make or break a project for you. A year and a half ago when steel prices were going nuts, one project that Jay submitted a proposal/bid on got caught by those rising prices of steel. Between Jay submitting the proposal/bid to the client and them accepting it 3 months later, the cost of the steel for the project went up $800! That quickly eats up a lot of any ... profit. Luckily it did not cost Jay anything other than a bunch of his time. It could easily have ended up costing him out-of-pocket money and his time to make that project for them - since he did not have an ending date on his proposal/bid. A friend who teaches at the one high school tried to get some bids on steel for the school shop around the same time. All the suppliers would only give him a bid that was good for one or two days!

So, if possible, build in a clause on any proposal/bid to allow adjustments for rising materials costs. The larger the project, the more it can affect your return on your labor.

Once you see that in action, you then can understand why so many building and government projects are bid as Costs + Profit.

Mikey - working on following my uncle's business practices --- a not for profit business, although it did not start out that way!

Edited July 21, 2009 by Mike Ameling

[thecelticforge]

I use a simple formula. Flat rate for simple things less than an hour labor, and 40 dollars an hour for more complex things. If you buy material whole sale, you double the cost plus tax. If you buy it retail, charge what you pay.

[mcraigl]

This came up at a hammer-in last weekend. Some things that I hadn't thought of from that discussion. Don't forget to add the cost of you consumeables (fuel, welding/cutting consumeables, gas, grinding discs, etc. etc.). Also one of the guys had a shop rate of $65, and a design rate of $110. At first I was kind of blown away by that, but the more we talked and the more I thought about it, that was an outstanding idea. That way if they take the design to a competitor's shop you've at least been paid for the work you did on it. It also adds credibility to your value as a designer and artist, and would make me anyway feel better about the time I put into design that hasn't normally been part of the revenue stream.

Edited July 22, 2009 by mcraigl
clarification hopefully.