Taking your hobby of CNC router to a side business can be a huge step for you. Setting down to calculate your CNC hourly rate is key to your future success.
So how do you find your hourly in this daunting task? Well, there are a few different methods we can work through to help find that hourly rate that makes the perfect sense.
Possibly charging by an hourly rate isn’t even the right approach. Maybe having most of your jobs set up as a flat rate per job is the best solution and more likely the ideal situation
Figuring Out What Your Time Is Worth
The first step in finding your CNC hourly rate is figuring out what your time is actually worth to you. This can be accomplished by knowing what you would like to take home as an employee.
Keep in mind if you have ever read the E myth you should be working to be the guy bringing in the sales and not the technician of the company. However, when getting started I understand you will play multiple roles in this endeavor.
Also, remember every job that comes through the doors won’t always be worth your time so pick your work carefully.
Calculating Profit Margin In Your CNC Hourly Rate
You should always be working for a profit on all your jobs. Seems like a no brainer right? Well, you would be surprised how many people will just take a job to say they have work but in turn, won’t be the right job. With very little in return for there efforts.
Possibly only working for only 10-15% percent of a profit when they could have spent the time looking to find that job that that earned more around 50% percent profit. This type of job would have covered more of the overhead for the month.
Now we have to spend the time looking for 4-5 more jobs to find the same amount of income.
So the moral of this section of the article? Only work for profit and shoot for that 50% and above profit margin on all jobs.
But 50% Profit Margin Is Too High
If this is going to through your head you already have the wrong mindset. It needs to change. You deserve that 50% profit for the countless hours you have put in learning your craft.
Not only the time learning in your field of CNC but the amount you have invested in equipment. You’ve earned it so charge that 50% percent.
This always goes back to what I’ve been saying in almost every paragraph, not every job will be a fit. Some customers will say your to high and that’s fine. There is plenty of work to be had out there.
Charging this 50% percent profit also gives you the ability to slow down on jobs because you know you won’t have to run to the next job because rent is coming due You only had to do 6 jobs compared to the normal 15 to make ends meet.
Your quality of work has come up and people in the next town over are starting to show up as well.
Don’t Overbook Or Overwork Yourself
Not overbooking yourself is key when starting this new phase of your business CNC hourly rate mission. A lot of things can happen when the overbooking begins. For starters, the quality of work dissipates.
Quality of work and delivering on what you told your customer is going to be delivered is key as well as to your success. Doing damage control on every job is not a fun way to run a business.
So in saying this, be upfront with your customers and tell them this is what it’s going to cost, this is how long and just lay it all out. When doing so you MUST do what you told the customer you will do.
While being transparent with your customer on the scope of work you need to be equally transparent with your team members in getting your CNC hourly rate right. What do I mean by this?
Well if you bid a job and win you need to communicate with the guys and let them know we have $2500 bucks to get the job done. 55 hours quoted to the job and $1250 in materials. What you’re essentially doing is giving them guidelines on where they need to be on this project
Having this great communicate with more than likely get your guys excited and possible to have them coming to you with ideas of equipment or setups to make things run more efficiently.
Steps For The Math On CNC Hourly Rate
Finally, let’s begin to discuss the math of this madness of building our CNC hourly rate. Step one is going to be determined how long a given job is going to take.
This is another place you could bring you guys in to see what their thoughts are on getting a particular job done is.
This, in turn, could hold everyone accountable to hit the right objectives in getting a job done.
Figure out what materials you’re going to need to complete the given job. I always like to add a little buffer in this category not much but I don’t want to be piecing things together at the end of a job and in turn letting my quality take a hit.
One key thing is to think of any special tooling you might need to complete the job more efficiently and keep those labor costs where you quoted them at.
If you added your labor up and came in with a total of 15hrs at a rate of 30hr so a total of $450 in labor. Materials/cost of goods came in around $375. Making a total of $825 dollars in labor and cost of goods. So already a lot of you probably are thinking this is a lot of money.
Don’t worry I use to too. Let’s think about the $30 an hour is just for your pocket to take home. It’s not there to pay the electric at the shop or the rent. That $30 an hour is to feed your family.
With your $825 we will add our 50% profit so X2 giving us a total of $1650. So before you blow through your computer screen or phone and say these numbers won’t work in your area.
Already you have the wrong mindset and I bet you’re saying your customers won’t pay those prices. That’s what I thought too but I just had the wrong customers and the wrong mindset. So settle down and evaluate your customers.
What I like to do when getting all my CNC hourly rate data in after finishing a job is to review. This is what’s going to make you really grow and ensure your going in the right direction.
I like to set aside time at least once a week and review jobs that I have completed and make sure my profits are where I suspected them to be at. If not it’s time to evaluate why we are falling short on our objectives. You can’t skip this step in your business.
I know some of you are probably shaking your heads with some of the information I laid out in the article above. That’s fine, but as I have stated a few times in calculating your CNC hourly rate you need to have the right mindset. The years you have put into learning all the things you know about CNC/ your trade are worth every penny. Every customer might not understand that but that just means they are not the right customer for you or your business. The right customer will stop by and will be more than willing to pay what you’re worth. There’s nothing worse than bidding and a job and the customer saying “what a relief I thought it was going to be a lot more”
Thank you for reading.
Check out our recent article on CNC router depth of cut here.