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Total price vs materials ratio?7/12
This question is for those of you who most of the time fabricate and install cabinets that you would consider 'standard' for your method of fabrication. For example, vast majority of my cabinets are made the same way, different (non-standard) widths play no role, melamine sheets may be different in color or price, edge-banding too, but none of that influences the speed of fabrication itself.
I'm trying to find some simple formula for producing quick "shoot from the hip" reasonably precise estimates for customers that have no patience.
The only compute-able thing that I could produce on the spot using laptop would be how much sheet material and cabinet hardware I would need to build what they need.
Has anyone yet calculated the average ratio of the TOTAL PRICE for the project (how much you charge customer for everything) vs the PRICE OF JUST MATERIALS you need to build and install the project?
If yes, than what is the quantity scale (numbers of projects) or time scale (for how long period) you used for calculation?
Did it work for you?
You should be able to easily figure out a ballpark figure for a linear foot of upper and lowers. Or a price per box on average, say for uppers and for lowers.
Make a list and you can quickly put together ball park pricing.
I wouldn’t get to worked up with impatient customers, I would tell them to go elsewhere, throwing a quick number together is a good way to get burned.
I also wouldn’t use anyone else’s numbers( I doubt they will give them to you anyways) You will just get yourself in trouble doing this, your costs will be different and you will end up getting burned.
This is not rocket science. Material plus labour plus overhead plus profit divided by how many lineal feet of a type of cabinet and wow, you have your answer.
I have found that "shooting from the hip " often results in getting shot in the foot :):(
It's easy for me to calculate my ratio, but my business history is short and my product variety is very limited, so my data are probably not much relevant across wider markets. I'm looking to expand my product portfolio a little bit, but I lack real life experience in pricing strategy.
I'm trying to figure out if the total price scales in arithmetic or geometric progression regarding the cost of materials (or none of the above).
Let me clarify using this simple example:
Now, let's say customer wants better quality melamine and better hardware and the price for such material would be $700.
For me, there would be no difference regarding the fabrication or installation itself. Weather it's $25 per sheet white Columbian melamine or $50 per sheet textured Tafisa makes no difference how much time it takes to make it.
Now, do you guys think that the total price usually tends to gravitate toward the (4 x $500) + $200, i.e. just increase the price for the difference in material cost, or more likely toward (4 x $700) ?
I know that the simplest (and most likely the best) answer would be to do just "what works for you", but a lot of things work for me and I would'n like to leave money on the table or be a fool that ruins it for everyone else (including himself in the long run) and not knowing it.
Yes, that's true. But sometimes I have to.
I think pricing and estimating has to many variables to be a consistent value.
It is my experience that these types of questions are like the recipe for the old Kentucky Fried chicken with 11 herbs and spices. It is a trade secret and most people won’t give you to much information.
If you want a shoot from the hip number take total annual sales divided by total hours
When people ask me for ballpark number I tell them I use 0-9 with commas and decimals. I do give customers a ROM (range of magnitude) for off the hip so 8-10k.
Another example just like the one you gave but more extreme, both from the past 3 years for me:
I don't know the type of work you do and the types of work you're hoping to expand into, but I suspect I am not alone in having a similar example as laid out above. If this type of scenario does not at all apply to you or your work, then maybe you will be able to find the ratio you're looking for. But I have found scaling material cost to be a losing game. While I could certainly find a line of best fit for all my projects that graphs material vs. total project, using that would give me outrageously high bids on simple cabinetry work and leave me destitute after bidding on more complex projects. The ratio of work between paint grade vs. stain grade cabinetry is not the same as the ratio between labor on the two, as another example.
With more inputs you may be able to find a formula that tells you what you want; if it were me I would be coming up with quick ways to estimate man hours on a project as quickly as you do material and hardware.
When I have taken some time to meet a potential customer and they want a ballpark figure, I deal only in whole weeks which keeps it simple and lets me provide very rough estimates. I can fairly reasonably estimate how many weeks a project will take me. That, plus material, then present them a range of +/- 15% of that number. It has worked well for me, but again requires estimating my labor not scaling my material cost. As has been noted before, if your initial estimate is low, it's hard to end up course-correcting later and keeping the client happy.
Sorry to not give you what you're looking for. Hopefully someone who does a similar type of work is willing to share enough data points that you can find the scaler you're after.
As a mostly one man shop for over 35 years I have divided the price of completed jobs by the footage of cabinetry. After finish and installation. I add a surcharge for material costs 10-15- 20 % or whatever , on larger more complicated jobs I raise the installation at least 5% because multiple trips will be made. It is amazing how close this works on a quick estimate based on materials.
Good luck I hope this helps
It would be incredibly hard to give anything but an order of magnitude pricing unless you primarily build specific ranges consistently. Low, medium, high.
I could see offering a $5k, $10k, $15k... I would be very conservative(high).
However, the problem is once you say a number it sticks. They may immediately say you are too expensive. When you come in 25% higher on your actual quote they will say “but you said...” Regardless if you say “don’t hold me to it”.
You would need a ton of your own data to give a decent guess.
I’m not sure where the 1/3 material 2/3rds labor came from. We are always at least 1/4- 3/4. We build pretty nice stuff. That would be prime only. Painting can add another 20%.
Ball park pricing is incredibly dangerous. If you suggest a lower price than you can make a profit from with an off the cuff estimate, and come back with a hard estimate to the customer that is higher, all they are going to remember is the lower price. Great way to drive them to your competition.
Finished bid price is 7x the material cost plus 15-20% profit
in the past i took the sales price and divided by the LF and made adjustments from there for that particular job. As i've accumulated experience and past job folders i will often take a similar past job as a base price and add or subtract based on the new jobs specs. But i admit i need to be careful about that 1st number thrown out. It is the one that is remembered but often i am very close and the client understands the reasons if it goes higher. Still, estimating is my least favorite and time consuming thing to do even after all these years.
I shoot from the hip when asked, usually less than a million dollars. I then ask how much dinner will cost? If all they want is a price, they are not my customer.
I was taught many years ago to use a consultative sales approach, we design and sort the details together. The answer I was told to use was we can design to your budget, what price point do you want to design to?
That gives you the option to work on some details that meet their price point or pass.
This type of sales process works through the project and the budget to come to a close.
My quick formula was developed based on a post I read here a few years ago.
I price based on sq ft of cabinet faces. That price is based on materials use, paint grade or stain/varnish solid wood. (paint grade is 25% higher as a rule because of additional labor required) Add to that the # of boxes required & charge $125/box. $75/drawer/pullout. Add for any finished ends or panels. Get's me really close fast for ballpark figuring.