Charging for Short Runs of Custom Moulding
Thoughts on how to price custom short moulder runs when the customer supplies the rough stock. June 24, 2007
I manufacture custom moldings in a variety of wood species, often requiring grinding knives to match patterns. I offer some standard designs in our product line but do not maintain an inventory. The runs range from 5 to 12,000 feet. My current position is material cost plus overhead and a 30% markup; runs under 100' carry a setup charge. On local jobs the customers tend to bring their own material; setup charge is applied regardless of footage and a sliding scale depending on footage. The profit margin winds up getting reduced as there is no material to mark up. I run into resistance from my clients over cost. Is there some guideline as to how to structure the pricing for both situations?
(Moulding Calculator Spreadsheet Program)
From contributor B:
How do you figure your overhead? X amount per year divided by x number of hours worked per year to give you your overhead per hour? Do you work Saturdays, 8 or 10 hour days, etc.? How do you calculate how long it will take for the set up and run? You need to be price competitive in your area. If cost plus overhead and 30% works, that's fine. I find it easier to figure material cost plus x amount per lf based on total lf. 1000' would cost more per ft than 12000'. For 5 or 10', it is the setup charge plus the price per foot if ordering 1000'. Crowns sell for more per lf than casing or base. Not because of machine time, but because the marketplace says so. Study your market prices.
From contributor S:
As contributor B said, you need to know what it is costing you to set up and run the machine. But that is only half of the problem. Letting people bring in their own lumber is the other half. You are counting on the markup from the lumber you supply to come up with the profit margin you normally make. Sounds like the local customers are cheap. They know you charge and count on the markup on the lumber. They are trying to buy the moulding cheaper and in turn, beat you out of the profit. And whatever you come up with to charge them, it will be too much. At least from their point of view. What you need to do is either stop taking their material or make it so you make more if they supply the lumber. They need to understand that you have to make money to stay in business. Running 50' when they supply the lumber isn't going to pay the bills, let alone cover the cost to turn on the machine. There is a reason they keep coming to you. It may be that everyone else with a moulder in the area won't touch these small orders. Don't forget that you are the one with the capitol investment in the machine, tooling and overhead to run it. If they really need it, they will pay your price. And if you can't get what you need to make, then what have you lost? Once you agree to run their material at a lower cost, they will keep coming back to do it again. So unless they come through with a substantial order, where are you going to make money with these people? The problem with selling to small customers is not the cost, but the way the cost is presented to them. You are much better off with a small customer folding in the setup fee. To many of these small guys, a setup fee is nothing more than an added cost they have to pay. If you fold it in, they don't see anything as added cost. They just pay what you are asking.
From contributor J:
Here's a link to a spreadsheet here at WOODWEB for calculating moulding costs. It always uses a setup cost (because there always is a cost to set up the machine), but only gives a price per LF for all the time and material needed.
If someone brings in lumber for me to mill, I subtract my cost of the lumber out, keeping the markup in the price. There is still storage and handling and time spent with the customer.
Moulding Calculator Spreadsheet Program