Why You Should Lose More Quotes | Machine Shop Talk Ep. 49
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- เผยแพร่เมื่อ 12 พ.ค. 2022
- In an industry experiencing some significant contracture, why should you aim to LOSE more quotes?
It’s a bit of a head-scratcher - but in this episode of MACHINE SHOP TALK, Ian Sandusky from Lakewood Machine & Tool dives into the Practical Machinist forum to answer exactly this question!
In examining the story of a Practical Machinist community member who was winning over 90% of the work he quoted on - yet was experiencing serious financial struggles - Ian explains why winning the work isn't always the best-case scenario for your business.
Explore the topics of quoting strategy, using quote win rates to determine how your pricing stacks up, and why every customer isn’t necessarily a good customer - we get down into the quoting trenches to answer why you should likely be aiming to lose a few more quotes.
Join the conversation on the Practical Machinist forum here: www.practicalmachinist.com/vb...
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Ian Sandusky
Lakewood Machine and Tool
lakewoodmachine.com/
sales@lakewoodmachine.com
(905) 853-6194
LinkedIn: / ian-sandusky-3a223227
Instagram: / lakewoodmachine - วิทยาศาสตร์และเทคโนโลยี
What are YOUR thoughts on this? Do you go for the 'quantity is a quality all it's own' method of attracting work, or are you hyper-specific in what you take on?
We win about 35% of what we quote. This seems low, but it lets us focus on the most profitable work that is available to us. I have learned that being busy generally leads to less profit. Being steady tends to be more profitable.
The golden rule is 3/1 for quoting…anything more your way to cheap and your cutting your own throat…you can never refuse work but you can and should out quote work..it’s a skill and something that I’s learned through time trial and error ..knowing when to pull the trigger and cherry pick work that suits you and your shop @ a correct margin..and when to knock work back..is just as important as your skill as an engineer 👷♀️
I normally make Request for quotes and have some trusted vendors. When the series is low and the total estimated prices is less than 1000 $, I'll only ask one vendor and see if the price is reasonably close to what I would have expected. I'm a former machinist and I'm pretty close very often when I make my guesstimate. I don't work with machine shops, that makes a price tag so high as it was a lottery coupons.
great points:
Having a high win rate is not always a good sign
Having too many bids can impact productivity rate with a bottle neck
roughly 70% win rate can be a good thing
Business exist for one reason. "To make money". I approach every job with that philosophy.
It's funny how often people forget that!
If you are accurate on material, tooling, setup and production times (total job cost) and include your targeted profit margin then you should be making money. If you get the work and are losing money then you need to figure out what is wrong. If you are hitting your numbers but still getting a high percentage of quotes then you probably need to bump your profit margin up a little depending on your workload. The main thing is to make sure your job costs are in line with your estimate. The old adage is that you never lose money on a job you don’t take.
This is very true! I've burned a lot of time, lost a lot of hair, and lost a lot of money on bad jobs - but I've never lost much sleep over the jobs we didn't get. Thanks for watching!
My shingles needed to be replaced. I asked a few companies, they all came in around 11-14k. Except AM Roofing. He quoted me 60k. He was so firm on it too. I laughed him off my property. I realized that if 1 in 50 people didnt do their homework, and actually went with him, he would be pulling in so much profit.
Oh man, I've had this before in my industry before as well. Get material quoted out at one spot for $15k - go to others, find out average is about $10k. If I had been lazy, that would've been a cool five grand off the top for absolutely no reason. Always pays to do your homework!
@@iansandusky417 I am deep in your industry (just down the road in Guelph), definitely have the same experience in material almost every day! Glad to hear you're doing your homework too, gotta keep inflation down somehow lol
Great video! We’re I work we quote how long we think the job will take on the machines after processes and material cost and then we simply put 20 points on it. There’s time we are awarded the work and break even there’s times we crush it on the job and there’s time we loose terribly and there’s time we just simply don’t get the work. As I move up in my company I have to do more quotes and I absolutely hate that aspect of the job. The last thing you want to do is take work at a loss, but you also don’t want to be way to high and loss the bid. There is a fine line with that aspect of the job. I truly believe it’s a skill on its own. And in a machine shop I do believe the person doing the quotes needs to have a strong knowledge of every aspect of manufacturing in a machine shop. If it’s a large number of parts there are just things you can’t miss. Eg saw cut time handling time on all operations, do the parts need any kind of sandblasting do the holes need to be plug well doing so. On a job like that it could be real easy to miss something and it turns into a total loss. Anyways that’s my 2 cents on it and what I have seen when it comes to quoting work since being in a role where I actually see this aspect. Thanks again for the great video!
Thank you very much sir!
I agree with you, it can be a real drain on your mental bandwidth dealing with quotes. One missed feature when you're quoting on a big run can mean a world of headaches and custom tooling if you're not careful, and I've been there more times than I'd like to admit! Thanks for checking it out!
many years ago my boss started struggling, we had lots of work but money was tight , he started showing me the prices of the parts and cycle times he had , he had got them over the years by his main guy at the time , all i can think is this guy thought he made himself look good by saying 5 mins to set and 1 min each run time , so a simple 100 off would be priced at £1 each , when i started redoing the times the prices tripled + we only had one customer try and screw us back down and say she will put it out to requote we still won the work and we put it up again next time , others didn't say a thing , the only parts that kept the company going at the time was the tooling as that was priced different . another thing to look for is the software error , we quoted on a 3 year contract , orders of 5/10/15/20 etc of each part 3-4 times a year , all out of inconel 718 , boss gave me computer prices , if they ordered 10 would of been cheaper than 5 , and 20 cheaper than 15 lol , because of material cost the overall price looked higher but the extra parts would of been £5 each when material £100 . when our IT guy looked at it he had a blip in the system . how much had that blip cost him .
I would say I'm in the 60-70% range. A lot of shops in my area are one trick ponies. Only do cnc milling, no lathes at all. Some only do steel, a little bit of aluminum, no stainless, or plastics. If they do other than steel work. OMG the shit show, I've seen. Have customers come to me and ask me If I can me this part. Sure, I can but it won't look like that. I use the 3-4-week lead-time always. I'll get their work done sooner than send a email. I just tell them that we slipped them in since we were running the same material before cleaning out the machine.
This is a really solid strategy - I hope people see this because especially under-promising and over-delivering when it comes to timelines is critical. I'd rather make someone happily surprised by seeing their work earlier rather than have them hound me because I'm a day late!
Thanks for watching!
Very true, the skills to make a quote itself are mostly based on the combination of experiences and guesstimate...
Hard agree here - quoting is always a toss-up I find. Half the time the quotes that I just throw a number at turn out better than the ones I spend the time to calculate down to the minute / penny!
Thank you for the 🔥content Ian. Sometimes I bite off more than I can chew.
Thank you very much sir!
X = sales
Y = profit margin in % of sales
X and Y have nothing to do with each other.
Definitely - and I think a lot of people may not realize this. You can have all the sales in the world, but if you're not building and hitting a proper profit margin in there, you're basically just rinsing money through the accounts if you're lucky, and actually losing money if you're not.
very true.
I get way to many quotes. I need to raise hourly rate again
Been there, my friend!
I think it would be good to study your competition in the market before adjusting or changing. I use some pre mission planning as in look into my operation area or at my area (next closest shop, how many), demographics(what other shops do or advertise, companies that may need services, who asking or needing work). I review this information annually to see who is new, still in or out of business. Job Shops or are not big in my area (companies do most in house due to lack of trade training and availability of services). I attempt to catch the short run, just in time and prototype stuff (I am cheaper than in house machine shop - at times. I find this type exercise is well worth the time & education I get on my area and market.
It's easy in my situation, the shop I use to work for and some other buddies shops will give me work that they quoted and keep 10%-15% so I get 85%-90% which works great for me since I don't have to spend time quoting and being 1 guy in his garage I can afford to loose the 15%. The only issue with others doing this is you need a great relationship with those shops because they can lie very easy. Goes back to, being a small shop has it's benefits. Easier to pay bills and pocket the rest.
This is a very sound strategy for being successful as a small shop! Taking overflow / excess work is a very viable method of keeping afloat - but as you say, trust is key. There's nothing worse than being pressured to drop your price points only to find out there was a lot more meat left on the bone than was let on.
Thanks for checking it out!
There is a dark art to quoting and the witchcraft is in how much math you can do.
This is the most accurate description of quoting I’ve ever heard - just don’t start publically spilling the beans about the profit margin blood rituals.
OK good stuff. Thank you. I think you really could have shared all this in about 2 minutes, no need for 14 minutes.
Ian what's your user name on PM? Sometimes an opportunity comes along where you can look at the part as "what the market will bare" and not what it will cost you to make it. I'd prefer to win 5% of the quotes, and be able to charge $1000/hr. It's a nice day dream.
I'm prettttty sure it's LakewoodMachine, but I'll be honest - I'm mostly just a lurker!