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Shop Pricing Strategies1/25/19
Over the past year, I've spent a lot of time refining this excel spreadsheet that I use to estimate cabinet jobs. I currently use Mozaik, so everything I do is based off of materials and labor. I'm building a kitchen and I can't help but think that my price is too expensive. I've attached pictures of the kitchen to be built. Am I overcharging somehow? I know it varies from shop to shop but if you have any tips please share! Offer any suggestions you may have or constructive criticism - I need the help.
A few questions
2) Are you installing or subcontracting installation? Is the $2,000 a bid or a budget?
Same question as the doors, why no markup?
3) a lot of states installation isn't taxable.
I have a Markup on install labor and a separate OH for installation that is lower than Plant labor
I markup different buyouts at different % depending on what it is, what the risk is and how much management time, along with if we are paying a deposit.
If the doors and install are hard numbers and removing your "proift" you are working on a less than 15% gross margin (7891.78/$9,235.00) =0.85455116.
A 30% GM which is low would put you at 11272 before taxes.
I don't know what things sell for where you are or your soft costs to keep the doors open but you may want to move the numbers and overhead around to make sure you are making money.
FICA, SS, WC, vacations, holidays all that is usually at least 35% on top of labor cost.
You can either capture overhead on labor, labor and material or just in the gross margin.
The problem is a paint grade kitchen with everything else the same has almost the same amount of labor costs.
We split our OH between material and labor to account for that but you can just add more to labor to recapture overhead.
Basically you want to get to a price that is breakeven with all oh costs etc, that is your "cost", then your profit is "policy"
You may want to use consider using margin instead of markup.
Somewhere in your pricing model you need a contingency.
Not sure why you are putting "waste" on labor.
Labor is generally counted two ways
1. The doors do not have a markup. Generally, I do, but honestly I was concerned that I was overpricing the project, so I looked at ways to cut down.
Your shop rate is $22.50/hr? That's like 1950s rate. 10% waste on labor? What's that? I'm not sure that you have any markup on any materials except for the trash pullouts. Is all your materials delivered? What about the time spent getting those? Don't see any charge for design and estimating. Rental truck must be close. I've spent an hour just driving to them and standing in line to sign the paperwork. Fair amount of labor for $1,300 profit. How many jobs have you built with this pricing?
My cost would be about $17,500. So I think you might be a bit low. But it really depends on your area also. I'm on the NE coast area so costs are naturally higher.
$12k before install and tax. West coast. Usually in the 30-50% percentile price wise.
Rich - Since my time is an estimation I like to figure in a 10% margin. I just labeled it waste quickly - no specific reason. The rentals are close, and very cheap (fortunately). All materials are delivered. I haven't thought about estimation or design since I'm the one doing it. It's a great idea (because I'm not being paid for hours and hours of work) but I still just get concerned about high costs. But! That's why I posted in this thread - for everyone's input - so I guess I need to get over it. As for how many jobs - all of them. It's our second year of business and I'm still trying to figure out the business side of cabinet making.
You want to charge the highest price the customer is willing to pay. That has nothing to do with your costs. If at that price you canít make a good profit you have a problem. You canít think in terms of what YOU would be willing to pay.
I am located in Georgia and build face frame cabinets with overlay doors. A quick estimate based on your drawings would be around $13,500 installed not including tops or decorative hardware. Plain stain or painted finish with no extras to the cabinets.
I'm in Canada, I'd be $17,500 installed
Is it your intention to give this spread sheet to the customer, or shop only. I had a lot of pushback when telling customers my labor cost. Give them a final cost and everything was good.
Always amazing that you can have 10 or 100's of thousands of dollars worth of equipment, employees, and rent, utilities etc.
But $75/man hour is outrageous.
Andy, i am in wisconsin. we would be around 13k-15k installed.Add more for a
N.E. Penna. 12,500.00 installed. No counter top. your in business to make money not just handle it. Your labor rate is insane low.
I'm not a cabinet builder but will throw in my two cents as a consumer. Your pricing is way to low. If other shops are bidding this job they are likely to be in the range of what others posting are saying. The last thing you want is to be is thousands below what other shops are bidding. The quality of your work will be questioned. I've heard $50 an hour for labor tossed around by many of the shops I'm in.
Your labor cost are way too low. At $22.50 your guys are costing you more than that. Someone making $18 an hour on average cost you about $26 an hour even if you don't pay any toward their medical insurance. This number does include lost labor at 30%. All overhead should be build into this cost. Overhead is calculated buy ALL cost of the business per year minus the labor cost and material cost divided by the number of man hours per year. This number can easily be calculated with a profit and loss statement from quickbooks for the last year. The hard part is going into quickbooks and getting the number of employee hours worked in the last year. Your labor rate should be somewhere in the $50-$80 range depending on a lot of factors.
If you still feel like you are pricing a job too high then you need to work with your shop on ways to get the labor down. 2.5 hours per box seems high because it doesn't look like you are finishing them. We are running a CNC and building mostly frameless boxes so its hard to compare if you are building face frame and cutting on a regular table saw.
The number one way to make money in a cabinet business is to knowing how to run a business its not knowing how to build cabinets. There are several guys in my shop that know enough about cabinets to easily run a business but they don't know enough about business to try and run one.
My only take away from it is that yes, your hourly rate seems crazy low, but I also didnt take the time to look at all the numbers in the sheet in detail but did notice there is zero dollars in there for finishing. If you are shipping the cabinets sanded/raw to be finished on site (by others) I feel less of an issue with regards to the total but its still a bit low for that job for me and I am operating in the armpit of the universe.
Shipping the cabinets unfinished will easily knock a third off most of our jobs (which we are never lucky enough to have happen). While for me your still low for unfinished cabs if thats the case your not insane low, but still close to cuckoo low but then I have no idea of your process and the details. If you fly them out it may be fine.
Did anyone really look at the sheet in detail? 1/2" pre-fin at 28 a sheet? 3/4" (gotta be raw) at 46/sheet? I havent been able to buy 3/4" shop grade birch or maple for 46 a sheet for ages but we buy domestic. 1/2" dog crap import pre-fin birch (the stuff is like a boomerang) is like mid 30's in quantity for me.
Yeesh. If it werent for the taxes on my shop, commercial property, on the main drag, being $400 a year,... Id be thinking of moving.
So without costs here is my takeoff, there may be some overage on sheets as I didn't fix all my material and finish specs and I didn't check door price
We are 16-21k delivered and installed, all taxes included within 100 miles depending on materials.
Click the link below to download the file included with this post.
Some of my hours are at $0 per hour like cleaning edges and finishing.
$450-680 a lineal foot finished and delivered does NOT include install.
You are too low especially if you are including the countertops. If you're that unsure, take your plans to Home Depot and have them estimate it for you. I guarantee you they'll be 16-20k for stapled together crap with nice faces.
In UK, it costs $16K approx fully installed. Pretty expensive.
I think the $22.50 is not his shop rate but a hard labor number for bidding purposes. Am I correct in this assumption? If so I know folks who bid like this. I would think all your labor costs should be together but at a glance your bid looks low. No Design/engineering costs, we found our engineering costs to be considerable.
We try to mark up everything we touch since we are ultimately than responsible for it. When the client is upset who will they call??
Best of luck
D. John Bishop
FWIW i just recently bid a job of similar size at around 21k, and was told by the client that I (1-man custom shop) actually came in lower than Kraftmaid from local showroom. I'm in central MA.