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Pricing Sanitary Welding

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Pricing Sanitary Welding

Postby Superiorwelding » Wed Mar 15, 2017 7:52 pm

This might be a long shot but it also might turn out to be a great topic and help others. I have been doing sanitary/food grade work for several years now, mostly pans and such, but am not getting into the "big leagues" and getting the opportunity to do other types of work, like sanitary tubing. I really enjoy this type of work and if I keep up the quality work, which they are impressed with so far, there is a lot more work to be had. With that said, I know I am not pricing my jobs high enough. That's right. I keep getting told that my pricing is too low. I normally throw extra time in anything that is food grade for the extra care in handling and cleanup. However, even with that little bit of extra labor my prices are still low. On one hand that is great because I am almost guaranteed to get the work. On the other, I want to receive my fair share and I hope to be full time again and will need the extra income. So the question(s) is this: how do you small business owners charge to perform any type of sanitary welding and fabrication? Is there a premium on this type of work (as far as a higher labor rate to be charged) that I am missing out on? Any details that can be provided will be a great help.

We discussed pricing jobs in episode 6 (Pricing Jobs) of the Welding Tips and Tricks Podcast but I don't believe we touched on sanitary welding. I want to reach out to the community here before I look for help elsewhere.
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Re: Pricing Sanitary Welding

Postby LtBadd » Wed Mar 15, 2017 8:17 pm

Jonathan
I worked for the owner of a small fab/machining shop for 15 years, started out as a welder and finished as manager of the shop. I quoted many jobs, while we didn't do much sanitary I would ask you this, are you required to polish the ID/OD of the weld? I would guess so.

We did a lot of SST tubing for the semi conductor industry but the welds were flanges to tube, the welds were required to be helium leak tight, and the tubes were polished, and the finished part was electropolished, my point is these are premium components. I did listen to the podcast your referring to and smiled as I listen to this being discussed.

As a baseline we would markup the material anywhere from 50 to 100% and shop rate of $75 per hour. Now of course there are still many variable's, are you being asked to quote 1-5 parts or 20 or 50? Sometimes one customer in particular would ask for 1 part which may include CNC machining and welding, I knew it would be very expensive and in the quote I included pricing for 1, 2 and 3-5 to let them see the cost savings, sometimes it worked and they bought more then 1. Even if they didn't I was showing them potential cost savings and that I was looking out for their best interest, building relationships.

Good topic, I look forward to the podcasts, thanks
Richard

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Re: Pricing Sanitary Welding

Postby cj737 » Thu Mar 16, 2017 6:11 am

The Bottom Line is: any project is based upon your time and potentially the consumables. If you are asked to bid work based upon a project then you simply factor in the total time required to do all aspects. Pad the time by a margin in case you encounter issues unforeseen, or you need to re-work. This always equates to your billing rate per hour.

So the only question is really, is your billing rate reflective of your work? If you are under-charging, then perhaps you should fully examine what you earn per hour, the taxes paid on that income, the consumables, gear, machine, insurance, etc and determine if you are actually making a profit. If not, do the math and charge a rate reflective for your satisfaction.

You can not make money going broke. You don't need to get wealthy welding, but there's every reason you should earn a good living by working hard, doing high quality work, and applying a skilled trade.

My best mate charges too little for some types of work. I had to put on paper for him to see all the costs associated with him providing welding service. It was an eye opener for him to say the least. In fact, he was so busy busting his balls to make a living, he couldn't pursue the type of lucrative he's best at because he was so damn busy do the "go broke" jobs.
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Re: Pricing Sanitary Welding

Postby motox » Thu Mar 16, 2017 7:39 am

another consideration is that if you are self employed,
besides SS you will need to factor in enough profit to start
and maintain a retirement fund. early on in my business
my accountant pointed this out and drilled into my head
that you can not work forever.
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Re: Pricing Sanitary Welding

Postby motox » Thu Mar 16, 2017 7:41 am

and as i sit here today, retired, he has my thanks.
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Re: Pricing Sanitary Welding

Postby Superiorwelding » Thu Mar 16, 2017 8:38 am

Thanks for the replies so far guys! I'll just lay it out there, because I don't have anything to hide. I normally mark up material 40% and my shop rate has been $65/hr and portable rate of $75/hr. This falls in line with most companies in my area. When I bid these jobs I am making a profit for sure, for which I am thankful, but when they say that my prices are coming in WAY under the company they were using I have to scratch my head. So far I have been able to bid the jobs accurately as far as my time goes. If I say it will take 4 hours, as an example, I usually get it done quicker than that or right at the 4 hour mark so I am making my shop rate. I even had my wife (who is the CFO) look at my numbers and they all work out for what I have always done. I guess I will look into raising my hourly rate and increase my markup and see where I fall. Worse case they say I am to high.

Another factor, that I just remembered actually, is the main company I am doing some of this work for is non-union but the weld shop I am competing against is union. My guess is they are raking them over the coals on projects. They mentioned to me that when they call them in for a small run of SS piping that needs repaired or fabricated they send 3 or 4 guys out when in reality it only should have taken one, maybe two max. So I imagine they are used to paying an hourly rate times 4. If, and a big if at the moment, I can continue to provide quality work and fair pricing I can literally live off this company for a very long time. That is the goal anyway. The other company has a little "shop" section dedicated to just them because they are in this company so much. I would love to see Superior in there.
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Re: Pricing Sanitary Welding

Postby PeteM » Thu Mar 16, 2017 10:26 am

I would consult with an accountant that can develop a bid formula for you. I've worked in shops where the total cost per employee was greater than even your field rate.

Also, please pardon any misunderstanding if your wife (CFO) is an accountant. Sometimes the delivery, whether tongue in cheek or serious, escapes me over the interwebs.
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Re: Pricing Sanitary Welding

Postby cj737 » Thu Mar 16, 2017 4:43 pm

And be sure to add an hourly rate for your "consumables". ;)
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Re: Pricing Sanitary Welding

Postby Poland308 » Fri Mar 17, 2017 12:35 am

What does the average auto mechanic charge in your area? How about HVAC service people? And the local Doctor? I bet there all in the 80-100$ range. If so that's where you should be. Remember that's average so specialty jobs of risky or rush jobs should all be a premium. I.E towards the high end of the average.
I have more questions than answers

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Re: Pricing Sanitary Welding

Postby Rudy Ray » Sat Mar 18, 2017 3:30 pm

One thing to consider when doing anything food processing is to cover the liability involved. If there is a sanitary issue and they ca point the finger at your work, they will. Sanitary work brings up to double the "going rate" for just this reason.

I have a good working relationship that borderlines personal with a couple of customers. I can ask these customers nearly anything. After completing a job and they say for the 3rd time that my work is too cheap I would ask what range they would typically expect to pay for a job like this one.

Plain and simple, there is a cost to liability.
you build gates and fences $60/hour
you build structural steel $90/hour
you build food process piping $120/hour
you build atomic power plants $180/hour
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