Quoting Job Shop Work: Charge for Custom Tooling?

We had a viewer ask if it's OK to add in the cost of tooling he did not already own. It's a common situation for all shop owners and in this video, we talk about some of the ways we think about quoting jobs, adding in costs for custom tooling, other one-off costs, and creative ways to think about maximizing your shop profitabilit!
00:00 Intro
01:07 Starting up your shop
01:45 Take it to the EXTREME
02:30 What is it worth to customer?
04:10 Storing Custom Tools is hard!
05:50 Tool Extensions
06:41 Residual Value
08:20 Do you NEED the custom tool?
10:20 What are you SELLING?
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Links for this video
How We Quote: • How I Quote CNC Machin...
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[@Brentiannoli]

In aerospace and defense work it is very common to include pretty steep non-recurring engineering (NRE) fees to cover initial programming, fixture design/manufacture and tooling. This has the added benefit of incentivising customers to reorder a part from you instead of incurring another NRE if they would go to another supplier.

[@danohpsp]

I totally agree with charging NRE. Using profits to buy fixturing and initial consumables makes no sense to me.

[@MachinistDom]

If I have a longer running job, I'll add a tooling consumable charge. Sandvik have a good tool life estimator so you can see how many features you'll get from an insert. Often jobbing work will completely use up inserts. I had this recently and spent several $100 in tooling on a job. I listed it as a separate item so the customer could see where the cost went.

[@GrumpyMachinist]

We're in the business to make money. I charge for almost all tooling. About the only thing I don't charge for is HSS drills and spot drills under 1/2 diameter. If I have to order it to complete the job, I'm charging. My advice is don't fall in the trap of gifting tooling charges because customers will start to expect it. *edit* If I'm going to adjust the numbers to get a price down I typically go to shop rate first but keep in mind we aren't quoting at a bare minimum shop rate. We have a lot of wiggle room. I don't alter tooling costs in the quote file because I like to keep tooling records for book keeping, reference, and in case the work comes back.

[@poetac15]

I’m curious if you typically work with harder materials or if you apply this to to aluminum/plastic as well? I’ve found it hard to justify including tooling costs for aluminum jobs considering the tools last for months or longer at prototype volumes.

[@GrumpyMachinist]

​@@poetac15 We're batch production. In your situation it would depend on whats in the drawer and how many spare we have. Even if I was eating the cost I would still document tooling in my quote file and it's mainly for our bookkeeper/purchasing agent.

[@AdamEarl2]

There is another option for special tooling.. give a price including the special tool, and a lower price if the feature is standardized. If it saves you $50 a part to do it standard, offer a $35 savings instead. Customers love optimizing their designs as well.

[@fryer05maverick31]

Cheap is not good - Good is not cheap!

[@automan1223]

What a beautiful workspace. Every machine you could want. Money well spent. I have boxes full of tools that were bought for a one of job hoping that I would see the same job again. Sometimes I guessed right & made my investment back. Sometimes I have never seen that job again.

[@EVOMAN14]

I used to watch you in the early days. Started again recently. Its great to see how well you have done John. Good job 👌🏻

[@johnranalletta9249]

Thanks, John. Great advice, esp at end. When a client said, "That seems high", I'd respond, "Don't forget. You're getting me as well." I never responded to RFPs. If I couldn't talk to a client to help them define and quantity their need(s), an RFP = "We want the lowest bidder".

[@northernmetalworker]

I think I understand what is being said here. Job shop machining is a business based on providing a service, not a product. And as such it is better to look at tooling as something that may are may not be profitable to purchase, which then influences whether you will take on the job in the first place. Great words of wisdom!

[@AgentWest]

To get around the "i don't have the right tool" problem i learned to grind some basic ones. Since my work is all soft materials i can even get away with modifying a regular router wood bit, especially if it is for just one job/part. In my case it was about understanding what customers wanted and showing a sample that basically states "no, you don't need 0.01mm accuracy for this specific thing, 0.1 is plenty". Samples work wonders since they allow the customer to physically examine fit/finish of the part instead of having to imagine it.

[@fryer05maverick31]

I've been doing a brass job and your correct about chip $$ helping out on winning the job.

[@jakobhalskov]

This is so useful no matter what kind of business you are into. Thanks for sharing your thoughts and experience! 🙏🏻

[@burningdieselproduction5498]

Thanks for such content John!

[@piccilos]

From a manufacturer point of view, we have bought machine shops tools that they used for us then returned when the job was finished. This never bothered us since it was needed and will be needed again if we ever moved to a machine shop. So if it is something special, I wouldn't feel bad about asking for this.

[@joecool509]

you are very correct. I do a lot of business with vendors and people will pay more for an accurate schedule and updates then cheapest and you get it when you get it... it is a cog in the wheel and when you dont know when you will get it and they are difficult it causes so many problems. great topic and thanks for sharing!

[@covertmoose8384]

I've been in the same boat but with welding. Definitely clears up some questions I've had for a while.

[@synio2492]

Great video, thanks for creating and sharing your knowledge.

[@user-vn6hi2bi3g]

I would always try to provide solutions that did not require extra expenses on my part and when extras are unadvoidable I provide two quotes for jobs that had extra costs included in the quote and the second for re-orders that did not have these extra costs, sometimes I got the second order right away. My customers always knew where they stood with respect to their cost and this always served both parties well. Ray Stormont

[@prodesign8189]

Great vid. Thanks for the guidance and interesting points of view. I am all job shop work for a few good customers local to where I am and I totally related to this video. Sometimes its very organic as far as quoting for me, but the customers love that I can provide quick and with some really decent quality. (and to boot, I'm still boot strappin it with 2 tormachs!) Doing well thanks to you brother!

[@racefan1445]

I just had a job where there was a DIN spec called out that you could have bought a special tool to create. We were able to choose an of the shelf tool and program the feature. This was much cheaper.

[@burningdieselproduction5498]

Wow, took the honor of smashing that first like!

[@jacobhargiss3839]

I do custom 3d printing. when we get really out of the box situations that require hardware modification, we definitely charge for that.

[@CJ-ty8sv]

11:18 QTC principle, Quality, Time, Cost, Pick which two you want because you cant have all three.

[@parnellpollioni]

Any tool that is not a standard off-the-shelf endmill .125 .01R ect is 100% charged to the job that requires the tool. I use a lot of dovetail O ring groove tools and I actually include two of them with every job.

[@emilgabor88]

I make jobshop work for a factory next to me. 90% of the work is from them and in communicat good whit them and I have a open relationship whit te prices and tooling. if is a custom cutter for a special job I will tax it 100% to the costumer, because in the beginning of my shop i didn’t tax the custom tooling at all and now have hundreds of special tools that I probably wouldn’t use ever anymore… basically I have just lost money at the start

[@helicopterdriver]

Figure exactly what it is going to cost to do the job and double it and you may make money. If they come back you will make even more. Satisfying the customer is 99% of your goal. They have no idea what things cost, they just want it done well and on time. Do all of that and you will make money. I've quoted jobs that many people I worked with claimed I was raping the customer, but we made a handsome profit and they were happy. Tooling is a write off for most jobs but you still have to make the work happen and go out the door. Like you said, setup, programming and tooling is a part of it regardless even if if you already own the tools. They break and they wear out. Unavoidable in a production environment. We won a lot of large contracts just doing that.

[@Poncho-dd2pl]

Where do you get jobs from ? Is there a website where people bid on jobs?

[@stevedevney7322]

What do most shops use for equipment cost per hour. I always thought a 100,000 machine should generate 33-75 per hour plus people tooling materials etc. But that is a wide range.

[@HuskyMachining]

Wait?! pull studs for your beast of a machine is $50 -$70 each... damn

[@JackFilmTube]

First

[@burningdieselproduction5498]

I’ll get you next time! Ha ha ha

[@calvin2855]

🙈 p♥r♥o♥m♥o♥s♥m

[@Renda238]

What are the small grey tool boxes on the bench? assuming tool holders. brand/link?

[@chrisyboy666]

You should be making your own tool holders and pull studs @ this point in your journey it’s criminal and lazy your not….you will never be making proper profit on every job waisting Money paying OEM prices and your handicapping and stunting your future growth…. you should have a tool a cutter grinder in your shop as well…

[@LarrysMachineShop]

Carlos , maybe don't try tell John how to manage his shop. he is very successful and making pull studs is not as easy as it sounds. Same for tool holders.

[@GrumpyMachinist]

Um, machines are more profitable when they are producing parts to sell rather than producing in house work.

[@GetBlitzified]

This is so funny it has to be satire.

[@chrisyboy666]

@@LarrysMachineShop johns obviously a very clever entrepreneur but not a great machinist his words as for a successful business 5 machines after 10 plus year is hardly successful and any business this far down the line should be making their own tool holders if they can’t justify the outlay in new….there made out of steel and what does a Cnc lathe and mill do cut steel only thing he can’t do is grind but he could hard turn them saying that on a Haas yeah he might struggle

[@harrisonottens]

I can't tell if this is a joke or not

[@robotchickenworkshop]

You all did a custom fixture plate for my @avidcnc and it’s great!