How to Price Your CNC Projects With The Time & Materials Method
Whether you’re an experienced entrepreneur or a first-time side hustler, starting a business to sell your own creations is an exhilarating enterprise. With online marketplaces like eBay and Etsy or tools like the X-Carve and Easel, it’s never been easier to pursue your hobbies and turn what you love into a living.
But one of the first hurdles makers run into is a surprisingly difficult question to answer: how much should I charge for my CNC work?
Whether you’re pricing your finished pieces or providing estimates for custom orders, just like any other aspect of carving, pricing your work takes practice. In this article, we’ll provide some advice on how to get started pricing your pieces using time and materials. We cover market-based pricing in this article.
P = M + ( T * R )
Determining a price at which to sell your work generally depends on three variables: (1) cost of materials (2) time spent on the project and (3) hourly rate. One of the most common methods for determining price incorporates these three factors in the equation:
P = M + ( T * R )
Price of work = cost of materials + (time in hours x hourly rate)
Cost of Materials
If you’re pricing finished work, determining this variable is relatively straightforward: how much did you spend on the raw materials to complete one piece? Note: do not factor in overhead costs, like carving equipment, insurance, lease payment, or other business expenses, just yet. Those come later.
If providing estimates for custom orders, this step gets a bit more complicated because you need to actually… estimate. This is where practice and experience factor in. Sometimes you’ll overshoot the cost and other times your estimate will come up short. In either case, it’s important to keep detailed records of everything you purchase, compare with your estimate and refine for the future.
You also have the option to add markup for the cost of materials. This ensures that you won’t lose money over this variable, although, you run the risk of losing trust with your customers. If they see you’ve charged $100 for the cost of materials for things they can get at Home Depot for $50, they may not be too happy about it. However, this choice is entirely up to the maker.
Predicting time for custom projects can get a bit tricky. When calculating an estimate for a customer, start by breaking down all the tasks you’d need to do in order to complete the project (shopping, designing, carving, finishing, delivery).
Breaking down a project into tasks allows you to more accurately predict the time you’ll need. Keep your chunks of time manageable. If you estimate a task might take longer than several hours, see if you can break it down further.
During your project, keep close track of your time just like the cost of materials. Precision is important here; it will allow you to more accurately replicate your estimates in the future.
If you’re just starting out, try a few practice runs. Come up with a project you’d like to do and estimate how much time you’ll spend on each task. Then, record the actual time spend, compare to your estimate, and refine.
Calculating Hourly Rate
Arguably the toughest part of the equation is calculating your labor rate. The FDMC pricing survey found the typical range of woodworking labor to be between $35-$100 per hour. That’s a pretty big range and generally speaking, the less experienced the woodworker is, the closer their rate will be to the $30 dollar end of the spectrum.
But one way we can narrow down the range is by working backward from your desired income:
A person working 40 hours per week will work about 2000 hours per year
So, multiply an hourly rate by 2000 and you’ll get your annual income (for 30 hours per week, multiply by 1500; for 20 hours per week, multiply by 1000 and so on..)
For example: ($30/hr) x (2000 hrs) = $60,000/year
(hourly rate) x (annual hours) = desired income
Sounds pretty good, huh? But not so fast. We still need to factor in the overhead. Overhead is the total cost of running your business (excluding the materials for each project). This includes everything from the cost of running a website, marketplace fees, workshop rent and utilities, bookkeeping, business insurance, and any other costs your business incurs.
Calculating overhead can be difficult for beginners. Start by creating a list of all your potential expenses. This may take a bit of research and asking around, however, accurately identifying your costs will help you make informed decisions and make the most of your time. You can then factor your yearly overhead costs into your desired income.
(hourly rate) x (annual hours) = desired income + overhead
Let’s say you're going to start selling your CNC projects as a side hustle. You want to earn an extra $10,000 per year and can work 10 hours per week. You’ve estimated your overhead costs to be about $2,000. Fill in the variables and the equation becomes:
(hourly rate) x (500) = $10,000 + $2,000
Hourly rate = $24/hour
Although pricing your work may appear like a daunting task, breaking the process down into the equation and steps listed above will give you concrete steps from which to work. Maintaining detailed records of your estimates, costs, and time will help you to make continual improvements and ensure that you’re not losing money with each project you undertake, allowing you to pursue your passion as a maker.