CNC Hourly Rate? None – We work by the project!

Now that I’ve spoken to a number of manufacturers who are interested in the CNC offerings I can provide, the one question I keep getting asked is “What’s your hourly rate?” My answer is always “I work by the project, not by the hour”. Let me explain.

Apples to Lemons

I bought a brand new Trotec Speedy 400 flexx (born in Austria) with the intention of providing awesome repeatable results for customers regardless of material or application. Compared to a Chinese machine, I paid through the nose for this honor (well worth it btw) and as a result, I have no interest in an hourly price matching scheme compared to what a guy in his basement with 4 Chinese machines is charging. Why does he need 4 machines verses my 1? He will have problems and needs the other 3 for spare parts… I bought a Trotec which means you buy ONE and it works.

(by the way, these are made-up numbers & I lived in China for two years and am married to a Chinese woman – Chinese machines are the cheapest CNCs out there using within this industry)

Let’s say the Chinese CNC laser guy charges 100$ an hour for his services… why would I charge the same rate if my machine is 5x faster? If I told a customer I’m charging 500$ an hour vs his 100$ an hour, I’d lose the business while in reality, I’m actually more competitive!

It would mean my “hourly rate” compared to him is 20$ an hour if I tried to price-match him… so I can undercut him severely but at 20$ an hour, I’m better off working at McDonalds flipping burgers, I have more costs than him, I invested in a high-quality machine, I don’t put bottom-of-the-barrel materials in my machine, I use more electricity per hour than him, my lenses are worth more than his and the list goes on. The number one mistake people do in this industry is allow the customer to compare hourly rates and not QUALITY rates. Quality means that my results are consistent, quality means that the operator knows what he’s doing and quality means that I make enough money to STAY IN BUSINESS. Oh yeah, if I have a problem, I pick-up the phone no matter what time it is and can talk to a Trotec guru to sort out my issues… Chinese guys is screwed. How much is a deadline worth to you?

The perverse incentive of hourly rates

When I started my 3D animation studio almost 20 years now, I came-in with the perspective of working by the project, customers loved it as x$/hour really tells you NOTHING. I always believed that hourly rates for projects isn’t the way forward for a business, why? Well, think about it. If it takes me longer to do a project who pays? The customer. If I stick an intern on a machine who works twice as slow, who pays for this? The customer. If I like to take coffee breaks, watch TV and talk on the phone while doing my work, who pays? The customer.

If I work by the project, the customer knows EXACTLY what it will cost him, I know EXACTLY what I will make – I’ve never asked anybody in 20 years for “extra” even if I lost money on the deal – and best of all, I’m rewarded for being efficient. If the first time I do a project I’m slow or the results aren’t up to snuff, this learning curve comes out of my pocket, not the customer. I did the same when I designed websites eons ago… it’s such an efficient way to conduct business and to me, it shows that I have absolute confidence in my skills and that of my employees who are getting paid by the hour. It takes a bit longer to work out the job quotes for sure, but everybody is on the same playing field and all the cards are facing up before something starts.