It looked like it was going to be a good month as the plant had been full, most jobs were running well, and sales was celebrating the win. My belief is that your financials should confirm what you already know – not surprise you. But when the month closed, the owner was staring at a margin number that didn’t reflect the effort everyone had just put in. What happened?
Nobody had really messed up a job. The estimate came back, the numbers went onto the quote, and everyone assumed the estimate was the price. In many shops, that practice is fair game for most jobs – particularly for existing clients and the type of work that you do day in and out. What I’ve seen is that for some companies, many of the estimates are done so that a price can be added to the purchase order – it’s already your job. But for these new jobs, new clients, or new products, this can be a problem.
What Estimating Actually Does
When you estimate a job, you’re building a run plan and establishing the estimated hours by cost center. Once that is done, the estimate produces a target price based on your predetermined cost-plus margins. You feed in the specs, and poof – the math comes out the other end. You need it, your production team needs it, and every job requires it. But estimating math doesn’t know who the customer is, what your capacity looks like next week or next month, or whether this is the kind of work you want more of.
That is where estimating ends and pricing begins.
Read this full article on Printing Impressions, a publication of PRINTING United Alliance, ASI’s strategic partner.
