More Accurate Estimating Standards Lead to Greater Profits

By Mark Porter

Often standards that are used in post press industry estimating are developed for the sake of expediency. It is vital that customers get their quotes quickly and therefore in order to meet that need owners and estimators have taken their knowledge and condensed it into simplier factors.

This is seen in many processes when standards such as $3 per M are applied or if the cost for running the process includes material. An example is laminating where say the cost of $125 per M includes the laminate.

This may get the price to your customer quickly but does it maximize your chances of making money on the job or minimize your risk of losing the job because your price is too high.

If your method of estimating does not allow you to take into account different conditions and materials then you maybe getting the pricing to your customer quickly but you are greatly reducing your chances of maximizing your profits.

Let's look at a couple of examples to see how changes in conditions or materials can dramatically change the price of a quote.

In a previous issue we talked about estimating cutting and we used the example of cutting sheets of 60lb and 100lb paper.

Lets say that we had settled on a price of $12 per M sheets cut because we didn't have time to look up calipers, calculates sheets per lift, number of cuts etc. On our 5000 sheets cut 2 out we would have gotten 5 x $12 per M or $60. As per our example though the 60lb stock would have cacluated to $50 and the 100lb stock would have been $75. This is a $10 to $15 dollar swing on 5000 or a $100 to $150 swing on 50000. The variances get greater with thicker and thinner stocks and based on the number of peces cut out.

Lets look at a laminating example where material is included in the running price. On a 10000 sheet run of a 19x25 sheet at $125 per M we would calculate $1250.

But the laminate material could vary from 1.2mil Gloss Polyproplene at $.065 per MSI to 1.2mil Matte Polyester at $.300 per MSI. The cost difference is significant.

If we say the labor cost is 10000 shts / 2000 speed = 5 hours x $100 / hr that is $500 in labor plus our material cost for 1.2mil gloss polyproplene is $309 (19x25x10000/1000x$.065) and the 1.2mil matte polyester is $1425 (19x25x10000/1000x$.300).

This now gives us a swing of $1250 - $ 809(500+309) = $441 limiting our chance to get the job or $1250 - $1925(500+1425) = $675 in loss on the job.

The more accurate your standards the better your chances are of maximizing profitability. If your estimating method compromises profits for the sake of speed you should examine your estimating methods.

CHARGEABLE EXTRAS A SIGNIFICANT REVENUE STREAM

By Mark Porter

When was the last time you produced a job without any changes ? Are you capturing the revenues for these legitimate extra charges or are they falling through the cracks ?. If not more revenue then at least avoid costs. If a job is changed during production and you did not collect the extra revenue for the change then you propably incurred more cost.

Finishers/Binderies provide quotes for customers and customers submit orders. The normal process is to ensure that the job submited and the quote provided are significantly similar that you can approve the production of the job. Once that approval has been given any customer driven changes to the order should be chargable. But how do you track these changes and bill your customer so that they feel compelled to pay but more importantly allow you to collect the charges without damaging your relationship with that customer.

You must follow a procedure to record all changes to jobs, chargable and non chargable, to ensure that that nothing falls between the cracks and is forgotten. But just recording changes will not allow you to collect your legitimate extra charges. The changes must be documented as to date, time, employee and reason the changes were made to provide the maximum support for your claims.

Documentation is not enough. The changes must be communicated to the customer at the time they are requested. The changes must be recorded as having been submited in writing to the customer, warned that they were chargable and that a price was quoted.

When the job is completed a full listing of all changes should be supplied to your employee in charge of invoicing. They can then decide which charges should be accepted, changed or deleted . The invoicing decisions are determined and the invoice is submited to your customer. If the customer questions these extra charges you can support your claims by providing the customer with the who, what where, why and costs details.

Hopefully your customer will start to provide you with better information when the jobs are first submited. Either way your company is in a better position because you are either collecting legitimate extra charges or avoiding the additional costs of providing those changes without charging for them

Estimating-Valuable Numbers to Your Customers and You !

By Mark Porter

When your customers require a quote you take the time to calculate an estimate that they can use to make decisions regarding their company but you are also generating numbers that can be valuable to your company.

Everytime you generate an estimate you can be tracking numbers that can provide your own company with valuable information that can predict future work and predict future trends.

By reviewing and analyzing your estimates you can find desirable jobs, future business, changes in market conditions and monitor your customer base.

Every week you should review the estimates that you generated. Look for desirable jobs that you can follow-up. Whether it is a quantity level or a price level - flag these jobs and follow up these estimates to ensure you don't lose the order for a bad reason.All companies have a won\loss ratio for the estimates they do. If you monitor the number of estimates you do each week it can be a predictor of how busy you will be in the future.

All companies specialize in and perform different types of work at different levels of success. Tracking estimates each week by job type can further strengthen your predictions of production levels in the future. If 80% of your estimates last week were for work you typically don't get - you may have a production slow down in the near future if you don't increase your sales effort now.

Won / Loss ratios should be monitored for Customers, Job Types and Sales people. Tracking your won / loss statistics can provide important information such as who are your best customers. Tracking won/loss by Job Type can indicate where your company excels. A shrinking won / loss ratio for a product you typically do well on could indicate a competitor is reducing their pricing.

Won / Loss ratios by Salesperson can indicate if the salerep is targeting their efforts on the type of work your company does well.

Tracking estimate activity can not only tell you who is giving you estimates but also who is not. This is especially true for your good customers. Monitoring information such as no recent estimates can indicate if a customer is starting to shift work to another finisher / binder and provide you time to try to correct the situation. This is especially true of your good customers. 80% of revenue comes from 20% of customers - you must stay on top of these good customers.

Finally ask questions like when will this job be awarded and then track estimates each day. Find the desirable estimates each day and stay on top of these quotes. Don't lose highly valuable jobs because the printer didn't think you had the capabilities or capacity or simply lost your quote behind his desk