Many think there’s something magical about computerized pricing. There’s not. We estimated long before computers were invented. So, don’t clog up your system by making it too complex. In fact, increasing the turnaround time of the estimates will do more in closing the sale than having the perfect price. And our objective should be to get the sale.
Estimates in the Olden Days
In the olden days, estimators created tables or spreadsheets of specific charges. That’s when spreadsheets were done in pencil on columnar paper. Take folding. They calculated the two types of charges: a set-up or “start” charge and a “running” or per thousand (or per piece) charge. Then they calculated individual prices for 100, 1000, 50,000 or whatever quantity points they desired and put it into a table (spreadsheet).
Once they created the various spreadsheets, then they “picked” a price for each function (line item) from their tables, added them up, and had a finished price.
Personal computers and the advent of spreadsheet programs (remember Lotus 1-2-3, VisiCalc and Microsoft Multiplan) allowed streamlining the function.
Then came various estimating programs such as the forerunner to today’s EFI PrintSmith and Printer’s Plan. In these programs, we set up a “press definition” or something similar that basically are “setup or start” charges and “running” or per piece charges.
Most systems incorporate an hourly or budget hour rate. Budget hour rates essentially convert the annual budget for wages and overhead to a cost per hour. Then take the time required (based on production standards), multiply by the budget hour rate and then add for direct materials and one has the standard “cost” of a job. Mark that “cost” up appropriately and you have your retail price.
Yes, in the estimating system there are numerous tweaks that can be applied to vary the price up or down, but essentially, we are “picking” the price by line item from a formula (spreadsheet) deep inside the computer. And that’s based on two factors: a start or setup charge and a running charge. Same thing we did in the olden days.
Estimates by Computer Aren’t Necessarily Faster
Now, some say that estimating is faster using a computerized system. Well, I’ve seen some who could estimate with a pencil and an adding machine far faster. Nonetheless, initial estimating speed isn’t the greatest value of using a computerized system.
The greatest value typically is loosening the choke-hold estimating has on our throughput. Estimates don’t have to sit on the owner’s desk for days or be under the purview of the professional estimator. CSRs can be taught to run most systems and return the price.
Yeah, butta, some jobs are much more complex and have a high dollar value. Okay, put some parameters on review. Have the less experienced person create the estimate, set up dollar or complexity parameters and then have someone review (like the owner). Don’t just pile the complex estimates up on the owner’s desk for them to get around to doing.
The biggest pickup in estimating speed is done downstream when you pull a job to be reprinted. Pull it up, tweak it, update to current values and bam, you have a new estimate or work order. That not only saves time but allows for more accurate estimates as we’re less apt to leave out a step. It also allows many people in a shop to create prices for customers who otherwise wouldn’t know the budget hour rate or production standards and thus increase speed.
Here’s the Secret to Estimates
Now here’s a secret. A very large company I worked with, who was apt to do a lot of market research, found that the speed of the estimate had as much to do with whether we got the job or not as the actual price.
Right. On straight-forward jobs they found that prices that could be returned the same day closed at a high rate (nearly 80%). But when the estimate hung over until the next day, their closing rate dropped precipitously (around 20%).
So, speed up your estimating time. Have your estimating program available on a network and then have more people trained on using it.
After all, we’re still just picking a number (price) from a spreadsheet. And getting the job is the objective. So, speed up the process to close more sales.
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Message Tom Crouser at email@example.com for more information on how CPrint International can be of help to you in your business. No cost or obligation.