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Small CMs, how do you charge for this stuff (if at all)?

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Small CMs, how do you charge for this stuff (if at all)? | 29 May, 2008

All of our new board quotes include a charge for programming that's based on the component quantity and mix of SMT vs. TH. It doesn't take into consideration what it takes to reconcile BOM vs. PCB data inconsistencies, so we eat the cost of resolving the customer's mistakes. We can't do it anymore, at least not for everyone (especially repeat offenders).

The difficulty is with quoting and then finding out that we've got hours of work ahead just to correct and confirm. I'm trying to help develop some sensible quoting guidelines that revolve around the "additional charges may apply" angle. Suggestions?

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Small CMs, how do you charge for this stuff (if at all)? | 29 May, 2008

We charge a flat rate that covers Programming, Documentation, and Engineering fees. We arrived at the number by estimating an average time spent on these activities over a period of about a year.

I lifted this method from a company that I used to work for, and, in general, it works. Occasionally, my sales guy will get a little sketchy when it's a very simple job; but, I remind him that the charge is based on an average. Ocasionally, it won't be enough to cover the efforts...but, for the most part, it either covers, or is above and beyond covering the effort required. When it's a simple job, we make a little more on it....when it's a more complex job, we don't make as much, or even lose a bit. At the end of the year, it averages out, and I'm running somewhere around 10% above actual cost.

And, of course, my boss sees the costs as fixed costs, anyway, so, to him, it's 100% profit :)

cheers ..rob

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Small CMs, how do you charge for this stuff (if at all)? | 29 May, 2008

That system certainly has its merits (simplicity!) but we'd like to provide sort of a benefit to our customers that do good work up front and provide a little motivation to cooperate (or find out just how cost competitive we actually are) to everyone else.

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Small CMs, how do you charge for this stuff (if at all)? | 30 May, 2008

Interesting concept. Cost-motivate the customer to give you more info! I like it!!

I'd guess that to get to that point, you'd have to ensure that the customers know the cost-benefits. Maybe a menu of services that includes different price points for different levels of information provided. The customer that provides the most information, thus making the transition easier, pays the least amount of money. The customer providing the least information, thus making the job more difficult, paying more.

I can forsee some issues, however. You'd quote the NRE based on the documentation provided at quote time. That same NRE could be reduced, if the customer provided more information....something that may come up in negotiation. Something along the lines of...why is my NRE so high?? How can I bring it down? Perhaps that's the conversation that you're looking to have with your customers.

We've always published a list of data requirements for new jobs for our customers, and, I'm assuming, you guys do the same. When the questions come up about can you do the work without this info, or that info, that's when the sales guy starts setting the expectation of the NRE charges being related to the amount of info provided.

cheers ..rob

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Small CMs, how do you charge for this stuff (if at all)? | 2 June, 2008

So what happens in this hypothetical model when the customer provides you all the data you asked for and then your programmer finds out that it is the wrong revision data or the BOM is truncated or the centroids are missing refs, etc... Then new data is issued and you have to start all over just to be on the safe side? Then does your quote model account for the time you have to spend explaining to the customer why their NREs are going up and trying to justify higher NREs for "a couple value changes" worth of modifications to the BOM, etc.., etc....? The less customer interaction the better. They just drain your money and time if you give them too many choices. Keep it simple. Give your preferred customers a percentage discount everyonce in a while and tell them you appreciate their professionalism. Whenever a customer provides me with good data..I always make it a point to tell their engineer what a great job he did and how much I appreciate it. Customers like to get their egos stroked just as much if not more than a price break.

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