I don't think pwalter was suggesting NOT to work off COGs (actually COMs), I think he was suggesting the COMs you used was too high.
I don't necessarily agree, but ...
Yep.
Jim, here is my thought process. There are folks out there that might disagree. There are those that possibly have a better approach. But this is ours and it works for us.
If I was asked to bid that job it's going to come down to a few things.
1. What are my costs going to be.
2. How much money can I make.
That's it. I look at your bid of a 30% COG/MS on a 50 piece job and think that there is too much margin there. Now, I'm a capitalist through and through, so please don't read that right. I just know my market and my competitors. When a quote request comes through I've got a pretty good idea of who I'm bidding against. Being new, you might not. It's in your best interests to find out. Even if you have to get some quotes on your own to see how aggressive your competition can be (I strongly recommend this and do it regularly).
With the folks who are in my bidding pool I know I've got one shop that approaches it from the "I'm slow so I'll be aggressive" perspective. When they are looking at it from that perspective, I'm going to lose most times because they will sometimes bid a job with just a 10% margin. Crazy. But they've been around for 7 years even with that mentality so I'm sure they are set in their ways.
The other folks who normally are in the pool are a few shops who usually look at it pretty aggressively but not in a crazy way. So to be competitive I have to either compete or pass. I choose to compete.
On a job like what you quoted, if I were to average your costs to $100 for sake of math. You were going to get 50 pieces. Or $5000. Your cost of materials (right, not labor, not CC fees, etc?) was 30%. So you would have had material costs of $1500. Leaving you $3,500 gross profit. If it takes you 50 minutes per piece and you have an employee cost (burden and all) of $16 per hour then you have a total of 41.6 hours of work x $16 = $665.60 in employee costs to do this job. Less if it's you.
So gross profit of $3,500 - $665.60 leaves $2,834.50 in beer money. Feeling pretty good, right? But here is where the rubber meets the road. Since you didn't get the job (and likely put a perception in the mind of this customer that you are pricey so possibly you turned them off of your shop forever) you have to ask yourself this question. Would you have been happy to take that job if instead of $2800 you made $2k? What about $1500? At what point is it worth it to you? Everyone focuses on % and time. I look at the money and make a decision.
In our shop we would partner with one or more of our vendors to try and get costs down, work to be efficient, work to fix the production into our normal workflow and go from there. Then I deposit the check in the bank and move on to the next order.
Not telling you how to do your pricing, just telling you how we look at it. Others will cry that it's horrible, they disagree, they agree, they do it differently, they figure this or that in, etc. Good for them. This is good for me. You need to find what's good for you.
Rick