What should I look for in a fabrication shop’s quote history versus actual job hours?
Ask for a sample of past quotes alongside the actual hours and material costs on each job, then compare. Look for jobs that ran well over, and find out why. If the shop regularly underquotes, the profit you see may be thinner than it looks, and the owner’s habits may need changing.
Request quotes and job records for a range of job types and sizes, including the ones that went badly. Ask how hours are tracked, because a shop without time tracking cannot know where it loses money.
Compare each quote with the actual labour, material and outside work. Look at whether overruns are random or cluster around a type of job, a customer or a particular worker. Patterns point to something you can fix; one-off misses are less worrying.
Ask how the owner prices: by feel, by formula, or by what the customer will accept. If the pricing lives in the owner’s head, you would need to learn it quickly. Check how work in progress and materials are handled at the period end, since that affects the reported result. Your accountant can help you read the job costing, and your lawyer should look at any fixed-price contracts still open. Ask about the jobs the shop turned down or lost. A quote that never won is data too, and it shows whether the shop prices above the market or in line with it. Ask the owner how often customers push back on price and how the shop responds. If the owner has been discounting to keep the floor busy, you should know before you take over the job of setting prices.
Key takeaways
- Request quotes next to actual hours and materials for varied jobs.
- Look for patterns in overruns by job type, customer or worker.
- Find out how the owner prices and whether it is written down.
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Sources
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- 01Business Development Bank of CanadaGovernmentHow to conduct due diligence when buying a business
- 02Business Development Bank of CanadaGovernmentWhat is inventory
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