A Winning Shop

How win/loss ratios can keep a laser cutting job shop competitive and profitable

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For laser cutting job shops, staying competitive is essential to running a profitable business. But how do you measure that? How do you know where you sit compared with other job shops in your area that have a similar laser power or similar service offering?

One way to understand your position in the marketplace is to look at your win/loss ratio. The Tempus Tools’ leadership team – which has more than 100 years of combined experience that extends from the shop floor to the formation of entire laser cutting enterprises – has found that a typical win/loss ratio is about 30 to 40 percent.

This means, for every 100 jobs you quote, you win 30 to 40 of them. But it’s important to consider not just how many jobs you win, but how profitable they are to your business. Here are two common mistakes:

  1. Your win/loss ratio is below 30 percent, which indicates that you aren’t winning enough jobs. This can often be because your pricing is too high and is not competitive with other job shops offering similar services.
  2. Your win/loss ratio is above 40 percent, which indicates that you’re winning a lot of jobs, but your pricing may be too low. At the end of the day, the numbers show that it’s becoming a lot of work for very little profit margin.
Providing accurate and consistent costs is an effective way to boost the overall productivity and profitability of laser cutting job shops.

Finding balance

The first thing all laser cutting businesses should consider is what they do best. This is usually what makes the most money and achieves long-term profitability.

For example, think of a laser job shop that specializes in cutting thicker materials. The team has good expertise in this area, can produce high quality jobs and has the right stock on-hand. In this case, a good way for this shop to find balance in the win/loss ratio would be to accept more quotes that involve thicker materials.

Other factors to look out for include:

  • Material pricing. This is a significant cost for any laser cutting business, so it’s crucial for any job shop to maintain the correct margins.
  • Hourly rate. This should be monitored all the time; also, you should put a long-term strategy in place in terms of when that hourly rate can be adjusted in order to win a contract or not. Keep in mind that it can sometimes hurt a business to drop its rate too much just to win a particular job.
  • Losing too many small jobs. This could mean that your job shop’s setup costs are too high, making the business less competitive with the other shops in the area.
  • Losing too many large jobs. This could mean your job shop hasn’t considered the discount others are providing for larger work, due to economies of scale.

One temptation might be to see what other job shops are offering and wonder if it makes sense to lower your prices to the same levels to win the work. This strategy is not advisable because the other shop might be cutting corners on quality or might have an inaccurate quote to begin with.

Nobody wins with a race to the bottom on price – that only favors those with poor quality and no backup. The metal cutting industry as a whole has a responsibility to maintain high standards of quality and service, which benefits both customers and job shops. The goal is to achieve long-term profitability, not to compromise to win a particular job.

Analyzing your win/loss ratio can help you determine where changes need to be made to maximize the efficiency of a laser cutting job shop.

Accurate quoting

One of the most effective ways to win and retain business is to provide accurate and consistent quotes. But job shops use all sorts of methods – from manual spreadsheets to home-grown software – and these don’t always arrive at the right price, which can result in unexpected loss of jobs.

Tempus Tools conducted its own research and asked more than 250 users about their previous quoting methods. Fifty-four percent of users in the survey admitted they used inaccurate quoting methods, which is indicative of the industry more broadly.

One solution is ToolBox by Tempus Tools, a multi-functional laser cutting quoting software provided using a SaaS (Software as a Service) model, allowing laser job shops to achieve accurate and consistent pricing quickly. Thanks to software that simplifies drawing interpretation and calculation, users can get quotes in customers’ hands in no time flat. Professional quote and production documentation literally happens in minutes.

Overall, ToolBox is rules-based, so users can set rules for material cost, hourly rates, secondary processes and other parameters required to create accurate quotes. It’s also been designed so that anyone can use the program, with no CAD or CAM training or software required. Job shops such as Red Horizon Engineering have found this to be a great benefit. Owner Steve Geroski explains.

“ToolBox has been one of the smoothest and most intuitive programs I’ve ever used,” he says. “This meant I could implement it straight away and start quoting for orders while continuing to set up other parts of the job shop.”

Frank Maat, owner of Rolleston Sheetmetal Engineering, adds, “I like that my laser machine operator and I can get an accurate idea of material usage, time, labor and other relevant data for each job – and it greatly reduces the risk of human error because ToolBox is a rules-based program.”

Hurstbourne Forge owner, Jack Swanborough, says, “ToolBox is much better than anything we’ve used before, especially for larger and more complex quotes – and I like that it handles all the folding and secondary processes automatically.”

Watch the video to learn more about Tempus Tools’ ToolBox quoting software.

Consistency and accuracy

If job shops aren’t running a quoting system, most of the time they are just guessing on pricing when they respond to quotes. This guesswork not only takes longer to complete but can cause inaccuracies and inconsistencies that can lose business.

With ToolBox, users can set rules to keep pricing consistent and accurate, removing irritating customer issues. Imagine how it would feel as a customer to receive two different prices for the same job.

For those job shops looking to see how competitive and profitable their business really is, it’s smart to calculate a win/loss ratio to compare profit and loss statements. From there, it makes it easier to see where adjustments need to be made.

To make it even easier, Tempus Tools’ laser cutting quoting experts can help by providing seasoned advice on where minor changes can make a major difference to operations.

Tempus Tools

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