Pricing: Pricing by the Numbers
For 20 years Wall/Goldfinger was never quite sure it was pricing its office furniture profitably until after the fact. Say good-bye to all that
Problem: Pricing one-of-a-kind jobs
Solution: Database software that breaks jobs into discrete components and also handles scheduling
Payoff: Faster price quoting and more stable profits
For a business that creates a custom product, good estimates make or break profits. Wall/Goldfinger, a Northfield, Vt., manufacturer of contract office furniture, chipped away slowly at that challenge for almost 20 years before computerizing the estimation process in 1990. Now, with an inexpensive off-the-shelf database, the $3-million company can accurately price each job by forecasting labor expenses, projecting materials costs, and monitoring the manufacturing process to ensure that it sticks to its plan.
"We didn't want to go out and buy something complicated that requires lots of programming," says chief financial officer David Haber. He was introduced to computers with TimeLine (from Symantec, 800-441-7234; $699), a simple job-scheduling software product. Before that, he says, "I was doing the scheduling by hand."
Once he was comfortable with TimeLine, Haber started fiddling with a copy of Q&A, a database software package also made by Symantec ($399). The company then set up three databases in Q&A: One contains the prices of the different lumbers and veneers the company uses. The second lists prices of hardware. The third contains procedures lists -- that is, projects the company has done. Haber entered all the work and the costs the company had tracked on previous jobs and separated each job into segments such as veneering, finishing, cutting, and inlaying. "There's a section of the program where I can add new procedures," he says. "But we've done so many projects that I have almost every possible procedure already entered." For a custom quote, he simply strings together the procedures that will create the customer's product. The computer adds up the total cost.
"I call up the 'estimates' screen, with fields on the page that pull information out of the other two databases," he explains. Haber can type in a description of a job, and the computer will list all the necessary procedures involved in executing that job. Then he'll type in the amount of material needed (after years of experience, he can calculate that quickly in his head), and the computer will pull the total price out of the materials database. Next it totals the number of hours the job will take, multiplies that by the billing rate, throws in the company's markup, and voil√ -- a price is born. It took about half a day to program the database with simple formulas for creating quotes, and several months to enter the procedures lists, mainly because Haber had to create those as he went along, soliciting feedback from the woodworkers.
Before last year the company had no local area network (LAN) to speak of, so Haber just ran the calculations on his own PC and then printed out worksheets for the other nine managers. Last year Wall/Goldfinger added an 11-computer LAN, so all managers can gain access to Q&A and TimeLine from their own desks.
When an estimate is accepted and the project assigned, the two project managers log into Q&A to track the work in progress. They follow the project budget, checking the materials list and the quoted time for each section of the job. That way they can ferret out and address problems early in the process, as soon as time or materials costs begin to run over. The bookkeeper also logs in, using the information to track accounts payable.
This year the more efficient price-quote process has allowed the company to triple its sales. Haber wrote $10 million in quotes last year. "Before this system, I was doing $3 million to $4 million, and I had to write it all out by hand." Haber says the new system enables him to churn out more quotes during dips in the "win ratio," or the percentage of jobs actually won out of all the bids, which ranges from 10% to 25%.
Generating more quotes means Wall/Goldfinger has been able to sign contracts with more sales reps, widening the company's national presence. And those reps can negotiate faster with customers, now that Haber can adjust quotes within seconds whenever a salesperson calls from a customer's office with a question like, "What if we change the veneer to oak?" Company profit margins are still slim (hovering at about 4%), says Haber, but Wall/Goldfinger has paid off most of its debt and has increased salaries and benefits each year over the past eight years, adding dental coverage last year. "Financially," says Haber, "we're much better off." -- Phaedra Hise