Avoid Underbidding Custom Metal Gate Projects (DIY Guide)
I remember the first large entrance project I took on in my own shop. I had calculated the steel costs down to the penny. I knew exactly how many feet of square tubing I needed. I thought I was being thorough. When the project was finished, I looked at my bank account and realized I had essentially worked for five dollars an hour. I forgot the “invisible” costs. I didn’t account for the three packs of grinding discs I used or the spike in my electricity bill from the TIG welder.
Most of us starting a side business in metalworking come from a hobby background. In a hobby, your time is free and your tools are already paid for. When you move into paid fabrication, those assumptions will sink your business. To stay profitable, you must stop thinking like a builder and start thinking like a shop manager. This means tracking every spark, every minute, and every inch of wire used in your workshop.
Establishing a Realistic Hourly Shop Rate
A shop rate is the total amount of money your workshop must earn per hour to cover all expenses and provide a profit. This is not just your take-home pay; it is the “rent” the business pays to exist.
Setting a shop rate is the foundation of every quote you send. If you just pick a number that sounds good, you are guessing with your future. In the fabrication world, a healthy rate for a small shop or side-hustle usually falls between $65 and $120 per hour. Where you land in that range depends on your local market and your specific overhead.
To find your rate, you must add up every single monthly cost that isn’t metal. This includes your shop rent (or a portion of your mortgage), electricity, insurance, and even the rags you use to wipe down steel. If your monthly overhead is $1,000 and you only have 40 hours a month to work on side projects, your base overhead is already $25 per hour before you even pay yourself or buy a single hinge.
| Expense Category | Monthly Cost (Example) | Hourly Impact (40 hrs/mo) |
|---|---|---|
| Shop Rent/Mortgage Share | $400 | $10.00 |
| Utilities (Power/Heat) | $150 | $3.75 |
| Insurance & Basic Fees | $100 | $2.50 |
| Consumables (General) | $150 | $3.75 |
| Tool Maintenance | $100 | $2.50 |
| Total Base Overhead | $900 | $22.50/hr |
Once you know your base overhead, you add your desired hourly wage. If you want to earn $50 an hour for your skill, your shop rate becomes $72.50. This ensures the shop stays open and you get paid for your expertise.
Calculating Equipment Amortization and Tool ROI
Amortization is the process of spreading the cost of an expensive tool over its useful life. It ensures that your customers are slowly paying for the machinery you use to build their projects.
I often see new fabricators buy a $3,000 multi-process welder and fail to include its cost in their bids. If that welder is expected to last five years, it needs to “earn” a certain amount every hour it is plugged in. If you don’t account for this, you won’t have the money to replace the machine when it eventually dies. This is how shops go out of business—they have plenty of work but no cash to upgrade or repair equipment.
To calculate this, take the purchase price of a tool and divide it by the number of hours you expect to use it before it needs replacement. For a $2,500 cold saw that you use for 10 hours a month over five years (600 hours total), the tool cost is roughly $4.16 per hour.
- Identify your “Big Three” tools (usually the welder, the saw, and the plasma cutter).
- Estimate their lifespan in total working hours.
- Divide the cost by those hours to find the “machine rate.”
- Add this machine rate to your hourly shop rate for jobs that require those specific tools.
By doing this, you turn a major expense into a predictable business cost. It also helps you decide if a new tool is worth the investment. If a new tube bender costs $1,500 but will only save you two hours a year, the payback period is too long for a side-hustle.
Estimating Labor Time for Fabrication Phases
Labor time is the most common place where fabricators lose money because they only estimate the “active” time. They think about the time spent welding but forget about the time spent cleaning the shop or unloading the truck.
When building a custom entrance or garden gate, the work happens in distinct stages. You have the layout and design phase, the cutting and prep phase, the fit-up and tacking phase, the final welding, and the finishing or grinding phase. I have found that for every hour spent welding, there are often two hours spent on prep and finishing.
I recommend using a “multiplier” for your labor estimates. If you think the welding will take four hours, budget at least eight to twelve hours for the total project. This covers the “shop tax”—the time spent moving heavy steel around, changing saw blades, and sweeping up metal shavings.
- Layout: 10% of total time.
- Cutting & Prep: 25% of total time.
- Fit-up & Tacking: 20% of total time.
- Final Welding: 20% of total time.
- Grinding & Cleaning: 25% of total time.
Interestingly, the grinding and cleaning phase is where most beginners underbid. Removing weld splatter and smoothing out joints on a complex scrollwork project can take much longer than the actual assembly. Always track your actual time versus your estimate on a notepad during the build so you can adjust your future quotes.
Tracking the Hidden Costs of Shop Consumables
Consumables are the items that get “used up” during a project, such as welding wire, shielding gas, sanding discs, and drill bits. These are the silent killers of profit because they seem cheap individually but add up quickly.
In my experience, many small shops try to guess a flat fee for consumables, like “twenty dollars for gas and wire.” This is almost always too low. A better way is to apply a “consumable burden” to your material costs. For most steel fabrication, a burden of 10% to 15% of the raw material cost is a safe starting point. If you are doing heavy grinding or using expensive TIG filler rods, that number might climb to 20%.
| Consumable Item | Estimated Use per Gate | Estimated Cost |
|---|---|---|
| Mig Wire (2lb) | 0.5 – 1.0 lb | $4.00 |
| Shielding Gas (C25) | 1/8th of a tank | $12.00 |
| Flap Discs (4.5″) | 3 – 5 discs | $15.00 |
| Cut-off Wheels | 2 – 3 wheels | $6.00 |
| Cleaning Solvent/Rags | Small amount | $3.00 |
| Total Estimated Burden | $40.00 |
If you ignore these costs on five projects, you’ve essentially given away $200 of your profit. I suggest keeping a simple log of how many discs and tanks of gas you go through over a month. Divide that total by the number of projects completed to get a very accurate average for your specific working style.
Managing Raw Steel Sourcing and Markups
Material markup is the percentage you add to the price of the steel you buy before charging the customer. This isn’t just “extra profit”; it covers the time you spend ordering, picking up, and storing the metal.
When you buy steel for a project, you are taking a financial risk. You are using your cash to buy a product that the customer hasn’t paid for yet. You are also using your vehicle and fuel to transport it. A standard industry markup for raw materials in a small shop is 20% to 50%. If a project requires $500 in steel, you should be charging the customer at least $600 to $750 for that material.
Sourcing also plays a role in your profitability. Buying “drops” or off-cuts from a local steel yard can save you a significant amount of money, but it takes more time to find what you need. If you are spending two hours driving across town to save $30 on a piece of tubing, you are losing money. Your time is your most valuable asset.
Building a relationship with a local supplier is better than hunting for the lowest price every single time. Consistent pricing allows you to quote projects faster and with more confidence. Always ask for a “quote sheet” from your supplier every month to stay updated on fluctuating steel prices.
Building a Comprehensive Project Quote
A project quote is a formal document that tells the customer exactly what they are paying for and what you are providing. It should be based on your shop math, not a “gut feeling” of what the customer is willing to pay.
To build a quote, I start with the “Linear Foot” method as a baseline, then adjust for complexity. A simple frame gate might cost $80 per linear foot, while a decorative gate with intricate scrolls might cost $200 per linear foot. However, the linear foot method is only a shortcut. For a side-hustle, you need to be more precise.
- Calculate Material: List every piece of steel, hinge, and latch. Add your 20-50% markup.
- Calculate Consumables: Add your 15% burden based on the material cost.
- Calculate Labor: Multiply your estimated hours (including the prep/finish multiplier) by your shop rate ($65-$120).
- Add Specialty Fees: If the project requires heavy lifting equipment or specialized tooling you don’t own, add those rental costs here.
The final number might surprise you. It might be higher than what you see at a big-box store. That is okay. You are selling a custom, hand-crafted product that is built to a higher standard. If you try to compete with mass-produced prices, you will go out of business.
Post-Project Financial Reconciliation
The most important step in staying profitable happens after the project is delivered. This is the process of looking back at your estimate and comparing it to what actually happened. This is how you “calibrate” your bidding brain.
I keep a simple folder for every project. Inside, I put the receipt for the steel, a note of how many hours I actually worked, and a list of any tools I broke or replaced during the build. If I estimated 10 hours but it took 15, I need to know why. Did the grinding take longer? Did I make a mistake in the layout that required re-cutting?
- Actual Labor vs. Estimated Labor: Did I stay within my time budget?
- Actual Material vs. Estimated Material: Did I have a lot of waste?
- Actual Profit: After all expenses, how much did I actually earn per hour?
If your actual hourly earnings are consistently lower than your shop rate, you have two choices: raise your prices or find a way to work faster. Most of the time, the answer is raising your prices. Small shop owners often fear that higher prices will drive away customers. While it might drive away “bargain hunters,” it will attract customers who value quality and ensure your shop remains a sustainable business.
Frequently Asked Questions
How do I handle customers who say my price is too high? I have found that the best approach is transparency. Explain the quality of the materials you use compared to mass-produced options. Mention the thickness of the steel and the quality of the welds. If they still push back, they are likely not your target customer. It is better to lose a job than to lose money working on one.
Should I charge for the time I spend designing the gate? Yes. Design time is professional labor. Whether you are sketching on paper or using a layout tool, that time is being taken away from other productive work. I usually include a “Design and Layout” fee as a flat line item in the quote.
How do I account for electricity costs in a home shop? Unless you are running a massive CNC plasma table eight hours a day, electricity is usually a small part of your overhead. However, it is not zero. I look at my power bills from a month where I didn’t work in the shop versus a month where I did. The difference is your “energy burden,” which you should include in your base shop rate.
What is a “scrap factor” and should I include it? A scrap factor accounts for the bits of steel you can’t use—the ends of the 20-foot bars. I typically add 10% to my material quantity to cover this. If the customer is paying for the steel, they are paying for the whole bar you had to buy to make their part.
How do I price the delivery and installation? Installation is a separate labor category. It involves travel time, fuel, and often working in less-than-ideal conditions. I charge my full shop rate for travel and installation time, plus a “truck fee” to cover fuel and wear on my vehicle.
What if I make a mistake and the project takes twice as long? This is the “tuition” of running a business. If the mistake was yours, you generally have to eat that cost. You should not charge the customer for your learning curve. However, you must record that extra time so you don’t repeat the mistake on the next bid.
Is it okay to charge a lower rate while I am still learning? You can, but be careful. If you set your rate at $30 an hour, you will attract customers who only want $30-an-hour work. It is very hard to raise prices on existing customers later. It is better to set a fair market rate and perhaps offer a “first-time customer” discount if you feel you need the experience.
How often should I update my shop rate? I review my numbers every six months. If my insurance goes up or the price of welding gas spikes, my shop rate needs to reflect that. In a world of changing costs, a quote you gave a year ago is likely no longer accurate.
How do I track my time without using fancy software? A simple physical logbook or a whiteboard in the shop works perfectly. Write down the time you start and the time you stop. Be honest—don’t stop the clock every time you take a three-minute phone call, but do stop it if you go inside for lunch.
Should I charge more for projects that use stainless steel or aluminum? Absolutely. These materials require more expensive consumables (like pure Argon gas or specialized TIG rods) and often take longer to prep and weld. My consumable burden for stainless steel is usually 25% to 30%, compared to 15% for mild steel.
How do I factor in the cost of shop space if I own my home? Even if your shop is in your garage, it has a value. If you weren’t using it for fabrication, you could use it for storage or parking. I calculate a “rental value” based on the square footage of the shop compared to the local market rate for small industrial spaces. This ensures the business is truly paying for itself.
What is the “low-margin trap”? The low-margin trap is when you take on so many low-paying jobs that you don’t have time to look for or execute high-paying jobs. You are “busy” but not “profitable.” Breaking out of this trap requires the courage to say no to projects that don’t meet your shop rate requirements.
(This article was written by one of our staff writers, Michael Hargrove. Visit our Meet the Team page to learn more about the author and their expertise.)
