Yesterday I realized my own broken way of thinking. Here’s a close-to-reality anecdote with hypothetical numbers. Say there’s a component I need to order for work which costs about $8 per part and we need 500 of them. This part typically gets machined out of stainless steel on a CNC. Recently, I bought a CNC machine for 20k. Instead of sending this part out to some other machine shop, I was thinking of giving it a shot myself. Since I’m no expert machinist and this will be my first CNC job, a reduced rate of $5 per part seems appropriate. $5 times 500 is $2500. The raw metal will cost max $300 and tooling around $200 (hopefully not so much, but this will allow for a few broken bits due to naivety). That leaves about $2000 in profit. In my head, this didn’t seem like enough to justify me taking on the job: it’s only about 10% of the purchase price of my machine and it would take a lot of effort - there’s plenty of setup, resetup, and manual threading involved. Upon a cursory review, the amount of work and unknowns - again, not an experienced machinist - makes it seem not worth it, especially when the income is a small percentage of the machine cost… there are other, higher price per part jobs I could possibly do - on the order of $200 per part - but those are much lower volumes, about 1-3 pieces. This is when I recognized a different way of thinking. Instead of considering the profit as a percentage of the machine expense and projecting an ambiguous degree of effort involved in producing 500 parts, I began thinking more in terms of the value of time. If I made about $50/hr in my day job, and these parts will make a profit of $4/part, then I just need to figure a way to make 15 in an hour and I’ve already exceeded my rate by $10/hr! 15 parts doesn’t seem unreasonable at all! If I can get the programming right, I might be able to do close to 25 per hour: $100/hr, double my going rate! I’m pretty sure anyone would work for twice their typical rate if they could.
So, how did my paradigm change? Instead of worrying about the recoup rate of the initial, massive cost of the machine - which has already been paid for - I should pay more attention to the machine’s ability to multiply my hourly rate, increasing the value of my time.
Disclaimer: Again, these are just hypothetical numbers for the sake of easy math.
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