How to Quote a Custom Machine: Cost, Margin and Mark-up

Quoting a one-off machine is the riskiest moment of the whole project. You commit to a price before the last drawing is released, before suppliers have confirmed their lead times, and long before anyone has counted the hours it will take to wire, debug and commission. Get it wrong and the profit you thought you had is gone before the machine ships.

This guide walks through a practical way to price a custom machine: build the cost from the bottom up, add a sensible contingency, choose a margin on purpose, and avoid the mark-up mistake that quietly shrinks profit on almost every quote that uses it.

Step 1: Build the Cost From the Parts List, Not a Lump Sum

A quote that starts from "a machine like the last one was about $50,000" inherits every mistake the last machine made. Start instead from the bill of materials. Even a rough parts list with budget prices is far more reliable than memory, because it forces you to look at what the machine actually contains.

Group the cost into a handful of lines you can defend one by one:

• Bought-in parts - motors, drives, sensors, pneumatics, controllers, guarding, fasteners. Use real supplier quotes for anything expensive or long-lead.
• Machining and fabrication - frame, plates, brackets, custom components, whether made in-house or outsourced.
• Assembly labor - mechanical build, piping and wiring.
• Electrical and software - panel build, PLC and HMI programming, vision setup.
• Commissioning and testing - debugging, factory acceptance test (FAT), training.
• Packing, shipping and installation - crating, freight, travel and on-site days.

If you already keep a parts list for each build, you can copy its total into the first line and refine it as prices come in. Our guide to creating a professional bill of materials covers the columns that make that total trustworthy.

Step 2: Price Labor With Hours and a Real Rate

Labor is where custom machine quotes most often go wrong, because the hours are the hardest thing to estimate and the easiest thing to wish smaller. Estimate hours per task, not for the whole project, and multiply by a rate that includes everything it costs to have that person working: wages, payroll taxes, benefits, and a fair share of the shop's overhead.

For example, 120 hours of assembly at $45 per hour is $5,400, and 60 hours of electrical and software work at $55 per hour is $3,300. Write the hours down on the quote file even if the customer never sees them. After the machine is built, they are what you compare against.

Step 3: Add a Contingency You Can Explain

Something always changes between the quote and the finished machine: a supplier price moves, a part is discontinued, the customer adds a sensor, a design review finds a clash. A contingency is the cost of that uncertainty, and it belongs in the price rather than in hope.

A simple rule of thumb is to scale it with how much is still unknown. A repeat of a proven design with firm supplier prices might carry 3% to 5%. A first-of-its-kind machine with open scope deserves more, and the customer should hear that it is a new design. Whatever you choose, record the percentage so you can look back at whether it was too little or too much.

Step 4: Choose Your Margin on Purpose

This is the step where most small builders lose money without noticing, because margin and mark-up sound alike and are not the same number.

• Margin is your profit as a share of the selling price. A 25% margin means $25 of every $100 you invoice is profit.
• Mark-up is your profit as a share of your cost. A 25% mark-up means you add $25 to every $100 of cost.

The price for a target margin is cost / (1 - margin). The price for a target mark-up is cost x (1 + mark-up). The two give different prices for the same percentage:

Margin you want	Mark-up needed on cost
10%	11.1%
20%	25.0%
25%	33.3%
30%	42.9%
40%	66.7%
50%	100%

A Worked Example

Take a small assembly machine with these costs:

• Bought-in parts: $24,500
• Machining and fabrication: $6,800
• Assembly labor (120 h x $45): $5,400
• Electrical and software (60 h x $55): $3,300

That is $40,000. Add a 5% contingency ($2,000) and the cost to protect is $42,000.

• Price for a 25% margin: $42,000 / 0.75 = $56,000. Profit is $14,000, which is a 33.3% mark-up.
• Price for a 25% mark-up: $42,000 x 1.25 = $52,500. Profit is $10,500, which is only a 20% margin.

Same percentage, a $3,500 difference, and the second quote would probably have been written believing it earned 25%. You can try your own numbers, in 20 currencies, with the free margin and mark-up calculator, or work through the same example in the free cost and quote worksheet.

Step 5: Decide What the Customer Sees

Customers need a clear price and a clear scope. They do not need your costs or your margin, and showing them invites a negotiation about a number that is not the one they are buying. Most builders quote one of three ways:

• One price for the whole machine, with a written scope of supply.
• A few price lines such as machine, installation, training and spare parts.
• Options priced separately so the customer can see what each extra costs.

If you show several lines but want to keep some costs private, spread the hidden costs across the visible lines before applying the margin, so the lines still add up to the total you need.

Step 6: Write the Terms That Protect the Price

A good price can still be undone by loose terms. A short list covers most of it:

• Validity. How long the price holds, for example 30 days, because component costs move.
• Taxes and shipping. State whether the price includes them. Many B2B quotes say prices exclude applicable taxes.
• Payment milestones. A common structure ties payments to the order, shipment and acceptance, so you are not financing the machine.
• Lead time. Quote it from order and drawing approval, not from the quote date.
• Acceptance. What the FAT proves, and what counts as a change request. Our guide to factory acceptance testing shows how to keep this clear.
• Spare parts. Offer a recommended spare parts list as a separate quote, at your standard mark-up. See spare parts management for machinery manufacturers.

Step 7: Close the Loop After the Machine Ships

The most valuable quote you will ever write is the next one, and it improves only if you check the last one. When a project finishes, compare the quoted cost of each line with the actual cost, and note where it moved and why. Over a few machines you will see which of your estimates are reliably low, usually labor and commissioning, and you can correct your rates and contingency instead of repeating the same shortfall. Tracking costs during the build is what makes this comparison possible.

Common Quoting Mistakes

• Using mark-up when you meant margin.
• Quoting from a similar machine instead of the current parts list.
• Estimating hours for the whole job in one number.
• Leaving commissioning, FAT, crating and travel out of the cost.
• No contingency, or one that nobody can explain.
• No validity date, so an old price comes back after parts have risen.
• Never comparing the quote with what the machine really cost.

Where Software Helps

Everything above can be done in a spreadsheet, and for a first quote it often should be. The trouble starts when the cost lives in one file, the parts list in another and the quote in a third, and a change to a supplier price has to be copied into all of them.

In AssembleFlow, the Project Costs tab builds up actual cost from your purchase orders and from priced parts you have not ordered yet. The Quotation tab starts from that grand total (actual or budget), lets you add your own cost lines such as installation or travel, applies your margin as a share of the selling price and shows the customer only the lines you choose. Hidden lines have their cost spread across the visible ones, and your costs and margin never appear on the customer's document. Each quotation gets its own number, and you can export it as a PDF or send it by email. You can see how it works in the product tour, with no sign-up.

Frequently Asked Questions

Free tools: the Excel templates (BOM, PO tracker, cost and quote worksheet), the margin calculator and a product tour need no sign-up.