LumberJocks

Pricing Projects

  • Advertise with us
Blog entry by TheWoodenOyster posted 07-29-2014 02:11 PM 911 reads 3 times favorited 12 comments Add to Favorites Watch

Pricing Projects

I see the topic of pricing work come up over and over again, so I thought I would share my thoughts on the matter. By no means am I a guru of pricing or anything, but I have come up with a decent system that seems to work for me. I am currently a “full time” woodworker, but haven’t been for long. There are many more experienced folks on LJ’s, so take this with a grain of salt.

I start with the same master excel spreadsheet for every project. The spreadsheet has three separate sections – Labor, Materials, and Overhead.

I begin with labor. The first step is to pick an hourly rate for yourself. This can be hard, but I believe that in any for-profit situation (not a favor for a family member or anything like that) your hourly wage rate needs to be at least in the $15 range. For reference, I am in Fort Worth, Texas if you want to know what region I am basing that wage rate off of. I charge more than that now, but on my first few projects, I didn’t. It is really hard picking this rate for yourself because you feel like you are grading your own test. But remember, you are the guy with the tools and the knowledge. They came to you for a reason. It is because you possess skills and knowledge that they don’t have. That is worth money. Try as hard as you can not to short yourself.

The second step of the labor estimate is to painstakingly think through the entire build process, activity by activity. This usually takes me 2 hours or so. When I start thinking through my build sequence, I literally talk through how I am going to build the entire project. This is how the conversation with myself goes, this gets a little schizophrenic, but hang with me:

“Self, first you are going to have to go to the lumberyard. That will take you about 4 hours total, if you include driving and picking through lumber.”
- Punch in 4 hours for material pickup
“Self, after that, you will have to unload at the shop. That’ll take an hour”
- Punch in 1 hour for unloading
“Self, next you will have to do all of the milling. You can probably do that in 8 hours”
“No you can’t, idiot.”
“Ok, 10.”
“Get real, doofus”
“Ok , let’s just go with 12.”
“That’s better”
- Punch in 12 hours for milling

And so on. Now, as you are punching in numbers for hours and thinking through your build process, you should also be considering all of the materials you will be using for each step and putting them over in your material section. At the end of the labor section you should have a good idea not only of how long this is going to take, but also how you are going to do it. Once I am done with labor, I usually work through the build sequence once more, this time really focusing on materials. After the second time through the build process, you should have a very good labor and material estimate. 2 tips for the manhour estimate
1) Don’t skip small stuff like material purchase, clean up, delivery, etc. That stuff adds up. And despite the fact that you don’t feel like you are working when you are doing it, you are.
2) Don’t overestimate your speed. I did that once and got obliterated on a price. Underestimate if you need to. Be realistic.

Overhead is a smaller chunk of the pie, especially for someone who doesn’t do much volume per year. Over the past year, I have done a decent amount and will be claiming my profits on my personal tax forms, so I factor in taxes, profit (10%ish depending), electricity, and gas in this section. I know taxes aren’t something that come up with a lot of you, but if you neglect state and income tax and then end up having to pay them in the end, you will likely lose 30%ish of your revenue, not just your profit. That is why I try to keep that stuff in order and build in a buffer so that when I get a serious negative tax return, I have money in the bank to pay for it (just don’t spend that money on go-karts and stuff ).

At the end, I just add up all labor, material, and overhead. That is my final price. I look at it every time and think it is astronomical. I tell myself that I have to lower my hourly rate. Or I have to do without some of the materials. Anything to bring the price down. But then I realize that despite my own reservations about how good I am and what I am worth, I am still probably better at woodworking than at least 99.5% of the population. And a lot of you likely are too. Not many people know as much about woodworking as us dorks, and we have to use that to our advantage. Our knowledge base, accrued skills, and time are worth something. So don’t screw yourself over.

In my opinion, you HAVE to be systematic when pricing projects. Shooting from the hip works sometimes, but I would advise against it. For example, just doubling or tripling material cost will murder you on a very labor-intensive job with small amounts of wood. If you work through the entire process every time, you are much less likely to get burned.

I’d be happy to send my excel spreadsheet to you for your use, but I don’t think we can attach things onto blog posts. No guarantees that it is a flawless financial document or anything, but it is a decent place to start. PM me if you are interested in that.

Hope you enjoyed the read. Comments and criticism welcome.

-- The Wood Is Your Oyster



12 comments so far

View Todd A. Clippinger's profile

Todd A. Clippinger

8780 posts in 2757 days


#1 posted 07-29-2014 04:56 PM

Brother, you NAILED IT!

-- Todd A. Clippinger, Montana, http://americancraftsmanworkshop.com

View Earlextech's profile

Earlextech

979 posts in 1348 days


#2 posted 07-29-2014 06:06 PM

You left out one important thing – PROFIT!
By adding up your labor, material and overhead you only charge what the project “cost” you. If you don’t add profit you’ll never get ahead.
And I want to say that if you look at your final price and “think it’s astronomical”, again you will cut yourself short. I learned early on that pricing has no reality. Once you have figured out your price, with profit, don’t question it. Move on to presenting your estimate to the customer and work on presenting it so that they feel it is worth it! Keep in mind that you can always drop your price (not something I recommend) but it’s much harder to raise it later.

-- Sam Hamory - The project is never finished until its "finished"!

View TheWoodenOyster's profile

TheWoodenOyster

871 posts in 592 days


#3 posted 07-29-2014 06:29 PM

I do put in profit, just forgot that. Just edited it in.

-- The Wood Is Your Oyster

View Grumpymike's profile

Grumpymike

1085 posts in 973 days


#4 posted 07-29-2014 09:16 PM

OK,
1) figure the exact cost of the material and jot it down
2) Guesstimate how much time will be involved, add this to the material.
3) Figure in a chunk for the overhead (Cost of saws, blades, Shop and supplies etc.)
Now take 1,2,and 3 to give you a nice total … Take that total and multiply by 2.5 and you will have an actual cost of the project.
Kind of like the guy that bought the strawberry plants, watered them, fertilized them, harvested them, bought the jars and all the need canning supplies and ended up with 4 pints of strawberry jam … at the cost of only $17.00 … ... per spoonful.
Now on the serious side (yes I have one), It would be nice to be able to charge $20 – $30 per hour, BUT, do we move as fast as a 25 year old kid? Are we set up to be a production shop that can turn out 50 to 100 units per day??
and the last thing to ask your self, are we known by the public as an artist and have been published??
If you can say no to any of these, then you, like me, are a hobbyist.
Look at the finished piece and price it out as traffic will bare. Yep you will lose out on a few, but look at the fun you had while making your prize.
I have had commissions that I handed the client the bill for the materials and asked for a donation to the Grumpymike retirement fund … and was pleasantly surprised at the value of my labor to them.
So, the bottom line is that there is no formula to price out a piece for the hobbyist.
If you are looking to bid a job on the commercial market, the competition is tough, look at your business plan very closely, then decide if this is the job for you.

-- Grumpy old guy, and lookin' good Doin' it. ... Surprise Az.

View TheWoodenOyster's profile

TheWoodenOyster

871 posts in 592 days


#5 posted 07-29-2014 10:09 PM

Mike,

I think your approach can be a good and appropriate plan for hobbyists, particularly hobbyists who don’t really need to make much money or profit on projects. If you are retired with a shop and a pension/good savings, then your projects will pay for your tools and you might get a cherry on top for an extra goody or two. But in the end, you don’t really need to make money.

If on the other hand, you are doing this to make some sort of living, I think you have to have a formula. If you follow the formula, some people aren’t going to like your prices and you may have to change jobs. But, if you get some people to buy into your furniture and tell their friends, you may be in business. More importantly, you may be making enough to live on. Pricing by looking at what the market will bare is a death wish if you want to make a living out of woodworking. Losing out on some projects isn’t really an option if woodworking is what is feeding your kids. That said, you are very correct in saying pricing things out on the commercial market is difficult. That is why so many of us are hobbyists :). I am currently doing commission work as a sole means of income but will not be doing it for much longer as I have a job lined up. I am happy doing this work for a year or so, but I no doubt would stressed to the max if this was the plan for the rest of my life. Custom woodworking is not an easy road…

-- The Wood Is Your Oyster

View AandCstyle's profile (online now)

AandCstyle

1325 posts in 914 days


#6 posted 07-29-2014 11:41 PM

.

-- Art

View Todd A. Clippinger's profile

Todd A. Clippinger

8780 posts in 2757 days


#7 posted 07-30-2014 02:50 AM

My mind inserted “profit” the first time I read it.

The reality is, the subject of pricing work can get pretty deep and detailed. But you actually cover the principles of it in a nice overview manner pretty well.

-- Todd A. Clippinger, Montana, http://americancraftsmanworkshop.com

View camps764's profile

camps764

794 posts in 1017 days


#8 posted 07-30-2014 11:01 AM

This was a great write-up! My shop is a part-time shop, so take my opinion for what it’s worth, but my process is essentially the same.

I figure out roughly how long it will take me and multiply by my hourly shop rate. I figure my time at $30/hour. Sometimes a project goes faster and I make more than $30, sometimes I screw up and it takes a little longer and I make less. But this is the price point I’ve found that works pretty well. I’ve also been keeping time cards on my projects for a while, so I have a good average of how long certain tasks take me.

Next I figure out what the materials are going to cost me, and then add 10% markup on materials. This usually covers my gas to go get the stuff, get it home, etc.

Add in any overhead. Jim Tolpin has a great book that covers this, and includes a percentage of electricity costs, and disposables like blades, glue, etc.

Add it all up, multiply by NE sales tax – 7%.

The first few times I bid jobs like this I felt bad because my prices came out kind of high. Some clients balked and walked, others smiled and shook my hand. I realized after a few jobs that that clients who want it cheap aren’t the clients that I want. Cheap work ain’t good, and good work ain’t cheap.

Loren and Huff usually chime in on threads like this and always add great perspective.

-- Steve. Visit my website http://www.campbellwoodworking.com

View TheWoodenOyster's profile

TheWoodenOyster

871 posts in 592 days


#9 posted 07-30-2014 12:10 PM

Steve, Thanks for the comments. Sounds like we run a pretty similar “business” when it comes to doing commissions. For a while I was doing this on the side but due to my current work situation, I have sort of ended up doing this full time, but only til January. Then I’ll shift back to weekend warrior mode. $30/hour sounds great to me and I actually just hit that mark for the first time on a bid I sent over this morning.

Taxes are a tricky deal. I talked to my CPA about State and Federal taxes yesterday and understood it all til I got home and looked at my notes. It is hard to get a grasp on that stuff and I plan to continue to work on that part of my accounting a lot more as time goes on.

-- The Wood Is Your Oyster

View jerrells's profile

jerrells

851 posts in 1542 days


#10 posted 07-30-2014 12:35 PM

I agree with what you have posted and all of the comments. Another factor, I think, is what do you build. A nice piece of fine furniture might demand this type of calculation but a set of wooden books ends (just an example) would not. I do (or did) scroll saw work and it always seemed that my first price was too high. I live in Plano, TX so I have about the same market you do. Another factor is where do you sell. Trade/craft shows might be different that advertising/word of mouth sales.

Just a few additional thoughts.

-- Just learning the craft my Lord and Savior Jesus Christ practiced.

View camps764's profile

camps764

794 posts in 1017 days


#11 posted 07-30-2014 08:01 PM

No prob man, just some additional insight. Glad to hear you’re going to hit the 30 mark!

Jerrells – I bet you’re right on the craft show being a different beast than commissioned work. I actually have never had a ton of luck building something and then trying to sell it. Usually the things I build end up being advertisements. Someone sees something I’ve built that I have for sale, and then they email for a custom order…”Hey, I’m not interested in the boot bench, but I DO need a new table, can you do that?” I chalk my house full of non-sold furniture up to building a portfolio.

-- Steve. Visit my website http://www.campbellwoodworking.com

View pashley's profile

pashley

1024 posts in 2375 days


#12 posted 08-01-2014 01:31 PM

My head just about exploded – a spreadsheet to price a project? I guess I’m the rogue (or maybe idiot) here, but that seems like overkill.

My principle concerns when pricing a project is not how many nails, ounces of glue, or watts of electricity I’m going to use – that’s small stuff. Do you count how much your meals, gas and clothing’s cost when you go to a regular job? It’s just part of the game.

I think the critical thing is your time spent doing the project. Do you have to do a custom design? Do you have to hunt for wood? Is it intricate work – a sculpture as opposed to a shipping container?

Materials are a consideration too, of course, but I usually charge upwards of anywhere from 5x materials cost. You can’t base on materials cost too much, because I can have $10 in materials cost for an intricate carving that will take me, say, 40 hours, or $100 in a shipping container that takes me three hours.

In my opinion, price high – depending on the work you do. I don’t know what kind of work you do, but if you do carpentry, you have price competitively, but if you are making furniture, like I do, price high, because the kind of person that wants a custom piece of furniture understands it’s not going to be cheap, and they usually always have extra cash for it.

Just some thoughts…

-- Have a blessed day! http://newmissionworkshop.com

Have your say...

You must be signed in to post the comments.

DISCLAIMER: Any posts on LJ are posted by individuals acting in their own right and do not necessarily reflect the views of LJ. LJ will not be held liable for the actions of any user.

Latest Projects | Latest Blog Entries | Latest Forum Topics

HomeRefurbers.com

Latest Projects | Latest Blog Entries | Latest Forum Topics

GardenTenders.com :: gardening showcase