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My path to professional woodworking #3: So just what should I charge for this thing I'm building?

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Blog entry by hangdog posted 1653 days ago 961 reads 0 times favorited 5 comments Add to Favorites Watch
« Part 2: Pottery Barnyard Part 3 of My path to professional woodworking series no next part

The last post logically progresses to the above question. Ironically The Wood Whisperer has helped me out again with this new posting on his site:

http://thewoodwhisperer.com/pricing-your-work/

He shares his technique with the disclaimer that he his not a business consultant and you can certainly consider the same for me. Anyway, the method that he shares is similar to mine and has worked well in the few paying projects I’ve done thus far. I’m pretty handy with Sketchup as well as the Cutlist plugin so I enjoy sketching up ideas on there. It also forces me to consider the construction methods like deciding what kind of joinery, choosing final dimensions to minimize waste (e.g. like all the parts being cut from one sheet of plywood), etc. I get prices from my supplier and total them up and tack on 10% to cover time and gas spent shopping (more on this in a minute).

From there I make a time sheet. I cut my teeth as a flat-rate mechanic and got very accustomed to jobs being broken down into tenths of an hour so that’s what I do. I make an Excel spreadsheet (I’m an Excel geek) with a column for tasks, one for time (with the number setting to fractions in tenths), and a column for the time multiplied by my hourly rate. Then I fill it out. It might say “mill stock to S4S” and the next column says 8/10 and then the next column figures out the price. When I get the total I may tweak it a bit to get the amount to where I feel comfortable. Marc calls that the “common sense adjustment.” Then I make another spread sheet with the materials and I usually throw in a certain amount for misc. which would cover screws, sandpaper, varnish, etc. Then I present this to the customer so they can see exactly why the project costs what it does. Also, if I email it to them I convert it to a pdf and make it read-only so that it can’t be easily altered. I doubt that any clientele I’ve dealt with thus far would do that but it’s a good habit. I also title it something like “Smith Toybox Quote – rev. A” as I figure the price may move around a bit depend on customer’s wants and it’s a good habit to keep a history of the revisions in case there’s disagreement come payday. Lastly, if the customer wants a price break I send them shopping. I don’t do it for fine hardwood but if the project needs some box store plywood or they want a particular paint color or hardware I let them get it to save the 10% markup that I charge. Plus I get ick of going to HD all the time. I haven’t needed this trick yet but it’s in my pocket if needed. Once I go through the work of designing and figuring a quote I really want to make the deal happen, even if my profit goes down a bit on the job. Otherwise, if there’s no deal my profit goes down a lot since I did a bunch of work with no payoff. Plus I think everyone feels better when they end up with a price that’s less than the original quote so I always try to stay flexible and keep it alive while avoiding the classic used care salesman question “so Mr. Smith, what will it take for you to buy a new bookshelf today.”

Interestingly this method has proven my guessing to be pretty accurate. I start the process thinking “this oughta cost about $250.” Then I’ll do the process and it will end up pretty close to that. Some may say that makes it a waste of time to do the estimating process but it still gives the customer an explanation of what they’re paying for and it get’s my brain thinking about the specific needs for the project. This also keeps me in check by preventing me from just starting out willy-nilly which I am notorious for doing with all things, not just woodworking.

Lastly, if you read the TWW story then be sure to check out the comments. There’s plenty more info in there. One reader put up a link to this interesting site:

http://bridgewooddesign.com/estimator/index.htm

I clicked through it a little and I’ll probably try it out for my next quote by comparing it to my usual method. It seems pretty similar but it does a lot of the thinking for you so you’re less likely to forget something. Let me know if any of you have tried it.

Cheers until next time,
Matt

-- Don't just talk about it, be about it.



5 comments so far

View bluchz's profile

bluchz

187 posts in 1975 days


#1 posted 1653 days ago

I think any process that can be explained in any way is better than ” it costs this much”. I have been having to deal with that a little, it stinks to say it costs this much and then have to justify it after. i have seen this bite people in the rear end!

-- flash=250,100]http://www.brickshelf.com/gallery/sprxtrerme/BANNERS/thornax.swf[/flash]

View woody57's profile

woody57

645 posts in 2028 days


#2 posted 1653 days ago

bentlyj is right. You’ve got to find out what the product is worth. I have a good friend who started up a cabinet shop a few years ago. He went around to several cabinet shops in his area posing as a client. He got them all to price the same set of cabinets for a house he was supposedly building. This gave him a good idea of what to charge.

Once you find out what a fair price is then you have to figure out how to make it at a profit. You might have to change some of your work methods to take some time out.

-- Emmett, from Georgia

View hunter71's profile

hunter71

1954 posts in 1788 days


#3 posted 1653 days ago

Now add in the current economy and start all over.

-- A childs smile is payment enough.

View hangdog's profile

hangdog

34 posts in 1681 days


#4 posted 1651 days ago

Thanks, Bentlyj, for your perspective. I think part of the reason folks struggle with determining a price is because it’s sometimes a mystery as to how to determine the value. With 30 years of experience you have a pretty good feel, I’m sure, but it’s tough for new guys. It’s often hard to find a benchmark. If I use Pottery Barn stuff (like I talked about in the second entry of this blog) as a benchmark I should charge more than them since it would be of higher quality. But perhaps I give the customer a quote and they tell me that PB sells the same thing $500 cheaper. I can tell them that it’s junk but would they believe me or be lured by the price? Dunno.

As for never making more money, with the flat-rate system for mechanics there is a standard time to do a task and as you get better and do it quicker you still get paid the same. If a brake job calls for 2 hours a rookie might take 3 hours to do it and get paid for 2 but an experienced mechanic will do it in 1 and still get 2 hours pay. It’s not unusual for a seasoned mechanic to log 80 or 100 hours in a 40 hour week. As for furniture/cabinet making, I would call my skill level somewhere in the intermediate range. So if I keep applying the same times ten years from now when I’m more skilled and efficient I might be making $80 an hour instead of $40 (not accounting for inflation of course). That’s based on man-hours, not quoted hours. But to Bentlyj’s point, if I were to lower the times required for each task as I got better at them I would be cutting my own throat. I would make twice as much stuff and earn the same amount of money. The question for my method would be how to come up with standardized times.

Fact of the matter is we’re all different people with different strengths which is what makes the world go around. Different methods will work better for different people. Not just the builders but also the consumers. On the West side of Cincinnati, where I’m from, folks are notoriously frugal and want to know exactly where their money goes. An itemized list seems to work well for this type of client. And, perhaps the demographic makes the bar a little lower here than somewhere else. There are certainly many people out there who would say “I don’t care what it costs so long as it is exactly the way I want it.” What it boils down to is that something is worth whatever people are willing to pay for it. It’s our job to figure that number out for our specific target customer.

-- Don't just talk about it, be about it.

View hObOmOnk's profile

hObOmOnk

1380 posts in 2729 days


#5 posted 1651 days ago

These oft quoted formulae for pricing, e.g. materials cost (+10%) + (hourly rate x project hours), really determine a “target cost” not a final “market price”. If you are selling your client “time” then this type of time + materials pricing will work.

However, if you are selling an “artistic unit”, then the market determines the price. In this case, the customer may not care how long you took to make the “unit” or even how much you paid for the materials. In these cases, its YOU, YOUR reputation and external factors, e.g. the economy, competition, locale, supply and demand, etc.; that determine what the customer will pay.

I wonder if anyone ever asked Sam Maloof to break down the cost of a rocking chair in to time and materials? :)

I teach a pricing class for artists and crafts people titled “Worth-M.O.R.E.”

-- 温故知新

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