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How to price my woodworking (and sell it)

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#1 ·
How to price your woodworking to make a profit (and sell it)

How to price my woodworking?
(And sell it) Part 1

So where do you begin to answer such a simple question; or is it that simple?

I've heard this question asked so many times and I've heard so many one liner's for an answer:
• "Know your market"
• "You can only sell it for what the market will bear".
• "I sell it for enough to support my hobby"
• "It's just a hobby, so what does it matter as long as you at least cover your material cost".
• Cost of materials x 2.
• Cost of materials x 3.
• Cost of materials x 4.
• $150/lineal foot (or whatever price per lineal foot)
• "I don't sell my woodworking", I just make stuff for my friends and family.

So, if you've been in sales and all these one liner's make sense to you, or you're comfortable with how you price your woodworking then no need to read on, but if you have no sales or marketing experience but would like to understand how to price your woodworking and then be able to sell it, I hope my series will give you some insight on pricing and selling your woodworking.

PRICING is going to be different for every woodworker so there will be no magic answer here and I'm sure I'll step on some toes before it's over, so take everything I share with you with a grain of salt, use what information you think will help you and disregard the rest if you don't agree.

Woodworkers range from everything from an occasional hobbyist to the full time Professional woodworker that depends on it for their living and everything in between! It's all those in-between areas that seem to have the biggest problem deciding how they should price their woodworking.

The true hobbyist doesn't "sell" their woodworking, or if they do, they charge enough to cover materials to build something for a friend or family member. So it doesn't matter what they charge and they usually don't worry about it.

One the other end of the scale, the full time professional knows that pricing his or her work is a major factor in operating their business, so most professionals already have a system for pricing in place. But don't kid yourself; I've seen a lot of so called professionals that don't have a clue on how to price their work and make a profit. (That's why so many go out of business or find another career).

And then there's all the other woodworkers in between that slide up or down the scale; they may be the hobbyist that really does want to make a little profit when they sell some of their work or the woodworker that is trying to start a small side line woodworking business and sell his woodworking while still keeping his regular job, but would like to make enough to make it worth while giving up nights and week-ends trying to have a business.

Maybe you really want to start your own woodworking business so you could go full time and replace your regular job with doing woodworking for a living.

First, you'll have to decide where you fall on the scale of what you expect from selling your woodworking and from there you can begin to find your comfort zone.

You can take all the formulas in the world that could help you price your woodworking and they won't do you a bit of good if when you're finished you're not comfortable with the price you have to quote to your customer.

Most people only want to sell in their "comfort zone", which means, most want to be nothing more than an order taker, a cashier, and simply go to the bank and deposit money, but not really having to "sell" our product, so we tend to price accordingly. We just want people to walk up and buy our product (everyone!).

So how do we get around this, or deal with this "comfort zone"? How do we get comfortable with the pricing of our woodworking? Everyone deals with it in different ways or uses different excuses, but the easiest way is to know all the facts instead of trying to price things from others opinions or simply guessing on what might be a good price. There's no one simple answer to pricing or selling your woodworking. There are so many things that can affect how we price our work or how and who we can sell our woodworking to that
I would like to take the time and write a complete series on how to help you understand and find your comfort zone for both pricing your woodworking and also how you can sell it. (Pricing and selling go hand in hand).

This may be too long and boring for some to follow along, but I will try to break it down into sections that you can decide if that topic is of interest or not.

We have a tendency to pick the easiest way to price our work and really don't have a clue if we actually make a profit or even if it was worth the time and effort to do the project. We're more concerned if the customer will buy our work then if we actually make a profit when we do.

When all is said and done and the sale is completed, that's when we look at the sale and try to justify in our minds that it was a good price we sold it for and if we made a profit. We end up making excuses why we sold it for what we did or why we couldn't sell it, but not really truly understanding why we ended up pricing it the way we did.

That's why we don't like to compete with places like Wal-Mart, Ikea, the big box stores and the like. Watch the average consumer (yourself included) when you walk into a store like that, you find what you're looking for, you put it in your shopping cart, and off you go to the cash register to pay for it. That's what we want everyone to do with "our" products, unfortunately it usually doesn't work that way for the average woodworker.

My whole career for the past 45 years has been in sales and the last 27 years of that as a full time professional woodworker where I had to determine the selling price, be able to sell it and make a living doing so.

In one sense I was lucky, I didn't start as a hobbyist and then try to figure out how to make it a career, but instead I jumped in with both feet and it was either sink or swim as a woodworking business. (It forces you to take things a little more seriously).

I was fortunate that my wife had a good job and that took care of a lot of the household expenses, but the business was totally a sink or swim situation. It was totally up to me to figure out how to market, price and sell my work!

After a few years in business I realized I was cheating myself and my woodworking because I was still allowing the household budget to cover my butt when I didn't make enough to cover all the expenses involved with running a woodworking business.

It really opened my eyes when my wife was diagnosed with terminal cancer and was no longer able to work. We became a one income family with a ton of medical bills and a child ready to go to collage. There were no more safety nets, it was going to be either make a profit with woodworking or find someway else to make a living.

All said and done; I've enjoyed a wonderful 27 year career as a professional woodworker and wouldn't have changed it for any other. I'm as passionate about my woodworking today as I was when I started.

So I have very little patience when I hear someone whine and complain because they can't make any money doing woodworking.

Pricing your work, knowing how to market your work and getting out there and selling your work all have to go hand in hand.

I realize most woodworker's don't have a background in sales or even comfortable selling at all, so I hope I will be able to give you some food for thought that may help you price your work, be able to actually make a profit and sell your work for the price you should.

If you're sitting here reading this and saying yeh, yeh, yeh, that's all fine and dandy; he has lots of experience in selling, but what's that got to do with pricing my woodworking? It's simple; pricing and selling go hand and hand.

There's a fine line between pricing your work where you can make a profit but still sell it, and pricing your work so you really don't have a problem selling it, but you don't make any money doing so.


So, with that being said, here are a few things I would like to cover in my upcoming series so you will be able to figure a price for your woodworking and then how to actually sell it.

• I want you to understand why you're pricing your woodworking the way you are and how that may affect your final price.

• Truly understand what your total cost is to build a project to sell (how can you price your product if you have no idea what it cost you to build it? (I'm not talking just material cost).

• Understand what your product is and how will it fit in the market place. (Is there even a market for it)? Just because you build it, doesn't mean they will come.

• Understand who will buy your product. (One important thing to remember, not everyone shops at Walmart.)

• Understand how to reach those that will buy your product
.
• You may have to actually "Sell" your product!

I hope I've created enough curiosity and interest that you will follow along the next few series to see if I can help you with your pricing (and selling) of your woodworking.

Check back tomorrow for part 2.
 
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#4 ·
You bring up a lot of good points here.

I'm one of those that tends to sell my work for the material cost x3. This is something I picked up from my dad, as that's what he generally sells his stuff for (we both do it as a hobby and sell occasionally to coworkers or friends of friends).

That said, I never expect to make as much selling WW projects as I do in my full-time job. One example is a set of maple legs for a friend's foosball table. The material cost was about $15, and when I told her $50 for the set, she ended up handing my three $20 bills and said to keep it. I would estimate that the project took me a good 6-7 hours, so my time was valued at about minimum wage.

In our "buy it cheap" culture, few people want to spend money on quality products, so finding an acceptable selling point should be hashed out before even starting a project. This is why I try to make the project to suit a client instead of making something and then trying to sell it to some random consumer. Sure, you may get less work, but if you're not counting on a steady income, that's not necessarily a bad thing.
 
#7 ·
I like that you warn readers that you might "step on some toes".

Engaging in commerce is stepping on toes. Goods and services providers seek to make money. How much?... More.

Buyers and clients want goods and services at a price. What price? ... Less.

We can all be cordial, and play our own side of the field, while not doing a disservice to our counterparties. But we must accept the reality that we want to earn more, and they want to pay less.

Of course there are "name your price" jobs, but those are few and far between, and many we won't get to recognize as such until after the fact. Too late. :)

Be fair to yourself, and be fair to your clients.

A favorite line from the movie "The Joy Luck Club" is this: "You not know what you worth".

Always a big mistake, in life and commerce.
 
#10 ·
"I'm one of those that tends to sell my work for the material cost x3. This is something I picked up from my dad, as that's what he generally sells his stuff for (we both do it as a hobby and sell occasionally to coworkers or friends of friends)."

And it's a silly way to do things.

Think of two copies of the same basic 16w x 24h x 12d wall hanging shelf… One is MDF, primed, edges filled, and painted. The other is rare figured cherry, with a fast, sprayed lacquer finish…

You'd probably spend far more time getting the MDF to look decent, yet the item would sell for far less.

The only way to sell anything with a profit motive is get a realistic rate for the time expended, then add materials, hopefully with a markup that covers the costs of obtaining and carrying the materials. Remember, the materials didn't beam into your shop, you probably spent time selecting, ordering, and/or picking them up. If you can't get the price you need to cover your expenses and make a profit, the job is not commercially viable, and shouldn't be done.

If you're not interested in a profit, you're doing favors, so who cares? Favors are good deeds, and have nothing at all to do with pricing work.
 
#12 ·
Thanks for the encouraging words. I'll post part two in a little while so hope most everyone will follow along.

Jim (Puzzleman); I respect your opinion on marketing and sales more then anyone, so I'm flattered that you are reading this. I hope you will follow along and follow up on anything I missed.

I have 5 parts to this series, so we have a long way to go ( unless I need to add more before it's over) lol.

I'm sure I'll be stepping on toes, but that's exactly what it took for me to take a second look on how I was pricing my work and knowing if I was making a profit. I'm not trying to insult or make anyone mad, but I do have a tendency to be blunt at times.

Barry; I had to laugh when I read your post this morning because what you mentioned about covering all your time when doing a project is exactly what I was thinking about what I might need to mention and stress a little more in my blog.

We have a habit of only thinking of the actual build time and never take into consideration the time spent going to get lumber, stopping to pick-up hardware, finishes or time spent on the computer ordering things. Down time in the shop because we can't do anything else because we're waiting for a finish to dry or picking up and putting things away so we can start another project and most importantly, the time spent marketing and selling our products.

And I really like your comment on; If you're not interested in a profit, then you're doing favors….........and favors are good deeds. You're right, that has nothing to do with pricing our work. We need to keep those seperate. Well said.
 
#13 ·
One of the problems I have with pricing per hour is that on a new project we will be slower the first time through (learning curve) then later when we make the same thing quicker after a dozen times. Also the in-experienced WW would be slower than the more experienced.

This would then lead to the inexperienced WW making more money then the master??? No he would have to figure less per hour then the master WW to offset his / her lack of experience. If you were charging straight per hour the first prototype would cost a fortune. Now you have to estimate the true cost of future products based on an estimated time to build. I think 3x or 4x or 5x is just a quick way of trying to estimate ALL costs into one formula.

The 3 times cost is a typical retail markup. What fascinates me is that we would markup a $100 item to $300 (3x or 300% mark up) and then offer a 50% discount and still make a 50% profit. Of course this is called Mark Up and then there is Gross Profit Margin.

If I had a $100 cost item and wanted to maintain a 30% GPM I would sell it for $142 (100 divided by .7 or 30% of the sales price is now profit $142×30% = $42 rounding pennies of course). This one we used in the distribution / industrial field and of course was supposed to cover ALL expense or costs of doing business. Was confusing to me in the beginning but made sense after a while.

I guess we are all looking for a simple formula to help us sell our WW products.
 
#15 ·
Jim,

You make a valid point, it does take longer to make a proto type then it will after we work out all the bugs, make templates and jigs and get more experienced and efficient with our woodworking.

If you are planning on building multiple items of the same you have the advantage of building that proto-type and having time to study to determine if you could build it in less time if you had better tools, templates to simplify the tasks, jigs to make it easier and faster and of course the learning curve.

Trust me; 99% of all beginning woodworkers leave out plenty of hours they figure is their learning curve and don't charge for it.

I realized after 27 years working full time as a professional woodworker, I improved my build time for most projects, but unless you become an assembly line, mass-producing something and invest in the equipment to be able to do so, then you can only produce so much in an 8 hour day no matter how much experience you have.

Custom work is always the hardest for a beginning woodworker. Number one, you've never built it before so you have no idea how long it will take, second; you may not have experience in that particular type woodworking at the time and have to learn a new technique or something, and third; you have to quote a price without knowing for sure the material cost or the number of hours it will take.

Like I said in my blog; if you're comfortable with how you price, it's all good. There's no magic answer to how we should price our work.

I hope you will continue to follow along.

Good luck and thanks for posting.
 
#16 ·
"Trust me; 99% of all beginning woodworkers leave out plenty of hours they figure is their learning curve and don't charge for it."

Not just beginners….

I once heard Steve Latta share a story about back in the day when he was employed in a shop (Irion?) that made extremely fine custom items, like $80k armoires, they spent a decent number of unbillable, and possibly unpaid, learning hours figuring out how to make certain parts.
 
#17 ·
You have made a lot of points that lead to hard to answer questions for me. To be sure you have to know your market.

Im my area I can get a fraction of what my work will bring an hour away. The other part of that is knowing what people are looking for. It seems to me that a successful woodworker needs to find those things people want, look for quality in, and they can do marketed better than the mass produced imported stuff.

I don't have any answers on this topic and usually come away wondering if I was too cheap.
 
#18 ·
Like this post,

I was hired for my house building skills by my brother's business associates to re panel a small room. They had the paneling and nothing else. I had to estimate the materials cost and I had to put a price on my shopping time? Gas? etc.

I had no one else to do the pick up or materials purchase and I was not in business at the time. I charged them what I would pay for the service. We were all happy with the results.

I've worked professionally and privately doing small contracting work. Time overhead and materials should be figured in the IRS does. LOL!

If someone wants a piece refinished, how much can I charge for stripping and preparing the piece? I often tell people they might want to do that part themselves as it is where they might save some money ? Especially if they go to Walmart or IKEA.

Great blog. There are some great books on operating a one man shop and a couple on this topic.
 
#19 ·
Just read number 1 after reading number 2. VERY well written! I have been in sales most my life (industrial machines, renewable energy, information technology) and this stuff applies to all sales. I very much look forward to install number 3! Pack this together in an ebook and sell it! Thanks, this is a fresh reminder even for my day job!
 
#20 ·
Terry, I know exactly what you mean by having to travel to find a market for your work.

Living in a small rural farming community there was not a market for the type woodworking I wanted to do, so my only choice was to go where there was. I always figured my travel time when pricing, so distance didn't bother me. (actually I have sold and delivered my work in 13 states up and down the east coast).

I believe my next two parts will help you with knowing if you are selling too cheap and if you're making a profit.

Hope you will follow along.

jim65, Thanks for the kind words. Actually I've just finished my first book; How to start a woodworking business.
 
#21 ·
First, I want to wish the best for you in your battle with that bad "C" status. Secondly, you've got my attention. Everything you've said is right on, imo. Look forward to round 2. In the mean time, Work/Play safe. Keep makin dust.
 
#24 ·
How to price your woodworking to make a profit (and sell it)

How to price my woodworking?
(And sell it) Part 2

Know your market!

So let's start with why you're pricing your woodworking the way you are now. If you're a hobbyist and you don't sell your work or you really don't care how much you make when you do, then there is no reason to read further.

If you're comfortable with how you price your work or you're a professional and you already have a system for pricing in place and you like how things are going, then there is no reason to read further.

But if you fall some where in between on that scale I talked about in the first series, then let's get started to see if I can help you with pricing.

It really doesn't matter what your background experience is or what you do for a career or how much experience you have in sales. You need to have a starting point and that should be to know what you're building and what it is you actually plan on selling. So what do I mean by that?

Here's a question I hear a lot from woodworkers ask; I love woodworking and I want to sell some of my work. What sells?

That's such a loaded question and there's no golden answer, no one liner that's going to help you on that one! What one woodworker may be able to build and sell, another woodworker wouldn't stand a snowball's chance in hell of selling! Sorry to be so blunt, but now that I've got your attention, let's clarify that a little.

Just because I can design and sell $5,000 home entertainment centers, doesn't mean every woodworker out there would or should or could, and just because another woodworker can design and sell $50,000 kitchen cabinets and make a living at it doesn't mean every woodworker could or should or would and again, if a woodworker can design and sell birdhouses and make a profit at it, doesn't mean I could or should or would.

You have to "start" with what you have the capabilities to build, what tools and your shop will allow you to build, what you would "like" to build and what you think you would be able to sell once you built it.

The only other thing I want to say about your woodworking before we move on to actually pricing and selling your work is; you better build a quality product! Just because you built it, or you hand crafted it, doesn't automatically mean that it's better then anything out there in the stores already for sale. Be honest with yourself, if you're offering nothing more than some ho-hum product and expecting to be able to sell it for a great profit, then you're starting out behind the 8 ball from the get-go.

Once you decide what you would like to build and sell, then you have to find a market for it. Here's where so many woodworkers make a fatal mistake when they start the process of pricing their work.

Let's see if I can put this in perspective; say you build a beautiful jewelry box. It's made with some expensive exotic wood with elegant design features and flawless finish. You have hours and hours invested in making this box and you take it to your local flea market or country craft fair to sell it. Nobody there is looking for a $400 jewelry box, so you automatically figure you must have it priced too high.

Hello!!!!
That's known as knowing your market; or in this particular case; it's not knowing your market. So instead of finding a market you could sell your jewelry box at, you start thinking about how low of a price you need so you can sell it. You forget about how much it cost or how many hours invested in building it, but focus more on "what the market will bear" and you start pricing your work based on that.

It should not have as much to do with "what the market will bear", as it has to do with finding the right market for what you build and want to sell.

And it doesn't matter what you build, whether its bird houses or kitchen cabinets, if you don't find the right market you will end up letting the wrong factors determine how you price your work.

That's why we get hung up with customers buying at Wal-Mart, Ikea, Harbor Freight, Lowe's and the like. We somehow think that "everyone" shops at these places and we have to price our work accordingly or we will never be able to sell our products.

If that's the customer base you want to sell to, then yes, you will have to figure out how to price your woodworking to compete with their prices………And good luck with that!

Two very important things to remember when it comes to worrying about whether you should or could compete with stores like that.

First; they have the luxury of choice in deciding who they buy their products from and how much they are willing to pay for that product so they can retail it to the average customer. Even if they buy cheap crap from overseas, they are looking for one thing and that's "price point"! They're looking for the masses to purchase their products, so price will have to be low………….real low. Quality, Service or even where it's built or by whom it's built doesn't have much to do with it.

Second; if you had the luxury of selling thousands upon thousands of a single item, you could probably find a way to build it and sell it at a lower price. If you had the thousands of outlets to show and sell your products, you could probably sell a lot more at a lower price.

You have to realize this is not the market you should try to compete in and that's not the average customer base you are going to sell to. If you allow yourself to go down that path, then you have to allow those factors to determine your pricing.

As a woodworker; being your own manufacturer, having to sell just a few items at a time and having to rely on more then just a low price, you have to find a different market all together. It's a much smaller market and you have to actually work harder to find that customer.

I know most of you will say you already knew that, but I also know that most of you will still think about those stores and worry about their pricing when it comes to trying to price and sell your work; Right?

When I first started my business, one of the things I really enjoyed designing and building was home entertainment centers. That was almost 30 years ago and most of the styles were Armoire type cabinets. (Before wide screen TV's). Even though there were no Ikea or Rooms-to-Go type stores around at that time, Sears and all your local furniture stores carried that type (mass-produced) entertainment centers and most sold for around $399.95 or less. How in the heck could I compete with that?

I can still remember the first time I came home and told my wife I had sold an entertainment center for over a $1,000.00. It was exciting and I had to realize that just because I was a one man shop, located in a small town in a farming community, not everyone bought their furniture from Sears. I could find customers that where looking to have a piece of furniture custom built and willing to pay for it.

I had to find my market and grow from there. It took time, but I realized that some customers where able and willing to pay $5,000, $10,000 or even $25,000 to have a custom made home entertainment center for their home.

Here's my point; you can't sell that type furniture in a Wal-Mart parking lot, or at a flea market or on Craig's list. I had to find a market for my type woodworking and a price I could afford to build and sell them for and not allow others to dictate my price. I wanted to design, build and sell $1,000.00 entertainment centers for $1,000.00 and not build $1,000.00 entertainment centers to sell at $399.95 because that's all the market will bear or that's where I allowed my "comfort zone" to be.

Guess what; I found my real comfort zone was designing, building and selling $5,000 to $10,000 entertainment centers. I quit worrying about the customers that bought their furniture at Sears or the local furniture stores and started thinking about where the rest of the customers shopped for their furniture.

Here's another example of finding your market. John is also a Lumber Jock and I asked his permission to use his business as an example in my book, so I'm sure he won't mind me sharing his story here. Let's talk birdhouses for a moment. Now there is a product you can find in Wal-Mart, Lowe's, Home Depot and any home and garden shop across the nation. Talk about pricing! How in the heck could you ever build a birdhouse and compete with Wal-Mart or the others? Simple, don't try competing with them, see if they can compete with you.

Check these birdhouses out!

Sky Travel Facade Landmark Collage


Do you really think John worries about what Walmart or the lawn and garden departments from the big box stores sell their birdhouse for? I know this is extreme, but I wanted to make a point. The lowest price is not always the answer, but knowing your market and targeting it can work at any price. (Your product has to match your market).

Please visit John @ www.extremebirdhouse.com. He's a true craftsman and knows how to market his product.

THANKS AGAIN JOHN!

Let's continue on tomorrow.
 

Attachments

#25 ·
How to price your woodworking to make a profit (and sell it)

How to price my woodworking?
(And sell it) Part 2

Know your market!

So let's start with why you're pricing your woodworking the way you are now. If you're a hobbyist and you don't sell your work or you really don't care how much you make when you do, then there is no reason to read further.

If you're comfortable with how you price your work or you're a professional and you already have a system for pricing in place and you like how things are going, then there is no reason to read further.

But if you fall some where in between on that scale I talked about in the first series, then let's get started to see if I can help you with pricing.

It really doesn't matter what your background experience is or what you do for a career or how much experience you have in sales. You need to have a starting point and that should be to know what you're building and what it is you actually plan on selling. So what do I mean by that?

Here's a question I hear a lot from woodworkers ask; I love woodworking and I want to sell some of my work. What sells?

That's such a loaded question and there's no golden answer, no one liner that's going to help you on that one! What one woodworker may be able to build and sell, another woodworker wouldn't stand a snowball's chance in hell of selling! Sorry to be so blunt, but now that I've got your attention, let's clarify that a little.

Just because I can design and sell $5,000 home entertainment centers, doesn't mean every woodworker out there would or should or could, and just because another woodworker can design and sell $50,000 kitchen cabinets and make a living at it doesn't mean every woodworker could or should or would and again, if a woodworker can design and sell birdhouses and make a profit at it, doesn't mean I could or should or would.

You have to "start" with what you have the capabilities to build, what tools and your shop will allow you to build, what you would "like" to build and what you think you would be able to sell once you built it.

The only other thing I want to say about your woodworking before we move on to actually pricing and selling your work is; you better build a quality product! Just because you built it, or you hand crafted it, doesn't automatically mean that it's better then anything out there in the stores already for sale. Be honest with yourself, if you're offering nothing more than some ho-hum product and expecting to be able to sell it for a great profit, then you're starting out behind the 8 ball from the get-go.

Once you decide what you would like to build and sell, then you have to find a market for it. Here's where so many woodworkers make a fatal mistake when they start the process of pricing their work.

Let's see if I can put this in perspective; say you build a beautiful jewelry box. It's made with some expensive exotic wood with elegant design features and flawless finish. You have hours and hours invested in making this box and you take it to your local flea market or country craft fair to sell it. Nobody there is looking for a $400 jewelry box, so you automatically figure you must have it priced too high.

Hello!!!!
That's known as knowing your market; or in this particular case; it's not knowing your market. So instead of finding a market you could sell your jewelry box at, you start thinking about how low of a price you need so you can sell it. You forget about how much it cost or how many hours invested in building it, but focus more on "what the market will bear" and you start pricing your work based on that.

It should not have as much to do with "what the market will bear", as it has to do with finding the right market for what you build and want to sell.

And it doesn't matter what you build, whether its bird houses or kitchen cabinets, if you don't find the right market you will end up letting the wrong factors determine how you price your work.

That's why we get hung up with customers buying at Wal-Mart, Ikea, Harbor Freight, Lowe's and the like. We somehow think that "everyone" shops at these places and we have to price our work accordingly or we will never be able to sell our products.

If that's the customer base you want to sell to, then yes, you will have to figure out how to price your woodworking to compete with their prices………And good luck with that!

Two very important things to remember when it comes to worrying about whether you should or could compete with stores like that.

First; they have the luxury of choice in deciding who they buy their products from and how much they are willing to pay for that product so they can retail it to the average customer. Even if they buy cheap crap from overseas, they are looking for one thing and that's "price point"! They're looking for the masses to purchase their products, so price will have to be low………….real low. Quality, Service or even where it's built or by whom it's built doesn't have much to do with it.

Second; if you had the luxury of selling thousands upon thousands of a single item, you could probably find a way to build it and sell it at a lower price. If you had the thousands of outlets to show and sell your products, you could probably sell a lot more at a lower price.

You have to realize this is not the market you should try to compete in and that's not the average customer base you are going to sell to. If you allow yourself to go down that path, then you have to allow those factors to determine your pricing.

As a woodworker; being your own manufacturer, having to sell just a few items at a time and having to rely on more then just a low price, you have to find a different market all together. It's a much smaller market and you have to actually work harder to find that customer.

I know most of you will say you already knew that, but I also know that most of you will still think about those stores and worry about their pricing when it comes to trying to price and sell your work; Right?

When I first started my business, one of the things I really enjoyed designing and building was home entertainment centers. That was almost 30 years ago and most of the styles were Armoire type cabinets. (Before wide screen TV's). Even though there were no Ikea or Rooms-to-Go type stores around at that time, Sears and all your local furniture stores carried that type (mass-produced) entertainment centers and most sold for around $399.95 or less. How in the heck could I compete with that?

I can still remember the first time I came home and told my wife I had sold an entertainment center for over a $1,000.00. It was exciting and I had to realize that just because I was a one man shop, located in a small town in a farming community, not everyone bought their furniture from Sears. I could find customers that where looking to have a piece of furniture custom built and willing to pay for it.

I had to find my market and grow from there. It took time, but I realized that some customers where able and willing to pay $5,000, $10,000 or even $25,000 to have a custom made home entertainment center for their home.

Here's my point; you can't sell that type furniture in a Wal-Mart parking lot, or at a flea market or on Craig's list. I had to find a market for my type woodworking and a price I could afford to build and sell them for and not allow others to dictate my price. I wanted to design, build and sell $1,000.00 entertainment centers for $1,000.00 and not build $1,000.00 entertainment centers to sell at $399.95 because that's all the market will bear or that's where I allowed my "comfort zone" to be.

Guess what; I found my real comfort zone was designing, building and selling $5,000 to $10,000 entertainment centers. I quit worrying about the customers that bought their furniture at Sears or the local furniture stores and started thinking about where the rest of the customers shopped for their furniture.

Here's another example of finding your market. John is also a Lumber Jock and I asked his permission to use his business as an example in my book, so I'm sure he won't mind me sharing his story here. Let's talk birdhouses for a moment. Now there is a product you can find in Wal-Mart, Lowe's, Home Depot and any home and garden shop across the nation. Talk about pricing! How in the heck could you ever build a birdhouse and compete with Wal-Mart or the others? Simple, don't try competing with them, see if they can compete with you.

Check these birdhouses out!

Sky Travel Facade Landmark Collage


Do you really think John worries about what Walmart or the lawn and garden departments from the big box stores sell their birdhouse for? I know this is extreme, but I wanted to make a point. The lowest price is not always the answer, but knowing your market and targeting it can work at any price. (Your product has to match your market).

Please visit John @ www.extremebirdhouse.com. He's a true craftsman and knows how to market his product.

THANKS AGAIN JOHN!

Let's continue on tomorrow.
Outstanding write-up!
 

Attachments

#44 ·
How to price my woodworking (Knowing what it cost to build a project)

How to price my woodworking?
(And sell it) Part 3

Knowing what it really cost to build your project to sell

Again, like I said in my earlier series, if you're a hobbyist and you really don't sell your work, then no need to follow along, but for what ever reason you are building and wanting to sell some of your woodworking, then this series is real important to read and understand when it comes to pricing your work.

One of the first things you have to realize when you decide you would like to sell some of your woodworking and especially if you want to sell your work and actually make some money doing so, then you need to know the true cost of building your project.

You may not want to think of your woodworking as a business, but once you make the decision to start selling some of your work, then you are a business and you should treat it as such.

There's a lot of gray area between making a little money as a hobby and actually selling your work and being considered a business, part-time or not. I'm not going to get into that, and if you only look at your woodworking as a hobby and you don't think of it as "making money", then again, there is no reason to worry about how much to charge or knowing the true cost to build it.

Here are three ways of figuring your selling price that will be a sure way to "NOT" make a profit if you do not fully understand what the true cost is to manufacture or build your project. If you simply base it on the cost of materials and nothing else, then you are bond to lose out in the end.

1. Simply pulling a figure from the top of your head or out the crack of your butt, because you can roughly guess what the materials will cost and you think you would like to "make this much" or "you really need the job"! Now that's a losing combination all the way around and sorry if I stepped on some toes.

2. Material cost times 2 or 3 or 4 or maybe even 5. How does this work? I really need the job so I better only times materials x 2, or this guy looks like he can afford it so I think I'll times my material cost x 4 or the best one of all; I want a new BMW, so I think I'll times it x 5.
Bottom line; are you really dealing with any facts or just guessing you are going to make a profit?

3. Pricing by the lineal foot. This way of pricing is usually done by the full time professional cabinet shop, but I have to ask, are they pricing this way because that's how their competition prices their work or simply because it's a fast and easy way to give a quote. All I can say is; if you don't know the true cost of how much it cost to build a certain product by the lineal foot, then at best are shooting in the dark…….and how does that work for custom work?
I could easily add style changes, building techniques and options to at least double the material cost or triple the time to build with most any 24" of cabinet.

From this point on, I'm going to be talking more to the woodworker that is trying to have a side-line business as a woodworker and make some money and to the woodworker that is really considering doing woodworking as a living and trying to decide if they could actually make a living doing so.

I would hope the full time professionals would know their true cost of building a project and their pricing system takes all that in consideration when determining a price, but it's still OK for you to follow along if you would like.

One of the hardest things for a hobbyist to do is to change his/her way of thinking from treating their woodworking as a hobby to treating their woodworking as a business and making a profit.

I'm about to get long winded and cover a lot of stuff. If you start reading this and decide it's not for you because it's too involved and it would take too much of your time to figure all this out, then I understand.

Now is the time for me to be brutally honest and blunt. No pulling punches or worrying if I'm going to hurt someone's feelings. If you want to be lazy or don't want to spend time to really figure out how to figure your cost of building a project and how to price it from there, then I can't help you from here. Now it's time to treat your woodworking like a business or don't bother worrying about how you price things, let's worry about how much it cost you to build it first!.

There are 5 major factors you need to take into consideration to know exactly what it cost you to build a project and how you use that to price your work.

1. Your fixed overhead to run your business (part time or full time , whether doing it at home or in a commercial setting).
2. Your administrative or non-productive overhead to run your business
3. What you would like to pay yourself.
4. What do you expect as a profit?
5. What is your material cost?

I'm talking as a one person shop, so I won't be talking about employees at this time.

You noticed I put material cost last; that's because the first four can add more to the cost of building a project then you might think. So, let's start with #1.

Fixed overhead; Yes I know, as a hobby we let our household budget pay for everything like the mortgage (or rent), lights, water, phone, heat, cooling, insurances, taxes and anything else it takes to run the shop, but you need to change your way of thinking if you are going to treat your woodworking as a business. It's always difficult to separate a business from personal when you operate a business from home.

But even so, you should consider at least a small percentage of your total overhead at home for your business overhead.

I would guess 75% of small businesses run from home are probably not set-up as a legitimate business anyway, so how you handle that is up to you, I'm just saying; if you want to know all the cost in figuring what it cost you to build a project then you should take your overhead into account. If you're a full time woodworker then you already know about overhead.

I'm going to talk about working part time for now, but you still use the same principles when doing this full time.

Just for giggle and grins, let's say your total household overhead is $3,000 a month (including the mortgage, electric, phone, insurances, taxes, internet, etc.) and you only consider 5% of that for business purposes (which is a very modest percentage). That alone is $150 a month. Now let's say you only spend 5 or 6 hours a week working in your shop building things to sell. That's spending about 20 to 25 hours a month working in your shop.

You can do the math, but if you divide 20 or 25 hours you work per month into the $150, you're looking at around $6 - $7/hr. for every hour you're in your shop just to pay that small of an amount towards the overhead. You should be considering that it cost you that much to operate your business from home.

You can run the numbers up and down the flag pole all you want, but the facts are, it cost you something every month to run a business from your house and you should have some kind of a quess-timent what that is! (I know, that's not really a word, but it sounded right).

It's difficult to know exactly what % of your total electric, heat, cooling, phone, etc that you use each month for business purposes when your total utilities are wrapped up in your household budget. Personally, I would ask a CPA what % is allowed as far as tax purposes and figure from there.

As far as a full time woodworker goes, the same principle applies except you have to take your total overhead cost and divide that by the total number of hours you work on the average each month in your business. If you're running a full time woodworking business from home,(160 hours or more a month), you can bet your bottom dollar you are using a lot more than 5% of your total household budget for business purposes.

Again, you should check with a CPA to see what's allowed.

But let's move to the next part; Administrative overhead. This is all cost to operate a business that's not considered fixed overhead.

This changes from month to month and would be things like all your office supplies, computer, marketing and advertising cost, legal and accounting fees, expenses to operate and maintain vehicles and equipment for the business.

This list can go on and on and it's really difficult to put hard numbers to it because it changes constantly. Example; some of your advertising and/or marketing may be done on a monthly basis; like hosting for a web-site and then you may have marketing expenses that come along every now a then, like doing a show or advertising something on e-bay or having business cards printed. You can see how this could change on a monthly basis.

I don't know of a magic number to put to all of those expenses, but I found over the years of operating a full time woodworking business, my administrative expenses ran about 20 % of my fixed overhead.

Let's come back to that in a couple minutes.

Next; what would you like to pay yourself! Let's be honest here, you wouldn't want to work at a regular job having no idea what you would be paid, so why would you want to build something for someone and have no idea what you will get paid?

Pick a number, any number. Would you like to make minimum wage? Would you rather make $10 or $20/hr. or maybe more? That's totally up to you. One important thing to remember here, it's one thing to make an hourly wage working for a company and it's all together different making that same hourly wage working for yourself and no benefits are included. No taxes taken out, no vacation time, no sick time, no health care benefits etc.

But it is like any other job as far as; you may not pay yourself as much per hour to start with but as you gain experience and get better at what you do, you can raise your pay (give yourself a pay raise!)

Moving on; Profit! Every business needs to operate with a profit. If not, a company can not grow or even survive. If you try to do woodworking without figuring a profit then one of two things will happen.

You will never be able to grow or buy a new tool, or upgrade what you have if you don't make a profit in your business. You will be doing exactly the same thing tomorrow as you did today. You will be doing the same thing next year as you are doing today and ten years from now you will still be trying to do with what you have now, or the second thing will occur and that is you will be forced out of woodworking all together.

Again, it's totally up to you what you would like to make as a profit. Did you realize that on a nation wide basis, the average profit margin for a professional cabinet shop is about 15%? That's not a large percentage, but then again, if you have covered all your true expenses and cost, then a clear 15% profit is pretty darn good.

Last, but not least; Materials. This is probably one area you already have covered pretty well, but I will say this; take your time when you are figuring materials for a job and double check yourself.

Don't cut your materials too close, it's always better to figure just a little on the high side then to find out you short changed yourself and you have to buy extra materials to finish a job after you've already quoted a price or even worse; you allow yourself to short change the customer because you don't want to spend the extra money to do it right.
I told you I was going to get long winded! I'm going to stop on this one and the next series we are going to put all these numbers together and see if we can make any sense out it all.

Hope you will come back later today because I'm going to post the next part later in the day. I want this part to be fresh on your minds when I get to the next section, but I want to give you a little time to absorb this first and maybe even take a piece of paper and jot down some of your own figures as far as what you may have as Fixed overhead, Administrative overhead, what you would like to get paid per hour for working and of course profit.

Try to be honest with yourself.
 
#45 ·
How to price my woodworking (Knowing what it cost to build a project)

How to price my woodworking?
(And sell it) Part 3

Knowing what it really cost to build your project to sell

Again, like I said in my earlier series, if you're a hobbyist and you really don't sell your work, then no need to follow along, but for what ever reason you are building and wanting to sell some of your woodworking, then this series is real important to read and understand when it comes to pricing your work.

One of the first things you have to realize when you decide you would like to sell some of your woodworking and especially if you want to sell your work and actually make some money doing so, then you need to know the true cost of building your project.

You may not want to think of your woodworking as a business, but once you make the decision to start selling some of your work, then you are a business and you should treat it as such.

There's a lot of gray area between making a little money as a hobby and actually selling your work and being considered a business, part-time or not. I'm not going to get into that, and if you only look at your woodworking as a hobby and you don't think of it as "making money", then again, there is no reason to worry about how much to charge or knowing the true cost to build it.

Here are three ways of figuring your selling price that will be a sure way to "NOT" make a profit if you do not fully understand what the true cost is to manufacture or build your project. If you simply base it on the cost of materials and nothing else, then you are bond to lose out in the end.

1. Simply pulling a figure from the top of your head or out the crack of your butt, because you can roughly guess what the materials will cost and you think you would like to "make this much" or "you really need the job"! Now that's a losing combination all the way around and sorry if I stepped on some toes.

2. Material cost times 2 or 3 or 4 or maybe even 5. How does this work? I really need the job so I better only times materials x 2, or this guy looks like he can afford it so I think I'll times my material cost x 4 or the best one of all; I want a new BMW, so I think I'll times it x 5.
Bottom line; are you really dealing with any facts or just guessing you are going to make a profit?

3. Pricing by the lineal foot. This way of pricing is usually done by the full time professional cabinet shop, but I have to ask, are they pricing this way because that's how their competition prices their work or simply because it's a fast and easy way to give a quote. All I can say is; if you don't know the true cost of how much it cost to build a certain product by the lineal foot, then at best are shooting in the dark…….and how does that work for custom work?
I could easily add style changes, building techniques and options to at least double the material cost or triple the time to build with most any 24" of cabinet.

From this point on, I'm going to be talking more to the woodworker that is trying to have a side-line business as a woodworker and make some money and to the woodworker that is really considering doing woodworking as a living and trying to decide if they could actually make a living doing so.

I would hope the full time professionals would know their true cost of building a project and their pricing system takes all that in consideration when determining a price, but it's still OK for you to follow along if you would like.

One of the hardest things for a hobbyist to do is to change his/her way of thinking from treating their woodworking as a hobby to treating their woodworking as a business and making a profit.

I'm about to get long winded and cover a lot of stuff. If you start reading this and decide it's not for you because it's too involved and it would take too much of your time to figure all this out, then I understand.

Now is the time for me to be brutally honest and blunt. No pulling punches or worrying if I'm going to hurt someone's feelings. If you want to be lazy or don't want to spend time to really figure out how to figure your cost of building a project and how to price it from there, then I can't help you from here. Now it's time to treat your woodworking like a business or don't bother worrying about how you price things, let's worry about how much it cost you to build it first!.

There are 5 major factors you need to take into consideration to know exactly what it cost you to build a project and how you use that to price your work.

1. Your fixed overhead to run your business (part time or full time , whether doing it at home or in a commercial setting).
2. Your administrative or non-productive overhead to run your business
3. What you would like to pay yourself.
4. What do you expect as a profit?
5. What is your material cost?

I'm talking as a one person shop, so I won't be talking about employees at this time.

You noticed I put material cost last; that's because the first four can add more to the cost of building a project then you might think. So, let's start with #1.

Fixed overhead; Yes I know, as a hobby we let our household budget pay for everything like the mortgage (or rent), lights, water, phone, heat, cooling, insurances, taxes and anything else it takes to run the shop, but you need to change your way of thinking if you are going to treat your woodworking as a business. It's always difficult to separate a business from personal when you operate a business from home.

But even so, you should consider at least a small percentage of your total overhead at home for your business overhead.

I would guess 75% of small businesses run from home are probably not set-up as a legitimate business anyway, so how you handle that is up to you, I'm just saying; if you want to know all the cost in figuring what it cost you to build a project then you should take your overhead into account. If you're a full time woodworker then you already know about overhead.

I'm going to talk about working part time for now, but you still use the same principles when doing this full time.

Just for giggle and grins, let's say your total household overhead is $3,000 a month (including the mortgage, electric, phone, insurances, taxes, internet, etc.) and you only consider 5% of that for business purposes (which is a very modest percentage). That alone is $150 a month. Now let's say you only spend 5 or 6 hours a week working in your shop building things to sell. That's spending about 20 to 25 hours a month working in your shop.

You can do the math, but if you divide 20 or 25 hours you work per month into the $150, you're looking at around $6 - $7/hr. for every hour you're in your shop just to pay that small of an amount towards the overhead. You should be considering that it cost you that much to operate your business from home.

You can run the numbers up and down the flag pole all you want, but the facts are, it cost you something every month to run a business from your house and you should have some kind of a quess-timent what that is! (I know, that's not really a word, but it sounded right).

It's difficult to know exactly what % of your total electric, heat, cooling, phone, etc that you use each month for business purposes when your total utilities are wrapped up in your household budget. Personally, I would ask a CPA what % is allowed as far as tax purposes and figure from there.

As far as a full time woodworker goes, the same principle applies except you have to take your total overhead cost and divide that by the total number of hours you work on the average each month in your business. If you're running a full time woodworking business from home,(160 hours or more a month), you can bet your bottom dollar you are using a lot more than 5% of your total household budget for business purposes.

Again, you should check with a CPA to see what's allowed.

But let's move to the next part; Administrative overhead. This is all cost to operate a business that's not considered fixed overhead.

This changes from month to month and would be things like all your office supplies, computer, marketing and advertising cost, legal and accounting fees, expenses to operate and maintain vehicles and equipment for the business.

This list can go on and on and it's really difficult to put hard numbers to it because it changes constantly. Example; some of your advertising and/or marketing may be done on a monthly basis; like hosting for a web-site and then you may have marketing expenses that come along every now a then, like doing a show or advertising something on e-bay or having business cards printed. You can see how this could change on a monthly basis.

I don't know of a magic number to put to all of those expenses, but I found over the years of operating a full time woodworking business, my administrative expenses ran about 20 % of my fixed overhead.

Let's come back to that in a couple minutes.

Next; what would you like to pay yourself! Let's be honest here, you wouldn't want to work at a regular job having no idea what you would be paid, so why would you want to build something for someone and have no idea what you will get paid?

Pick a number, any number. Would you like to make minimum wage? Would you rather make $10 or $20/hr. or maybe more? That's totally up to you. One important thing to remember here, it's one thing to make an hourly wage working for a company and it's all together different making that same hourly wage working for yourself and no benefits are included. No taxes taken out, no vacation time, no sick time, no health care benefits etc.

But it is like any other job as far as; you may not pay yourself as much per hour to start with but as you gain experience and get better at what you do, you can raise your pay (give yourself a pay raise!)

Moving on; Profit! Every business needs to operate with a profit. If not, a company can not grow or even survive. If you try to do woodworking without figuring a profit then one of two things will happen.

You will never be able to grow or buy a new tool, or upgrade what you have if you don't make a profit in your business. You will be doing exactly the same thing tomorrow as you did today. You will be doing the same thing next year as you are doing today and ten years from now you will still be trying to do with what you have now, or the second thing will occur and that is you will be forced out of woodworking all together.

Again, it's totally up to you what you would like to make as a profit. Did you realize that on a nation wide basis, the average profit margin for a professional cabinet shop is about 15%? That's not a large percentage, but then again, if you have covered all your true expenses and cost, then a clear 15% profit is pretty darn good.

Last, but not least; Materials. This is probably one area you already have covered pretty well, but I will say this; take your time when you are figuring materials for a job and double check yourself.

Don't cut your materials too close, it's always better to figure just a little on the high side then to find out you short changed yourself and you have to buy extra materials to finish a job after you've already quoted a price or even worse; you allow yourself to short change the customer because you don't want to spend the extra money to do it right.
I told you I was going to get long winded! I'm going to stop on this one and the next series we are going to put all these numbers together and see if we can make any sense out it all.

Hope you will come back later today because I'm going to post the next part later in the day. I want this part to be fresh on your minds when I get to the next section, but I want to give you a little time to absorb this first and maybe even take a piece of paper and jot down some of your own figures as far as what you may have as Fixed overhead, Administrative overhead, what you would like to get paid per hour for working and of course profit.

Try to be honest with yourself.
again, fantastic, thanks!
 
#58 ·
Putting all the numbers together (creating a shop labor rate)

How to price my woodworking?
(And sell it) Part 4

Putting all the numbers together
(Creating a shop labor rate)

Shop labor rate; what is that and why would I want or need to have a shop labor rate?

I'd like to take credit for coming up with this, but I learned this from another woodworker and you might have even heard of him; Marc Adams. He's well known for his woodworking classes that his school teaches, but I was lucky enough to attend one of his seminars years ago and this was exactly the topic he covered.

Establishing a shop labor rate helps you be consistent in pricing your work because you have put all the cost factors together in the beginning and you're dealing with facts and from that point on all you have to do is figure your material cost and the number of hours it will take to build a project.

So lets put together some of the numbers we talked about earlier and see if we can come up with a shop labor rate. Please remember this is only an example and you have to supply the correct numbers that pertain to you and your business.

The shop labor rate is based on the first four categories we talked about in my earlier series; fixed overhead, administrative overhead, your hourly wage and profit.

I'm not sure how to condense this down to make it short and simple. I feel like I'm rewriting my book where I covered this in great detail. All I can say is if you have any questions or want to know more about it, just drop me a line and I will be glad to discuss everything in more detail.

So here we go; let's use the figures we talked about earlier and you can add or subtract from there using your own figures;
Fixed overhead; we used a very modest figure of 5% of your total household overhead using a fictional number of $3,000 month for your total which amounted to $150 month for your part of operating your business from the house. Again, you can run these numbers up or down depending on what you feel you use operating a business from home or if you are running a full time woodworking business in a different location then from your home, you have to figure 100% of your fixed overhead.

Administrative overhead; again, I said it was really hard to put a number to this on a monthly basis, but let's use 20% of our fixed overhead as a starting point for this example. That would amount to another $30 month.

Your pay; this is a number that you and you alone have to determine, but let's use $15/hr. for our example here.

Profit; there's a number of ways of figuring this, but I like to figure it up front so I have one basic figure to work with and it's already figured in. Here's one way you can do this.

I'm going to jump ahead a little with our figuring so we can determine a dollar amount for our profit.

Let's take our $150/month for our fixed overhead we used in our example and the $30/month for our administrative overhead and add them together for $180/month. Now let's take the average number of hours you spend working your business and we used 20 -25 hours a month earlier, so we will use that again in our example.

Let's take our $180/month divided by 25 hours a month we work and you will see that it would cost you about $7.20 per hour to cover your fixed and administrative overhead to operate your business.

Now if you take the $7.20/hr. for overhead and let's add what you would like to make per hour and for this example we will say you would like to make $15.00/hr. and add the $7.20/hr for overhead = $22.20/hr. Now if you would like to figure some profit to this, you could add a percentage to our $22.20.

We'll use 15% for our example, which would add about $3.30/hr to our total. This may seem a little confusing right now, but trust me; it will make more sense as we go along.

$22.20 + $3.30/hr. would make your "shop labor rate" $25.50/hr.
You're probably asking why you would want to do all that figuring just to come up with a shop labor rate. Simple, if this is the rate you use every time you price a job you will know exactly how much you will make. You know you would be able to pay all your overhead, pay yourself and also make a profit and that's the key to any business if they want to make any money doing so.

Let's do another example to see if any of this makes sense.

Let's say you have to quote a price to a customer on a project that will take $100.00 in materials and you figure you will have a total of 17 hours invested in getting materials, building, finishing and delivery the project.

2 hours to order and go get materials hardware and finishes
7 hours to build
1 hour to prep for finish
5 hours to finish and do final assembly
2 hours to deliver and set-up

Now, let's use our good ole' multiplier method of figuring our price and let's times our material cost times 4 because we think he can afford that!
$100×4 =$400. Sounds like a money maker there, right?

Now let's use that same scenario using our shop labor rate instead.
Same material cost and same number of hours invested.
17 hours x $25.50/hr (shop labor rate) = $433.50
+ Materials = $100.00
Total = $533.50

Am I over priced? Not if I want to pay all my bills, pay myself and have a little profit for the business.

Facts; Sure you would feel better if you could sell your project for $400 instead of having to try to sell it for $533.50.
Sure it would make the customer happier if you would build it for $400. In fact; if you times your material cost x 3, look how happy you would make the customer!

So if you charged $300 or $400 you would make enough to cover materials of $100 and all the rest is profit…………….wrong, wrong, wrong! Facts are facts and that is; you may have enough to pay for materials and yourself, but there would not be enough to pay for your total overhead or profit and as a business that is not making money or even being able to stay in business.

This all goes back to what I've been saying from the very beginning; you can treat your woodworking strictly as a hobby and let your other job pay for all the expenses of your woodworking or you start treating your woodworking like a business and price your work to make a profit.

The biggest advantage of using a shop labor rate is consistency and accuracy.
You can feel confident when presenting a price to a customer that you are giving them as fair of a price you can and make a modest profit. If a customer begrudges you that, then you are probably better off by not doing a project for them.

There's are ways of adjusting your selling price other than cheating yourself or your business, so before you get your skivvies in a bunch, let me continue on and we will talk about that a little later.

Five Pitfalls that can ruin a woodworking business when it come to pricing their work.


1. I'm new in this business, so I'll price my work real low to get customers and they will refer me to others and I'll build my business from referrals. That's the best way to build my business, Right?
The part about referrals is correct, but getting referrals because you low-ball a price will do more harm then good. Who do you think they are going to refer you to and what do you think their referral will expect from you? That's right, they will expect the same kind of pricing as you gave your first customer and if your first customer comes back again as a repeat customer he will expect the same again.

That's a very slippery slope and hard to stop once you begin pricing that way.

2. Friends and Relatives! It's a lot easier to deal with friends and relatives once you've established yourself as a business, but in the beginning, they can worry you to death and you feel obligated to give them a "special" price. Another words, you work for nothing!
I'm not about to tell you how you should handle projects that your friends and relatives ask you to do, all I will say is you better be well aware that they can suck all the profit from you and even though they will enjoy and maybe appreciate a project from you, you will be the one left trying to pay bills, replace worn out equipment and lose time from your own family.

3. Times are tough and I really need this job, so I'll discount my price to make sure I get it. First mistake; no guarantee you'll get the job just because you priced it making no money. Second mistake; once you get the job, knowing you're not going to make any money, you now have closed the door to being able to actually do a profitable job. Third and most fatal; bad, bad habit to get into, because it becomes easier to sell at a lower price so you begin to use that as an excuse to lower your price each time. I've seen this happen over and over with woodworking businesses. (Ex-woodworking businesses).

4. Changing your standards of quality so you can build it cheaper and sell it cheaper. A lot of businesses do this, but very few woodworkers do it for the right reason and even if they start doing it for the right reason, they fall into a bad habit that will destroy them down the road.
Yes, you can offer your customer different levels of quality at different price points. You let your customer decide where they are willing to compromise on quality or service to be able to save some money, but usually what happens is the woodworker starts trying to second guess all of his customers and starts dropping his/her standards every time just so they have a lower price and an easy sale. I've seen this ruin the reputation of a lot of professional woodworkers.

5. Allowing your competition to set your pricing. Just because the guy down the street will build a project for a certain price doesn't mean you have to price your work to match his. One of the first things I've always told my customers is; I promise you I am not the cheapest woodworker on the block, but I will be glad to put my quality, craftsmanship and service up against anyone.
If a low price is the only thing you have to offer a customer, then you probably won't last long as a woodworking business.

What's even worse then allowing your competition to set your pricing, is allowing your customer to set the price. How many times have you heard a prospective customer say; I've only got "this much" to spend on a project and even though you know there is no way in hell you could build it for that and make any money, you still try to convince yourself you could build it for "their" price. Oldest Trick in the Book! Even seasoned professionals fall for that one and here is what usually happens when they do that……..refer back to #4 and you will begin to understand how that happens. Trust me; the customer still wants all the quality, craftsmanship and service, just at the price they set and you're trying to figure out how to cut corners so you can afford to build it at their price.

I would suggest you read those five pitfalls again and see if you fall into any of those categories. Don't beat yourself up too bad; we all have at one time or another for whatever reason. What's important is to realize they exist and don't allow yourself to aimlessly fall prey to those fatal mistakes.

The main reason most woodworkers go out of business or change careers is they don't make any money. They may use every excuse in the book; like the economy, tired of dealing with customers that don't appreciate quality, tired of the hassle with schedules or whatever, but most of the time the real reason is they don't make money.

Woodworking is fun as a hobby and money is not involved, but woodworking is not fun when all you're trying to do is make ends meet, pay the bills on time and trying to support the family.

I'm as passionate about woodworking today as I was when I started. Has it been an easy career? Definitely not, but it has been very rewarding to me and my family.

For me, the hardest part was to never compromise my standards and hold true to my pricing, no matter what the economy was doing or how bad I thought I needed a job. I'm so glad I did though, because over the years I've seen a lot of woodworkers go out of business because they either compromised their standards or started lowering their prices just to get any job and usually the only thing they did was prolong the agony of going out of business.

I'll write a summary tomorrow, hope you come back!
 
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