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How to price my woodworking (and sell it) #5: Summary

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Blog entry by huff posted 06-02-2013 01:12 PM 2198 reads 7 times favorited 20 comments Add to Favorites Watch
« Part 4: Putting all the numbers together (creating a shop labor rate) Part 5 of How to price my woodworking (and sell it) series Part 6: Correcting mistake to Summary »

How to price my woodworking?
(And sell it) Part 5

Summary

As you’ve probably figured out by now, pricing, marketing and selling your woodworking is not an easy task, but its all part of a woodworking business and something you have to learn and improve upon just like you do with your woodworking skills.

You didn’t learn how to build a square box, dovetail a joint, or finish a project overnight, so you have to realize pricing and selling takes time to get comfortable with and know how to improve your skills with time.

If you learn how to price your work consistently and accurately, you make selling a lot easier. It’s not because you came up with the lowest price (in fact, you may not like the numbers you come up with) but you will know that you have your price figured accurately, based on facts. There’s no way you shouldn’t be able to sell with confidence. Confidence, now that should be your comfort zone!

Even though there’s so much more to running a successful woodworking business then what I’ve covered here, I would like to cover just one more thing before we wrap this series up.

How can we adjust our pricing if we simply use a shop labor rate?

Now you really will have to treat your woodworking as a business. The main things to remember is do NOT screw with the facts! (Your shop labor rate). Sure you can change your pricing a little by adjusting your numbers a little in your shop labor rate, but keep it honest.

For instance, you may be able to lower your fixed overhead by using less electricity, or eliminating an extra phone line or finding a cheaper heating source for your shop, but again, keep it honest. Don’t just lower that figure because you don’t like it!
You could also decide to lower your own pay from say $15.00/hr. like we used in the example to something like $12.50/hr. until you feel a little more comfortable with your work and then you can go back and give yourself a pay raise.

You could also lower your profit margin, but never eliminate it!

You can also find little ways to lower your administrative cost, but I still found that it still averaged around 20% of my fixed overhead, so I wouldn’t look too hard there.
Basically, that’s simply tweaking your numbers and that’s something you should do now and then anyway. Usually the longer you’re in business, the more things will need to be added, not subtracted, so don’t be surprised.

But where your real savings will come into play is like any manufacturing company does.

Materials and Time Management.

Materials; Don’t be stupid and buy cheap materials, but find sources for your quality materials at a better price.

Here’s a quick example of what not to do. We moved from South Carolina to Delaware this past year so I’m new to the area. I had all my suppliers in South Carolina that I could buy the best quality materials at a very reasonable price and even though I can still order on line from some of them, I like to hand pick my lumber and sheet goods and had no clue where to find a supplier here in Delaware.
A neighbor of ours has a cabinet shop behind his house and even though he is fairly new in his business, I thought I would walk over and introduce myself and see if he could tell me a good place to buy my hardwood lumber and sheet goods from.
His answer was; I’m not sure, I buy most of my stuff from Lowe’s. What? He wants to be professional cabinet maker and he’s buying his materials from Lowes. Sorry, but I don’t think he will last very long in this business.

You’ll be amazed on how much you can save on materials if you take the time and find the right suppliers………..Again, do not use cheap quality materials to try to save money, that will only cost you more in the long run.

Build time; This is one area that can really change the price of building your project. (It doesn’t matter if it’s large projects or small).

You will normally become more efficient simply by learning your trade and finding the best techniques to build with. Again, don’t compromise your quality, but find ways to keep your build on an even flow through your shop from start to finish. Whether it’s a new tool that will save time and improve quality, or a jig that will help with set-up time and allow for more accurate cuts, but find ways to improve and shorten each task.


Quick tip; when I first started my business and didn’t have a clue how long it would take to build anything, I actually kept a time card on each piece I built.
I tracked every minute of every phase of the build and finishing. It didn’t take long before I knew exactly how long it would take to build a raised panel door or dove tail a drawer or do a cut list and size parts. I did that for over two years and even though I haven’t used the time cards in years, I still catch myself glancing at the clock when I start a certain phase of a project and check my time to see if I’m still on track or maybe even become more efficient.

An organized shop can save as much time as anything else you can do. If you’re wondering around like a “lost puppy” looking for a tool you misplaced or tripping over a bunch of junk you haven’t taken the time to take care of, then you will be wasting a ton of time.

An organized shop is an efficient shop and a much safer environment to work in. A cluttered, unorganized shop is……….well……………….. a cluttered, unorganized shop!

And the woodworker that thinks you can never have a big enough shop is usually collecting junk and has nothing to do with actually making a living from all that space.

Too much space can be just as restrictive as too little of a work space if all you do is fill it up with junk that has nothing to do with making money at your woodworking. On the other end of the spectrum, trying to make money when all you’re doing is moving things around so you can find room to work can also be a killer of time.

There’s a happy medium and you have to find that. You can organize a small space and make it work for you and you can have an extra large shop and it can kill you.

Another way you can save time is repetitive work, building many of the same items and this usually applies to small items, but it can also pertain to cabinetry also. The more you build one item the more efficient you can become making it. Personally, I hated doing that, because I love custom work and always wanted to make something new and different, so I had to learn other ways to save time.

Procrastination can be a killer on time. I’ve seen so many woodworkers that could take a project from the beginning and build very fast and then all of a sudden they get to a part of the project they either don’t like to do or would rather do something else and the projects basically comes to a halt. They may procrastinate about sanding, or dovetailing drawers, or it gets to the finishing stage and they don’t like to finish or whatever and all of a sudden the flow of the build stops.

Be aware of bottle necks in production and if something seems to take longer then it should compared to the rest of the build, then work on that to improve so it doesn’t hold you up or slow you down the next time

Time Management is the key to keeping your cost in check. I don’t care if it’s wasted time in the shop building, wasting time talking on the phone, wasting time on the computer (oops) or wasting time riding all over creation getting materials and hardware.

Once you understand time and get a good grip on that, you will be surprised how nice it is to use your shop labor rate and figure your true cost and figure your price.

Then when you come face to face with your customer, you can have the confidence to sell your work at the price you would like to and really feel good about it.

The most important thing to remember here; when all is said and done, some times we just have to put our “big boy pants” on and realize we may not be able to make a certain project and sell it at a certain price! That’s a fact every manufacturing company has to deal with every day of their life so don’t kid yourself or beat yourself up so bad!

I didn’t mean to rewrite my book here, but I just thought of one more thing I want to mention.

Earlier in my series, I said you couldn’t sell to everyone. You have to find your market for your type work and price. Here’s a formula I learned years ago and even though it didn’t have a thing to do with selling woodworking, it does deal with sales in general and I’ve found it to be pretty close to our line of work.

What should you expect your % of closure be in selling your work?

Another words, if you talk to 100 serious customers, how many do you think you should be able to sell your products to? Here’s one way to look at it and break it down so you may not feel so bad if you don’t get a sale every time you talk to a perspective customer.
If it’s higher then that, that’s good, unless it’s a lot higher, like I mentioned at the beginning, then you may want to see why. Is it because your prices are too low? Are you giving your work away? And don’t get discouraged if your closure rate is less. All these percentages are flexible, but we have a tendency to only think of price for a reason someone doesn’t buy from us.

I know that must sound weird; worried about your pricing being too low when everyone wants to worry about their prices being too high, but I’ve actually lost sales because I was too low with a bid. (They didn’t believe I could do it for that price).

If you have any questions, please feel free to drop me a line or we can have an open discussion here on the blog or start a new forum.

Relax and have fun! If you enjoy woodworking then you should have just as much fun selling it.

I get as much excitement and enjoyment in pricing and selling my work as I do from designing and building it! Once you put all the figures together and you are dealing with facts, then the rest has to do with attitude.

What did I say in the first part of my series?

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.

A customer can tell immediately if you are not comfortable with your pricing and if you don’t have confidence in the price you’re asking or quoting, so how in the heck can you expect the customer to have any confidence in buying from you?

SALES; now that’s another story! Maybe another series? You tell me.

I can only hope that everyone enjoys their woodworking as much as I’ve been able to.

Best of luck to all!

John Hufford
The Hufford Furniture Group (Retired, but still making saw dust!)

-- John @ http://www.thehuffordfurnituregroup.com



20 comments so far

View WannaBBetter's profile

WannaBBetter

62 posts in 1455 days


#1 posted 06-02-2013 02:33 PM

First and foremost thank you, very informitave blog. You talked about percent closure, is their a number for that?

-- I cut it three times and it's still too short

View helluvawreck's profile

helluvawreck

15782 posts in 1519 days


#2 posted 06-02-2013 02:50 PM

Sounds like some well thought out advice. I know a fair amount about business but I’m not much of a salesman.

helluvawreck aka Charles
http://woodworkingexpo.wordpress.com

-- If a man does not keep pace with his companions, perhaps it is because he hears a different drummer. Let him step to the music which he hears, however measured or far away. Henry David Thoreau

View huff's profile

huff

2804 posts in 1938 days


#3 posted 06-02-2013 03:29 PM

WannaBBetter,

Thanks for bringing that to my attention! I wrote this summary the other day and I have it all broken down, but somewhere between writing it and posting it here in my summary it vanished! lol.

I’ll repost that part of my summary, so I hope everyone will look for my new post, I think it’s some helpful information and can’t believe a lost it.

-- John @ http://www.thehuffordfurnituregroup.com

View MrFid's profile

MrFid

528 posts in 557 days


#4 posted 06-02-2013 03:49 PM

What a great series. Thank you for writing. If you’re offering, I know I’d love to hear what you have to say about sales as well, and I am sure others would as well.

-- Bailey F - Eastern Mass.

View Joe Lyddon's profile

Joe Lyddon

7712 posts in 2705 days


#5 posted 06-02-2013 04:14 PM

Excellent Job!

Thank you.

-- Have Fun! Joe Lyddon - Alta Loma, CA USA - Home: http://www.WoodworkStuff.net ... My Small Gallery: http://www.ncwoodworker.net/pp/showgallery.php?ppuser=1389&cat=500"

View huff's profile

huff

2804 posts in 1938 days


#6 posted 06-02-2013 04:32 PM

Hey everyone,

All of a sudden I’m having a helluvatime (sorry helluvawreck) trying to get this last information posted! lol

Something is not being very Cooperative, but I’m working on it. I guess I’ll just end up with Series #6.

-- John @ http://www.thehuffordfurnituregroup.com

View DocSavage45's profile

DocSavage45

4988 posts in 1495 days


#7 posted 06-02-2013 05:51 PM

Thanks for sharing your knowledge and experience. I’d add that if your business gets on the internet you can have people calling years from the posting.

Thought I would do home repair as a way to make some cash. Posted in yellow pages and in a free weekly where others posted services ( was not free to me LOL!) The major market is 44 miles from home. Did a few jobs and bid on others, but each required travel time. Also might not have a specific tool which had to be purchased locally. The bidding was time consuming and costly. The following year I had a quadrupled cost for liability. Stopped then.

Many years later, still receiving phone calls from out of state companies looking for maintenance services, because I’m on the internet!

I’m looking forward to your marketing methods.

Thanks

-- Cau Haus Designs, Thomas J. Tieffenbacher

View jerrells's profile

jerrells

851 posts in 1537 days


#8 posted 06-02-2013 06:15 PM

Thanks again for a great post

Percent closure – having been in computer sales for 28 years let me add this. There is NO real number. Track your sales and find your closure rate. Now try different things and see if it increases over time NOT over night. It is a number you should know and you should work toward making it higher. However there is a ceiling – somewhere. It could be 15%, 20% or 35% but it ain’t 100%.

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

View huff's profile

huff

2804 posts in 1938 days


#9 posted 06-02-2013 09:54 PM

James101,

I think I’ve always look at my business differently then most woodworkers. That’s why I always liked working with a shop labor rate.

Tracking each job, I soon realized that as long as I figured my hours correctly when I bid a job, then I really didn’t worry about how much the other guy charged. Over the years I saw way too many shops under bid jobs just to get it and then have a tough time (if not impossible) being able to even complete it, never mind making a profit.

It didn’t take me long to realize that too many cabinet shops allowed themselves to get caught up in price wars trying to under bid the other. I’m surprised you had the opposite problem. Everybody wanted to charge more then you. That’s a nice place to be.

My Gross sales changed from year to year, but that depended on the number of jobs sold. You’re right when you said we only have so many hours each year to produce our products, so you can basically only make so much as a one man shop.

That’s why I never wanted to sell my work short. I felt I couldn’t afford to do a job and not make a profit, I didn’t have the time to waste.

-- John @ http://www.thehuffordfurnituregroup.com

View Buckethead's profile

Buckethead

1921 posts in 522 days


#10 posted 06-02-2013 11:03 PM

I don’t build cabinets. I haven’t framed a house in over 2 years (but I have framed hundreds). I have installed millwork and perimeter/floor fixtures in retail remodels.

I fully concur with what James 101 said. I think you might find that most successful companies are not the lowballers. They are figuring the cost of business, inept/unmotivated employees, travel, overhead, materials, administration, sales, accounting, and profit. Not the 7% profit they claim.

I have learned that I can compete with big companies precisely because I’m small, nimble, eager, on site, and have lower overhead.

Give your word, price in completion, keep your word, adjust your pricing for following jobs if needed. Ease your pricing up as you go. Make yourself an integral part of your client’s business models as you can. There is money to be made. Good money. Be a good provider of goods and services. Then don’t forget to pay yourself (raise your prices as the market bears) (side note: currency is less valuable by the day… you MUST adjust accordingly or you will truly regret it) good clients will take a great service at a rock bottom price forever. They will also pay a better rate for your superior services, especially considering the often astronomical pricing of larger providers.

-- Bucket, any person that spends 10k on a bicycle is guaranteed to be a $@I almost started to like you. -bhog

View shipwright's profile

shipwright

4965 posts in 1451 days


#11 posted 06-02-2013 11:24 PM

This has been a great series John.

I’m a retired hobby woodworker now but when I had my shipyard I was building boats where a 5% miscalculation could cost several thousand dollars. I used to quote on a hull, deck and cabin, closed up because that part was pretty much as per the designer’s plans but all interior, finishing and rigging etc. was cost plus. That worked out very well but you really needed to know your overhead and costs and even then swallow hard before you gave the quote. All of the points you make are right on the mark as far as I’m concerned and I’m sure will help lots of people on the other end of their woodworking careers.

Thanks.

-- Paul M ..............If God wanted us to have fiberglass boats he would have given us fiberglass trees. http://prmdesigns.com/

View huff's profile

huff

2804 posts in 1938 days


#12 posted 06-03-2013 12:12 AM

James101 & Buckethead,

I agreee with you; You really need to know your total cost of operating a business before you can even begin to think about how much money you can make.

I find the biggest struggle most woodworkers will encounter is trying to convert from a hobbyist to a business.

Even though they want to sell and make money doing woodworking, they have a hard time letting go of treating their business like a hobby and that’s why I wanted to write this series.

I wanted to see if I could help those that want to cross over or are considering starting a woodworking business to be able to better understand how to price their work.

There’s so many other factors to make a business successful.

Thanks for your input.

-- John @ http://www.thehuffordfurnituregroup.com

View CessnaPilotBarry's profile

CessnaPilotBarry

890 posts in 763 days


#13 posted 06-06-2013 05:25 PM

Nice job on the series.

I concur with all you’ve written.

-- It's all good, if it's wood...

View brtech's profile

brtech

672 posts in 1575 days


#14 posted 06-13-2013 05:59 PM

Most businesses would add profit to materials as well as labor. That’s easy to do, just add your profit margin to your materials costs (15% margin = 1.15 * actual material costs)

Some businesses prorate fixed costs over materials as well as labor. Many of your fixed costs do have something to do with material as well as your labor. It’s harder to do this calculation – usually you need enough history to be able to calculate your yearly materials and labor hours so you can compute a multiplier on your materials and labor.

You forgot the maxim that helps me the most when I’m thinking about underpricing an opportunity:
“You can lose a little on each job, but you can’t make that up with volume”. Underpricing to gain business is, in my experience, roughly never a good idea. You can break even, sometimes, but you can’t price to lose. Sometimes your estimate is off, and you do lose, but never go into a job expecting to lose.

View Earlextech's profile

Earlextech

975 posts in 1343 days


#15 posted 06-13-2013 06:19 PM

I agree with everything above – all very good points. I would like to add one more.

After you do all of these calculations and finally figure out what you should be charging for a project – DON’T IGNORE YOUR CALCULATIONS! I have seen many, many custom builders come up with a $15,000 price only to say to themselves, “Nah, they’ll never pay that” and lower the price even though their own calculations tell them not to.

Pricing has no reality, not if you want to make money. Don’t think about the price and if YOU would pay it. Hopefully you’re working for people with more money than you!

Good luck and keep selling!

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

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