Reply by richgreer

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Posted on Pricing Your Work

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4541 posts in 3099 days

#1 posted 04-27-2012 12:05 PM

Let me preface this by saying that I do not try to “make a living” with my woodworking. I’m retired from my profession (I was an actuary) and most of my woodworking is done for myself, for gifts or as voluntary work for my church of some other charitable cause.

There was an exception recently when I built deck for a friend. She insisted on paying me the “market price” for my work and I accepted about half of the normal market price (because I was helping a good friend).

Despite the fact that I don’t “make a living” in woodworking I will comment on the subject. In my opinion there are 4 basic ingredients in a pricing formula: materials, overhead and maintenance, labor and profit.

The cost of materials is obvious.

Overhead and maintenance is more difficult to quantify and most people throw in some arbitrary factor. Nonetheless, the cost is real.

Labor and profit are 2 different concepts. I believe you should pay yourself X dollars per hour.

Lee pointed out the need for an explicit profit component (in addition to labor). In my opinion, profit comes from taking risks. If you are building something without knowing, for certain, that it will sell, you are taking a risk and you need to be rewarded (i.e. get a profit) for taking risks. By contrast, if you are doing a contract job and you don’t have to worry about making a sale, you have very little risks.

I know a general contractor that builds houses. He builds both custom houses per a contract where he has a guaranteed sale and, when times are slow, he builds spec (speculation) houses that he will put on the market after they are built. With a spec house he is taking a risk. He does not know, for certain, that he can sell it for the desired price. He told me that he always prices his spec houses about 10% higher than if he had built it as a contract sale.

-- Rich, Cedar Rapids, IA - I'm a woodworker. I don't create beauty, I reveal it.

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