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View wookie's profile

Pricing Your Work

by wookie
posted 04-27-2012 01:18 AM


16 replies so far

View nick85's profile

nick85

39 posts in 999 days


#1 posted 04-27-2012 02:46 AM

This may not apply directly to woodworking, but the formula I use at work for building custom battery packs is:
(C (cost of cells) + M (cost of extra materials)) x N (number of cells) x 1.5 (general estimate of time) x 1.6 or 1.8 (commercial or retail)

Simplified for your situation, take the amount your materials cost, determine how much time you have exerted and what you’re willing to sell your time for, and then pad it a little to make it worth it. If they are not complicated stands, look decent, and you enjoy building them, I would say $100-150 would be a fair price. More if they are extravagant or custom, less if they are hastily built as utilitarian.

I wish I could say that people are still willing to pay a fair price for good, quality craftsmanship, but most will tell you “I can get it cheaper online” as though you’ve never touched a computer before. However, in niche markets such as yours, and especially if you’re selling in a shop that caters to vintage audio equipment, I think you could do quite well. If you have the skills to do so, maybe have the shop owner advertise for you to build full custom enclosures and cabinets. There is a large market for well built, mid-century vintage pieces.

Just my thoughts. Good luck!

-- "I suggest a new strategy, R2: let the Wookiee win."

View Lee Barker's profile

Lee Barker

2169 posts in 1603 days


#2 posted 04-27-2012 04:27 AM

Nick’s got a nice formula there, but I don’t see profit. It should be a separate line item, a percentage, and that money means that your business can thrive and grow. If that’s not there, why do it.

Here’s another one:

Material cost + extras cost x 125% plus (hours times your shop fixed costs/hour) plus your labor rate x hours = $123.45. times your profit percentage, say 114%, = selling price.

Your fixed costs should include rent, utilities, insurance, licenses, taxes, tool maintenance and supplies such as stain and glues. And I may have forgotten some stuff there.

Kindly,

Lee

-- "...in his brain, which is as dry as the remainder biscuit after a voyage, he hath strange places cramm'd with observation, the which he vents in mangled forms." --Shakespeare, "As You Like It"

View richgreer's profile

richgreer

4525 posts in 1827 days


#3 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.

View wookie's profile

wookie

154 posts in 1836 days


#4 posted 04-27-2012 02:16 PM

Thanks Guys,

I knew this was a little complicated, but as usual, got some great ideas from you all. I am going to sit down here with pen and paper and give her some more thought. You would hate to work for 4 bucks an hour or anything like that to keep your price affordable. All I know is if I ask someone for their service usually have to pay though the nose for that. Of course this is my hobby and I do enjoy it. Still, time is money.

-- Wookie=Wood Rookie

View Lee Barker's profile

Lee Barker

2169 posts in 1603 days


#5 posted 04-27-2012 03:08 PM

Thank you for hearing us, Wookie. It’s not the kind of question that gets a two-line response, like “two coats of poly. Be sure the stain is dry.”

Rich, thank you for underscoring some points I made. I take issue with your idea of profit being equatable to risk. Or better, I absolutely agree with that, and being in business for yourself is risk enough to require profit from every job. Let me illustrate.

Profit is what lets you bridge gaps. Suppose Wookie has a contract to deliver another set of custom speaker stands by May 1.

Suppose he has spent the last two months building similar product under similar conditions, and now his springtime allergies kick in, and he’s useless in the shop for a week. He has nothing to fall back on. He may be unable to meet his fixed costs this month. Profit would have prevented that tragedy.

Again, suppose Wookie is perking along making these contract jobs with no profit in them and he peeks at CL one morning and there by golly is an Onsrud Pin Router for sale, in the next block over, for $150. Because he has been working for net, he has not one cent available to him to take advantage of this opportunity for his business to grow.

And finally, suppose Wookie has been building speaker stands for six months, spec, with a realistic profit figure built in. All his dreams have been realized and things are going fine. His product, process and business procedures have all improved.

Now someone comes along and wants three sets on a contract basis, so he bids them with no profit.

Suddenly he finds himself working away at the shop, doing what he loves, but for less money than he was getting last week. Tell me what you think will happen to his attitude and, by extension, his productivity and his relationship to this job and this client.

There should be profit in every job.

Kindly,

Lee

-- "...in his brain, which is as dry as the remainder biscuit after a voyage, he hath strange places cramm'd with observation, the which he vents in mangled forms." --Shakespeare, "As You Like It"

View Loren's profile

Loren

7826 posts in 2400 days


#6 posted 04-27-2012 04:54 PM

$20-$25 in materials per stand and you want to sell them for $100/pair?

I wouldn’t even consider it, personally. Woodworking is really not that
fun when you are making the same thing over and over.

General rule of thumb is you’re not getting at least 6X the material
cost in what you sell it for, it better be a real simple product like
an 1-piece incense burner. If the market won’t bear the price
of the product at at least 6X markup, I’d look for another product
to make. There are certainly ways to make some money at
woodworking but in general making the lower-priced version of
a commodity product for retail stores is not it.

-- http://lawoodworking.com

View wookie's profile

wookie

154 posts in 1836 days


#7 posted 04-28-2012 05:25 AM

Lee and Loren thanks again for your input. Maybe I’m having delusions of grandeur or putting the cart before the horse, I don’t know. But it does give a guy something to think about. Hopefully at the least the one set will get my receiver repaired and I can enjoy it and my JBLs on my new stands :)

-- Wookie=Wood Rookie

View Rick M.'s profile

Rick M.

4508 posts in 1133 days


#8 posted 04-28-2012 08:02 AM

When you’re talking manufacturing (as opposed to custom work), pricing your work is working backwards. Determine the market value of your work before building it then figure out if you can build it profitably. You can buy laminated particle board stands retail for less than $50. Cheap hardwood stands for less than $100 retail. My guess, if the shop owner is interested, he will want them for about 50% of retail so you’ll have to find the retail value then work backwards to see if you can make money.

-- http://thewoodknack.blogspot.com/

View MoshupTrail's profile

MoshupTrail

299 posts in 1233 days


#9 posted 04-28-2012 11:30 AM

Two extremes in pricing strategy:
Prices of commodity items (common items, lots of options and alternatives for the buyer, easy to make, etc.) must generally be priced at “cost plus”. So that’s what a lot of these “formulas” attempt to do. They start with cost and work up until you get to a price that includes some acceptable level of profit. But watch out! If the other guy can make the same thing and sell it for less, yours will sit on the shelf. So these are generally low margin items that you’ll need to make a lot of to make money.

On the other end of the spectrum are one-of-a-kind items. Artwork. These are much more difficult to price. You’ve got to figure out market value as: what would a buyer be willing to pay. What a lot of people do is search eBay or other auction sites for a similar item. Artisans at fairs “just know” from experience what someone would be willing to pay. It’s usually going to be high. After all, it’s art, and there’s no identical item available. People are willing to pay extra for something unique and beautiful.

So where do you think your speaker stands sit in that spectrum?

-- Some problems are best solved with an optimistic approach. Optimism shines a light on alternatives that are otherwise not visible.

View wookie's profile

wookie

154 posts in 1836 days


#10 posted 04-28-2012 01:38 PM

My stands are definitely not art. Maybe an alternative to the cheap overseas made stands you can buy online. They are handmade and made local. I, myself, would not be comfortable with my priced speakers setting on particle board. Maybe other clients of the shop might feel the same way. Thanks for your input guys.

-- Wookie=Wood Rookie

View Sawkerf's profile

Sawkerf

1730 posts in 1821 days


#11 posted 04-28-2012 01:44 PM

They are handmade and made local.
That will appeal to some folks, but it limits your market.

I,myself would not be comfortable with my priced speakers setting on particle board.
Why not? Particle board is very stable and plenty strong for this application.

-- Adversity doesn't build character...................it reveals it.

View wookie's profile

wookie

154 posts in 1836 days


#12 posted 04-29-2012 05:05 AM

Sawkerf, points well taken. My JBLs are 44lbs. each. Like I say, if they can get my receiver fixed, I’ll be more than happy with that. He charges $75 right off the bat for servicing.

-- Wookie=Wood Rookie

View derosa's profile

derosa

1557 posts in 1588 days


#13 posted 04-29-2012 05:59 AM

I’m trying to figure out Lee’s pricing and all I can think is that it will way overprice something
Material cost + extras cost x 125% plus (hours times your shop fixed costs/hour) plus your labor rate x hours = $123.45. times your profit percentage, say 114%, = selling price.
I’m trying to figure out how the 125% that multiplied to the materials and extra costs isn’t the profit. Seems like multiplying the whole formula by the 114% just results in multiplying profit x profit and that makes no sense to me.

Basics at the bicycle shop are
parts plus materials X 2 + labor rate x estimated hours. The labor rate takes into account the pay, income tax/ssi, utilities and costs to keep the shop open per hour. Roughly 70.00 an hour. So there is no profit on labor, more of a breaking even with all profits made on materials/parts. When dealing with very low cost items they may be marked up several times to increase the overall profitability.

-- --Rev. Russ in NY-- A posse ad esse

View Lee Barker's profile

Lee Barker

2169 posts in 1603 days


#14 posted 04-29-2012 04:17 PM

Hey Russ—

I’ll try to sort that out more clearly. It’s a classic run on sentence, that’s for sure.

The 25% markup on materials is for handling, driving to get them, sorting, stacking, shopping hardware on the web, that sort of thing. It’s the time involved in getting the stuff into a pile that will become the project.

Next is fixed costs. I figure this out by calculating what I would pay at the end of a month if I just came in and turned on the lights and flipped a few motors on and off and cranked the heat up for a while and heated some water and pressurized some air, being insured all the while. I divide that monthly figure by the number of productive hours I average in a month. This gives me the fixed costs per hour.

My labor rate per hour is a separate number, or at least starts out that way. What I bring to the table, in other words. What I need to live on plus something to reflect my experience and training.

I end up with those two numbers—fixed costs/hour and labor/hour—conflated, but I think it’s best to work them out separately.

So there’s the hard cost of the project: materials, fixed costs, labor. The profit figure then is a function of that total. If it’s 1%, I think that’s worthy and good discipline. There’s a number larger that should be your target, but because of the nature of craftsmanship the actual number will vary from project to project.

Please let me know if that helps or just confuses.

Kindly,

Lee

-- "...in his brain, which is as dry as the remainder biscuit after a voyage, he hath strange places cramm'd with observation, the which he vents in mangled forms." --Shakespeare, "As You Like It"

View joebloe's profile

joebloe

157 posts in 1047 days


#15 posted 04-29-2012 07:44 PM

The way I do it is simple 3x the cost of materials plus 30%,it works for me,but I’m not trying to make a living at woodworking.

View wookie's profile

wookie

154 posts in 1836 days


#16 posted 04-30-2012 04:57 PM

John,I”m not trying to do that either. Believe me it”s a good thing I have a day job! Looks like about $100 a piece with your formula. Like your entertainment center. Like I say, don’t like that pressboard either.

Thanks,

Jack

-- Wookie=Wood Rookie

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