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Forum topic by bhuddah posted 2335 days ago 1525 views 0 times favorited 19 replies Add to Favorites Watch
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bhuddah

26 posts in 2336 days


2335 days ago

Topic tags/keywords: question

For those of you who make woodworking projects and charge for them, what is your formula for deciding what to charge your customer? I’ve been told that I consistently undercharge for what I make. How do you decide what your time is worth, hourly, kind of project, number of items???

-- some days are like driving in oncoming traffic


19 replies so far

View wpreman's profile

wpreman

1610 posts in 2337 days


#1 posted 2335 days ago

That’s a great question! I’ve wondered that myself. I look forward to reading the feedback you receive.

-- Bill, Florida

View rikkor's profile

rikkor

11295 posts in 2499 days


#2 posted 2335 days ago

As a hobbiest, I am “free will offering” and if I am unsatisfied I don’t deal with that person again.

View motthunter's profile

motthunter

2141 posts in 2424 days


#3 posted 2335 days ago

i figure my time, add material cost and then add a profit margin.

-- making sawdust....

View Thos. Angle's profile

Thos. Angle

4435 posts in 2587 days


#4 posted 2335 days ago

I think I’ve given my formula three different times. It’s here somewhere.

-- Thos. Angle, Jordan Valley, Oregon

View Joe Dusel's profile

Joe Dusel

22 posts in 2355 days


#5 posted 2335 days ago

I use two software tools to generate prices for my cabinet jobs. I first design the project with eCabinet Systems software. This not only gives me the design drawings, renderings, cut lists and nest diagrams; but it also gives me a very good estimate for all of the board stock, moldings, sheet materials and hardware that the job requires.

I then plug the materials cost into a spreadsheet where I have various tasks setup. The tasks include everything I can think of from design time to installation. I tend to break things down into dozens of tasks. Here is some of my list – design, purchasing materials, milling, door installation, sanding, line boring, edgebanding, etc. Every time I come up with a new task I just add it to the mix. If there is no time for a particular task I put in 0. I also have it setup to use an hourly rate field, a sales tax field (when necessary), a profit field and an overhead field. Once I input all of my numbers it spits out the job cost.

I find this to be reasonably accurate for me. Of course, it’s best for you to keep a log of how much time it takes you to do various tasks so that your numbers will be getting closer all the time.

Take care,

Joe

-- Joe, http://www.cft411.com

View GaryK's profile

GaryK

10262 posts in 2613 days


#6 posted 2335 days ago

Check out the book PRICING YOUR WORK by Ramsey.

-- Gary - Never pass up the opportunity to make a mistake look like you planned it that way - Tyler, TX

View ATWilliams's profile

ATWilliams

116 posts in 2360 days


#7 posted 2333 days ago

Gary, I have that book as well, good book.

I’ve been in business for a while, and tried a ton of different methods,, the one I use now, is Total time and materials, includeing travel and gas times 2.5 – 3.5 depending on the detail of the piece. Since I do a lot of inlay work , and only one of a kind pieces, I was unable to you use an off the shelf program so I created job tracking sheets similar to Joe above that track every thing in detail, in order to keep accurate records and price all jobs evenly.
Actually, after you have done this for a lot of projects, it makes it easy to give folks ” Ball park” figures on the fly … hope this helps …

-- A. T. Williams Creation's

View Cameron's profile

Cameron

4 posts in 2348 days


#8 posted 2333 days ago

My dad makes cabinets for a living in a shop in his garage, and I think his general formula is usually materials times 5. If it’s something with carving or something else that takes far more time, I am sure he accounts for that, but he’s been doing it for about 30 years, and it seems to have worked for him.

View Dan'um Style's profile

Dan'um Style

12909 posts in 2608 days


#9 posted 2333 days ago

as a hobbiest, I’m happy to make what ever I can. more then minimum wage I hope and enough to keep me wanting to make more.

-- keeping myself entertained ... Humor and fun lubricate the brain

View Slacker's profile

Slacker

178 posts in 2326 days


#10 posted 2317 days ago

I am just beginning my next career as a woodworker, and I have given some thought to this. For the time being, I will remain strictly small time, doing jobs for friends of friends, and so on. I have a job that pays the bills and then some, so I can afford to do woodwork for a small profit while I work it all out.

I could bill by time and materials, but I think that most clients would like to have a reasonably accurate estimate of the job at hand.

I could do the stopwatch thing and measure how long it takes to do this and do that, but that would drive me up the walls in no time at all. It would be a full time job to measure all these times, and I am not that disciplined.

So here is what I have come up with. Simply estimate the cost of materials (the wood), burden it at 25% to cover costs of obtaining the materials and to cover reasonable hardware costs (screws, nails, glue), and multiply it by a factor depending on what you think the client can or is willing to pay, or the difficulty of the project.

Say the client wants a bookcase. I recently built one for my roommate (gratis), and he covered all the materials. The dimension was 32”w x 42” h x 14” d. He paid $125 for oak-veneered plywood and some oak sticks, stain, poly, etc. Using the formula, I would have charged $156.25 for materials ($125 times 1.25). The factor for this project could have been 1.75X (because of the ease of the project), so the cost I might have charged a person who asked for this bookcase would have been $156.25 * 1.75, or about $275. As it turns out, I think I spent 6 hours building the thing, so had I charged for the bookcase, I would have made $20 an hour, more or less.

So, now you have to ask yourself… is $275 too much for a solid wood bookcase? And adjust the price accordingly. Anyhow, this is just a concept that I have not put to the test. For the time being, I dont rely on woodworking to make a living, so I adjust the formula price to what I think is doable.

-- Adapt, improvise, overcome

View Ad Marketing Guy - Bill's profile

Ad Marketing Guy - Bill

314 posts in 2423 days


#11 posted 2316 days ago

Studies show the majority of small business owners undercharge for products they sell or attempt to sell ….If you are trying to sell your products, you must be a business man first and a woodworker second – do NOT let the woodworker talk the business man out of setting prices. While it is nice to sell a project——you are in business to make money——Save your ego for after the sale.

REMEMBER: Van Gough died broke and penniless as has many a “starving artist”

The Artist Builds the Product, The Businessman Sells It, The Entreprenuer Conquers The Market—-You must wear all three of these hats.

The only way to determine your best price is to test YOUR market.

You test by offering a variety of different price points, you will get objective data to work with. You’ll be able to see what people actually do, as opposed to what you think they will do. In other words, testing takes subjectivity out of the equation.

Pricing is set by the market – “what will YOUR target market/customer pay for your products. Studies show the majority of sole proprietors undercharge for their products- they forget many items which contibute to their cost——-overhead (shop electricity, where and tear on equipment, scrap lumber, their time for picking up materials, their time for planning the project etc). They simply look at cost of materials used their time spent and use a “non-descript” markup ….WRONG!

There is one fundamental guideline to testing prices: Keep charging more and more until you reach the point at which people “walk away” (balk). That highest price may not be the best price for you to choose. But you should at least know what the highest acceptable price for your product may be, and then step down to find the PRICE POINT – that will establish market value, regardless of your computed costs—-

Any price over your full burdened cost is considered profit – any below is a loss -no one stays in business for long by selling at a loss.

Start with testing, then follow with analysis

It’s impossible to be sure about the best price point for a product or service without first testing a variety of options. And, as mentioned, it makes sense to find out how high you can push that price.

Then, as with all testing, it’s important to study the results in detail before jumping to conclusions too quickly.

CREATE your Product’s Value to your prospective customer – craftsmanship, design and unique appearness along with quality of materials used – Value Proposition !

Wishing you GOOD Luck in your business.

-- Bill - - Ad-Marketing Guy, Ramsey NJ

View lew's profile

lew

9991 posts in 2380 days


#12 posted 2316 days ago

bhuddah,

Check this link-

At the bottom of the first page is a forum for “Projct Cost Estimator”

Lew

-- Lew- Time traveler. Purveyor of the Universe's finest custom rolling pins.

View FloridaNoCypress's profile

FloridaNoCypress

16 posts in 2321 days


#13 posted 2309 days ago

It’s likely to depend on the type of work you do. Period repros, because of the compleity and the premium placed on accuracy and goodness-of-fit, is something of a high-risk proposition, so you will want to charge more for the piece. This may also be true for one-of-a-kind custom job, even if it is a set of dining chairs; you will want to charge more for the piece or set.

It seems what will keep my prices within range is to get a bunch of furniture catalogs from several different local sources to see what’s charged for major cabinet pieces (such as dressers, headboards/footboards, entertainment centers, etc.), minor cabinet pieces (nightstands, end tables, wine racks, etc). Try to get your catalogs from places you know sell quality pieces, not the termite barf you may find at, say, Pier 1 Imports or World Market or Sauders (sic?).

If you’re thinking e-Bay, go to where furniture and other pieces (again quality, not sawdust putty) are sold. Try to see what the final bid was.

Use Sketchup to design some comparable pieces. Develop a materials and cutting list so you can do some semblance of a material cost estimate. Keep in mind you’ll want to find some wood wholesalers (not retailers) in your area. I found out in my area at least (SW Florida), neither Lumber Liquidators nor Cox Lumber will do. So I gotta keep looking, but since I’m starting with pretty small pieces and maybe outdoor stuff, like benches and tables as well as plant stands, Big Blue or Big Orange will have to do for awhile.

If you’re a one-person shop, there are a few things you probably don’t need. One is all that corporate paperwork headache, not to mention any kind of franchise fees and unemployment taxes you’ll have to pay to the state department of revenue. Basically, incorporation is for those nuts who have lost all perspective and decided that they like the headaches of meeting payrolls, making significant invesmnts in machinery and tools, finding enough room to put all that stuff (and it ain’t the garage or basement or backyard shed), carrying insurance of all kinds, and keeping the bankers happy, usually by opening up a merchant account package where they charge you at least $10 a month for you to have a checking account, etc., etc., etc. Your head pounding yet?

In short, ask yourself, are you a hobbyist whose products have garnered questions about “Where’d you get that piece? Oh, you made it? My God! How much will you sell it for?” Or are you a full-time professional who just happens to like what you do for a living?

if the former, then your price should be something like 2.5 to 3.5 times the cost of materials and supplies (glue, replacement blades and bits, fasteners, hardware, and finish [which I suggest you buy by the smallest unit available, pints or quarts, for that job only). The only finish I’d buy by the gallon is SealCoat.

If the latter, then it’s time to break out the calculators and call in a real hardcore controller-company accountant-industiial engineer type. Believe me (since I was a company accountant) you will not find that kind of person at your local CPA. Look in the yellow pages, under “business consultants”. Call every single one of them, because most of them can’t do what you’re asking for. But you will run into one or two that can. Another good source of real good business consultants is SCORE – Service Corps of Retired Executives. You might find your gem there, for a reasonable fee.

In the past, there have been several different ways to run a professional woodshop. Some succeeded. Some failed. There was, if memory serves me right, the Roycroft community, which was based on some incredibly idealistic model which did not fit in with the larger culture. Again, if memory serves me righ, Charles Limbert ran a shop in Grand Rapids, Michigan. And the Stickley Bros. tried to do their pieces wth hand tools, but found the demand so far outstripped their ability to keep up with hand tools, they had to switch over to machine tools.

Message? Perspective is the key. Good luck.

-- FloridaNoCypress

View Al Killian's profile

Al Killian

273 posts in 2378 days


#14 posted 2309 days ago

FloridaNoCypress, Incorperating is a good way to protect yourself. If someone sues yoou they can only get the contants of your bussiness if you are inc.. For me I do alot of refinishing and try to average around $20 hour. This only part-time and not my bread and butter.

-- Owner of custom millwork shop

View FloridaNoCypress's profile

FloridaNoCypress

16 posts in 2321 days


#15 posted 2308 days ago

Al – Re: incorporating to limit liability to contents of business: Suppose you are the sole shareholder of the business – and that is allowed here in Florida. Other states say you have to have at least three persons as incorporators. There have been product liability cases or negligence which went beyond the “protective veil” of the corporate form. That’s why, whether you are a corporation, you still want to carry that full package of insurance, which includes E&O (errors and ommission) and general liability insurance. And if you meet payroll, workers comp insurance is required under most state laws. As a small business under any form, even if incorporated, if you have to float a loan with the bank, the loan officer will want to see your personal finances as well as your business finances, especially if you are the only shareholder. As with anything you do, you need to understand where the risks are, and work on reducing them by what you do, not by any papers you carry to limit possible liability. That’s why to me, incorporation is a “growth instrument”, not an “income protection insturment”.

-- FloridaNoCypress

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