Wholesale pricing

I actually did it the other way around. I set my wholesale first, then I multiply by 1.4 to get my retail. It usually ends up in the 30% GP margian for retailers. Of course, the retailers can sell it at whatever they want.

-- Childress Woodworks

The standard keystone markup is:

Retail = Wholesale x 2

or

Wholesale = Retail / 2

-- Randy, Rustic Artisan, a family tradition. (No PM's - auto-deleted.) - "I am a seeker, not a follower."

Speaking of pricing, How do you guys figure your retail price. I’ve been asked to build two items. The problem is I don’ want to price them so high noody buys them or it scares the customer off. The materials cost is around $80. and it will take pretty much the better part of a day to assemble. If I figure in 8 hours worth of labor it will price it out of sight. I want to make a little bit on the item, and I don’t plan to get rich off of them either. A little help here would be greatly appreciated.

-- There are three signs of old age. The first is loss of memory. I forgot the other two!

If your interested in determining pricing take a look at this site.
http://bridgewooddesign.com/estimator/index.htm

It provides a good starting point to figure out prices based on materials, labour and your mark up.

I buy wholesale and sell bulk orders at my store And for brick and morter I retail about 50%, and online about 25-30%

meaning
Wholesale $100.00
B & M $150.00
Internet $125-130.00

this is about the average. But the nicer the product or better your service changes that. I seen people pay too much because the service was excellent. So don’t set a single price. Adjust with the buyer, and always start high and let them bring you down some. They feel power and buy,tricky little game but it works

All my prices are marked up at different percentages mostly 30%
check it out

-- Woodshop supplies at bulk discounts. www.getneds.com

That’s a nice little calculator that CanadaJeff posted, once you figure out how to work it. I figure the materials required, plus 20% and multiply it times 3.5. I don’t have hardly any overhead, so this works good for me. Some of the items that I make are priced on the “supply and demand” concept, and are price a little higher than the formula that I just gave you, in order to slow down the amount of orders that I get for that item, and to keep the profit up.

-- Tim -- http://tmuli.com

The calculator does work, but isn’t entirely applicable to the typical woodworker. I took the info from the calculator that applies to me and made a spreadsheet that is more applicable to my needs. It works pretty well and allows me to track my expenses.

If you have a board foot calculator too, you can use it to price out jobs before you start.

What will the market bare. I just made a black walnut 8 gun gun cabinet. I had $719.00 into it. I offered it to a friend for $900.00 and he went nuts. Thought I was ripping him off. He refused to take it. I ended up putting it in a store and it sold for $1595.00. You just never know what or how to price them. I know one thing, don’t build for a friend. They think you should work for free.

-- Just believe and God will take care of the rest

Selling my work to friends? Never done that. Woodworking is not a source of income for me. If a friend asks me to build something for them, I keep it simple. They buy the materials and come help in my shop. They take the assembled item and do all the finish work themself. Beyond the materials, the only cost to them is the time they have to put up with me and my bad humor and the time they spend helping clean up when we are done.

-- I love the smell of sawdust in the morning....

Great idea but this guy don’t know a hammer from a saw! I have done what you suggest for some good friends and there is nothing better than the reward you get of seeing them learn and the pride of knowing they helped put it together. I also let a brother-n-law work on the chest you see in the photo with my pic and he has quite a bit of experience in shops. That day he ran his fingers through the blade on the table saw. The blade was only up about 1/4” but it still did a lot of damage. Two years later he has 90% use of all fingers. He is lucky. So I have stopped letting anyone work with the tools unless I know for sure they are safe.

Thank for the reply
Dick

-- Just believe and God will take care of the rest

in my businesses i have been engaged in custom or job shop fabrication for over 35 years and i have never reached a satisfactory solution to the question of pricing work at a wholesale level and at a retail level. perhaps i’ve been naive, but i believe in charging a fair price for our work. what is a fair price? it’s a price that accounts for all the materials including waste and consumables that go into the job, the labor we estimate it will take to do the job and a markup that will cover the overheads and provide a profit that makes sense for me to be in business. if you’re doing the work yourself, you better pay yourself a fair wage just as you’d pay someone to do the work for you or you’ll be out of a job fast. your wife will see to that. i find that if i total up my overhead expenses for a year, divide them out by the number of billable hours we will have in a year (your guys are not going to be productive 8 hours a day, 2000 hours a year), and take that number and add it to the gross wage and add a 15% profit, i get a chargeout rate. add about 30-50% to the materials, i get a selling price. i’m looking for about a 80-100% markup on direct cost. less than that and i’m trading dollars, not making dollars.
now once i’ve gone thru the above song and dance how do i establish two price levels. the only satisfactory way i know is for the so-called wholesaler to give us an order for a single item that is large enough that we can build it more efficiently than we can one off. if they can’t do that then they are a retail customer, unless your marketing strategy says you should take some money out of your pocket and give him a better deal because he’s going to give me lot’s of profitable work in the future.
if you’re selling materials or distributing goods, maybe you can have two price levels, but as a custom manufacturer i don’t see it. our labor costs are so high, comparable to offshore, that there is noway i can discount it for a one-off or double it because i think i can put my hand in his pocket for more. if a customer wants to do business with me, he’ll get the best price i can give him for the amount of work he wants done. and with that in mind, if your customer thinks you’re over the top with your price, direct them to costco or ikea.
there you are; hope it’s of some use and pardon my rant.

-- phil roche, vancouver, canada

The formula link is a good start for people to understand actual costs.

I’d like to expand on Phil’s point of trading dollars for dollars or even worse discounting dollars.

You need to account for your overhead even if you are working out of the detached garage at your house in figuring out if you are making money.

List every piece of equipment in your shop and itemize what it would (will) cost to replace it. If you don’t want to count something in the shop then move it out for room. That number needs to be accounted for over a period of time to replace all of those things. If it is quality, then use five years. So the total is divided by 5 and then the real number of hours you actually work in a year. Phil made good point about that. That dollar amount should be in every hour you are using in the estimate. Even if the scroll saw isn’t being used in every project, it is part of your overhead. Now a lot of real big companies can figure out the unique amortization of each major item, but on a smaller level it isn’t usually viable. Also, as a real business that should be money (not profit) that you put away for that eventual replacement or upgrade. Some would argue that tax offsets should be used in the calculations, but I will leave that for others.

In my case for utilities, I have read my meters for multiple one hour periods when nothing in the shop is operatings and averaged the readings. Then I have designated a period where I read the meter and then turned on the maximum number of things that could run at the same time for an hour. Comparing the two I was able to figure out the hourly utility costs using the monthly billing formulas. Again, this is not profit from the sale.

Most people starting out are discounting dollars in the beginning. Some have a day job that subsidizes. (That used to be me.) Others can never figure out why the bank doesn’t agree with their success in selling. (A good broke friend of mine.) Many accumulated the tools in a prior life and enjoy solvency for some period of time until a major tool breaks. Unless you know where all the costs associated with your operation, you can’t really forcast a profit or know if you can last at it. Being above water can get questionable when the table saw motor goes, the band saw needs new bearings or a larger job being offered requires a wider belt sander.

Steve.

Phil and Steve hit it on the head.
I worked for a Gentleman by the name of Fred Gould, who owns Chicago Blower Corperation. They are the worlds largest manufacter of Industrial Fans & Blowers. To say the least Fred was a rather sharp old guy, I had a world of respect for him. But the most important thing he taught me was you won’t be doing whatever it is your doing for long if your selling $10.00 bills for $5.00.

-- Ed - Milan, IN

That’s putting it about as plain as it can be said. Don’t leave any room for error. Thanks EdC!

-- There are three signs of old age. The first is loss of memory. I forgot the other two!

Phil and Steve have made very good points here. Phil gives you a basis to set your price. Determining a wage rate to pay yourself takes some time to figure out. This has to be determined by many factors related to your location and the cost of living in that area. Determining what it will take to maintain your current lifestyle is critical to determining your wage rate. Remember what Phil said, you are not going to be 2000 a year productive like a commerical shop. I also beleive that your pricing should not be different just because you are full time or part time. I also agree with Dick’s comments on selling to friends. Friends should never determine pricing. I make this a rule for my work when it comes to pricing friends work: Always quote the job as if it was a stranger and make any “friend discount” when the project is completed. If you are not experienced in doing spreadsheets in Excel, Canada Jeff’s calculator might be a start. ....Stock

-- Glen

Wholesale price = volume in my mind, so if they are going to give you a large volume of business where you can use apprentices, jigs and other methods to reduce cost then give them a discount proportionate to the savings. If wholesale just means you are going to do the same work you would do for an individual customer then they would get my full rate. For example if a wholesale customer wanted 10 of the same items i would consider a reasonable discount as I would mass produce the items with helpers, min. setup time and reduced material cost.