# Am I undercharging?



## GregP (Jul 10, 2010)

I've been charging what I believe to be reasonable, fair prices, however I'm currently backed up for nearly 2 years. Which leads me to believe I'm charging too little; anyways here's some of my work and the prices that I've charged for them. Let me know what you think, too high? too low? about right?



Oak bed, charged $500.



Alder table made too look like walnut, charged $50



Custom oak desk for computer, charged $100 (got 25% tip)



Custom folded horn loudspeaker, charged $50 (driver was provided)



Cherry bathroom cabinets, charged $1600



Cherry display case, charged $1500 (Part of the wood and the glass was provided by the buyer)

Sorry if I overloaded with the pictures, I'm just trying to get a better understanding of where to price things. on a somewhat related note, although I've never been commissioned to make a high end item I have made some for myself. Out of curiosity and for future reference what would be a fair price for the following items, each took about 3 months of very hard work.


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## cabs4less (Nov 2, 2010)

if you are backed up then yes you are under charging furniture i do not know about its rates but the bath cabinets were way to low i built a popluar set kinda like those painted and glazed finish for 2000.00 do you have an hourly rate figured up yet

ps if you are trying to make a living off this then (with no offense intended) you need to get faster than 3 months or no one will be able to afford you


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## dbray45 (Oct 19, 2010)

Depends upon your situation, customer base, location, and - what you are willing to get.

I had a friend that was a dbase plus programer (dates me doesn't it) who relocated. In the small city where he came from, he charged $50 an hour. When he relocated to the Washington DC area, he started marketing himself at the $50 and hour and couldn't get any business. We discussed what he was doing and I told him to select 4 businesses that he hadn't spoken with and tell them that his fees were $150 an hour, accelerated programing was $175 an hour (this included 3 hours evening work 4 nights a week).

In one week he had 2 months worth of work at the $175 rate. He could not get any work at $50 because people were not taking him seriously in the new market place.

Moral of the story - depends on where you are. Put different rates and pieces for sale in different markets and test the waters. If it sells at the higher price, keep pieces for that market and have other pieces for different markets. I also learned that you can lose a valued customer pricing too low as well as too high. Having fun yet ???


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## stixman (Aug 26, 2009)

Greg,
I had the same decision to make as you are now facing.

I carve snakes on walking sticks http://www.kywalkingstick.com Kentucky Walking Sticks. I first charged only $150 for each walking stick. Later increased the price to $200. Now each Carved Snake Walking Stick cost $250. I sell fewer walking sticks, but I make about the same money.

Good Luck,


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## lilredweldingrod (Nov 23, 2009)

Greg,
I would say you are low, way low. Setting the price on any contract, written or a hand shake, is a negotiation. Start high and you can lower the price a bit to get the work, but if you start low you can not raise the price.
As for the furniture, you do excellent work, but you are a bit slow. Remember that your speed will increase with experience, so strive for accuracy and quality and the rest will take care of it self over time.
Another thing is for the high end furniture, browse a high end store and see what they are charging and look at the quality of their product. Open doors, pull out drawers and look at how these compare to yours. The prices are right there for you to see. This will give you an idea where to place your prices.
If you are to cheap, people will think your product is cheap as well.
Hope this helps you. Rand


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## DerekL (Aug 18, 2008)

You have a mix of high and low there I think. In particular, you're undercharging on the smaller pieces. The table, desk, and loudspeaker all are at about half (or less) of what I'd expect to pay.


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## ZeroThreeQuarter (Jan 11, 2010)

greg, i think the wording that tips the scales in one direction or the other was the "however I'm currently backed up for nearly 2 years."

if you're REALLY backed up for two years, then yeah, you're charging way to low. Being backed up is nice, cause it means you're busy and not searching for the work, but being backed up too long also means they may go elsewhere and be willing to pay more just to get it sooner.

Two years is a LONG time for people to wait for something they're looking to get sooner.

With that said, theres a quote someone once said "if you're comfortable with the price that you're charging, then it's too low"

Personally, I'd rather be too high and haggle down, then hope that the client will pay me a bonus. The analogy I use is this: a plumber will NEVER come to your house, charge "X" per hour for work and have you say "you know, you're doing a good job.. here's a raise" Just like an employee has to ask for a raise, you have to ask for more. The client won't just give more money cause they feel like it, they'll give it if they're ok with a higher price..

that said, time to raise the prices my friend!


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## ZeroThreeQuarter (Jan 11, 2010)

meant to add:
Greg - I guess that answers the questions that I'd sent you some time ago about woodworking in Spokane


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## Puzzleman (May 4, 2010)

I will say that your pricing is too low. I agree with the above in that if you are backed up for two years and people will wait that long, you are not charging enough. Raise your pricing till you get to the point where you are looking for work, then lower down just a little. By raising your pricing you will make more money doing less work.

Why is your pricing where it is? Have you done time studies do determine the amount you are making per hour? This is an important part of the business. If you are backed up for two years but only making $10/hr, is it worth it? Determine how much what you making per hour and you will know if your prices are too low.


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## rhett (May 11, 2008)

Yes, your prices are too low.

You will find that getting out of the "budget woodworker" catagory will be harder than you think. Raising your price is more difficult than lowering it. Looks like you do good work, get paid what your worth.


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## mattg (May 6, 2008)

??? People always tell me what I want it too much, so I wouldn't know!!


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## TulsaWoodSmith (Mar 17, 2009)

Greg, 
I have to agree with what has been posted above. The prices for the small pieces are too low.

I price my projects 3 different ways usually. a fixed price-turn key. or cost of materials x 4. or cost of materials plus hourly rate. There is rarely more than 3 or 4 % difference between them. Some clients are just more comfortable with one way than another.

My hourly rate is $65 for me and $30 for my assistant. We are accurate and fast. So far every client has come back for a least a second project, so the prices must be acceptable to all concerned

Next week I will post the fotos of an office suite of furniture we built in the last 4 weeks. Granted, we put in some long hours, but I charged almost $18,000 for the four pieces. It tickled the client and it was a good job for me.

Your work is outstanding, Greg. Make sure you are getting what it is worth.
Michael


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## Jack_T (Feb 6, 2010)

The clearest sign that you are way undercharging is that a client gave twenty five percent more than you charged him.

You need to establish a pricing formula as has been mentioned above. In doing so do not forget to include *all *of you costs both the patent and latent ones. The patent costs are the obvious ones such as your materials including such items as paper and ink for your plans, wood, clue, screws, finish etc.). The latent costs are the hidden ones. These include such items as your time spent designing the project and drawing your plans, your time spent in manufacturing the item, your time spent in making the sale and delivering and installing the item, depreciation of your tools (the wear and tear on your tools in making the item), the electricity and oil/gas used in your shop while manufacturing the item, telephone and marketing expenses etc. Make sure you capture every single expense.

Having a two year backlog is not necessarily a good thing. If your clients have actually placed binding orders with you for an agreed upon price, you have assumed all of the economic risk for the transaction. If your costs go up you lose profits.

Your work looks very good, I think you should raise your prices.


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## Gator (May 2, 2008)

Greg,
I have an excel spreadsheet that I use to determine how much you should charge for each project. It is full of formulas, you just enter the information as far as material and time. It is not an exact science, but gives you a very good idea as to where you should be, by calculating all your time as well as material and markup.. I would be more than happry to send you a copy to play with and taylor to suit your needs if you would like.. just email me and I will send it ?
It appears as if you are getting paid for material and most of your time, but you are likely depreciating your equipment at your own expense.

Gator


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## RexMcKinnon (Aug 26, 2009)

I am not a pro woodworker but as a buyer I would say those prices are great. If I was shopping for some of the things you built I would not expect to see these prices unless they were total junk. Which your stuff is obviously not. I say you could double most of your prices and if someone complains then tell them. Go to the big box stores and buy from them and you will get what you pay for. No solid wood, no grain matching, no custom fitting, and everyting falling apart in a few years. A reasonable person will agree with you and then try to knock your price down a little and you should give them a little bit. They walk away thinking they got a deal on a quality piece of furniture and you can eat.

I can't see how you made any money of that table and desk once you calculate, wood, finishing supplies, wear on tools, consumables…

You can say that you are just doing the small projects to be nice, maybe they were for friends and family but these are costing you a lot becasue you are probably losing money and they are not helping you clear your 2 year back log.

I would say slowly start raising your prices and when you hit the point where some customers start walking away you are where you want to be. You don't have to sell something to every person that walks through your door.


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## GregP (Jul 10, 2010)

Thank you so much for all the help guys, it's an issue I was a little uncomfortable bringing up to be honest. I also never meant to insinuate that all those pieces took 3 months just the last 3 which had a bit of carving and I did in my spare time I doubt it would take that amount of time if I was doing it for a customer.

I have been using a calculation for my prices, however it's a simple Material cost+ $10/h which I'm beginning to think is way too low for an hourly rate (perhaps I should raise it to $20 or more?) and I didn't take into consideration the wear and tear on my tools or any of the other little expenses because it's honestly just not something I ever thought about. It also never occurred to me that a low price could actually hurt the perception of my products value. Luckily I haven't advertised my prices publicly yet because I haven't really had to look for sales. I always forget this is a skilled craft and feel like I'm being greedy if I charge what I consider to be a lot so I guess that's something I need to work on getting over.

anyway, I really appreciate all your input and support, I kind of fell in to this business before I got all the details worked out and it really helps to have someplace to get good info about the business, and gator I'd love to see your excel spreadsheet.


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## dbray45 (Oct 19, 2010)

You need to re-evaluate your pricing. There are a lot of things that you are not considering. Every one of the tools that you used for each of these projects are degraded from doing their respective duties. Every blade gets worn, I recently remilled some cherry for a floor (my kitchen) and burned up my router. The replacement, if I were running a business, would be amortized into the pricing for every job it was used. The electric bill is being paid from what you charge, as are medical, phone, lumber, etc…

For myself, after you add the tool expense, you may actually be making a negative income. Lets say that you lost both a tablesaw and bandsaw motors in the same day - working on whatever. If these are commercial duty motors, and they should be, you are out $400 at a minimum, maybe $800 plus down time. Every job that you use these tools should be contibuting to an account to maintain youy tools. Accounting software will account for this, the small business should create a savings account for your replacement. This account should have enough to replace every tool in the shop at least once.

Then there is the eating thing - need I say more? And you want a vacation?

Just a thought


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## dbray45 (Oct 19, 2010)

Look, I know I am being a little hard on you but I am not saying this for just you. I am seeing a number of people that are moving to turn their hobby into a business and the rules are different. In a hobby, the overhead is just something you do and if you have a loss, you fix it when you have time and no harm done.

In a business, every hour that a tool is out of commission, that tool is not making money for you and is in fact costing you money because jobs are not going out. In a one-person shop, this is even more stressed because you are spending your time repairing, replacing, making calls … instead of doing what pays. If, when you work with customers - all of them - and you take a business approach, unless you are giving someone something, you are not only paving your way to a business but building a customer base - and - you are building your tool reserve.


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## huff (May 28, 2009)

Greg,

I think you're on the right track now. Don't be afraid to raise your prices because your work is far beyond that. Remember, you're a professional…......your work shows it….......so don't be afraid to treat yourself as one. If you don't, nobody else will. When I first started woodworking, pricing was a nightmare for me. I didn't have the confidence to charge what I should, and I found myself getting tons of work, but it was mostly average, run of the mill type projects that I felt almost anyone could do. I finally realized that the Custom Shops that were charging $ 50/hr or more seemed to be getting all the big projects. It wasn't that I couldn't build those type projects, it was I was setting the wrong image. That type customer didn't think of me as a high end builder. It was amazing how many jobs I lost because my prices where too low. 
I always like to relate to this story when I see someone struggling with their pricing. I had been in business a couple years and decided to do a Home Show in Raleigh, NC. This Home Show draws about 25,000 people in 3 days, so I felt it would be good exposure for me. I had a small display of furniture I had built and one piece in particular I was really proud of. It was a solid walnut drop front desk that I had built for myself, but took to the show to show my work. I had a price tag of $2,400.00 so I figured that would scare everyone away. At that same show was a Master Craftsman that had some of his work on display and I was so intimidated by his work…........and his prices!. He had a secretary he built on display with a price of $17,000.00.
During the show, he stopped by my booth and introduced himself. He looked my work over and complimented me on my craftsmanship. As he was leaving my booth, he turned around and told me the only thing he saw wrong with my work was I was not charing enough…........he grinned and walked away. I immediately went and took the price tag off my desk and made another on. $4,800.00. Did I sell my desk at the show? NO…......but I got an order to "Custom" build a walnut desk like it, and I never looked back.
That was over twenty years ago and I still have my desk and I became good friends with Norman Journigan until his death 7 years ago. He taught me a valuable lesson. I hope you will take his advice too!
Best of luck with your business and keep us posted on how things are going.


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## Beginningwoodworker (May 5, 2008)

I cant really answer, your question but you do some good work.


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## nate22 (Jul 12, 2010)

Greg,

I agree with the rest of them your prices are two low. I only saw this because I am in the same boat you are. I am tring to figure out how much to charge for my furniture. I found out I wasn't charging enough. Like some of the others said if you charge to low people will think it's cheaply made and they won't want to buy it. And you might get a lot of people say thats a little more than they want to pay so don't let those people get you down. They are usually the ones that go to walmart or some other retail store and buy the cheap stuff. So if I was you I would raise them and if people don't want to pay it it's there lost. But you will get enough people to buy them also.


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## Gator (May 2, 2008)

I took some lessons from a proffessional woodworker that builds very high end furniture. He shared a way to "target" the clients in a specific area with me. In order to ensure his advertising dollar is spent as wisely as possible he makes flyers offering his services to be put out in a mailing list. If you go to your local postal people they can tell you where specific income households are based on zip codes. They gather this information through the census process. You can then specify what area or zip code you want your flyers or mail outs delivered too, thus ensuring a target area of households with more liquid cash to invest in custom furniture. I believe he makes a very good living. This is only one of the "tools" he uses to sell his products. Marketing is by far the biggest part of running any kind of a business, and as far as pricing.. your product is as only as valuable as anyone is willing to pay for it.
One of the biggest threats to anyone running a woodworking business, is the hobbiest who is willing to build for the price of material. These people ( and I do not mean to offend anyone here, as I have a lot of friends that fall into this group - me somewhat included) do not need to earn a living from their craft, they do it as a "hobby" to hone their skills.

Gator


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## CanadianWoodWorks (Dec 29, 2009)

I built the same bed, from the looks of it anyways, built from ash. I figured I would charge $700 but it was for my brother.

Yes I agree $10 an hour is way too low, we charge $30 + $9 for shop + material of course


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## Claymation (Sep 9, 2010)

without knowing more and basing it on my rates and area: I'd say you're way under. I wouldn't have touched the bath cabs for less than 3K. Shop job bid rates are at least 45/hr. 65 if i'm mad or really backed up (i'm usually not mad). Judging from the pics, you got pretty good skills. With a 2 yr backlog! Are you kidding me?! Up your price, man!


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## ChrisForthofer (Jan 1, 2010)

Your federal pieces are beautiful, some day I may attempt one but until my skills are there I'll let you pros handle it  Just from general shopping around for furniture perspective, your small pieces (as said many times above) are quite under-priced. I've seen particle board crap go for what you are asking for the end table and computer desk. Give yourself a raise, you and your skills deserve it.


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## Wood_smith (Feb 12, 2010)

...ditto- too low…way too low on the small pieces!


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## millssnell (Oct 24, 2010)

Man, I am having the same problem. I am a beginner woodworker and most of the cabinets and items I am building now are just simple things that will be painted. I too am lost for price and how to calculate. I am a married college student so I don't want to charge nothing, but I also want to help out my friends!


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## fge (Sep 8, 2008)

I agree you are undercharging, course everyone has stated that already. We also undercharge and are trying to figure out the charge thing. I have been charging for my work for more than 3 years now and still have a problem finding the right price point. I do know where I would like to be as far as custom cabinetry, I think around 200.00 per LF is a nice price point to be at but currently we are no where near that.


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## pcott (Jul 7, 2009)

I know when we doubled our rates for networking analysis and repair, not only did our business triple, but everyone, including the chronic complainers stopped whining about our work.


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## Jered (Sep 15, 2010)

You do nice work. The style of the last two pictures looks very classic Italian to me which is my preference. Classic French is too feminine for me, British too dry. Italian strikes a good balance of decorative but masculine.

Just wanted to post to offer a different way to price things. Figure your fixed costs for one month: business insurance, health insurance, rent, electricity etc. If you own your shop, just figure in how much it would cost to rent it from someone else. Now think about how many pieces of a given piece of furniture or how many lineal feet of cabinetry you could complete in a month. Remember to account for the unforseen set-backs. Now figure in your supplies to build a month's worth of work. Use hard numbers for everything, do not estimate. Figure in every last screw and every last drop of glue. Add 20% to allow for fluctuations in costs, shipping and handling on certain items and gas money to go pick up the supplies.

Now come up with how much money you would like to be making in a month. Add that to the figures you came up with for cost. Now add 10% on top of everything for profit, tool and machinery purchases and maintenance. Divide that total by the number of hours you want to work in a month. That gives you your hourly rate.

You will be surprised how much you need to make in a month in order to compare with a $10/hr job working for somebody else. Sounds like the way you are charging, you are making less than minimum wage after all is said and done.


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## REK (Aug 30, 2009)

Your prices for the bed and bathroom cabinet almost reflect a big box store, yet it is custom made.
On the other hand you have a back log…I think you might want to try to raise your prices slightly,
my suggestion is to give gradual slight increases and see if it effects your volume of sales. I don't know what your bottom line is but most guys go for 50 an hour…sometimes it works out sometimes they lose a little.my rate is 40 an hour.


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## Brad_Nailor (Jul 26, 2007)

I'm no pricing expert by any means, but to look at some of your pieces and see the prices..you are definitely charging too little..


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## dbray45 (Oct 19, 2010)

Bought wood over the weekend, not much - 23 bf of ash, maple, and a couple pieces of walnut. All of it was up 20% in about 3-4 weeks.

As you bid these, make sure your bids are in line with current raw materials. If your backlog is 6-8 weeks, you could easily get yourself in a situation where your materials cost more. If you are purchacing the materials when you get the order, then you are incurring storage for the materials. All of these are factors in manufacturing.


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## Gene01 (Jan 5, 2009)

Your prices are just right if you are an employee! Well, maybe a little high.

Your labor rate+materials (inc. the excess you always figure in)+ shop cost(s) (which include depreciation on tools AND building) + shop profit.

When you have that figured, I'm sure you'll be raising your prices.


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## REK (Aug 30, 2009)

Forgot to mention your work looks really great in the photos. Very refined.


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## LeeBarker (Aug 6, 2010)

I just read all these posts twice. LJ at its best, would you agree?

This subject is dear to my heart. I'm not an expert, just an old guy. I'll make a few comments then a couple things for Greg.

Gator-wonderful offer of the Excel spreadsheet. If that is Greg's language, that will be a huge gift.

Huff-in your post you are giving back to us what Norman gave you. This is a large payment on that debt, would you agree?

JackT-I say +1 on your patent and latent costs post, (though the terms are new to me). Combine that exercise with Colin's succinct description of fixed costs and we've pretty much got Going Into Business 101 covered.

One thing we must admit is that we didn't go into professional woodworking because we love bookwork, bookkeeping, record keeping, keeping track. Let's all say that together. So we're into the hard stuff here. But if you want to chuck up a router bit tomorrow, you've got get this stuff done today.

(As I write this my bookkeeper, who has a key to my shop, is there doing my end of year stuff. I pay her $35/hour. She does what she does best, and I do what I do best.)

I just sent my $50 fee to the Corporation Division of the state to keep my DBA registered another two years. Do the math, Greg-it costs me 2 bucks a month for that.

A number that is valuable to me is 35%. That's the waste calculation I use. So if I am bidding a job that involves lots of face frame rips, or 10" wide 6/4 boards for a table top, I calculate the footage I need, based on available lengths, not the required lengths, multiply that by 135% then mark it up 25%.

Taxes. If you owe them, pay them. Daily is painless. April 14 should be just another day. Can you spell CPA?

Now, homework for Greg: Next three jobs, after you finished but before you deliver: Make three columns on a sheet of paper. Column 1: materials (in dollars) Column 2.: supplies (in dollars). Column 3: your hours.

Add up 1 and 2 and combine them and subtract that from the bill amount. Divide that number by the total number of hours to see what you earned. Oops-haven't taken out the fixed costs yet…

A final thought: You can be in business all your working life and never make an enemy. But going into business to make friends is a huge mistake.

When the shop door opens would you rather hear, "People tell me you're the cheapest around," or "I hear you're the best in town."

Thanks for the OP, Greg, and thanks to all the LJ responders.

Kindly,

Lee


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## Pop (Aug 6, 2007)

I do small work that no one else wants. Replacing runners under drawers, replacing drawer fronts, furniture repair etc. I'm retired and don't need to make a living off my work. I price my work on what the market will bear. Sometimes I'm right & sometimes I lose money on the deal.

I have friends who build custom furniture for a living. Looking at their prices & looking at yours here are my corrected prices for the work you showed us. Bed $900 to $1000, Alder Table $250, Computer Desk $300 to $500, Speaker cabinet ($50 you got to be kidding) $700 to $1000, Cabinets double, You got it in the ball park on the display case. Now about the projects you built for yourself: Chest-of-drawers $3000 to $5000, Side-bar $2000 to #3000, Cabinet $2000 to 3000.

Custom furniture is not cheap. Another couple of points already pointed out by other LJs. 1 - Human physiology says cost equals quality. Ie. the more you charge the more it is considered high-end. From your photos you're high end charge for it. 2- You're labor isn't all that's involved. Your wear & tear on machines, shop maintenance (sharpening those saw blades), and just keeping the lights on. Even the space used is a cost.

The bottom line is you're way low. My idea on the prices I gave are my guesses but I think I'm close.

Good luck

Pop


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## dbray45 (Oct 19, 2010)

A word of advice-IF you raise your prices, there are two ways to do this - and make it work.

Gracefully over time. Post it that due to your overhead - electric, gas, rent, cost of wood, etc … your prices have to increased and post your new pricing schedule - 10%, 20%, etc… This, your customers will understand and tolerate. Calculating and posting your rates - and sticking to them, I have found, some people may walk away for a little time but if your work is sound, they will come back. They greatly appreciate posted rates versus an estimate. It legitimizes your work and the company. However, an estimate based upon posted rates gives you the ability to change your price estimates especially if the customer makes changes to the job.

Restart the business under new management - this ruffles feathers but creates a clean slate.

Planning is the key, the more you plan - for the good, the bad, and the ugly; the better you will be. Same as your woodworking, you have to have an order in which to cut, assemble, and finish your projects, think of the business as a master project and your woodworking as sub-assemblies that hopefully never end.


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