I’m dealing with a situation within my custom cabinetry business that is causing a decline in actual customers. My estimates are too high and they are driven by the cost of materials,and overhead. I basically multiply the cost of materials by 3 to arrive at my fee. I have spoken to others that use a factor of 5 to arrive at their fees.
I’m wondering if there’s a better way to arrive at my fee. I’m losing time and money by doing free estimates and not succeeding in getting the business.
Should I charge for the estimates which includes an isometric drawing of the project? I can use some suggestions on the way to do this.
Thanks
Senor Dorado
Replies
Senor Dorado: I have had a few sales jobs in my time and have learned to be comfortable saying some version of the following," I am willing to go back to my shop and try to design a solution to the problem, (or do a drawing, or work up a detailed estimate) without charging you for the time. All I ask is that you give me some idea of what your budget is, so that I am not wasting your time or mine. I don't want to design a Chevy if you want a Cadillac, or vise versa. I ask that either you tell me in some detail what you want me to build, (in which case you should be able to look at your labor, as well as materials and be more accurate) or tell me what your budget is for this project."
Surprisingly, lots of people will comply in a positive way, so that you can leave with an idea of what they want to spend, and detail the project accordingly. Or, it may be a good way to find out that they are only "kicking the tires" and there really is no viable project to be had, saving you a lot of time and disappointment. Many people who don't have a lot of experience buying custom work have an unrealistic expectation of what it should cost.
Asking for even a nominal fee for design and drawing is a good way to qualify the customer. If you don't value your time, the customer won't either. I know that it's not always easy, but I have found that the more detailed I am in my presentation, about the price, the terms, what I plan to do, and any contingencies that might arise, the more my good customers relax and we have no problems. No one likes surprises, so I try to anticipate things that might come up and get them out in the open early. And doing that makes you more professional, and justifies your price to the customer, even if they might otherwise consider you high.
Good luck.
Bob K
Bob K Thanks for your thoughts. There's a lot of good sound experience in those words. I guess the hard part for me, which merely means sitting down and taking a closer look, is having a more exact idea of how much labor a project requires and being able to place a rate charge that accurately reflects my expenditures on the project. This will come with experience. Your suggestions of being more informative,detailed, and open during my presentations are great, there are times when the customer gets their thoughts out and then are either not interested in hearing my side, or in a hurry to end the appointment. I do try to be patient yet some what aggressive with a professional touch. There has been times when a couple gets into a disagreement argument and I turn into a guiding light with a hazy concept of the project. It's not easy! My drawings are very detailed and scaled with the use of Auto Cad which gives me a more accurate area to estimate materials with. A rate of $20.00 an hour is my idea of proper compensation, since a lot of the design and thought is involved. Your thoughts and or suggestions are welcome.ThanksSenor Dorado
I've been reluctant to contribute in this thread Senor because I didn't wish to give the appearance of blowing my own trumpet. However, your second response seems to suggest some inexperience on your part in the estimating game.
With that in mind can I suggest you try and pick up the current issue of Woodwork, December 2006 if it's available in your area. In it you'll find one of my bits of verbal diarrhoea on estimating for furniture makers. You might find it useful.
I've no idea where you're based of course, but I do wonder if $20 an hour is enough. Three years ago when I had my furniture business in Houston I reckoned my overhead was about $12 an hour based on a 40 hour work week. Then you have to bear in mind that most small one man business people only spend about 75% of their time on billable activities, i.e., making products they charge customers for. That $20 per hour might soon look inadequate if you were to undertake a proper examination of your overhead. I can't tell if you've ever done that.
Still, if your direct material costs for a job are $1000 and you're charging $3000 for the completed job, which is how your opening post describes your estimating method, I do find it hard to work out where you're getting any profit. After all, direct materials should be marked up for resale, and this is typically between 50% and 100%. If you're not marking materials up for resale then you are, in fact, taking a thumping great loss on every resale of goods to your customers-- materials don't get to your workshop for free. You'd have to make up for that loss by charging for it somehow in your labour rate. At $20 an hour there's nothing there that suggests you're making up the loss that way. Slainte.Richard Jones Furniture
$20.00 per hour???? Wow, in my world that will not even buy the gas for the truck, much less insurance, debt retirement, utilities, etc. I don't know where you are at, but if it is any place that has a market for a custom shop, you are at about a third of the rate you should be. If you want to make $50,000 per year in your pocket, (taxes not withstanding), you will need to revenue at least $125,000 through your door, depending on your various overhead loads.
SD: One other thought. It is tough for most of us to accurately predict labor hours. I deal with it by thinking in terms not of hours, but of days and partial-days.
For example, I might figure a day to layout the job, gather materials, source hardware, clean the shop before I start, maybe rough out the pieces. Then I'll figure I need to charge $400 per day. The next day might include milling lumber, cutting some joints, rough mock-ups, etc.
The thing is, if I'm off a little, I can work a little longer and still be somewhat even at the end of that day, if you get my drift.
I think that if you try to be too detailed, you are almost certain to miss something. Get close, then sell yourself on quality rather than price. Good luck.
I have never given a bid that wasn't figured on how much time I think it will take me to do the job multiplied by my cost of doing business.
My cost of doing business is paying for shop, tools, supplies, lights, insurance, what I want to make an hour; plus the cost of materials. On top of my cost I add my profit.
Materials cost multiplied sounds like a crap shoot to me.
Cost x Multiplier is a very inaccurate way to do business. You'll need to know your value on labor hours per job, to competitively price work.
And add overhead and profit, as suggested.
If you charge for drawings, let clients know it'll be applied or reduced from the job. But I don't leave drawings with them, as sometimes they'll shop it around to beat your price.
The problem with using such a multiplier is that even if the relationship between labor and materials was once sensible, as time passes it gets less so. A $10 hinge doesn't take longer to install than it did when it only cost $2. Why charge much less for labor to make a pine cabinet than a cherry one? Using a simple multiplier creates a relationship between labor cost and material cost that doesn't reflect reality.
Everone who operates any sort of business needs to know what it costs to operate. Some sort of software like Quickbooks can be helpful, but even if you just keep track of expenses on paper, you will get a sense of what you need to charge to make a living.
Edited 10/7/2006 11:18 am ET by smslaw
Hi Senor ,
The answer to your questions largely depends on what type of work you are bidding on . Kitchen cabinets and case work are bid differently than free standing fine furniture . Were you getting bids before but not now ?
I totally agree with Jackplane , I NEVER allow a drawing to leave my possession until we have a deal and a deposit is secured . They can easily take your plan and design and shop it with your competitors . Much of the work is done at that point and the next person to look at it may be more hungry than you .
Also the customer can ask if they can beat your price or a price lower than you actually gave .
Case work bid by the foot either square foot or lineal foot so much per drawer and so much per door is a very consistent method . The cost of materials plus so much per hour including overhead and profit can also work well .
3 times or 10 times materials can be way off and imo is not a consistent method , especially for case work .
good luck dusty
Sorry I haven't gotten back to you sooner. I'm really just at the beginning of a second career. The bids and estimates are coming one by one and I have only done one large project which took me several months to complete in my small basement shop. Thanks Senor Dorado
Senor Dorado,
In one of Jim Tolpin's books he recommends following the Detroit auto maker's lead. He shows his potential clients a "base model" along with a price list for "options". When the people see how little it costs to add this feature or that feature, he finds that he frequently gains the business.
I think that it has something to do with giving the customer a sense of control in the process.
Monte
At 3X cost of material I wouldn't make the cost of my overhead. I suspect that there is something else at fault.
sapwood ,
Wow you must have a very high overhead .
Dusty and Ring:I don't have appreciably high overhead costs, but perhaps I have relatively low material costs for what I do. Using Richard's figures of overhead at $12.... this equates to $1920 per month. At 3:1 ratio this leaves $480 for material for the months work with nothing left over to eat on. Now I have easily spent four weeks working on a custom piece that had a material cost in that range. Fortunately, I've sold those pieces for much more than $2K.
I'm with you Sap. I just delivered a job today that had material only being 12% of the cost.
Surely sapwood if you you use $12/hour as overhead for a 40 hour week you mean there's a monthly overhead of $2080, and not $1920?
Perhaps you're inadvertantly using a 48 week year?
On a semi-related and funny side note I had a potential employer try and work an interesting flanker on me. He wanted me to run his workshop. In explaining the wages he was offering he said, "That's so much an hour X 40 X 4 X 12, and that's what you'll earn a year, plus overtime. But you'll only earn overtime if you work over 45 hours a week. If you work 43 hours there's no overtime payment for the three hours."
When I asked about the other four weeks in the year, he got all mumpy and said something like, "Well, you're awkward being like that about it." I didn't think I was being awkward because as far as I know there really are 52 weeks in a year.
Needless to say, I didn't take the job which was offered to me. Jings, if the guy wasn't willing to accept the 52 week year, what else would he deny? Perhaps, after all, the world really is flat, and I missed it, ha, ha-- ha, ha, ha. Slainte.
Richard Jones Furniture
Edited 10/10/2006 3:24 am by SgianDubh
Yeah, yeah..... OK you got me on that. I was in the simple train of thought: so much per hour, 40 hours a week and there's 4 weeks per month...... which we all (with the exception of the dumb bunny you interviewed with) know is approximate. But then I was using your $12/hour number also so that ought to tell you I was just trying to make a point..... blah blah blah... OK, I goofed, no more excuses. And I'm am really good at math.... honest.So now with more or less fixed costs for rent or mortgage, insurance, trash removal, snow removal, etc...... all those things that will be so much per time period no matter how many hours a guy works. Does ones overhead per hour go down when one figures that most in business for themselves work more than 40 hours per week? Excluding the obvious additional cost of electricity for lights, motors, coffee pot, etc.
Ah, sapwood. It depends on how you slice and dice the numbers of course. I'd say the most logical way is to assess the overhead for a years trading and then carve it up into convenient units. This may be into a months trading, a week, a day or an hour-- whatever works best for your business.
For instance, you could use a rate per day for overhead, then work out how long a job will be in your workshop and apply the day rate to the charge to the customer. If you have two or three jobs on the go at once it could get a bit tricky apportioning the right amount of overhead to a particular project, but you'd have to find a means.
I've always found it convenient to attach the overhead into the hourly rate. I know other people do it differently, and their method works for them. And that's what really matters. Slainte.Richard Jones Furniture
It's very misleading to make generalizations about these things. For instance, my overhead includes the costs of renting industrial space, which is a large outlay. Others may own their building outright. Also the amount of subcontacting you do will affect your "material costs" substantially. Doing subcontracting effectively shifts labor costs into materials. And so on and so on. Certainly the type of job will change the figuring, even for the same shop. That said, I can tell you that at the end of the year my shop's expenses break down as follows: (as % of gross income)-
35% material costs
35% labor costs
15% overhead costsWe never price things by a simple multiplication factor, but rather figure materials and labor depending on the type of job. Even kitchens, which are our bread and butter, are never sold by the meter (or foot, if you want). We price them by analyzing the elements that make it up. I believe that the kind of % breakdown I quoted above has its usefulness, but not for setting prices.Just my own experience...DR
I hope you're kidding about that. I have relatively high overhead but can't imagine it reaching the level of material costs.
DR
Hi David ,
After looking at that statement from sapwood , it simply did not add up to me . Perhaps his shop is on Rodeo Drive in Beverly Hills .
In all honesty a 33 to 40 % cost factor is fairly standard in my shop for quality cabinet work .
I am not buying those figures and am glad someone else is doubting them .
Shalom dusty
One can argue about an appropriate way to formulate bids. But I can comfortably say that if at three times cost you are losing work then you have a tough row to hoe in your part of the world.
Three times raw materials, especially when the raw materials are mostly sheet goods, is not nearly enough for custom cabinet work (I am assuming high-end custom kitchens and built-ins).
Most of the custom kitchen guys I know are driving decked out F-250s and their wives are in brand new Suburbans if not a BMW. And they turn down work right and left.
Maybe you need to tell us a little more about the jobs you do.
If you do great custom kitchens and other such work you ought to be on your way to being pretty darned comfortable financially.
Sometimes you need to change your approach. In the business you're in, you are trying to cultivate a reputation of being the most expensive but the best builder in town. Let the folks on too tight budget look elsewhere. But be warned, you have to be able to walk the walk. You must be thoroughly professional from the get go. If anybody gets a whiff of 'pickup truck' builder you can forget it.
You can't call on Muffy and Buffy whilst sweaty, stinky, and driving a Fred Sanford-grade truck.
Edited 10/9/2006 1:42 pm ET by TaunTonMacoute
I am pretty much a novice at the wood working business. My projects that I've constructed for customers are small entertainment centers and a large display bookcase with underlying cabinets. I have done several design drawings for built in furniture and cabinets with doors and drawers. My customers are mainly folks that have bought a home within an Adult Community and are seeking creature comforts away from the basics of a major real estates developer's concept of a home. This is where my estimates seem to be too high. After reading through all of your responses I'm getting the hunch to change my customer market.I am located near Long Beach Island NJ where the real estate market is in the millions. Many builders within the area make their living from these summer residents and do very well. While talking to builders it has been suggested that I do some bullet board advertising in one of the major lumber dealers to get my name out into the community. Like I said above, I'm just playing a hunch here.I have never done any kitchen cabinetry, but I'm pretty much open to any and all projects. This is my start on a second career since being laid off from the Nuclear industry 6 years ago.You mentioned being able to walk the walk and being the best custom guy in town. I have a small shop in my basement and the ability to develope my woodworking talents. My task at hand is to find a way to gain experience and be the best I can.I hope I have filled in some holes and answered your questions. Thanks Senor Dorado
Go Here:
http://cwbmagazine.com/ME2/Audiences/Default.asp?AudID=8B8139CAF1B44057A08A43CDAA885CA5
Nice link! Thank you S.D.
I dont know any successful shop that uses the materials x 2, 3 or 5 method. That is horribly inaccurate. Cost per foot with standard material allowances is the most common practice. In other words look at past jobs that were comfortably profitable and figure out what you cost per foot is on each job. Then subtract the materials on every job and average the materials cost, and seperately average the non-materials cost (labor, overhead, whatever just average the whole thing togather). Now you have two importaint numbers; your average labor per foot and your average materials per foot. If you know that maple costs you 60% more for the materials or premium hardware adds $20 per foot, then you can modify the materials amount. Same with labor costs like adding mouldings and trim or working 3 floors up in a office bulding after hours. I use the foot price method for a accurate ball park figure, then if the price seems feasible to the customer I design the kitchen and figure all the material costs and look more closely at the specific challenges of the job and weather I will build doors and drawers in house or out source them and anything else that makes the job easier or harder. Then I bring them drawings (CAD) and a contract stating the actual cost. We discuss the details and any changes in the layout and if we agree on the specifics and costs they sign the contract and put 10% down and I let them have the drawings. From there we are really talking about invoicing practices which is another subject.
Pardon my spelling,
Mike
Make sure that your next project is beyond your skill and requires tools you don't have. You won't regret it.
I successfully use cost times a factor but I don't do bulk cabinetry. It works great when the multiplier is ten++ on solid wood. Funny thing too, I haven't met a client yet that wants a highboy built with Poplar or Pine, so the 'low cost wood, high cost construction' issue is, well, not an issue.
It's not the method to use when sheet goods, bulk cabinetry, and a Yellow Pages full of competitors is involved. I freely admit that. If you're building a product that can be bought at Home Depot and Lowe's then you've automatically got a little problem. Most successful guys overcome this by building really mind-blowing custom kitchens that CAN'T be bought at the big box stores (see CWB magazine). Custom has to mean custom. It can't mean "I can beat the prices you'll get from Home Depot." You can't.
The problem for the small shop owner in setting an hourly rate (and being reticent to change it) is that you've automatically capped the amount you can make in a year. If I wanted to do that, I'd simply take a job with a set annual salary and forget all the sturm and drang of running my own show. With a set hourly rate the only way to make more money is to work overtime. You're trading hours for dollars. That's too much like shift labor to suit my taste. The other alternative is to get really big. That's viable.
What I try to capture with a multiplier is the value of a piece as a work of decorative art, not the value indicated by the latest ABC cost driver analysis. Accordingly, the pricing exercise is more art than science and that suits my entire philosophy a lot better than the deep accounting $hit.
I haven't gone broke yet.
IMO, a pricing scheme needs to be flexible enough to allow for a 'wow factor' ... sort of like declaring a bonus for yourself when you come up with a great design and really knock one out of the ballpark. Otherwise, it's just a job. If you're excited about your work, the money will come.
You want to avoid at all costs painting a Mona Lisa and getting paid like you painted a sign for the fish and chips shop around the corner. A standard hourly rate makes both pieces of work worth the same amount.
You should embrace the notion of VALUE BILLING.
Edited 10/10/2006 1:02 pm ET by CStanford
I am not familular with your work, but if it is all the same then cost times is a great method. But since you mention a high boy.... Would you use the same factor if it has shop made compound radiused deep profile crown on top, hand carved egg and dart on the inside of the door frames where it meets the hand detailed raised panels, more than the normal amount of drawers, has a 10 step finish and the piece weighs 200 pounds and needs to be carried up a flight of stairs and down a long narrow hall way........ as you would for a contemporary piece that has no detail mouldings, no stain and will be an easy delivery. Both will require nearly the same amount materials and the same cost but the first project will take far longer to complete.
You mentioned that you charge materials with a multiplyer of 10++. I suspect that the "++" refers to these more difficult jobs and could be as high as 16. At that point you are not estimating any different than my method, you are just doing it from the seat of your pants based on your prior experience. Really that is what I do as well. But I go back and review the numbers after the job is done and compaire it to my averages for labor and materials. I then can make a note of what the cost increase is for different senarios. Now I know that using premium concealed slides adds (on average) $17 per foot to my over all average. The only problem with this method is that it requires accurate records and a good history of jobs. But you can begin by going to Home Depot and looking at their price per foot and asking around to see what others are charging.
Ive tried applying this method to large book cases and media cabinets using the square feet of the face. It is trickier because these jobs tend to vary more in complexity, but it gets me pretty close. Close enough that I can give the customer a price range and offer them options.Pardon my spelling,
Mike
Make sure that your next project is beyond your skill and requires tools you don't have. You won't regret it.
I hold my thumb in the air... the heavily decorated piece you mentioned would go on a 20 multiple or something like that... well into five figures. I'd make money. Or I might not get the job at all.
My method won't work for you. I don't build bulk case goods. The last time I had a sheet a plywood in my shop was when I bought a quarter sheet that I set my oilstones on.
The only think I look at when a job is finished is the deposit slip from my bank and the phone number of the next client. I don't guess I've blown an estimate in quite a while. I put a number out there and if I don't get the commission I move on. No tears shed.
I'm sure it sounds pretentious but I'm trying to price decorative art. Sometimes it's a WAG.
That is my point exactly. You really aren't using a simple materials multiplied system. You are making an informed estimate of the time the job will take and assigning a value to that time. At some point in your mental arithmatic I suspect that you consider how much you will gross per day or week and compaire that to what you know you need to gross to pay bills. At that point if a factor of 15 will not generate your needed income you bump it up.Pardon my spelling,
Mike
Make sure that your next project is beyond your skill and requires tools you don't have. You won't regret it.
Not really. If time was the driving factor in the way I quote then my prices would be going down instead of up since I seem to get more efficient as time goes by but I can assure you that my prices are not going down. But sure, to the extent that complex pieces tend to take more time and complex pieces fetch more money there is an apparent correlation. And you're generally right - I couldn't work on a piece for three months and charge it out at a few thousand bucks.
If I attempted to first determine what my 'plant capacity' was then convert my annual overhead to an hourly rate and then apply a profit factor to that hourly rate and use the resulting calculation slavishly then I'm quite sure that I would make less money than I do now.
I price very aggressively and don't mind being told no. Doesn't bother me a bit.
Because of a situation with our child, I am not able to work 60 hours a week (I don't usually get into the shop until the late afternoon during the week) and I had to change my focus and the way I do business.
Many years ago when I was just starting I doubled my prices and got more and better work. For cabinets I normally charge about 5-6 times the price of materials depending on the complexity and demand for my skills.
If you are too cheap your work is suspected by people.
The old saying, "A man knows what he's worth" goes a long ways.
Edited 10/10/2006 1:30 am by gb93433
I would agree with many of the ideas forwarded by others... and add the following thoughts.
First, there are a number of excellent books on the subject of pricing. One that I'd recommend is Don Ramsey's "Pricing Your Work", and perhaps also Martin Edic's "The Woodworker's Marketing Guide", where in chapter 18 he covers quotes and estimates. I also found a few nuggets of wisdom in Jack Neff's "Make your Woodworking Pay for Itself". In almost every case, such books tell you that price = labour + materials + overhead + profit.
From my personal experience in running a small, one-man woodworking business I have concluded the following:
Labour. I pay myself $25/hour for my labour costs; on those few occasions when I must hire someone else (such as installing kitchen cabinets), I factor their wages, workman's compensation, etc. into the estimate. Let's not forget that in calculating labour, you need to factor in how long it will take to draw up the final plans, pick up materials (from my suppliers (or the charge they bill me for delivery), shop time to mill rough lumber to final dimension, do all joinery, carcass assembly, door production (or cost for having them out-sourced), final planing, scraping and sanding in preparation for finishing, and the final finishing itself, including any needed buffing and polishing. Once the item(s) are completed, they need to be delivered and in the case of cabinets, mounted... and everything that goes along with that, such as adding filler strips, scribing to walls, etc.
Materials. Include everything you can think of: solid wood, sheet goods, hardware, finishing supplies, incidental shop items such as glue, sandpaper, shop rags, fastners etc.
Overhead. I estimate that it costs me $7.75 an hour to run my basement shop and office (electricity, heating, insurance, truck operating costs [loan, gas, maintenance, insurance], plus the wear and tear on equipment).
Profit. This is the most challenging thing for me to quantify. I have a sneaking suspicion I'm not charging quite enough... but I base it primarily on the difference between all of the above items and what I think is the local area going price for finished products that are done to the same quality as my work. I am finding that as my confidence and skills increase, so too is my ability to build in more on the profit end of my estimate calculations.
Marty S.
I think I am a little late with this reply, but If you are giving your customers a firm price and a drawing at the first meeting, they maybe simply having someone else look at it and beating the price. I suggest you get a feel for what they want in price, quality, material,etc. and try to work into their state of mind. You might be shocking them do to their lack of knowledge...sort of like sticker shock. Also, I would never give them anything tangible like a drawing, or a typed price for the next contractor to beat.
That is a very good point.Pardon my spelling,
Mike
Make sure that your next project is beyond your skill and requires tools you don't have. You won't regret it.
When you say "getting into their state of mind", I start thinking about my presentation and being very detailed and itemized in my discussion. This would be a very positive way to show them my professionalism and quantify my price. Do I have the correct idea here? Thanks Senor Dorado
When I talk to a plumber, designer, or a car salesman, I want different solutions, alternatives, various price ranages perhaps, so I can make a dicision. If you give your plan and your price it is pretty much sewed up....no decisions on the part of the person who is having to fork over the money. By the time you give your alternatives, examples of other projects you have done, the person should have a good idea what you are capable of doing. My wife always wants the best and highest price of something. Me, I am just the opposite, but we normally work it out.
I loosely use the cost x basis for pricing but it depends on what I am building. Do the multiplication, then subtract the materials, divide the balance by your hourly rate and you will come up with the number of hours to complete the job. Check that this number is realistic. Often it is not. The other factor is knowing how well you did the last time you built something. I have an on going record of jobs detailing their time and materials used. When someone asks me for a particular item, I check my list for similar jobs, rethink the time according to detail and difference in materials (if any) then tell them what it will be approximately based on other jobs (show them the list if needed) and charge them by the hour. My list goes back 25 years. Something I made 25 years ago may not take me as long now but that is my cushion.
I agree with a lot that has been posted.
Check out the books Marty suggested for pricing suggestions.
Sell yourself on quality - do your cabinets have full extension drawers? lower cabinet shelves on sliders to pull out for easier access? Do you consult with the cook in the family for their needs ( higher or lower counters based on persons height, hide and lift cabinet for stand mixer and so on)
Bring a portfolio with photos of completed projects, customer testemonials...
Do not give the plans till after the job is accepted and a deposit put down.
If you develop a "ball park" method of estimating ( by the foot, material x ?, whatever ) if it gives you a result that in looking back at previous jobs was correct. Give them that info after you get your measurements and before leaving, empahsiing that this is a QUICK, ROUGH estimate, It should be close +/- whatever is likely and that you will work up the plans and supply a final quote if they want to go ahead with the project.
" There'll be no living with her now" - Captain Jack Sparrow
Senor--
I do not own a cabinet business but I do run a business unit for a larg corp. I have seen coutless posts that suggest taking the material cost and multpling by 3 or 4 or 5. That method may work, but is is not the best way manage a business. Simply put you have three main factors to deal with:
1. material costs
2. your labor costs
3. current competitive market place pricing
You can easily identify the material costs. Now you must determine your labor costs/hour and assign how much is your time worth. Then get to the total cost by adding the labor and material togther.
Now you have to go out and fully understand the compettive market place pricing by other custom cabinet makers. This will require you going undercover to KNOW how much the other guys are charging for the same type of products.
Then you can assign a fair price to your cabs.
This is the readers digest version, but I would be willing to review in more detail if you want.
Thanks--
Thank you,
Cheatah
Cheatah Thanks for dropping in. I am currently reviewing a past project in order to determine my labor cost and overhead. Your undercover cabinet man idea is something that I have merely scratched the surface on. I have been conversing with builders, past instructors, furniture foreman and anyone willing to network with me just trying to get answers to various questions that I have had. My best source has been this forum and incidently this particular thread is the longest and most informative that I have had. Thanks to all that have replied! What other suggestions do you have concerning the ways of determining the competitive market? This may seem funny, but I get the hunch you may be suggesting a mock project scenario in which I pose as a customer and receive estimates from the regional competitors. I am curious to hear your thoughts and suggestions.Senor Dorado
Senor:
Yes. I do it all the time. Assume the role of a consumer and have your competition give you a price to complete the project. You can do this many time with different competitors and gain a comprehensive understanding of the competitive market place.
This activity is ethical and neccessary to understand where you stand in comparision to the competition. Also, if you can see the samples of the compettion's work you may find that there price is lower because of a certain joinery technique or their price is higher because they always use a specific quality of wood.
Good luck
Thank you,
Cheatah
I'd say your ethics are questionable. The ultimate result of shielding men from the effects of folly is to fill the world with fools. -- Herbert Spencer (1891)
DG:
Why do you think my ethics are questionable?
Thank you,
Cheatah
By asking for other companies to spend time and money to enable you to ccompete with them. It is not in my opinion ethical to ask for a quote for work you have no intention of purchasing. Looking at ads for products to see what a comparable product sells for is fine, but to cause a company to incur cost merely so you can take a shortcut is not. I would not knowingly purchase from a company or individual that engaged in such a practice, chances are they have other ethics problems also. The ultimate result of shielding men from the effects of folly is to fill the world with fools. -- Herbert Spencer (1891)
"It is not in my opinion ethical to ask for a quote for work you have no intention of purchasing."
Well said.
Cheetah doesn't know what he's talking about. Nobody worth a $hit would answer a question like that over the phone precisely to prevent what he is proposing doing. Anybody dumb enough to do so deserves to get beat on price and won't be in business long. High-end custom kitchens, libraries, and the like are not quoted by phone, fax, or email to some idiot pretending to be a 'customer.'
If this chump is a custom cabinetmaker then I'm Louis XIV.
Edited 10/20/2006 6:50 am ET by CStanford
Oh man I love ya! What a reply... great. I couldn't agree more. But for the record, he did say he wasn't a cab. shop. Nevertheless, I wish he'd call me to test the market. I'd give him an ear full...And for anyone's concern: as for "ball park" estimates...... they don't make any sense whatsoever in a custom shop, no matter what is being made: furniture, sweaters, coffee mugs, or whipped cream. In 25 years, I've never gone on to do a job for any voice on the phone asking for a price. I ask them to come meet me before we discuss the full project, let alone price.
"I do it all the time. Assume the role of a consumer and have your competition give you a price to complete the project. You can do this many time with different competitors and gain a comprehensive understanding of the competitive market place."If I ever caught someone doing this to me I'd seriously find them and kick their a$$...That is stealing my time which is my money which is food off the family table.We are not used car salesmen or drywall guys. This is one of the last gentlemen's trades and scams like that cheapen and demean all of us.
SeniorDorado,
congratulations !
you have a great resource here--and additionally i would suggest you stop in over on the FineHomebuilding website: Breaktime----and read EVERYTHING in the business folder----as far back as you can access
although I don't know the specifics of YOUR personal situation--- from what you have posted in this thread I think you are possibly making THREE basic errors
1) you need to know YOUR costs-- these will reflect YOUR personal skill set, your equipment,your living arrangements, your shop space and layout,your employees( if any), your speed of productivity,your insurance etc.
2) Regaurdless of what Chetah told you-------any pricing information you gather from " competitors" is of marginal value to YOU. Their pricing reflects THEIR costs and aspirations---which have virtually NOTHING to do with you. THEY may be higher/lower/roughly comparable----doesn't matter because you aren't selling their work---you are selling YOUR work
3)- long term your success will NOT come from being more "competitive" based on price. In fact I would say competing on price is a race to the bottom. You CAN succeed by learning to sell YOU, your methods, your productivity at YOUR price. you want your prospective customer so sold on YOU that your price is largely a secondary consideration---if not totally irrelevant.
Before I proceed any further let me tell you I am a woodworking hobbyist primarily, who supports himself via my small roofing/carpentry business. please feel free to dis-regaurd ANYTHING I say---as there are plenty of folks here( possibly all in fact) that are more skilled woodworkers LOL--
in my trade,as typically practiced, price is a HUGE consideration for typical consumers. Despite that---i get along nicely by concentrating on selling prospective customers ME, my methods, my materials,my techniques, my experience etc. you do NOT want a prospective customer to EVER be able to make an " apples to apples" comparison------you want them focused more on YOUR ability----price sensitivity will become less of an issue.
Additionally---recognize you are largely in the business of" making dreams come true"---- from the outside--that looks like a fun,attractive business to be in. you likely have lots of competitors competing for the fun attractive projects. in my trade things are similar--prices for large,easy " attractive" projects are helddown by competitors chasing comparatively safe"easy" money
for me,profit comes from problem solving-- the harder a project, the trickier, the more dangerous ,or more obscure the materials, the more finesse required, the more urgent---in general the less " competitors" want to do a project-- the greater my opportunity. I actively search out "oddball" projects that virtually no one else locally can or will do. most recently I built 2 "eyebrow" windows for a customer to fit 2 existing openings in a 80 plus year old house. in new construction these would be a fairly easy item to order from any decent lumberyard------ but for an 80 year old house---to plug into existing openings ( 2 subtley but crucialy different shaped openings BTW) I became the only guy who could/would do it. As a result I get to do the project at MY price--or the project doesn't get done.
your challenge---is that no one NEEDS their dream kitchen etc.---though a lot of folks want to build it. If you can shift slightly to building/producing what people can't readily get elswhere -------you will have it made.
short of that ,you need to develope your sales ability to the point where prospective customers think" I can get cabinetry from a lot of places--- but there is only ONE place to get cabinets built by Senior Dorado "
Very best wishes to you,
Stephen
BTW
If you have the chance--- you might look into meeting with S.C.O.R.E---which is a group of retired business executives who will offer you totally free and hugely benificial advice. Recently i had a wonderfull opportunity to meet with a local executive----- he had built a wildly successfull grocery market.--not a simple supermarket--- oh no---anything but that ! In a regular supermarket you can by a can of tomato soup for what?---70-80 cents ?---He routinely sells a can of tomato soup for probably $4/can----and you are convinced that is the best freaking can of tomato soup ever made---along with the best assortment of imported cheeses, the areas best wine department, the best imported beer, cuts of meat totally un-available in ordinary markets, organic produce, imported cookies, a fabulous in store bakery---------------- I have visitors from out of STATE who shop there on every visit because they have nothing like it back home. I find this gentlemans' operation really inspiring---because he understands that Walmart can sell soup---he however sells the Best Freaking Soups That Money Can Buy !!!!!! and he sells it in such a way that you don't even care what you paid---and if you do care---you find yourself bragging about how MUCH you paid and WHERE you bought it from LOL
Again very best wishes to you
Stephen
I have heard of SCORE and I'm looking in to communicating with them as we speak. Cornering a specialty within the industry is a philosophy that I have had and keep in the back of my mind. As I talk to people about my business I look for ways to find the avenues that will hopefully lead me to the answers.My plans are to start networking with designers and architects, presenting them to me and my work and begin to create a reputation of professionalism. From reading your posting I would think that you would agree with this methodology.As I progress with SCORE I will keep in touch.As Always Work safely!Senor Dorado
SeniorDorado,
In my trade I really never have cause to work with architects etc--------- so I wouldn't exactly know how to advise you on that---
but it seems to me that architects,designers, design build firms etc. are probably COSTANTLY contacted by folks like you---so it would be hard to really stand out from the crowd
combined with the liklihood that for something like kitchen cabinetry you are competing against a catelogue at the lumberyard of readily orderable items which can be installed on site by a trim carpenter.
I am primarily interested in old houses
so the way MY mind works( and if I had the required skills LOL)---- I would be looking for opportunites to work with architects who specialize in restoration work, or remodeling older properties----- and my approach would be that I could supply cabinets,woodwork, doors, fireplace surrounds etc. that will look like they have always been in that house------ NOT something that would look like it could be plunked into a vinyl sided McMansion.
imagine an addition being built for an older home in an affluent area----and you are able to fabricate a door leading into that addition that matches every other door in the house--and all the woodwork within that addition matches and flows seamlessly from the original structure------------ I would imagine that ,when completed--the project would be not so much that an addition has been built---but that the house is now miraculously LARGER. People who can do THAT, i suspect are in short supply !
specifically, on a smaller scale I have a fairly large older home where the interior is trimmed in walnut--- casing,wainscot, fireplace surround--doors etc. most of the doors are walnut with 15 panes of glass--- however 2 leading into thelibrary and 2 leading into the breakfast room or flush slabs.
ultimately I would love to have someone come and duplicate 4 doors with the glass---in walnut---that would match the rest of the doors. I suspect ability to match the old stain would be critical-----and even if I couldn't immediately afford the project , I would immediately begin preparing to pay that price---because where ELSE am I gonna get that service???? in the long term--price would be zero consideration--it would simply be a matterof time untill i could meet the price--------
that's the kind of niche I am talking about--- and i suspect it is REALLY hard to fill---but if someone CAN fill it--then price is not really much of a consideration
BTW---about SCORE---it may take you a while to meet up with the right adviser.
15-20 years ago I consulted with an other score exec.---not a good fit---- I couldn't communicate exactly what I was trying to do--- he really had NO clue what I was talking about other than to mouth conventional business platitudes
but the gentleman i met with this past summer-- he grasped immediately what I was talking about and had TONS of good ideas. Even though he was in a different industry--- he knew intimately the clientelle---as his family had been serving them for 3 generations
best wishes to you,stephen
Hazlett,
Your post is one of the best , and very well said. I've been in the remodeling
business, for up to 24yrs. , and selling yourself and your abilities is key.
Hiya Cheatah ,
Your suggestion to go " under cover " to find out how much your competition charges is thin at best .
This is what I call going in the back door , instead of the front door . The practice not only wastes precious time of many trying to make a living but could also be construed as dishonest and may lack accuracy .
When I get these calls from the new guy in town or any other trying to get a handle on how much to charge I give them little information . Easily a fake price can be given , which would not really be helpful .
Personally I respect and tend to be willing to help out people that come in the front door , those who are up front and honest and ask what the going rate say per foot or unit goes for .
Maybe you have found success in your neck of the business world , that's great , but in much of the rest of the real world your advice and tactics may be less than well received .
dusty
Green, Stanford, Sapwodd, -----
I am absolutely not full of crap, as you state and think. You guys are living in utopia riding your high and rightous horses. Today's compettiive market place demands knowing your compettiion inside and out. Not knowing your competition and fully understanding the catagory you represent will leave you earning a living in survival mode. The real goal is to thrive.
I clearly stated that I am not a custom cab maker. I have, however, managed product lines for a national semi-custom cabinet manufacturer and currently manage a decorative hardware business unit for a large corpration. Bottom line: I understand how to mange a business very well. No need to gt into more details.
I can see that my opinions are not valued. And that's OK with me. I seldomly post much here. But I do review the threads frequently. I have often found many of the post more entertaining than useful. Although there have been some informative posts here.
It is possible that I did not communicate clearly my point. But I am not going to waste any more time on this thread and will not elaborate any further. I hope you chaps reply to this as it is very entertaining to read the BS you guys seem to be so eager to write.
Good luck --- most of you will need it.
Later
Thank you,
Cheatah
I clearly stated that I am not a custom cab maker.
And that's the problem. You're advising the original poster who IS a custom cabinet maker to do something that's not really do-able in this business. Bidding on a custom kitchen entails more than a phone call between the parties. The notion that somebody can pick up the phone and call their competition and discover how they would price a particular piece of work is laughable. It doesn't work that way. You're talking about something you don't know anything about. So don't. There is so little in common between a local high-end custom builder and a national manufacturer that comparisons are hardly valid.
You might be familiar with some Podunk pickup truck builder that will bid a job over the phone, but that is not the way a quality outfit works I can assure you.
Senor Dorado is going to be terribly disappointed when he sits down at his desk and starts calling his competitors, posing as a customer, per your suggestion. If he is the least bit gullible he is likely to price himself into bankrupcty inside two years.
Edited 10/21/2006 10:25 am ET by CStanford
Cheatah ,
A few of us disagree with your opinion on this particular matter , does not make " I can see my opinions are not valued " . We all have differences of opinion , methods , business practices , please don't take this personal or get hurt feelings agree to freely disagree.
Some of us have been doing what we do for a very long time and we know what works for us . Being the large scale corp. type you are I'm surprised you would not suggest doing a " market survey " a term big companies use . The survey may include many things to help reach the goal of pricing .
dusty
Despite your assertions to the contrary, I see no evidence of good management skills in your writing. It is possible and even desireable to know your competition and category and have a thriving business without resorting to unethical practices.
The time you spend usurping others knowledge would be better spent managing your costs and improving your product and production methods.
I'll take my high and righteous horse thank you, and leave the morally bankrupt to wallow in what lies on the road. Lay, Skilling and a host of others thought they knew how to manage a business well too.
To justify dishonesty by asserting it is neccessary to have a thriving business is a disservice to the honest business person and does nothing but expose your weaknesses as a manager. If you were any good at what you do you would have no need to cheat to succeed.
I think you have communicated your point very clearly, what is bothering you is that some of us did also.
Perhaps it would be an eye opener for you if you were to print out this thread and show it to the owner of your company. If he is not shocked by your lack of ethics he will certainly be horrified that you put it in writing.
I would suggest a class on business ethics, but it sounds as if you have suckled on the teat of others efforts for too long and are unwilling to change your ways.
The ultimate result of shielding men from the effects of folly is to fill the world with fools. -- Herbert Spencer (1891)
SenorDorado,
I've been using CabnetWare for five or six years to design, estimate and provide cutlists, but used Excel spreadsheets to do estimates for years. They got more complicated until I switched, but they worked for me. In those days, I designed with story poles and devised some accurate Excel cutlists.
Labor, material and overhead are included. I hope the attached file adds insight and help. Sorry, I couldn't shrink it.
Gary W
gwwoodworking.com
Edited 10/23/2006 1:36 am by GaryW
Edited 10/23/2006 1:37 am by GaryW
Gary:Great looking excell file. I am going to look it over. Thanks for posting it.Ray
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