JP
I have been in touch with you before and found that your professional advice has been great. Now I would like to ask you a favor and have you read the first posting in the Estimates posting under Business.
Along with the above my other question is: How do you advertise your business and do your estimates in order to be profitable yet competitive in your part of the world?
I’m trying to improve my business and get answers to questions that have sprung up. Your thoughts and or suggestions are welcome.
Thanks
Senor Dorado
Replies
SenorDorado,
Fortune Small Business magazine has an interesting article(Nov. 06) focused on improving the profitability of high end custom shop in PA. The name of the article is 'Carving Out Profits' by Brian Reilly and takes Irion Co. Furniture Makers ( http://www.furnituremakers.com )through an evaluative process using experts from the UofP, Wharton School. I've tried to find the article on the web with no luck...we get the magazine at home for free. It does not address your issues directly but I thought you might find it interesting...if you can find the article. I'm sorry I do not have a scanner.
Hey BG Thanks for the tip, I'll check it out. Senor Dorado
I found the article you mentioned (Fortune Small Business, Nov. '06) about the Irion Furniture Makers. Go to their website and click on the "News" link at the bottom of the page. The FSB article is the first on the list.
Josh
Josh,
Thanks for the heads up on the article. I'll post the link ..http://www.furnituremakers.com/Furniture/News/FortuneSmallBusinessNov2006.html
Senor Dorado,
I have been struggling with the same issues you have mentioned in your postings, and have been finding success to come incrementally and with much frustration.
I might have a few ideas....
I've tried several methods for doing estimates. Some better than others... some that you have mentioned. I should say that I have never been turned down. Every job I've bid I've gotten. I used to think this was good, but I've been having second thoughts... driven by the fact that I work CONSTANTLY, and never seem to be pulling down a good profit. I have spoken with businessmen, advisors, accountants and other woodworkers - most suggest that I try different approaches while gaining necessary experience in how to streamline the process, and get confident with my abilities (business, record keeping, woodworking and otherwise.)
Some of my methods for estimating jobs:
1. cost of materials x 3 - not accurate, as mentioned by other responders
2. charge per lineal foot of finished cabinetry. ex. a wall of kitchen cabinets is broken down into lineal foot units floor to ceiling and a price is charged per foot. A twelve foot wall of cabinets would cost 12 x ?(whatever your price is - I've been advised from anywhere between $200 and $500 per foot for Kitchen cabs) Again, a bit of an awkward one to explain to a potential client, and worse if asked to justify mid-install! A 12' wall of cabs could range from $2400 - $7000 - what factors determine the price per foot?
3. estimate material costs - add 30%. Estimate the time it will take to complete the task from buying lumber, sheet goods, hardware etc to finishing and installing and multiply that # of hours by my hourly rate. Add the two together and compare that estimate with the two methods mentioned above and see which is higher... which seems more "reasonable", which will likely get me the job etc. and go with that one.
Needless to say I have seriously under-estimated some jobs. There are too many variables to clump into one "catch-all" method of estimating. I have tried to learn something from each, but the time to implement good practices - much less find out what good practices are - is in short supply due to the fact that I'm always double timing it to make up for lost revenue.
I recently read an article in Woodwork magazine (Dec. 06) by Richard Jones about how to go about making accurate estimates. He breaks the entire process down into units and assigns a time allowance to each unit (i.e. - surfacing lumber is broken down into units of 15 bf at 1 hour per unit. Joinery is broken down in a similar way... each m&t joint is given two hours with a 5% discount for multiples up to %30 etc.)
It is an excellent article. I am in the process of implementing this method on a current bid. So far the price is about 25% - 35% higher than I would have arrived at with either of my previous methods, but I'm gonna give it a shot. The price, I should mention, seems high according to what I have come to expect. There are many people who expect to get cabinets from an independent cabinetmaker at a dirt cheap price, and they are surprised to discover that cabinets and furniture can be had for much less from Lowes and Ikea. My solution for this problem is to seek out a new audience for my work. There are plenty of potential clients who appreciate fine craftsmanship, artistry, personal touches etc. Probably as many as those who just want a new place to store out-dated techno junk and overflow.
Custom woodworking is not cheap, and it should not be given away. The need to eat, and to sustain and grow a business is pretty important, also, and should ALWAYS be a #1 priority.
I have also found that the way I think about myself as a businessman/craftsman also has a great influence. When I started working for myself I almost felt embarassed because I knew nothing about business. I felt that my work ethic and abilities in the shop would speak for me. BIG mistake! I have since learned - with much constructive criticism from my wife, family, and friends - that I need to work on the businessman side. There is nothing odd about seeking advice on how to run a one man shop from a seasoned fortune 500 veteran. They know what works, and a good businessperson can apply the rules to any business - however small and humble.
I'll be attending small business seminars this month at a local SCORE (service corps of retired executives) chapter - check it out. They can help with a business plan, cash flow, legal etc. I also read everything I can on the subject of business and woodworking. So far it has been a terrifying ride - very uncertain - but if I look back on the last year I can't believe how far I've come. I'm pretty sure that in a year from now these 'problems' will be distant memories.
Good luck.
Josh Whipkey
Josh
These comments are all very familar, and your tips from Woodworking mag are great. I have met with SCORE and have implemented some of their suggestions. I'm also looking to hook up with a pro woodworker within the SCORE system to bat around a few ideas.
Good luck in your furture endeavors, and keep me posted. Thanks for replying to my query.
Senor Dorado.
Hi Josh ,
From your post I think you , like myself you do mostly case work , kitchens and such . With that in mind I'd like to try and answer some of your questions .
You asked what factors determine price per foot , good question packed full of variables. I start with a median per foot price and factor upgrade dollars for higher cost materials . Used to be Birch and Alder as a base price now it is the same for Red Oak as well . If Q sawn White Oak or Birdseye Maple are to be used an up charge is factored in to the bid .
The type and style of doors will vary in cost as well as the number of drawers and the type of hardware used i.e. full extension slides , under mount type ? Are they frame and panel drawer faces ? are you using dovetails ?how about cabinet backs ? Will you finish the job ? will it be a special type of finish ? will you install the job ? More detailed trim and crown moldings take more materials and time to finish and install .
Extras like lazy susans and pullout cutting boards , butcher block countertops spice racks and all the other bells and whistles also go into the equation .Paint grade work can be tricky as well , while the per foot cost may be less the time and trips you make to the job may be more , such as having to go back to install the doors , or waiting for the painter so you can get glass installed in the doors then go back and install them and so on and so forth .
Richard Jones method works for the type of work he performs , but may not be accurate for you and I .I really do not think Richard typically bids on kitchens and on free standing beautiful furniture like he makes I believe I have read him to say materials times 10 is close to reality . For a cabinetmaker like my self and perhaps you that formula will not work unless you are using similar methods as Richard .
I strongly agree that just being a decent or even great wood butcher is not enough , you must know employ sound business practices as well .
good luck dusty
Dusty,
Thanks for the advice. You've given me a lot to think about. I suppose it will take some time to develop a good practice... good methods... SOUND methods that are repeatable and reliable.
I have a hard time with the estimating part of the business. I am a visual learner... I can solve a problem if I can do it with my hands, tools, in the shop etc. The savvy business guy I need to be is a bit more slow to develop. It is a learning process - as well as a patience thing - and I appreciate that there are so many willing to share experiences, methods etc. I've already met so many good craftsmen who can't get a handle on the business end of things, and they end up getting frustrated and quitting.
Seems like you have a good handle on your practice. I hope to be able to gain some more insight from you in the future.
Josh
charge per lineal foot of finished cabinetry
I've begun using this method as a way to give a potential customer a ballpark estimate of the final cost - and emphasize that a firm bid isn't possible until they have a final (or nearly final) design. I don't tell them how I come up with the estimate - I just take a few measurements and give them the range.
If they're still interested, I'll explain that materials, finishes, door & drawer front styles, trim & moldings, etc. will all have a substantial impact on the cost. Another significant factor is the number of drawers. A base cabinet with 3, 4, or 5 drawers will cost more than the same size base cabinet with a door and a couple of shelves.
I'm not a big fan of this method, but it's a good way to weed out the "tire-kickers". This past year, I spent approx a month doing designs that cost more than they wanted to spend and I'm pretty sure than a couple of customers shopped my designs to someone else. My first 2007 resolution is that there won't be any more free designs!! - lol
That's a good resolution. I just spent about a day and a half doing a drawing... pretty much for free!
I have found that my most recent estimate came out pretty close - within $25 - of the lineal foot charge I would have given. I'll keep checking my records. I think you make a good point about the "tire-kickers." I'd sure like to have some of the time back I've spent catering to them.
Josh
Josh -
My latest proposal had about 12 hrs worth of designing in it that was "free" - but the customer doesn't know that. - lol
I'm making the transition from 2D AutoCad to 3D TurboCad and was right at the point where I felt pretty comfortable with it. I decided to "invest" some time doing some "quick sketches" for her to look at. I sent them last week and she's "thinking about it". She had thrown out a budget number which I told her wouldn't get everything she wanted, but that I would sketch something up that would stay as close to her budget as possible.
Now, she's trying to decide which is more important - budget or what she really wants. Either way, my exposure is limited. My pricing always includes design time and if she comes back wanting more cabinets, she signs on the dotted line for a design/build/deliver & install job.
Josh Whipkey
Buddy you aren't even scratching the surface yet.. In your business you have many competitors. some will work faster or do better work, some will work cheaper or have lower costs..
Plus you are competing against every hobbyist who wants to try the water and retired person who just wants to keep busy..
Your only real hope is to establish a clientele which is willing to pay you to do the work.. You
for your ability or Name..
You and not someone who can do the job..
You..
If you are modest it makes it extremely hard, if you don't compete in fairs or contests you won't get known..
You need to become known as the person to make,.....
Have it so that every no mind yuppie wanna be needs to own your stuff..
Become THE guy!
Frenchy,
I like your attitude! I think you're right about being humble in this business. One of my greatest criticisms is that I am too passive. Not quite a push-over, but willing to take more crap than necessary. It is/has been difficult for me to know where and when to draw the line - to assert myself as THE GUY. I'm sure it comes with time, experience, confidence etc. But you make a point about doing what it takes to get product out there. That seems to me to be the true litmus test.... Have something potential clients can see. Having the product to back up my outrageous claims of being a super-human craftsman!.., or even just the guy who can provide you with what you WANT and not just what you'll settle for.
I know I am good at what I do, but getting caught up in the business side of things seems to suck the time up... time I'd like to be working on a piece or two that I can 'shop around.' You mentioned shows and fairs. Can you offer any more information about that aspect of the business - it is something I have little knowledge of. Are there competitions? I've been to a few woodworking shows (D.C. area) and they all were about tools etc. No furniture displays.... I like the idea of getting something into FWW readers gallery..., but how many potentials read FWW?
I am interested it ways to get my name on the street. Do you advertise? Is there a threat of ever getting in over your head - i.e. all the sudden the phone won't stop ringing. Many folks stick to the word-of-mouth method, but I'm interested in seing what happens if I go 'guerilla.' Any ideas?
Josh
Josh,
you're too small to advertize effectively.. do something totally differant.. for example drive around in a woody.. a real woodie..
You can buy a solid Model A Ford pickup for less than $5000 (I got mine for $3000) it was complete but needed an overhaul.. I plan on throwing away the cab and bed and fabricating a woodie body.. It clearly gets you noticed.. it will provide transportation and a way to demostrate your abilities.. it is extremely effective and cheap plus it should make a profit when you sell it.
Give away your talent to potential buyers.. Go to your minister/priest/rabbi and offer to build something for your church etc.. explain that you are hopeing your good deed will help get some business. They will often work with you.. They understand that one hand washes the other..
Look at those you hang around with.. are they likely to be good customers who pay what the job is worth? If not spend time with those that are.. attend the theatre not a movie.. go to a play rather than a bar.. You don't need to dress in a tux to fit in .. let it be known that you make stuff from wood. dress neat, respectfully, and clean and most will gladely accept you even if you don't have a $3000 suit on..
Where in the DC area are you?
Overall, it's quite affluent and your bids need to reflect that, or you're cheating yourself by leaving money on the table. Several friends of mine are independent cabinetmakers in the area. You'd do yourself and them a disservice by underbidding.When I worked independently,( with one employee), I tried to plan work up to two months or so in advance.
No way should one get every job they bid, else the business goes under in short order.
I'm not living in the DC area any more. I'm in Columbus, and it is a bit different around here. I also lived in PA - Pittsburgh and Erie - for three years in between DC and here, and the difference in wage between all these places is striking. I took a serious pay cut when I moved from DC to Pennsylvania, but my personal cost of living didn't change much - my rent was less, but not much. Here in Columbus it's not much better. Some folks I've spoken with consider $25hr a premium - as in the max they'd spend on a custom carpenter. I knew guys in DC who charged $65hr to put up siding.
I've been moving around a lot, and it can be hard to adjust to the local economy. Maybe I under estimate what my skill is worth...? I also try to read how people act towards contractors and the like. I have found that here many people expect way too much from tradesmen. It comes off as the 'i want something for nothing' attitude, but there almost seems to be something in the culture that looks down upon the trades...? anyway... another story....
I sure wouldn't under bid on purpose..., but I have to keep making a living while I'm working all this stuff out.
Thanks for your remarks.
Josh
I once looked at a position near Erie, PA but the money wasn't as good.
Still, maybe you can Google Bureau of Labor stats to find the median income of your area via zip code and base a formula to charge customers, on that. Perhaps you'll give more accurate bids that aren't too far off one way or the other.
Edited 12/8/2006 8:22 am ET by jackplane
jackplane,
Actually there is a simpler way than that to find out potential markets. Income may mean little if the costs are out of line or most of the persons income goes towards living expenses..
Look at home values.. click onto the realestate sections and punch in zip codes.. I use zillow.com but there are plenty of others. Homes that reflect a modest income tend to be occupied by working stiffs who don't need well made custom stuff they need to spend as little as possible to get as much as possible..
You'll do far better marketing to areas of upper end homes.. they have the disposable income required to make a decent living on building custom stuff. Area's that need to take last weeks paycheck to buy stuff won't be very good as an income source.
Your third sentance says a lot. The biggest mistake people in the "creative" fields make is not charging a lot. Where a bad entry level lawyer might charge 150.00 an hour or even more I see very talented craftsman and artists charging 25-35 dollar an hour. If someone is getting every job they bid on and is working constantly and still not making any money they might as well charge twice as much and work half as hard and make no money. That is of course being simplistic but the solution is to charge more and the worst thing that will happen is that people will still hire you.Good luck Troy
Speaking of profits I am wondering what most of you are making per hour? Say you are charging $35 / hr then what are you left with after taxes, insurance, overhead, etc?? Maybe $20 for yourself?
rjones69,
It's important not to confuse that $20 with any profit , the way I see it the $20 sounds like a meager wage for a journeyman maker that may not include any profit which would be in addition to your wage .
So if your wage was $15 an hour and you had $20 left after expenses , indeed you would have $5 profit .
dusty
Ooops I think I meant wage. So with that in mind what might be an average for someone running their own shop make per hour?
Thank you all
I have read everyone's email and I appreciate and will take into consideration everyone's comments while making this decision.
Thanks Brandon
I believe I have a problem with over estimating. I have been fortunate to get some jobs though most people are floored when they here the quote.
The bottom line is that we need to educate the consumers. We need to let them know why we cost at least 6 times more then mass produced garbage.
Just the other day a women asked me to build a "simple desk" with drawers from pine. Her budget was a bit over 200 dollars. The problem is that she even called me and had me see the space she wanted it in.
Any suggestions on how to educate potential clients? Different methods?
I tell potential clients that if they wanted 10 pieces I could give them a cheaper price for each. I don't think this is the correct path.http://www.gedaliahblumfurniture.com
Client education is very important. Here is what I tell my prospective clients:
1. Furniture manufactures buy their lumber by the box car load, thus they have lower prices. However, often they build furniture with whatever board comes off the pile next. I give attention to grain and color matching, use premium materials, etc.
2. Furniture manufactures make many of the same pieces consecutively, 100's to 1,000's. This lowers there cost per piece. My work is custom, built to order to their specifications. I meet personally with the client so thier piece will meet their criteria.
3. Furniture manufactures pay factory labor wages, many of the workers may be unskilled or semi-skilled. I am a skilled worker which is verified by my portfolio and samples. I use mortice & tendon and dovetails joints, not staples in fiberboard.
These three reasons enable furniture manufactures to make items at a lower cost than I can.
4. I deal direct with the client, ther are no distributers, wharehouse, showroom, or other sales fees involved. Therefore on this point, I can compete better than they can.
However, the end result is that high quality, custom pieces cost more than stock production pieces. If they wanted stock type pieces, they would not (or should not) be comming to me.
Keep on educating!
gedaiahblum,
You understand the problem wrong.. No minds will always be with us.. you can spend your whole life educatiing people and they will continue to be just as foolish..
Don't be the guy people call when they want something made of wood.. be the guy when they want great stuff..
That's up to you..
you need to develope the skills that are in demand. Ones that only you have mastered or only you are known for..
Become a name a yuppie wanna be's have to have name..
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