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I just open a small shop (custom cabs, small furniture) Been lucky so far as far as making profits on jobs, but I have a question for you old timers or recently converted professionals. I always get squemish when I quote an hourly rate for a project and look at the final tally. The price always seems way too much to me, but maybe that’s because I have trouble paying someone to do something that I could do myself.
Any tricks you’ve learned for being humble and still getting your money?
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hambone --
Therapy. Just kidding..., but seriously, while I know next to nothing about costing projects and setting prices for woodworking, I am self-employed and put together proposals for clients all the time.
Many of us weren't raised to talk about money. We can discuss sex, drugs and vomit, tell loads of bathroom jokes, but money? No way... Many of us were also raised to be somewhat humble and to try not to cheat the other person. When we work for a big company, some anonymous "other" sets the prices for the company's products or services, so if a customer disagrees, it's a lot less personal.
It's basically a two-step process. Step one, know the value of your work and what the market will bear (neither of which I can help you on, I'm afraid).
Step two, teach yourself (and it will come with practice) to be able to name your price. Out loud. With pride. You know what you deserve, so ask for it. For some customers and certain opportunities, it might be worth being willing to negotiate a bit, for others it's not.
(For example, I have some clients for whom I do a hell of a lot of work. They get a "volume" discount, and some of their work is fairly repetitive and easy, so it balances out. Others are slow payers... so they pay a penalty.)
Assuming you're willing to guarantee your work, your customers should be willing to pay a fair price. The hardest part is being willing to lose a sale, especially when you're starting out. The simple fact is, I've lost a few projects myself, from the get-go, because the customers didn't want to pay my price. That's the way it goes. Did they get equal or better quality somewhere else, for less? Maybe, I don't know. But I do know that they didn't get what I could offer them, and I'm proud of what I can do.
Hope that helps some. Geez, I'm so damn touchy-feely today. What's up with that?
David
*Let me clarify one comment. I said:"Others are slow payers... so they pay a penalty."I don't want to pre-judge a client, so I don't charge them more than my standard prices, up front. However, I work penalties for late payment into the language of my contracts. And particularly notorious clients do not get any discounts, no matter how much work I do for them.David
*Stand in front of a mirror and practise saying "That will be five thousand dollars please" until you can say it without feeling self conscious.I'm not kidding. I make garden furniture and charge a fair price for it. I used to be squeamish when people queried the price or offer discounts where none was needed. I did the above (but substituting pounds for dollars) and have to say that I now only give discounts where there is a good reason and a request and am quite happy and confident to declare my prices without any embarrasment.If your price is fair and your work is good people will pay it. Not all of them, but enough of them.
*Hambone,When quoting an hourly rate be sure to emphasize that this is the shop rate (you and the shop are seperate entities). If they seemed shocked just smile, shrug your shoulders and tell them that when they get their car serviced they pay a higher shop rate.Hope this helps, Steve
*Listen, you're responsible for all of your rent, taxes,liability and health insurance,shop maintenance,material and hardware purchasing, job estimating and accounting. All of these things cost you money so they need to be factored into your overall rate for service. Add the cost of your overhead to your hourly (wage) rate then you can come up with a true valuation for your services. Also don't forget to add in your profit and a little extra for retirement savings. I don't know if you need to explain this rate to the customer, if you do good work let it speak for itself. If the customer needs more of an explanation then they probably don't have the money to spend. You are a craftsman, not a factory. People who understand this won't have a problem with your rate.
Look at it this way. Off you go with your truck to the dealer and ask for the 60,000 mile service. He tells you $750 for the whole thing. Pick up you truck in late afternoon, it runs great and you pay up. You go back to the workshop and start to twitch at the price you came up with for the totally custom "one off" living room unit and feeling bad for the high $$. So paying top dollar for routine standard service is fine , But custom by you should be bottom dollar?
I always figured jobs at Time, Material, plus % Profit. Time is all labor at the rate you want to charge. Materials is all costs not time related. Profit is just that - profit. When I did commercial cabinets (up till 15 years ago) I charged $25 / hr for time, plus all material cost (including travel and delivery charges), and added 25% of time and materials for profit. I had all the work I could handle.
On one real large job which I really didn't want, I figured my standard calculations, then doubled it. I got the bid. Made a lot of money, but I sure worked my buns off.
PlaneWood by Mike_in_Katy
PlaneWood
Totally understood. You're new at doing it full time for you, you want to be competitive, you want work coming in by the truckload, and good grief look at what the tax man and the insurance are gouging you for. I fought with this for a long time. I still do to some extent, and we probably all do. Judging all the stuff the other advice is telling you to - what the market will bear, etc, can only be done by you and time. Loony as it sounds when you're starting out, decide what you're worth and stick with it. If thats a shop rate of $45 an hour, post it by the desk. Other things that have helped in my experiences:
membership in professional organizations (networking & advice opportunities) - if you're producing custom furniture and cabinets, market the guys who buy them. Join the local Homebuilders group, for instance.
Become friends with your competitors and find out what they don't do. Everyone says niche markets are where it's at. I'd tend to agree. It's hard to compete with twenty other firms in town that do exactly what you do. Someone is always willing to do it for less.
Sell your customers on you. What do you do different or better. If youre the guy giving the blue light special on everything, then say so. If you're the most expensive guy in town, justify it. You take the time effort and energy to achieve perfection every single time and you'll stand behind it 100%, and I'm sorry if my cost for this project is half your net worth but there's a clientele out there who wants what I do and understands that quality costs. But make sure you find that clientele.
Take risks. Losing your shirt on a job stinks very much badly, but boy is it a great learning experience. The ones you win make up for it in the end.
Quit working when you get home. I've done estimating at 9:30 at night. Might help the business, but doesn't help the sanity. And when people start figuring out that you're really always kind of working anyway, that's when they start calling you at home at 9:30pm. On Sunday.
If theres estimating guides available for what you do, having one around isn't bad. Not that you can say "oh, it says $5.25 per square foot so that's what I'll charge" but it gives you another frame of reference, and you can compare what you're really doing with what they're really estimating, and in time, you'll be much better at deciding what each project is really worth.
When you've decided what you have to have to survive on a project, add 10-20%. Again, taxes, insurance, overhead, repairs, growth . . . I won't say profit b/c if you're just starting out the name of the game initially is survival. Good luck.
RW,
"Quit working when you get home. I've done estimating at 9:30 at night. Might help the business, but doesn't help the sanity."
No argument. However it reminds me of a joke that's so true, it hurts.
Here's the (very) short version:
First man: Too bad about Bob and his new business. Looks like he's not gonna make it.
Second man: No? Why not? What makes you say that?
First man: I went by his place at 11 o'clock last night and no one was working!
Rich
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