Well, Here goes. I am a telecommunications casualty ( laid off 11 months ago with few promising long term job prospects), and am finally making the plunge into generating revenue from my hobby(IE starting my own business). Presently, I have a few large projects lined up on a time & material basis, so I am not worried about these projects.
My question is how much should I charge for my work? Are there different rates for different types of work? Do you charge per square foot, lineal foot, set amounts? finished/ unfinished?
I have owned my own business before and I don’t intend to have employees this time around. If I need an extra body I’ll hire a grunt for the day from the labor pool. I know my overhead costs, and have an idea of what I would like to clear per hour. Equipment is not really an issue, the cost is minimal compared to my other business, and I have a fairly complete shop.
I figure that with all the new homes in the area, I can generate substantial revenue with closet/pantry/garage organizers, entertainment centers, and pull out shelves in the kitchens for starters.
Any insight, suggestions, or opinions will be appreciated.
Replies
Craig, there are two books I know of on this subject, one of which I went to Barnes and Noble looking for tonight, but they didn't have it in stock. Both are available at Amazon:
The Woodworker's Guide to Pricing Your Work and
Profitable Woodworking: Turning Your Hobby into a Profession
forestgirl -- you can take the girl out of the forest, but you can't take the forest out of the girl ;-)
Thanks for the info. I've seen one book at B&N(can't recall the title), but the publication date was way out of date and seemed to have old information. I'll have to check if they have a newer update.
Craig, forest girl and I went to the same library (must be that Washington connection; I'm originally from Spokane). Both books she recommended are very helpful and will answer the questions you specified.
As a newer woodworker who's interested in moving toward full-time and has sold a couple of pieces, I also spoke to a couple of interior designers who work with clients that purchase original, handcrafted work (furniture and otherwise). They were very helpful in determining what the local market will bear, helping me gauge what my experience and the quality of my work should bring and... most of all... developing the confidence that my work is, indeed, good -- at this point in my (semi)professional development.
David
David,
Thanks for the info. It looks like I'll need to do more reading, from posts it seems that the $45/hr shop rate mark is on average, also some rule of thumb is 3x material, add 15% for finishing. So far the 3x rule has worked well for me, but I need to get a little more refined on my bidding.
My next door neighbor is also an interior designer specializing in high end residences, and she is raving about my work-both price and quality. So I am not sure if I need to be aiming for a higher market, or maybe not charging enough for my craftsmanship.
Anyway, I'll take a stab at this full time, Telecom is upside down right now, so I'm sure it'll provide me a viable living.
Edited 9/17/2002 6:08:55 PM ET by craig
Be very wary of the $whatever X materials way of estimating. I take the attitude that I CAN make a "silk purse out of a sow's ear." So what happens if the materials only cost $100.....am I supposed to give it away? I suggest that you adopt a realistic shop rate (mine is higher than $45) and make a stab at the time it will take to make the piece. Then let the chips fall....
Another thing.......unless you are very young, you won't be doing yourself any favors by under charging now to build a client base. If you can deliver a good product, then you deserve to be duly compensated for it.
PS I hate the money part of working......simply hate it.
Good thoughts, Jeff. And Craig, just one more idea, gleaned from my early years as a freelance writer trying to win clients AND earn a fair rate for my work:
Be kind to yourself. In other words, don't turn yourself inside-out coming up with a "perfect" estimate at this early stage in your career. FWIW, even as you gain experience you'll never get it exactly right; i.e., some jobs, for whatever reason, will take longer or require more materials than you expect, others will take less time, etc. Over time you'll get an average that's fair to you.
In the meantime, give it your best shot, and keep careful track of the time and materials used on early projects. Use them to estimate future work. As you build up a portfolio (for me, it's been my writing work for the past number of years; now it's my furniture-making experience that's starting to build), you'll not only have products/samples to show prospective clients, you'll also have a better sense of what is a market-, effort- and quality-appropriate rate (or flat charge) for a piece.
Oh, and one other idea: if possible, once you've designed/built/sold one piece, see if you can sell another similar (although not necessarily identical) piece. Not only will you start to build a personal vocabulary that clients will recognize, all the time you spent building jigs, forms, patterns, etc. for the first piece will pay off even more when you build the second piece. (Others may disagree, valuing -- and charging -- for a "unique" item each time.) The same principle holds true for freelance writers: research one article, write four.
DavidHmmm... the garden or the workshop today?
"research one article, write four"
Ha, ha, David. I latched on to that one pretty quickly. And four or five years later, you might be able to edit it a bit, add some new photographs, and sell it again. Best chuckle of the morning for me you posted there. Slainte.Website
Thanks, Sgian, glad I could send a grin your way. But keep it down... people might find out!
DHmmm... the garden or the workshop today?
Another good source for pricing is "Cabinetmaker"'s October issue (not out yet). In it shops from around the country fill out bids for real jobs. You can get a good idea about overhead, installation, and finish rates in your area as well as across the nation. In my neck of the woods $45/hr seems right, too. I think your neighbor is gushing over you for two reasons: (1) you probably are doing FINE work, and (2) the bodgers (UK-speak for half-a** craftsmen) in your area are heady with clients throwing money at them for what they provide.
Good luck in resolving your pricing quandry. It is nice to have this kind of problem, isn't it?
Dave
If you build high quality, standalone furniture in a one man workshop with fine solid woods then a minimum of five times raw material cost is a good place to START. You would usually go up from there depending on the style and complexity of the pieces you are building and as the demand for your work increases. If you are getting every commission that you bid on your pricing structure is probably too low.
Trying to compute shop overhead rates, overhead application rates, capacity and material usage variances, etc. in a one man shop borders on the fanatical. It's not necessary.
If your intention is to build high volume craft items, projects that entail the relatively heavy use of sheet goods, hire employees, etc. then don't use the multiple of raw material cost method.
I agree with you about getting too carried away with overhead calcs, etc. But I have to disagree about a reliance on the 5 times cost formula. But maybe it's because I use some inexpensive materials.....
I made a small table about six months ago. This had a walnut top and steel legs/aprons. The walnut was beautiful but not pristine.....lots of cracks and knots. The steel was just that: plain square tube and some square stock. Total materials was about $150. According to the formula that gives me a selling price of $750. At what I deem a fair shop rate, it gives me ten hours in which to make it, design it, deliver, and sweep up.
It took a lot longer than that.
I charged more than 750.
Jeff, let me reemphasize the part of my post that said 5x cost was a good STARTING point. Until somebody establishes a reputation and demand one usually can do alright with 5x. Hey, if the demand is there, the market is ripe, then I say pump it up.
Congrats. on the table. I'm sure it was worth every dime you charged for it. Nobody held a gun to the head of your client, I'm sure.
OK , OK....I admit it......I've used the 5X factor myself.
just as a check
gotta cover costs, you know
Now how about for those jobs that you really don't want todo, but can't say no.....have you ever applied the "ugly factor?" Wooooeeeeee......the cost can go really high!
Well I'm lucky and very blessed to be at a point where I can pick and choose what I do, so that has not been a problem for me in recent memory.
Even though this thread is primarily about what to charge per project or commission, there is one longer-term check that offers a decent argument for keeping good track of costs, etc.
That is, at the end of the year are you profitable? When you report your income to the IRS, can you do it accurately, identifying all of the costs associated with your product, including materials, equipment, utilities, shop space, etc.? Once you've done that, plus thrown in the cost of insurance (health, liability, etc.), retirement savings, kids' college savings, mortgage and everything else -- including paying yourself -- are you able to report a profit?
If you can report a profit, even if it's a small one, then you're probably -- generally -- doing a decent job of setting a fair price. If you're in demand, try raising your prices. If you can't report a profit, something needs to give. Do a solid examination of all of the above, and then some. If -- worst-case scenario -- you have no clue as to whether or not you can report a profit, and you're scrambling on April 14th, then that's a clue that you really need to set up at least a minimal bookkeeping, inventory and project-tracking process.
Again, that doesn't help with the immediate issue of "What should I charge now?" but it does help in the long run. FWIW.
DavidHmmm... the garden or the workshop today?
Craig,
Wish I had seen this before. There was a local guy that recently passed away, but found himself in a situation like yours. Corporate buy outs in the 80's cost him his retirement. He was already retired, a carver and living a life of RV'ing with his wife by going to art fairs and the like. Once he lost his income he settled into going to the places he had been and started buying rough sawn wood at mills and reselling it in other places where the wood wasn't common. He actually ended up making a very good living at it. Rather then pull a car behind his RV, he pulled a trailer of wood, but not the typical stuff. He was selling stuff that was always about 6"x12"x8' and larger. People at the shows ate it up, and he also started selling to other show hawks that would resell it also. It just an idea, but I've often though of just taking a trip somewhere like Maine to pick up some cedar, or Northern WisconsinMinnisota for Maple, or out west for some redwood, or anywhere. It would seem like an interesting way to vacation. Like I said, it's just an idea, but as a woodworker you may have a feeling for what you could peddle in your neck of the woods.
Don
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