I sent a friend a couple little jewelry boxes, as samples, for the jewelry he makes. He wants to order 100 to have in time for Christmas. I am very excited about this. I’ve done little jobs before but never something this big.
My question is on pricing. I can figure labor/materials and shipping. However, how do I figure out a discount for volume? Once I get the setup going, it should go smoothly. Any suggestions?
Thanks.
Robin
Replies
robinlynn ,
I don't know of one formula that can be used for any product , however since you have a handle on how long it takes to make 1 or 2 of these boxes that can be a starting point for the volume you speak of . Say it takes you one and a half days to complete 1 , what I would do is track my time and materials so you can arrive or already have figured what you need to charge to make your wage and I hope some profit , yeah they are two different things . When you cut multiples say for 100 units much time will be saved in set up and such. Depending on the particulars of this box your assembly time may be the same if you make 1 or 100 , same may be true with sanding and finish times . You may be able to save on hardware and other materials by buying in case lots or bulk, so some costs may go down there as well .So you will figure out that you can only complete so many a day or week no matter what . That could be the criteria to formulate pricing per box or per 100 . If you want to make $50 an hour subtract your overhead costs once you know what they are and make sure you have charged enough to net the desired wage , then add a bit of profit over and above wages and overhead costs . This is just one of many ways . Personally I don't rely on say , cost times 3 or anything like that . If you work slow or fast be consistent with your net hourly or weekly wage and profit .
good luck I hope this helps a bit dusty
My 2 cents.
Unless you can pass off parts of this to your much cheaper labor, your costs will be surprisingly consistent no matter how many you make. Whatever you gain on set up time will be lost to handling, finishing ,packing and shipping. Your price is probobly fine,,,, people just ask for discounts automatically when they think they are ordering a lot.
I'd also reccommend reading "Negotiate to Close" by Karass to get a better idea of what is going on in a transaction like this.
robinlynn,
unless the volume gets in the thousands, and your equipment gets more automated, I wouldn't change much on the price.
if you buy in volume, you have to store in volume. if you buy new equipment you factor that in.
with 100 pieces, just count on getting faster. also when counting the total time, add some in for taking a break. you don't want the smooth operation to turn into boredom. keep your zeal going all the way to the last one. in your mind it will be the best one.
jericho
Great post you made to Robinlynn , and right on the mark imo .
dusty
I've built display racks for candles, and another one for soaps, and shipped those across the country, building over 500 in a few years.
After you've made/studied a prototype, figure how many can be made ina day, realistically. Add up all material costs even fasteners, glue, expendables etc. The only price break you as a producer receives are in lumber(mostly), in high volume. Once all this is done, add a percentage for profit at least 15 no more than 30%. This is important. If you're paid wages only your business cannot grow and small debt creeps in with other rising costs. I'f you can be assured of several hundred offer incremental price breaks.
Once you have arrived at a price you can live with, and your (now)friend agrees to it; by all means get it in writing. Each side needs to live-up to their promises.
Robinlynn,
Don't forget to take into account to wear & tear on your equipment, the cost of replacing belts, blades, and bearings; the cost of transport and disposal of materials and waste products; the increase in consumption of electricity; dust masks, dust collection filters...
When you've thought of all of this, remember that any investments you make or expenditures you incur in order to fulfill this order will need to generate a return on investment unless you've been aching to make these investments anyway and this project will amount to a way to buy more goodies for your shop in lieu of profits.
One thing most folks seem to forget with these kinds of ventures is the amount of space consumed at each stage of production. Will you simultaneously have room for the raw materials AND the units in production AND the completed units awaiting shipment? If not, you may not be in a position to buy materials in sufficient quantities to warrant quantity discounts.
Lots to think about. Good luck,
-Jazzdogg-
"Don't ask yourself what the world needs. Ask yourself what makes you come alive, and go do that, because what the world needs is people who have come alive." Gil Bailie
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