What do you charge then?

"Swingman" <[email protected]> wrote in message
news:[email protected]...
> "Todd Fatheree" wrote in message
>
> > "Cost" is not a variable in the equation
> > that determines "price" in my book.
>
> <snip>
>
> >(I don't do this for a living ... )
> <snip>
>
> That's probably a good idea, considering.

Any time you want to stop being an ass will be fine. In fact, I've done it
for a living. And if you are under the impression that a product is priced
at some point other than "whatever you can get", you're sadly mistaken. I'm
tired of explaining it, so if you have any more derogatory comments to make,
you're on your own.

todd

"Todd Fatheree" wrote in message

> "Cost" is not a variable in the equation
> that determines "price" in my book.

<snip>

>(I don't do this for a living ... )
<snip>

That's probably a good idea, considering.

--
www.e-woodshop.net
Last update: 11/06/04

Thanks JT for the infomative response, I see what you mean!

:)

Sam


"J T" <[email protected]> wrote in message
news:[email protected]...
Sat, Dec 4, 2004, 7:41pm (EST+5) [email protected] (Sam Berlyn)
waves and wants to know:
Hi,
If someone asked me (a 13yr old) to build a bookcase, how much would you
charge?
It would depend.

I would think you charge on a per job rate, or is it hourly?

It would depend.

Say the materials cost £15 and it took 5 hrs, how much would you
charge.

It would depend.

I am not going to start charging, as I am putting it down to experience,
just getting them to pay materials, but just wondering!

What to charge is very rarely a black and white thing. Usually more
gray. Materials cost, certainly. Unless you're making something for a
close relative, or friend, as a gift. Then it could be optional.
Everything else is not engraved in stone.
I'll use the US $ sign rather than the pound sign (not on my keyboard).

Someone wants a bookcase. Your materials cost $15. Takes 5 hours
to make a bookcase. You want to make $5 pe hours, for a total of $40.
The customer is happy, you're happy.

OK, someone else wants a bookcase. Materials will cost $15 this
time too. You tell him/her $40. However, this time the client wants a
different design - and this one takes 10 hours to make. You still want
your $5 hours labor, but you've already quoted $40. Hmmm, that didn't
work out quite right.

You get another client, who wants a bookcase, first design. Ah,
you say, I know this one. And quote $40. Except this time, you have
experience with the design, and cut your work time down to 3 hours
rather than 5. Ah, now your're cookin'.

But, then no one wants bookcases anymore. Drat.

Then you decide to make little boxes (or whatever), and sell all
you can make, at $15 each - which covers the $5 materials, and take 3
hours to make. You still want to make your $5 per hour, but if you
charge $20, they don't sell well. Then you fid out, if you take them 40
miles down the road, you call sell them at $20, with no problem; but
then you've got gas, the time it takes, etc. And, if you go down the
road 40 miles in the oppositie direction, they will only sell at $7.50
each.
It partly depends on what you make, what materials you are using,
where you are selling, what price you are asking.

Bottom line, there're just too many variables involved for there to
be any hard and fast answers.



JOAT
Be who you are and say what you feel, because those who mind dont
matter, and those who matter dont mind.
- Dr Seuss

Mark Jerde <[email protected]> wrote:

> Renata wrote:
>
> > The neighbor's house was done by an unskilled roofer. The shingles
> > angle down along the rows such that eventually two rows come to a
> > point. The tabs don't line up and basically, while it keeps the house
> > dry (I htink), it looks like $hit.
> >
> > Unique designs are a whole nuther level.
>
> From time to time I visit art galleries, often dragged along by my wife. I
> prefer things I can recognize: "That is a painting of a tree in a meadow
> beside a bubbling brook. That other one is a painting of the Grand Canyon."
>
> OTOH I've been to galleries that leave me wondering, "How can I break into
> this racket?" I could crush two beer cans and put them on the seat of an
> old rickety folding chair that has a moth-eaten sweater hanging on the back
> and title the exhibit, "Untitled", if some rich fool or the National
> Endowment for the Arts (NEA) would pay me to do so. ;-)
>
> Shingle tabs that don't line up? Shingle rows that come together? What
> boldness! What daring! That artist is a genius! Here is a check for
> $500,000.00 to enable him or her to continue his or her great series, "Man's
> Inhumanity to Adverbs."

This Cabinet did a fair price at the auction recently.

http://www.christies.com/promos/dec04/6968/pressRelease.asp

36 million US dollar.

--
mare

Swingman wrote:
> "mikey" wrote in message
>>
>> If you want to lose money on the job, charge 3x the material cost.
>> ie. is it for a family member where profit doesn't matter?
>>
>> If you want to break even on the job, charge 4x the material cost.
>> ie. is it for a friend that asked you to build it as a favor?
>>
>> If you want to make a living doing the job, charge 5x the material
>> cost. ie. is it for a customer?
>>
>> In the case of a 13 yr old, perhaps ask them to help
>> and don't charge them anything...maybe it will stir
>> their inner woodworker.
>
>
> Actually, and IME, this is pretty close to the truth ... if there is
> such a thing in this regard.

Even when charging 3X the material cost somebody always comes along and
underbids me.........

I just have to say to myself..."they are getting what they are paying for"
but it sure makes it difficult to earn a living as a wood dorker.

Gary

Todd Fatheree wrote:
> "GeeDubb" <[email protected]> wrote in message
> news:[email protected]...
>> Even when charging 3X the material cost somebody always comes along
>> and underbids me.........
>>
>> I just have to say to myself..."they are getting what they are
>> paying for" but it sure makes it difficult to earn a living as a
>> wood dorker.
>>
>> Gary
>
> This is why I shake my head wondering after reading all of these
> responses of cost-based pricing if anyone has been exposed to
> manufacturing. Prior to embarking on my current career of playing
> with computers, I worked for 7 years as a design engineer for a
> manufacturing company in a highly competitive marketplace. I can
> tell you that the whole concept of pricing your product based on your
> costs is wrong. The only consideration (as you're seeing) when
> pricing your product is what the the market bears. As I said in an
> earlier post in this thread, the only way that relates to your cost
> is that after subtracting your costs from that price, are you willing
> to work for that much money? Using a 3X or 5X rule of thumb is OK
> when you're either unsure of the market or no market has been
> established, but once you get some market experience, it's pretty
> meaningless.
>
> todd

I agree. I did say that when I charged an amount equivalent to the 3x
material cost I often get underbid and they customer gets what they pay for.
I can't count the number of times I've been called back to fix the work of
the lower bidder. At this point I charge t/m to fix the job with a 50%
estimate up front. All of my work is referrel but even with that I'm
usually not the chosen contractor but often the one that fixes the work
later.

The guy that stated that 3x material cost will result in losing money is
still correct in the market I'm in (and most any other market) and I'm not
willing to work for that little. It doesn't pay the bills. The past 15
years has seen labor costs drop (Phx, AZ), material prices rise and
competition escalate but quality is gone. Unfortunately the economy has
become one of disposable products and quality seems to be much less
important than cost (i.e., electronics/other from China).

Guess this is why I'm currently working two jobs......to pay the bills.

Gary

Swingman wrote:
> "Jim Wheeler" wrote in message
>> The boy is right - cost is not a basis for pricing in a competitive
>> marketplace. Knowing and controlling costs is a requirement to make
>> a profit and stay in business over the long run, but is definately
>> not a factor in setting price in a free market.
>
> Horseshit. Are you _still_ self-employed, Jim?
>
> How about just one, ubiquitous, example of 'price based on cost' that
> likely happened a thousand times somewhere in this"competitive market
> place" of good and services we live in? Ever hear of a "cost plus
> contract"? The price of the contract is most definitely BASED on ...
> all together now: COST!.
>
> Both you guys need to understand that you're talking esoteric,
> wannabe MBA voodoo economics when the thread is about one-off
> woodworking items, so leave the wannabe MBA bullshit to the real MBA
> bullshitters ... that's about all they excel at.

MBA = More Bad Administration

JMO

Gary

This is a keeper.
Best explanation to date. I see I'm not charging enough!

Thanks Tom
Gary

Tom Watson wrote:
> On Sat, 4 Dec 2004 19:41:56 -0000, "Sam Berlyn"
> <[email protected]> wrote:
>
>> Hi,
>>
>> If someone asked me (a 13yr old) to build a bookcase, how much would
>> you charge?
>>
>> I would think you charge on a per job rate, or is it hourly?
>>
>> Say the materials cost £15 and it took 5 hrs, how much would you
>> charge.
>>
>> I am not going to start charging, as I am putting it down to
>> experience, just getting them to pay materials, but just wondering!
>>
>> Cheers,
>>
>> Sam
>>
>
>
> Sam:
>
> What follows is a repost of something that I put up a couple of years
> ago.
>
> I reckon it still holds true.
>
> It is interesting to me in reading this thread that people confuse
> cost and price.
>
> You must know your cost.
>
> It does not always have to determine your price.
>
> The price may be a multiplier of the cost, or it might be the
> perceived value of the item or service - but must always exceed the
> cost - if you would like to be in business.
>
> In direct response to your query about the thirteen year old person -
> I would seek to do that for free, in hopes of luring bigger and more
> profitable fish.
>
> Kindness is a great lure.
>
>
>
>
>
>
> Formula is:
>
> M+L+O+P (Materials plus Labor plus Overhead plus Profit)
>
>
> MATERIALS COST = Cost plus Tax plus Acquisition Cost (going to get it)
> plus carrying costs if financed. Make sure you do your take-offs
> cleanly and add for waste.
>
>
> LABOR COST is a bit more difficult. You need to break the job down
> into individual operations and make sure that you charge for all of
> them.
>
>
> Once you have your number of hours figured you need to figure your
> shop rate.
>
>
> Maximum number of hours available for work = 2080 (52 weeks x 40 hours
> = 2080 hours).
> Minus vacation time = 2000 (2 weeks x 40 hours = 80 hours).
> Minus holidays = 1944 (7 days x 8 hours = 56 hours).
>
>
> Minus non-billable hours = 1555 (20% of 1944 hours = 388.8 hours)
> (marketing, selling, bidding, bookkeeping, purchasing,
> emptying
> spittoons, etc.)
>
> So, you now have 1555 billable hours in which to earn your money for
> the year.
>
>
> How much do you want to make a year as your wage (not including
> profit, that's a different animal)?
>
>
> Let's use $50,000.00 a year just for fun.
>
>
> Labor Cost per billable hour = 32.15 ($50,000 / 1555 billable hours =
> $32.15 per hour).
>
>
> OVERHEAD COST = All the costs of doing business. Some of what I put
> here should go into a thing called Labor Burden but screw it, I'm
> putting it here, which works if you're a one man shop.
>
>
> Shop Cost = 3.86 (We'll include heat and electric, etc. in here,
> $500.00 per month x 12 months / 1555 billable hours = $3.86
> per
> hour).
> Machinery Cost = 1.29 (Acquisition, repair, maintenance,depreciation,
> $2000.00 per year / 1555 billable hours = $1.29 per
> hour).
> Truck Cost = 2.22 (34.5 cents per mile x 10,000 miles per year / 1555
> billable hours = $2.22 per hour).
> Office Cost = 1.16 (Space, furniture, computer, supplies, etc.$150.00
> per month x 12 months / 1555 billable hours per year = $1.16
> per
> hour).
> Insurance = .64 (Contractor's Liability, building, etc., $1000.00 per
> year / 1555 billable hours = $.64 per hour).
> Health Insurance = 1.93 ($250.00 per month x 12 months / 1555 billable
> hours = $1.93 per hour).
> Professional Services = .64 (Accountants and lawyers, $1000.00 per
> year / 1555 billable hours = $.64 per hour).
> Other = .5 (All sorts of consumables and other stuff that can't be
> directly billed to a job, $.50 x 1555 per billable hour = $.50
> per hour).
>
>
> Total Overhead per billable hour = $12.24.
>
>
>
> Labor Cost plus Overhead Cost = $44.39 (Labor @ $32.15 plus Overhead @
> $12.24 = $44.39)
>
> PROFIT is not how much you make as wages, it's how much the business
> makes.
>
>
> A rough split on the cost of jobs is 1/4 material and 3/4 labor (Labor
> Cost plus Overhead Cost).
>
>
> If your yearly billing for labor plus overhead is $69,026.00 ( $44.39
> per billable hour x 1555 billable hours = $69,026.00). Then your
> yearly materials cost should be about $23,009.00 ($69,026.00 / 3 =
> $23,009.00).
>
>
> Annual Sales = $92,035.00 (Does not include profit, yet, Labor @
>
>
> $69,026.00 plus Materials @ $23,009 = $92,035.00 per year).
>
> Profit = 8.88 (15% of gross annual sales, $92,035.00 x 15% =
> $13805.00 / 1555 billable hours = $8.88 per hour).
>
> SHOP RATE = 53.27 (Labor Cost plus Overhead Cost @ $44.39 plus Profit
>
>
> @ $8.88 = $53.27 per hour).
> ANNUAL SALES = $105,840.00 (Labor Cost plus Overhead Cost plus
> Materials Cost plus Profit).
>
>
> QUARTERLY SALES = $26,460.00.
>
>
> MONTHLY SALES = $8820.00.
>
>
> WEEKLY SALES = $2035.00
>
>
> Every time I start thinking like this it makes me want to go back to
> working for somebody else.
>
>
> I'll probably catch hell for this because no accountant would ever
> group things together the way I have. Also, they don't, as a rule,
> make as much use of the WAG method as I have for cost estimating.
> They like GAP, I like WAG (they be rich - I be poor). I guess my
> point is: If I'd had someone present things to me in this way when I
> started, I probably wouldn't have started at all but, at some point
> you have to start thinking this way, preferably with the aid of a real
> accountant, or you won't really be in business, you'll just have a
> very expensive, very time consuming hobby. And, for you guys who
> think that 15% is a gaudy figure, yeah, so do I.
>
> Regards,
> Tom.
>
> "People funny. Life a funny thing." Sonny Liston
>
> Thomas J.Watson - Cabinetmaker (ret.)
> tjwatson1ATcomcastDOTnet (real email)
> http://home.comcast.net/~tjwatson1

"Edwin Pawlowski" <[email protected]> wrote in message
news:[email protected]...
>
> "Todd Fatheree" <[email protected]> wrote in message
> > Well, it doesn't much matter what you (or I) think. In a capitalist
> > economy, that's the way it works. The market doesn't give a damn about
> > how
> > much your costs are, so there isn't any point in using that as a
starting
> > point to arrive at price. If you want to enlighten us on why that is
> > wrong,
> > feel free.
>
> The market will determine the selling price, but if you don't know your
> costs, you can be in big trouble very fast. I've seen big companies sell
> products at what the market demands and they no longer exist. If you know
> your costs, know that selling price is less than cost, you find a new
> product before it is too late. The market price for some items my company
> makes has been driven down very low. We decided to no longer participate.
> Our largest competitor (in that market) had a big grin as they gobbled up
> most of the business. Two weeks ago they closed the doors. Suddenly, the
> market does care about our costs and is willing to pay more.

I never said you shouldn't know your costs. In my first post in this
thread, I said you had to know your costs to be able to calculate profit to
determine if the product is worthwhile for you financially. Hint: the
market still doesn't care about your cost. It's reacting to a change in the
competitive landscape. If your material cost went up 10% tomorrow, could
you just tack on 10% to your price? If you gave your employees a 25% raise
could you increase your product price commensurately? I doubt it. If
someone else came along next week willing to sell the product for the same
price your competitor was selling it at (albeit at a loss), where do you
think the market would set the price? Presto, once again the market doesn't
care what your costs are. Would the other company be foolish to do so?
Probably, but the market doesn't care.

todd

On Sat, 4 Dec 2004 19:41:56 -0000, "Sam Berlyn"
<[email protected]> wrote:

>how much would you charge?

They usual answer is "not enough"

>I would think you charge on a per job rate, or is it hourly?

If you don't want to starve, you charge hourly, and you choose work
where you can do this.

Installing junk MDF shelves pays better than veneering and french
polishing. The reason is simple - one of them is done "on site" and
the client sees you there, sees you working for a few hours, then pays
you for your _time_ at a reasonable rate. Skilled benchwork however
is unseen, and unseen work isn't valuable. Spend a couple of days
making a table and their first response is "It's just like the one I
saw for £25 in Ikea".

I was recently offered a job by a local kitchen fitting company -
fairly well known, reasonably high-end. They saw some work I'd done
with inch thick solid oak tops - low budget, but we had the materials
for free and it was a good piece of work. Then the guy offered me the
same as the rest of his crew - £6/hour. I politely pointed out that
shelf stacking in Lidl's supermarket was paying £7, and I'm proud to
say I chased him from the workshop with something sharp.

>Say the materials cost £15 and it took 5 hrs, how much would you charge.

There's a saying in the craft market of "three times materials" as a
rough rule of thumb. Now obviously this is crazy - woodturning might
begin with green local timber for free and just your skill, some
simple jewellery work might be an hour setting a £500 stone into a
£100 factory-made ring mount. But it's not bad when you can't think
of anything better.

As a comparison figure, try asking a plumber or electrician how much
to change a tap. Even allowing for the callout / workshop difference,
you will get a huge hourly rate from them. Why should woodworking be
any less ?

Unless it's tiny, your materials are more than £15 too. Don't forget
the finishes (and the rest of the tin that you waste), the consumables
(glasspaper) and the electricity of heating. Ikea's cheapest bookcase
is something like £45, and that's just chipboard (I have several, as I
can't buy timber for that little)

--
Smert' spamionam

"Todd Fatheree" <[email protected]> wrote in message
> I never said you shouldn't know your costs. In my first post in this
> thread, I said you had to know your costs to be able to calculate profit
> to
> determine if the product is worthwhile for you financially. Hint: the
> market still doesn't care about your cost. It's reacting to a change in
> the
> competitive landscape.

Just what is the competitive landscape for a single bookcase made by 13 year
olds?

> If your material cost went up 10% tomorrow, could
> you just tack on 10% to your price? If you gave your employees a 25%
> raise
> could you increase your product price commensurately? I doubt it.

Right now, are costs are changing rapidly on raw mateial. Yes, we tack it
on, but a 10% raw mateial cost increase does not justify a selling price
increase of 10%. We are passing on actual cost. So far this year material
increase is 50%. It MUST be passed on or we go out of business.

> If
> someone else came along next week willing to sell the product for the same
> price your competitor was selling it at (albeit at a loss), where do you
> think the market would set the price? Presto, once again the market
> doesn't
> care what your costs are. Would the other company be foolish to do so?
> Probably, but the market doesn't care.

Correct. I also hope it happens that way as it won't be long before another
compeitor is gone. That will change the marketplace if we are the only
supplier in the region! We lost a large customer to a competitor. They
offered a firm price for a full year that is lower than ours at the time.
Factor in the 50% material increase and we laugh every time we see the lost
customer's truck picking up product.

Sat, Dec 4, 2004, 7:41pm (EST+5) [email protected] (Sam=A0Berlyn)
waves and wants to know:
Hi,
If someone asked me (a 13yr old) to build a bookcase, how much would you
charge?
It would depend.

I would think you charge on a per job rate, or is it hourly?

It would depend.

Say the materials cost =A315 and it took 5 hrs, how much would you
charge.

It would depend.

I am not going to start charging, as I am putting it down to experience,
just getting them to pay materials, but just wondering!

What to charge is very rarely a black and white thing. Usually more
gray. Materials cost, certainly. Unless you're making something for a
close relative, or friend, as a gift. Then it could be optional.
Everything else is not engraved in stone.
I'll use the US $ sign rather than the pound sign (not on my keyboard).

Someone wants a bookcase. Your materials cost $15. Takes 5 hours
to make a bookcase. You want to make $5 pe hours, for a total of $40.
The customer is happy, you're happy.

OK, someone else wants a bookcase. Materials will cost $15 this
time too. You tell him/her $40. However, this time the client wants a
different design - and this one takes 10 hours to make. You still want
your $5 hours labor, but you've already quoted $40. Hmmm, that didn't
work out quite right.

You get another client, who wants a bookcase, first design. Ah,
you say, I know this one. And quote $40. Except this time, you have
experience with the design, and cut your work time down to 3 hours
rather than 5. Ah, now your're cookin'.

But, then no one wants bookcases anymore. Drat.

Then you decide to make little boxes (or whatever), and sell all
you can make, at $15 each - which covers the $5 materials, and take 3
hours to make. You still want to make your $5 per hour, but if you
charge $20, they don't sell well. Then you fid out, if you take them 40
miles down the road, you call sell them at $20, with no problem; but
then you've got gas, the time it takes, etc. And, if you go down the
road 40 miles in the oppositie direction, they will only sell at $7.50
each.
It partly depends on what you make, what materials you are using,
where you are selling, what price you are asking.

Bottom line, there're just too many variables involved for there to
be any hard and fast answers.



JOAT
Be who you are and say what you feel, because those who mind dont
matter, and those who matter dont mind.
- Dr Seuss

"Todd Fatheree" wrote in message ...
> "Swingman" wrote in message

> > "Todd Fatheree" wrote in message
> >
> > > "Cost" is not a variable in the equation
> > > that determines "price" in my book.
> >
> > <snip>
> >
> > >(I don't do this for a living ... )
> > <snip>
> >
> > That's probably a good idea, considering.
>
> Any time you want to stop being an ass will be fine. In fact, I've done
it
> for a living.

Next time you may want to consider changing your ideas about how to price
your goods in relation to what it costs to produce them.

And if you are under the impression that a product is priced
> at some point other than "whatever you can get", you're sadly mistaken.
I'm
> tired of explaining it, so if you have any more derogatory comments to
make,
> you're on your own.

Hey bubba, don't look now, but _you_ jumped into the thread of your own free
will, and apparently with such a piss poor argument to backup your
contention that you can only ultimately defend it by name calling.

--
www.e-woodshop.net
Last update: 11/06/04

No Wayne, wronge end of the stick!

I (Sam Berlyn) am 13. I am asking how much to charge. I have got my own
tools and workshed. I am NOT going round weeding and sweeping. and I am NOT
going to break other people's tools.. I have my own!

Thanks,

Sam


"Wayne K." <[email protected]> wrote in message
news:[email protected]...
> What to charge is why everyperson is not in Business selling a product.
It
> takes a keen eye and particular know-how to understand what the market
will
> bear and how far to push it. This what makes a good business. Not
everyone
> can do it.
> Many wannabes come along and cheapen it for everyone.
> I am neither of the above. I just like to make sawdust.
> In the case of the 13 year old, I would explain the cost of materials, the
> cost of time and discuss his budget. I would then offer to let him pay in
> cleaning my yard, weeding raking leaves etc and some minor shop time. A
> thirteen year old offering to pay you to make him a bookcase has a good
jump
> on the life he will be facing soon. Give him all the guidance he will
take.
> Very interesting thread.
> Wayne K
> Columbia MD
>
> "J T" <[email protected]> wrote in message
> news:[email protected]...
> Sat, Dec 4, 2004, 7:41pm (EST+5) [email protected] (Sam Berlyn)
> waves and wants to know:
> Hi,
> If someone asked me (a 13yr old) to build a bookcase, how much would you
> charge?
> It would depend.
>
> I would think you charge on a per job rate, or is it hourly?
>
> It would depend.
>
> Say the materials cost £15 and it took 5 hrs, how much would you
> charge.
>
> It would depend.
>
> I am not going to start charging, as I am putting it down to experience,
> just getting them to pay materials, but just wondering!
>
> What to charge is very rarely a black and white thing. Usually more
> gray. Materials cost, certainly. Unless you're making something for a
> close relative, or friend, as a gift. Then it could be optional.
> Everything else is not engraved in stone.
> I'll use the US $ sign rather than the pound sign (not on my keyboard).
>
> Someone wants a bookcase. Your materials cost $15. Takes 5 hours
> to make a bookcase. You want to make $5 pe hours, for a total of $40.
> The customer is happy, you're happy.
>
> OK, someone else wants a bookcase. Materials will cost $15 this
> time too. You tell him/her $40. However, this time the client wants a
> different design - and this one takes 10 hours to make. You still want
> your $5 hours labor, but you've already quoted $40. Hmmm, that didn't
> work out quite right.
>
> You get another client, who wants a bookcase, first design. Ah,
> you say, I know this one. And quote $40. Except this time, you have
> experience with the design, and cut your work time down to 3 hours
> rather than 5. Ah, now your're cookin'.
>
> But, then no one wants bookcases anymore. Drat.
>
> Then you decide to make little boxes (or whatever), and sell all
> you can make, at $15 each - which covers the $5 materials, and take 3
> hours to make. You still want to make your $5 per hour, but if you
> charge $20, they don't sell well. Then you fid out, if you take them 40
> miles down the road, you call sell them at $20, with no problem; but
> then you've got gas, the time it takes, etc. And, if you go down the
> road 40 miles in the oppositie direction, they will only sell at $7.50
> each.
> It partly depends on what you make, what materials you are using,
> where you are selling, what price you are asking.
>
> Bottom line, there're just too many variables involved for there to
> be any hard and fast answers.
>
>
>
> JOAT
> Be who you are and say what you feel, because those who mind dont
> matter, and those who matter dont mind.
> - Dr Seuss
>
>

"Sam Berlyn" <[email protected]> wrote in message
news:[email protected]...
> Hi,
>
> If someone asked me (a 13yr old) to build a bookcase, how much would you
> charge?
>
> I would think you charge on a per job rate, or is it hourly?
>
> Say the materials cost £15 and it took 5 hrs, how much would you charge.
>
> I am not going to start charging, as I am putting it down to experience,
> just getting them to pay materials, but just wondering!
>
> Cheers,
>
> Sam

IMHO, the answer is "whatever the market will bear". How long it takes you
doesn't enter into the price, AFAIC. You can use that to decide whether
it's worth your time to do it, but shouldn't have an impact on the price.
So, it comes down to what would a handcrafted bookcase made of similar
materials and of a similar quality go for on the open market?

todd

"Todd Fatheree" <[email protected]> wrote in message
> Well, it doesn't much matter what you (or I) think. In a capitalist
> economy, that's the way it works. The market doesn't give a damn about
> how
> much your costs are, so there isn't any point in using that as a starting
> point to arrive at price. If you want to enlighten us on why that is
> wrong,
> feel free.

The market will determine the selling price, but if you don't know your
costs, you can be in big trouble very fast. I've seen big companies sell
products at what the market demands and they no longer exist. If you know
your costs, know that selling price is less than cost, you find a new
product before it is too late. The market price for some items my company
makes has been driven down very low. We decided to no longer participate.
Our largest competitor (in that market) had a big grin as they gobbled up
most of the business. Two weeks ago they closed the doors. Suddenly, the
market does care about our costs and is willing to pay more.

"Todd Fatheree" wrote in message

> I never said you shouldn't know your costs.

You might not have meant it like it reads, but you clearly said price should
not be a _basis_ for cost, and that is simply not true:

>>I can tell you that the whole concept of pricing your product based on
your costs is wrong.

You ALWAYS use "cost as a basis for price" in some manner, if you want to
stay in business that is.

AAMOF, "basis" is the operative word here. You had better know PRECISELY how
much your widget cost to get to market before you set a price and that _is_
using cost as a "starting point" and "basis" for price. If your widget cost
you .50 cents in materials, labor and overhead to market, you damn well
better not plan on selling that widget for .50 cents or less if you want to
be profitable. After that point a myriad of other economic pricing factors
come into play, just a couple being "what the market will bear",
competition, and economy of scale.

>The market doesn't give a damn about how much your costs are, so there
isn't any point
> in using that as a starting point to arrive at price.

Don't give up your day job.

--
www.e-woodshop.net
Last update: 11/06/04

"Swingman" <[email protected]> wrote in message
news:[email protected]...
>
> Hey bubba, don't look now, but _you_ jumped into the thread of your own
free
> will, and apparently with such a piss poor argument to backup your
> contention that you can only ultimately defend it by name calling.

I called you an ass for being insulting (twice). Up to then, I made my
argument without trying to disparage you, which you had done twice to me.
But I don't have to be rude to make my argument, so I apologize for my
previous statement. How about we agree to disagree?

todd

If you want to lose money on the job, charge 3x the material cost.
ie. is it for a family member where profit doesn't matter?

If you want to break even on the job, charge 4x the material cost.
ie. is it for a friend that asked you to build it as a favor?

If you want to make a living doing the job, charge 5x the material cost.
ie. is it for a customer?

In the case of a 13 yr old, perhaps ask them to help
and don't charge them anything...maybe it will stir
their inner woodworker.

mikey.


Sam Berlyn wrote:
> Hi,
>
> If someone asked me (a 13yr old) to build a bookcase, how much would you
> charge?
>
> I would think you charge on a per job rate, or is it hourly?
>
> Say the materials cost £15 and it took 5 hrs, how much would you charge.
>
> I am not going to start charging, as I am putting it down to experience,
> just getting them to pay materials, but just wondering!
>
> Cheers,
>
> Sam
>
>

What to charge is why everyperson is not in Business selling a product. It
takes a keen eye and particular know-how to understand what the market will
bear and how far to push it. This what makes a good business. Not everyone
can do it.
Many wannabes come along and cheapen it for everyone.
I am neither of the above. I just like to make sawdust.
In the case of the 13 year old, I would explain the cost of materials, the
cost of time and discuss his budget. I would then offer to let him pay in
cleaning my yard, weeding raking leaves etc and some minor shop time. A
thirteen year old offering to pay you to make him a bookcase has a good jump
on the life he will be facing soon. Give him all the guidance he will take.
Very interesting thread.
Wayne K
Columbia MD

"J T" <[email protected]> wrote in message
news:[email protected]...
Sat, Dec 4, 2004, 7:41pm (EST+5) [email protected] (Sam Berlyn)
waves and wants to know:
Hi,
If someone asked me (a 13yr old) to build a bookcase, how much would you
charge?
It would depend.

I would think you charge on a per job rate, or is it hourly?

It would depend.

Say the materials cost £15 and it took 5 hrs, how much would you
charge.

It would depend.

I am not going to start charging, as I am putting it down to experience,
just getting them to pay materials, but just wondering!

What to charge is very rarely a black and white thing. Usually more
gray. Materials cost, certainly. Unless you're making something for a
close relative, or friend, as a gift. Then it could be optional.
Everything else is not engraved in stone.
I'll use the US $ sign rather than the pound sign (not on my keyboard).

Someone wants a bookcase. Your materials cost $15. Takes 5 hours
to make a bookcase. You want to make $5 pe hours, for a total of $40.
The customer is happy, you're happy.

OK, someone else wants a bookcase. Materials will cost $15 this
time too. You tell him/her $40. However, this time the client wants a
different design - and this one takes 10 hours to make. You still want
your $5 hours labor, but you've already quoted $40. Hmmm, that didn't
work out quite right.

You get another client, who wants a bookcase, first design. Ah,
you say, I know this one. And quote $40. Except this time, you have
experience with the design, and cut your work time down to 3 hours
rather than 5. Ah, now your're cookin'.

But, then no one wants bookcases anymore. Drat.

Then you decide to make little boxes (or whatever), and sell all
you can make, at $15 each - which covers the $5 materials, and take 3
hours to make. You still want to make your $5 per hour, but if you
charge $20, they don't sell well. Then you fid out, if you take them 40
miles down the road, you call sell them at $20, with no problem; but
then you've got gas, the time it takes, etc. And, if you go down the
road 40 miles in the oppositie direction, they will only sell at $7.50
each.
It partly depends on what you make, what materials you are using,
where you are selling, what price you are asking.

Bottom line, there're just too many variables involved for there to
be any hard and fast answers.



JOAT
Be who you are and say what you feel, because those who mind dont
matter, and those who matter dont mind.
- Dr Seuss

The boy is right - cost is not a basis for pricing in a competitive
marketplace. Knowing and controlling costs is a requirement to make a
profit and stay in business over the long run, but is definately not a
factor in setting price in a free market.

jim


"Swingman" <[email protected]> wrote in message
news:[email protected]...
"Todd Fatheree" wrote in message

> I never said you shouldn't know your costs.

You might not have meant it like it reads, but you clearly said price should
not be a _basis_ for cost, and that is simply not true:

>>I can tell you that the whole concept of pricing your product based on
your costs is wrong.

You ALWAYS use "cost as a basis for price" in some manner, if you want to
stay in business that is.

AAMOF, "basis" is the operative word here. You had better know PRECISELY how
much your widget cost to get to market before you set a price and that _is_
using cost as a "starting point" and "basis" for price. If your widget cost
you .50 cents in materials, labor and overhead to market, you damn well
better not plan on selling that widget for .50 cents or less if you want to
be profitable. After that point a myriad of other economic pricing factors
come into play, just a couple being "what the market will bear",
competition, and economy of scale.

>The market doesn't give a damn about how much your costs are, so there
isn't any point
> in using that as a starting point to arrive at price.

Don't give up your day job.

--
www.e-woodshop.net
Last update: 11/06/04

>how much would you charge?

1. Know your bottom price based on your own determination. This can vary
depending circumstances. Sometimes it pays to do something that will lead
to other things.

2. Know what you want to get for the job, again based on what it's worth to
you.

3. Most importantly, never underestimate what someone is willing to pay.
Before you answer the question,"how much do you charge?" Ask,"what are you
willing to pay?" Followed with," let me get back to you with a price."

"Todd Fatheree" wrote in message

> This is why I shake my head wondering after reading all of these responses
> of cost-based pricing

Keep shaking your head because you missed the point completely. I did not
say that was THE way to price, but just how often it turns out to be the
case when you go back an figure it up.

>I can tell you that the whole concept of pricing your product based on your
costs is wrong.

LOL ... IME, there is as much "wrong" with that statement as there is in
using it solely for a business philosophy.

--
www.e-woodshop.net
Last update: 11/06/04

"Todd Fatheree" wrote in message ...
<snip>
> How long it takes you doesn't enter into the price, AFAIC.
>You can use that to decide whether it's worth your time to do it,
>but shouldn't have an impact on the price.

Inarguably Tom Plamann is a very sucessful woodworker who obviously has a
good grasp on pricing woodworking projects. Here's what he said on abpw
about pricing and "how long it takes" with regard to his awesome stairway
project:

"I figured the price so that if it takes twice as long to make as I think it
will, I still make something on it."

Interestingly, at Tom's level "time" is likely his biggest "cost" factor,
not materials, so the cost of the materials-multiplier-method mentioned
earlier in this thread wouldn't even get you in the ballpark like it might
for the rest of us weekly wooddorkers.

Nonetheless, time is money, and inarguably part of the "cost" of a project,
and at least one _very_ successful woodworker gives us a brief insight into
how he figures that price.

Take note.

BTW, anyone who hasn't been to abpw to see the "prototype" ... "go and be
humbled".

--
www.e-woodshop.net
Last update: 11/06/04

"Merle" <[email protected]> wrote in message

>
> "Well... that's right, but the first one was fun!"

And this is why woodworking will never gat past the hobby stage for me. I
already have a job, thank you very much.

"Swingman" <[email protected]> wrote in message
news:[email protected]...
> "Todd Fatheree" wrote in message
>
> > I never said you shouldn't know your costs.
>
> You might not have meant it like it reads, but you clearly said price
should
> not be a _basis_ for cost, and that is simply not true:
>
> >>I can tell you that the whole concept of pricing your product based on
> your costs is wrong.
>
> You ALWAYS use "cost as a basis for price" in some manner, if you want to
> stay in business that is.
>
> AAMOF, "basis" is the operative word here. You had better know PRECISELY
how
> much your widget cost to get to market before you set a price and that
_is_
> using cost as a "starting point" and "basis" for price. If your widget
cost
> you .50 cents in materials, labor and overhead to market, you damn well
> better not plan on selling that widget for .50 cents or less if you want
to
> be profitable. After that point a myriad of other economic pricing factors
> come into play, just a couple being "what the market will bear",
> competition, and economy of scale.

I think we're caught up in semantics here. What I'm trying to say, contrary
to some of the earlier posts, is that figuring out your costs, then adding
some arbitrary factor (like 3x) is not a proper way to arrive at a price.
The price should be "whatever you can get". Of course you want to know what
the cost is (I've done my share of multi-level cost buildups). If you want
to say it's a basis insomuch as you want to know it before you determine
your price, fine. I'm just saying it's not a number you plug into an
equation and out comes your price.

> >The market doesn't give a damn about how much your costs are, so there
> isn't any point
> > in using that as a starting point to arrive at price.
>
> Don't give up your day job.

Nice. Because we disagree, I have to be stupid. Let's try to focus back on
the original question, which was how much to charge for a bookcase. I
recently built a maple & padauk table for an acquaintance. I figured out
what my material costs would be before giving him a price, but the price I
gave him was one that was based upon what custom-designed furniture went for
and what I thought he was willing to pay.

todd

"GeeDubb" <[email protected]> wrote in message
news:[email protected]...
> I agree. I did say that when I charged an amount equivalent to the 3x
> material cost I often get underbid and they customer gets what they pay
for.
> I can't count the number of times I've been called back to fix the work of
> the lower bidder. At this point I charge t/m to fix the job with a 50%
> estimate up front. All of my work is referrel but even with that I'm
> usually not the chosen contractor but often the one that fixes the work
> later.
>
> The guy that stated that 3x material cost will result in losing money is
> still correct in the market I'm in (and most any other market) and I'm not
> willing to work for that little. It doesn't pay the bills. The past 15
> years has seen labor costs drop (Phx, AZ), material prices rise and
> competition escalate but quality is gone. Unfortunately the economy has
> become one of disposable products and quality seems to be much less
> important than cost (i.e., electronics/other from China).
>
> Guess this is why I'm currently working two jobs......to pay the bills.
>
> Gary

I can't disagree with any of that. It's a sad state of affairs, but it's
tough fighting the system. The only thing you can do is be flexible and be
willing to walk away from it if it (at least as a money-maker) becomes
economically infeasible.

todd

On Mon, 6 Dec 2004 23:41:04 -0500, "Wayne K." <[email protected]>
wrote:

>What to charge is why everyperson is not in Business selling a product. It
>takes a keen eye and particular know-how to understand what the market will
>bear and how far to push it. This what makes a good business. Not everyone
>can do it.
>Many wannabes come along and cheapen it for everyone.
>I am neither of the above. I just like to make sawdust.
>In the case of the 13 year old, I would explain the cost of materials, the
>cost of time and discuss his budget. I would then offer to let him pay in
>cleaning my yard, weeding raking leaves etc and some minor shop time. A
>thirteen year old offering to pay you to make him a bookcase has a good jump
>on the life he will be facing soon. Give him all the guidance he will take.

LMAO! No, it is the 13 yr old *building* the bookcase, not buying it.
:)

>Very interesting thread.
>Wayne K
>Columbia MD
>
>"J T" <[email protected]> wrote in message
>news:[email protected]...
>Sat, Dec 4, 2004, 7:41pm (EST+5) [email protected] (Sam Berlyn)
>waves and wants to know:
>Hi,
>If someone asked me (a 13yr old) to build a bookcase, how much would you
>charge?
> It would depend.
>
>I would think you charge on a per job rate, or is it hourly?
>
> It would depend.
>
>Say the materials cost £15 and it took 5 hrs, how much would you
>charge.
>
> It would depend.
>
>I am not going to start charging, as I am putting it down to experience,
>just getting them to pay materials, but just wondering!
>
> What to charge is very rarely a black and white thing. Usually more
>gray. Materials cost, certainly. Unless you're making something for a
>close relative, or friend, as a gift. Then it could be optional.
>Everything else is not engraved in stone.
>I'll use the US $ sign rather than the pound sign (not on my keyboard).
>
> Someone wants a bookcase. Your materials cost $15. Takes 5 hours
>to make a bookcase. You want to make $5 pe hours, for a total of $40.
>The customer is happy, you're happy.
>
> OK, someone else wants a bookcase. Materials will cost $15 this
>time too. You tell him/her $40. However, this time the client wants a
>different design - and this one takes 10 hours to make. You still want
>your $5 hours labor, but you've already quoted $40. Hmmm, that didn't
>work out quite right.
>
> You get another client, who wants a bookcase, first design. Ah,
>you say, I know this one. And quote $40. Except this time, you have
>experience with the design, and cut your work time down to 3 hours
>rather than 5. Ah, now your're cookin'.
>
> But, then no one wants bookcases anymore. Drat.
>
> Then you decide to make little boxes (or whatever), and sell all
>you can make, at $15 each - which covers the $5 materials, and take 3
>hours to make. You still want to make your $5 per hour, but if you
>charge $20, they don't sell well. Then you fid out, if you take them 40
>miles down the road, you call sell them at $20, with no problem; but
>then you've got gas, the time it takes, etc. And, if you go down the
>road 40 miles in the oppositie direction, they will only sell at $7.50
>each.
> It partly depends on what you make, what materials you are using,
>where you are selling, what price you are asking.
>
> Bottom line, there're just too many variables involved for there to
>be any hard and fast answers.
>
>
>
>JOAT
>Be who you are and say what you feel, because those who mind dont
>matter, and those who matter dont mind.
>- Dr Seuss
>

Aut inveniam viam aut faciam

In article <[email protected]>,
Prometheus <[email protected]> wrote:

> >>how much would you charge?

A lady was browsing in a craftsman's shop when she saw a side chair she
liked.

"How much is the chair?" she asked.

"Oh, about $200", the carpenter said, scratching his head.

"That's great!", the woman replied. "What would you charge for a set of
eight?"

"Well, lessee", the carpenter thought some more. "That would be about
$3000."

"Three thousand! But eight times $200 is only $1600!"

"Well... that's right, but the first one was fun!"



:=)

merle

"Sam Berlyn" <[email protected]> wrote in message
news:[email protected]...
> Hi,
>
> If someone asked me (a 13yr old) to build a bookcase, how much would you
> charge?
>
> I would think you charge on a per job rate, or is it hourly?
>
> Say the materials cost £15 and it took 5 hrs, how much would you charge.
>

How much do you want to earn? Is the customer willing to pay that?

Very simplified, it is material cost plus labor. So lets step through it a
bit.

Material cost is the cost of wood, of course. You must also factor in glue,
screws, dowells, and things you may already have on hand. You may use only
a portion of a bottle, but it is still a cost you paid. Experience often
tells you how much to factor in. You must also account for waste. You can't
ask the customer for extra if you screw up a piece and have to buy more
wood, but yoiu will damage some. An allowance is usually factored on all
jobs, even those where there is no waste due to your error.

Labor will vary. For a business, you must pay either yourself or your worker
a wage per hour. Since you are a beginning woodworker, you will earn less
per hour. Work it backward. A bookcase is frth $100. Of that, $30 is
material, $70 is labor and it takes a skilled experienced craftsman 5 hours.
That works out to $14 per hour. Since you are new at this, it may take you
10 hours to complete the project. Your customer may only be willing to pay
that same $70, so you can only earn $7 per hour. In a business, you must
also factor in time to go get the wood, insurance cost, unilities, sales
commissions, supplies, taxes and many other little items

On Sat, 4 Dec 2004 19:41:56 -0000, "Sam Berlyn"
<[email protected]> wrote:

>Hi,
>
>If someone asked me (a 13yr old) to build a bookcase, how much would you
>charge?
>
>I would think you charge on a per job rate, or is it hourly?
>
>Say the materials cost £15 and it took 5 hrs, how much would you charge.
>
>I am not going to start charging, as I am putting it down to experience,
>just getting them to pay materials, but just wondering!
>
>Cheers,
>
>Sam
>


what are your skills worth, per hour?
it may sound like a smartass question, but it's not- the answer varies
a lot by location.

On Sun, 05 Dec 2004 00:16:49 GMT, "mel" <[email protected]>
wrote:

>>how much would you charge?
>
>1. Know your bottom price based on your own determination. This can vary
>depending circumstances. Sometimes it pays to do something that will lead
>to other things.
>
>2. Know what you want to get for the job, again based on what it's worth to
>you.
>
>3. Most importantly, never underestimate what someone is willing to pay.
>Before you answer the question,"how much do you charge?" Ask,"what are you
>willing to pay?" Followed with," let me get back to you with a price."

Figure out what you think it's worth to you, knowing how it's made,
then double that. It's really bad business practice to start with a
low price- face it, you're not going to compete with WalMart
price-wise, so you may as well go for snob appeal. If you can't sell
what you've got at the price you've set, it's always easier to drop
the price than it is to raise it- and you've got the added advantage
of being able to mark it "xx% off" so people think they're getting a
deal.

Most people undervalue their work. People go nuts for anything
handmade- go check out some Amish furniture stores if you doubt that!
Aut inveniam viam aut faciam

"Jim Wheeler" wrote in message
> The boy is right - cost is not a basis for pricing in a competitive
> marketplace. Knowing and controlling costs is a requirement to make a
> profit and stay in business over the long run, but is definately not a
> factor in setting price in a free market.

Horseshit. Are you _still_ self-employed, Jim?

How about just one, ubiquitous, example of 'price based on cost' that likely
happened a thousand times somewhere in this"competitive market place" of
good and services we live in? Ever hear of a "cost plus contract"? The price
of the contract is most definitely BASED on ... all together now: COST!.

Both you guys need to understand that you're talking esoteric, wannabe MBA
voodoo economics when the thread is about one-off woodworking items, so
leave the wannabe MBA bullshit to the real MBA bullshitters ... that's about
all they excel at.

--
www.e-woodshop.net
Last update: 11/06/04

I would definitely WORRY about letting a 13yo use my power tools. If
he was injured, you can pretty much count on being held liable for the
injury.

Personally, I would quote him a price based on mateirals and TIME, and
then decide how much to charge for your labor (or not charge as the
case may be)

John

On Mon, 06 Dec 2004 08:33:33 GMT, "res055a5" <[email protected]> wrote:

>> In the case of a 13 yr old, perhaps ask them to help
>> and don't charge them anything...maybe it will stir
>> their inner woodworker.
>>
>>>for a 13 year old? i would require that the kid actually do the work
>and supply the materials...i would then supervise him using your tools
>so he learns, the job gets done, and your tools aren't
>destroyed...hopefully!
>if you don't have the time; then point him/her to someone that you think
>might
>have the time, etc. guilty conscience bothering you? help the kid anyway.
>but make sure the kid learns.
>rich
>

On Sat, 4 Dec 2004 19:41:56 -0000, "Sam Berlyn"
<[email protected]> wrote:

>Hi,
>
>If someone asked me (a 13yr old) to build a bookcase, how much would you
>charge?
>
>I would think you charge on a per job rate, or is it hourly?
>
>Say the materials cost £15 and it took 5 hrs, how much would you charge.
>
>I am not going to start charging, as I am putting it down to experience,
>just getting them to pay materials, but just wondering!
>
>Cheers,
>
>Sam
>


Sam:

What follows is a repost of something that I put up a couple of years
ago.

I reckon it still holds true.

It is interesting to me in reading this thread that people confuse
cost and price.

You must know your cost.

It does not always have to determine your price.

The price may be a multiplier of the cost, or it might be the
perceived value of the item or service - but must always exceed the
cost - if you would like to be in business.

In direct response to your query about the thirteen year old person -
I would seek to do that for free, in hopes of luring bigger and more
profitable fish.

Kindness is a great lure.






Formula is:

M+L+O+P (Materials plus Labor plus Overhead plus Profit)


MATERIALS COST = Cost plus Tax plus Acquisition Cost (going to get it)
plus carrying costs if financed. Make sure you do your take-offs
cleanly and add for waste.


LABOR COST is a bit more difficult. You need to break the job down
into individual operations and make sure that you charge for all of
them.


Once you have your number of hours figured you need to figure your
shop rate.


Maximum number of hours available for work = 2080 (52 weeks x 40 hours
= 2080 hours).
Minus vacation time = 2000 (2 weeks x 40 hours = 80 hours).
Minus holidays = 1944 (7 days x 8 hours = 56 hours).


Minus non-billable hours = 1555 (20% of 1944 hours = 388.8 hours)
(marketing, selling, bidding, bookkeeping, purchasing,
emptying
spittoons, etc.)

So, you now have 1555 billable hours in which to earn your money for
the year.


How much do you want to make a year as your wage (not including
profit, that's a different animal)?


Let's use $50,000.00 a year just for fun.


Labor Cost per billable hour = 32.15 ($50,000 / 1555 billable hours =
$32.15 per hour).


OVERHEAD COST = All the costs of doing business. Some of what I put
here should go into a thing called Labor Burden but screw it, I'm
putting it here, which works if you're a one man shop.


Shop Cost = 3.86 (We'll include heat and electric, etc. in here,
$500.00 per month x 12 months / 1555 billable hours = $3.86
per
hour).
Machinery Cost = 1.29 (Acquisition, repair, maintenance,depreciation,
$2000.00 per year / 1555 billable hours = $1.29 per
hour).
Truck Cost = 2.22 (34.5 cents per mile x 10,000 miles per year / 1555
billable hours = $2.22 per hour).
Office Cost = 1.16 (Space, furniture, computer, supplies, etc.$150.00
per month x 12 months / 1555 billable hours per year = $1.16
per
hour).
Insurance = .64 (Contractor's Liability, building, etc., $1000.00 per
year / 1555 billable hours = $.64 per hour).
Health Insurance = 1.93 ($250.00 per month x 12 months / 1555 billable
hours = $1.93 per hour).
Professional Services = .64 (Accountants and lawyers, $1000.00 per
year / 1555 billable hours = $.64 per hour).
Other = .5 (All sorts of consumables and other stuff that can't be
directly billed to a job, $.50 x 1555 per billable hour = $.50
per hour).


Total Overhead per billable hour = $12.24.



Labor Cost plus Overhead Cost = $44.39 (Labor @ $32.15 plus Overhead @
$12.24 = $44.39)

PROFIT is not how much you make as wages, it's how much the business
makes.


A rough split on the cost of jobs is 1/4 material and 3/4 labor (Labor
Cost plus Overhead Cost).


If your yearly billing for labor plus overhead is $69,026.00 ( $44.39
per billable hour x 1555 billable hours = $69,026.00). Then your
yearly materials cost should be about $23,009.00 ($69,026.00 / 3 =
$23,009.00).


Annual Sales = $92,035.00 (Does not include profit, yet, Labor @


$69,026.00 plus Materials @ $23,009 = $92,035.00 per year).

Profit = 8.88 (15% of gross annual sales, $92,035.00 x 15% =
$13805.00 / 1555 billable hours = $8.88 per hour).

SHOP RATE = 53.27 (Labor Cost plus Overhead Cost @ $44.39 plus Profit


@ $8.88 = $53.27 per hour).
ANNUAL SALES = $105,840.00 (Labor Cost plus Overhead Cost plus
Materials Cost plus Profit).


QUARTERLY SALES = $26,460.00.


MONTHLY SALES = $8820.00.


WEEKLY SALES = $2035.00


Every time I start thinking like this it makes me want to go back to
working for somebody else.


I'll probably catch hell for this because no accountant would ever
group things together the way I have. Also, they don't, as a rule,
make as much use of the WAG method as I have for cost estimating.
They like GAP, I like WAG (they be rich - I be poor). I guess my
point is: If I'd had someone present things to me in this way when I
started, I probably wouldn't have started at all but, at some point
you have to start thinking this way, preferably with the aid of a real
accountant, or you won't really be in business, you'll just have a
very expensive, very time consuming hobby. And, for you guys who
think that 15% is a gaudy figure, yeah, so do I.

Regards,
Tom.

"People funny. Life a funny thing." Sonny Liston

Thomas J.Watson - Cabinetmaker (ret.)
tjwatson1ATcomcastDOTnet (real email)
http://home.comcast.net/~tjwatson1

"GeeDubb" <[email protected]> wrote in message
news:[email protected]...
> Even when charging 3X the material cost somebody always comes along and
> underbids me.........
>
> I just have to say to myself..."they are getting what they are paying for"
> but it sure makes it difficult to earn a living as a wood dorker.
>
> Gary

This is why I shake my head wondering after reading all of these responses
of cost-based pricing if anyone has been exposed to manufacturing. Prior to
embarking on my current career of playing with computers, I worked for 7
years as a design engineer for a manufacturing company in a highly
competitive marketplace. I can tell you that the whole concept of pricing
your product based on your costs is wrong. The only consideration (as
you're seeing) when pricing your product is what the the market bears. As I
said in an earlier post in this thread, the only way that relates to your
cost is that after subtracting your costs from that price, are you willing
to work for that much money? Using a 3X or 5X rule of thumb is OK when
you're either unsure of the market or no market has been established, but
once you get some market experience, it's pretty meaningless.

todd

"Swingman" <[email protected]> wrote in message
news:[email protected]...
> "Todd Fatheree" wrote in message
>
> > Nice. Because we disagree, I have to be stupid.
>
> Those are your words, not mine. I've read too many of your posts to
believe
> that.

Perhaps there is an alternate interpretation of "don't quit your day job"
that I'm unfamiliar with.

> IOW, _after_ you figured your "costs", you then practiced the art of being
a
> good businessman in your final pricing.

You have mistakenly assumed somewhere that I said you shouldn't know your
costs beforehand. That's not what I said. I said that you don't take that
number and calculate your price based on cost plus something. "Cost" is not
a variable in the equation that determines "price" in my book.

> Just for grins ... and be honest now ... just exactly what was the ratio
of
> the price your customer paid to your cost on the maple & padauk table?

My original estimate put the material cost at about 40% of the price. (I
don't do this for a living, so I'm not real careful about keeping track of
costs and I'm sure where things ended up). Had the maple been ebony like he
originally wanted, the ratio of material to price would have been a lot
higher.

todd

Sam,

Here is my "general guidelines" for pricing.

Cost of materials + 20% for handling, example 10 bf oak @ 3.00/bd ft =
$30.00 X 1.2 = $36.00 USD

Time in shop X hourly rate for example 3 hours @ 40 USD/hr = $120 USD

Then I add the two together = $156 for my wholesale price and I double this
for my retail price = $312 USD.

You will get all sorts of suggestions about rent, cost of tools etc. but for
me this system will get you started.

--

Rumpty

Radial Arm Saw Forum: http://forums.delphiforums.com/woodbutcher/start

- - - - - - - - - - - - - - - - - - - - -


"Sam Berlyn" <[email protected]> wrote in message
news:[email protected]...
> Hi,
>
> If someone asked me (a 13yr old) to build a bookcase, how much would you
> charge?
>
> I would think you charge on a per job rate, or is it hourly?
>
> Say the materials cost £15 and it took 5 hrs, how much would you charge.
>
> I am not going to start charging, as I am putting it down to experience,
> just getting them to pay materials, but just wondering!
>
> Cheers,
>
> Sam
>
>

"mikey" wrote in message
>
> If you want to lose money on the job, charge 3x the material cost.
> ie. is it for a family member where profit doesn't matter?
>
> If you want to break even on the job, charge 4x the material cost.
> ie. is it for a friend that asked you to build it as a favor?
>
> If you want to make a living doing the job, charge 5x the material cost.
> ie. is it for a customer?
>
> In the case of a 13 yr old, perhaps ask them to help
> and don't charge them anything...maybe it will stir
> their inner woodworker.


Actually, and IME, this is pretty close to the truth ... if there is such a
thing in this regard.

--
www.e-woodshop.net
Last update: 11/06/04

> In the case of a 13 yr old, perhaps ask them to help
> and don't charge them anything...maybe it will stir
> their inner woodworker.
>
>>for a 13 year old? i would require that the kid actually do the work
and supply the materials...i would then supervise him using your tools
so he learns, the job gets done, and your tools aren't
destroyed...hopefully!
if you don't have the time; then point him/her to someone that you think
might
have the time, etc. guilty conscience bothering you? help the kid anyway.
but make sure the kid learns.
rich

"Swingman" <[email protected]> wrote in message
news:[email protected]...
> "Todd Fatheree" wrote in message
>
> > This is why I shake my head wondering after reading all of these
responses
> > of cost-based pricing
>
> Keep shaking your head because you missed the point completely. I did not
> say that was THE way to price, but just how often it turns out to be the
> case when you go back an figure it up.

And I could give many examples of when it's wrong. I wasn't responding to
your post anyway. But I see lots of other posts talking about starting at
figuring out your material cost plus some cost of labor to arrive at a
price.

> >I can tell you that the whole concept of pricing your product based on
your
> costs is wrong.
>
> LOL ... IME, there is as much "wrong" with that statement as there is in
> using it solely for a business philosophy.

Well, it doesn't much matter what you (or I) think. In a capitalist
economy, that's the way it works. The market doesn't give a damn about how
much your costs are, so there isn't any point in using that as a starting
point to arrive at price. If you want to enlighten us on why that is wrong,
feel free.

todd

"Todd Fatheree" wrote in message

> Nice. Because we disagree, I have to be stupid.

Those are your words, not mine. I've read too many of your posts to believe
that.

>Let's try to focus back on
> the original question, which was how much to charge for a bookcase.

Finally ... we're back 'in context', sans Eco 201 mumbo jumbo, and getting
somewhere.

> I recently built a maple & padauk table for an acquaintance. I figured
out
> what my material costs would be before giving him a price,

Hmmmm ... that sounds real familiar.

>but the price I
> gave him was one that was based upon what custom-designed furniture went
for
> and what I thought he was willing to pay.

IOW, _after_ you figured your "costs", you then practiced the art of being a
good businessman in your final pricing.

Just for grins ... and be honest now ... just exactly what was the ratio of
the price your customer paid to your cost on the maple & padauk table?

I'd be willing to bet that it falls very close to one of the cost
multipliers remarked upon early in this thread.

--
www.e-woodshop.net
Last update: 11/06/04