This is an excerpt from “Shaker Inspiration: Five Decades of Fine Craftsmanship” by Christian Becksvoort.
One of the most difficult tasks when starting a business is pricing your work or product. Many woodworkers, especially those just beginning, seriously underprice their work. Hobbyists, especially, have no idea. Let me tell you, it’s really tough to be at a show next to Joe Basement, who is selling his very nice coffee table. He has no concept of the actual hours he spent, but his $140 worth of wood has turned into a $200 table. Wow, a $60 profit…wrong. The most basic pricing involves the cost of materials + overhead + profit. Let’s take a look at these one at a time.
Materials are your wood, hardware, glue and finishes – anything that ends up in the customer’s possession. When working with a variety of woods, you’ll have to refigure the price for each species. That can run the gamut from a couple of bucks for No. 3 pine or poplar to $60 per board foot for exotics, to more than $100 per sheet for top-grade plywood with fancy veneers (in 2017 dollars, as are all prices in this book).
Working almost exclusively in cherry, and paying roughly the same amount for the past 20 years, makes pricing for me much easier. Not only that, but I get to use leftovers and offcuts for the next project. At this point in my career, I know the exact board footage for all pieces in my catalog. When starting out, you’ll have to do a bit more math. When you come up with the board footage, add 10-20 percent for waste, depending on how fussy or frugal you are regarding knots, defects, sapwood and general waste. Besides the wood, also include screws, hinges, locks, knobs, glides, glass, hangers and your glue and finish of choice. Speaking of hardware, I always buy the top grade. It takes just as long to install a cheap hinge as an expensive one. Cheap hardware will come back to haunt you, and result in unhappy customers.
Overhead is an all-encompassing term that includes the expenses you pay as the cost of doing business, but of which the customer does not take possession. Here is a partial list: your shop building or rent or mortgage, insurance, vehicle, electricity, heat, office supplies, telephone, internet, tools, advertising, freight charges, accounting, postage, licenses and taxes, and a few others that I may have overlooked. The bigger items, such as the mortgage, vehicle and large power tools can be amortized over a long period of time. Don’t, however, forget to include small tools such as routers that need to be replaced, specialty bits and tooling for a specific project, etc. Again, it will be difficult to estimate these costs when first starting, but after a year or more of good bookkeeping, you’ll have a pretty good handle on what it takes to run your shop. Divide the yearly total expenses by 12 to give you a monthly figure, divide that by 30 to give you a daily figure, and divide the last by eight to give you an hourly overhead cost.
Finally, your profit. Yes, we’d all like to make $100 per hour take-home pay, but let’s be reasonable, especially when you’re just starting out. My profit, or hourly wage, when I opened my shop in the mid ’80s was $20 – which I thought was pretty good. It has since gone up considerably, but only after a few years. You can’t start out with astronomical prices when you have no track record, no reputation and no customer base. That comes with time, working efficiently, keeping your nose clean and keeping your customers happy.
A few random thoughts on prices and shop finances in general. First, if you give a customer a price quote, stick with it. You’re only as good as your word, and your word is your reputation. I’ve eaten my fair share of underpriced projects. It’s all part of the learning curve. Customers don’t want to hear “This took a lot longer than I thought….” They want results, not excuses. On the other hand, if a customer request changes for alterations to the original design, then a change in price is warranted. Keep track of any additions or alterations made after the original quote.
I don’t dicker, and I try to be fair. I don’t gouge customers because they drive up in a Mercedes. The same hourly rate applies to everyone. Once that price is established, it’s fixed, unless times and circumstances change. My shop rate is based not just on time, materials, overhead and profit, but also on my experience, craftsmanship and reputation as a craftsperson. When potential customers try to talk my prices down, I tactfully end the conversation. Now they are messing with my self-worth. Remember, once a customer asks for and receives a discount, they will expect one from then on. And word spreads.
— Meghan Bates