pricing

[HighTechOkie]

well doug, there are some flaws in your plan. you didnt add the cost of any consumables like bits, stains, polys, sanding paper or anything like that. another thing is you set your max wear out on the cw at 250 hours. i think that is very under rated. you think that you will go through 2 cw's in the time its gonna take to wear out a table saw. now figuring you use your machine 20 hours a week, its only gonna last 12.5 weeks. people are gonna be knocking down your door to get that machine. ask digitalwoodshop AL how many hours on his machine.

I see no flaws in Doug's analysis. If you bother to talk to Al and read some of his past comments, you would realize that he has not put 600+ hours on a machine without repairs. At some point, parts will need replaced. Those parts cost money. They also cost time to diagnose the problem, wait for parts to arrive, and then time to install. Meanwhile your are not able to make products to sell, but you still have bills to pay. All big manufacturing companies have an opportunity cost figured in when their machines are down. I know GM would charge some of its suppliers $100,000/hr for parts delays that stopped production.

In no way is Doug's analysis complete. It is a good framework to get you thinking of ALL the expenses you have in building your items. This is where a business plan comes into play. You make an educated guess at your expenses and material use, at the end of each month, you compare your actual expenses and material use to those numbers you planned for, and then look to answer the question: "Why are these number different?" Maybe the machine had problems and ruined a few projects, maybe the electric bill was higher, maybe it is taking you longer to stain and finish an item than you estimated. After several months, you will get a good idea of your regular expenses, and will have better estimates for the future months. There still will be unforeseen things that happen, but they will be less of an issue because you have covered your planned expenses and have money left over as a cushion for those unplanned instances.

i just need to figure out that magic number to make it all work.

There is no "magic" numbers in business. If all of this hurts your head, maybe you should consider a 9-5 JOB. The guys that are successful know how much it requires to cover all their expenses including planned maintenance, machine/tool replacement, operating expenses etc. To stay competitive, you need to know this to price your items appropriately. If you can't sell an item to cover your costs and make a profit, you are just a slave (free labor) to your customer. That definitely doesn't make much sense to me.

You should find your local SBA (Small Business Administration) office and visit with them. They can help you with many of these questions are more. They are a great resource and best of all...FREE.

Rob

[jab73180]

high tech okie, dougs plan is very good, but the figures he came up with were hours over the life of the machine. normal wear and tear and maintenace are different than wearing a machine out completly and having to replace the whole machine. another thing is he was just using the numbers as a guideline, they in no way represent how long each machine would go. i didnt know that at the time. you have to admit 250 hours on a cw isnt that much. like i said, i didnt know his analysis wasnt complete because he had final numbers to give to the customer. wouldnt you think that would be the end of a spreadsheet with the total on it. there is a magic number for me because im not in this to make a living, just to make extra money and the love of the work. none of this hurts my head and i do have a 9-5 job,(actually 730-5). there are special instances where you need to sit back and look and say, "does this look right" some times. if something breaks on this machine it needs to be fixed, that just comes off my gross profit line. if something breaks just fix it, thats what i say.

[jab73180]

doug, good job and keep up the good work. please go into detail about the finish because that is another question i have in my head. how much does the finish really cost?

[HighTechOkie]

In Doug's analysis, the 250 hours is meant as a method to calculate a cost of machine time. It does not mean the machine's life is only 250 hours, but that is the period in which we expect to get our $1800 back and have the money to pay for repair/replacement. Obviously we don't know what the machine's actual life is until it becomes to costly to keep replacing parts or a major failure (frame for example) results in replacing the machine. Ideally, you would break it down to a time and materials for each component (lubing flexshaft every 40hrs, replace motor brushes every 150hrs, replace carving bit every 50,000 board feet, etc.) While that approach would generate a very accurate cost of machine time, it is also a huge pain in the rear to go through. Since LHR is willing to warranty the first 200hrs of cut motor time, this gives us a ballpark figure to use. Additionally, the sum of the replacement parts will be greater than buying a complete machine, so $1800 is on the low side as well. So 250 hrs and $1800 are really just educated guesses.

All of this is just to create a starting point for cost estimation. After several months (and several $100s in repairs ), you will have a more accurate figure to base actual repair costs to machine motor time. Depending on how you care for your machine will effect its longevity. Some guys take dental picks to their machine after each carve and clean it meticulously and lube rails etc. Others just do a quick vacuum and load the next part. The first guy has more labor involved in preventative maintenance and lower machine break down, while the second has more labor in machine repair and ruined materials when the machine crashes.

The whole idea here is that you should know what it actually costs you to make an item to appropriately set a price. When you are starting out, much of your costs you simply must guesstimate. You should then track your costs to come up with more accurate figures AND to be able to spot when something is wrong and address those costs before they get out of control. The final part of all of this is to determine if this is really just a hobby that costs you money (and a tax write-off) or a business that makes a profit and how much do you send to Uncle Sam.

Rob

[TIMCOSBY]

you can double your price and do half the jobs and make the same or more.

[jab73180]

lets settle on a middle ground here. i think that dougs theories are great to figure a board foot, or time price for projects. if you have a 12 x 24 sign, you know your gonna have certain time on certain tools. you can even work up 3 or 5 example prices, average them, keep the highest, do what ever you want, but to have a spreadsheet or something and figure it on every project just seems like a lot of work. the k.i.s.s. method works for me.

[whr1900]

Just to put in my 2 pennies worth
This discussion has been going on since before i first started on this forum and with everything i have read it still comes back to one thing
LOCATION LOCATION LOCATION
What u may get for a carving in say Cal. or Maine or even the poconoes u will not get in Eastern NC, I have been looking and pricing and there is even a difference between Central NC and the coast. I still believe it comes back to what someone already said READ YOUR CUSTOMER and guage what you think you can get. Not every project will sell for the same price but in todays economy if it balances out and you make a little bit of money THANK GOD and keep on CARVING

William

[fwharris]

William,

Welcome back, long time no see!!

I think you are very right in your location statement. For me even a 40 mile distance makes a difference. Being in CowTown Colo. vs going just 40 miles to the west. You have to go to where the $$ is.

When I have had inquiring minds ask "how much is that?" and I quote the price some times I get an "Oh really!". They will most often ask how long it takes to make one of those? After telling them just the amount of time to carve it they usually seem to be more receptive to the price quoted.

Just to put in my 2 pennies worth
This discussion has been going on since before i first started on this forum and with everything i have read it still comes back to one thing
LOCATION LOCATION LOCATION
What u may get for a carving in say Cal. or Maine or even the poconoes u will not get in Eastern NC, I have been looking and pricing and there is even a difference between Central NC and the coast. I still believe it comes back to what someone already said READ YOUR CUSTOMER and guage what you think you can get. Not every project will sell for the same price but in todays economy if it balances out and you make a little bit of money THANK GOD and keep on CARVING

William

[roughcut]

A Rembrandt and a painting Charlie Brown paints may take the same time and materials . But I'll bet the Rembrandt is going to bring more money than Charlie's . Charge what you think it is worth to you.

[forqnc]

Doug, thank you for sharing your infomation regarding pricing, I don't remember seeing a breakdown that precise. I haven't managed to sell any of my work, but being a hobbyist I got payment from seeing the joy on peoples faces when I gave them something unique.

Too add my 2 cents as William (whr1900) said above, I have seen this discusion on an Electrical forum. Guys will ask advice on how to price a job. I know what works in Manhattan NY will not fly in booneyville VA.
4 ways to look at it and it depends on are you in business or hobbyist

1. In business need to recoup all materials used and pay bills. Higher $
2. Hobbyist not entirely rich, charge to recoup your materials. Cheaper $
3. Hobbyist retired and loaded with cash, give them away for free and enjoy the joy you gave someone. Cheapest $
4. Hobbyist comfortable give them away for free and enjoy the joy you gave someone. Cheapest again $

I was in the number 4 catagory, I was comfortable to be able to give away some signs to family and friends. If a stranger approached then I might want to recoup at least materials and some of my time. I am the competitor that Doug could be competing against, my bills are paid for wether I make money on a sign or not.

Good Luck to all in business or as a hobbyist.