MarkN1975

Advice on pricing for a client...

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You're pricing up a job for a client. It's an existing customer you want to look after so price is important.

It's a small but deceptively expensive item to make.

Thing is, the client gets 1 piece of information to go off.

The COST!

You know that if they saw a transparent cost breakdown, they'd understand how you arrived at the price you came to.

Do you send a transparent cost breakdown with the proposal or is that a line you don't cross?

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From the client's point of view, I generally appreciate it when the supplier explains the details of what I am buying. Maybe not go so far as to list your markup on materials, but be straight forward about your labor charges. A good client will understand that custom work requires more time and effort.

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I don't even mark up my materials, but I do charge for the entire amount I buy for the job (20-30 percent extra for loss) .i will explain if the is a time consuming step that's nessacary or the price of a certain piece of expensive hardware or materials. I do this verbally, written is only price or labor & materials. Don't forget to charge for consumable shop supplies & expenses , sandpaper, masking tape , sharpening etc.

But supply a complete price breakdown , never. That just opens an opportunity to nitpick .

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Focus on labor and the final value of the custom-made item.  

 

Materials breakdowns on small objects tend to breed the "There's like $15 worth of wood in that thing..." mentality.  Think about how much material is in something like a solid body guitar, or an artfully turned pen, vs. a built-in set of wall shelves or a wood entry door.   Full material breakdowns are great for decks and garage additions... 

 

Be aware, that there are plenty of things not worth making, if the buyer and seller can't agree on a price that makes sense to both.

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For the most part, I charge material the same way as Steve.  I say for the most part because I charge the advertised price, not the price I actually pay.  

 

My quotes usually just list time and material.  If a client wants to know why something is so expensive, I am always happy to have that conversation with them.

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I charge for my time to go hand select the lumber, but only charge the actual cost of the material I buy for the job. They might come out cheaper if I marked it up !

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Do you list sharpening as a separate line item, or do you just include it in the labor line?  Since it's such a specific labor (and on some woods it needs to be done more often), I'd see this as a different line item for accounting purposes, but I'm sure the client would argue it's not as necessary. 

 

(Keeping in mind that most clients don't know what's needed to complete the project, I'd hesitate to list a specific breakdown of everything.  The general "hardware" item should suffice on the invoice - similar to the GM example above.)

 

Two last points: One, I used to work for a lender involved in Manufactured Housing.  (The rest of the world calls them Mobile Homes, but it's so much more.)  There's two invoices: the one the customer sees and the one the bank/manufacturer/dealer sees.  The one the bank/manufacturer sees breaks down the price per component (example: footers at $200) but doesn't say there were five bricks per footer.  If you need a personal record, this is the route I'd take.  One for the customer showing components in with price (not cost), and one for you showing how many components at what cost.

 

Two:  Perhaps this topic should be moved to "going pro."

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Sharpening, tool maintenance, etc... are fixed overhead costs that should be built into your hourly rate.   You can get a rough idea of what you spend on external sharpening and your labor spent on internal maintenance, like sharpening hand tools and lubricating machines, and divide that by hours worked in an average time period, say... a quarter or month.  Then, add that figure to your hourly rate to create the one and only hourly rate you quote.  You may need to adjust this now and again, but if it's huge and making you non-competitive, you're too slow or tough on your gear, and need to look at your workflow.   

 

Setting up for specific operations, and cleaning up and putting things away at the end of every day, are part of the labor cost of the first example of each item or part associated with the job at hand.   This is why multiple copies of an item get cheaper with each iteration.     For example, you may spend an hour setting up tooling to cut the first set of raised panel door frame parts, and cutting those parts, while each additional copy may only add 5 minutes.

 

I think a "Sharpening" or "Cleaning" line item would do nothing beyond driving a client batty.  

 

If you need to get a specific cutter, etc... for a custom job, price it into that job.   Here, a "Custom Tooling" line item may be appropriate, but buying a straight bit or saw blade would not.   In this case, the client would have the option of using a profile you already own, or can use on other work, but if they gotta' have something exact, they need to pay for it.

 

In any normal business transaction, if what you're collecting it doesn't cover all costs and still allow profit, you shouldn't be doing it.

 

All that said, as much as possible, I prefer to avoid time and material price quotes.   I still do them for me, to know what I need to get, but I don't share the details with the potential client.

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I was counseled in the building trades to approximate tool rental/usage to cover blades etc. The recommendation was between 5 and 10% of gross on a line item that read tool usage. This goes away into overhead increases for bigger outfits. For the small project guy, it allows the client to ask the question if the cost surprises them. E.g., if I have to rent a jackhammer, line item tool rental. If I go through 80 Stanley blades, this is in the tools used.

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It's fairly simple. Take the price you want to sell the item for add 10% then give that inflated price to the client. Hopefully they will say it's a bit more than I wanted to spend but I like your work so go ahead and make the item, once the project is complete tell the buyer they are such a good customer your going to take 10% off the price.

 

The above scenario is ideal but not likely.

 

So when the customer says that the cost is to high tell him you can see if there is any way you can remove cost from the process, then part way for a bit. Come back later and tell him there is no way to reduce the cost but since he is such a good customer you will reduce your profit to make the piece more affordable.

 

Be advised I am not a professional woodworker, but I am a professional buyer, trust me this game is played all day by buyers and sellers alike.

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It's fairly simple. Take the price you want to sell the item for add 10% then give that inflated price to the client. Hopefully they will say it's a bit more than I wanted to spend but I like your work so go ahead and make the item, once the project is complete tell the buyer they are such a good customer your going to take 10% off the price.

 

The above scenario is ideal but not likely.

 

I disagree. Atleast, this is not how I do things.

 

Problem with the, "you're a great customer, here's a discount" is that's is total bs. It might work, but it's not ethically sound. The best thing that happens, is you get the job for the lower rate anyway, the worst is they know you're full of beans and shop somewhere else. If someone tried this garbage on me, I would spend my money elsewhere. Either way, the client knows damn well that you were trying to get them to pay more than they should. Not a good way to foster a good relationship with a new or existing client.

 

Moving on...

 

A recent build of mine (the recipe box) went a little like this: (I will leave the dollar amounts out)

Client had a list of ideas, including using padauk and ebony. There were some extra things she wanted, so I wrote up a proposal reflecting everything she had asked for. This included carving words on the top, and on the inside of the case. When she received the proposal, I was asked why it was so much for a box. I explained that the cost of materials was "x" amount, and that my time was estimated in there, and there is also a certain percent of up charge for shop supplies ect, as well as a shipping cost. After sending a detailed breakdown, we discussed what her budget was and I made some changes to the original design to accommodate this. We agreed to use walnut instead of ebony, and to not include the carving. Now we are set! Luckily, I was able to purchase a small piece of ebony that would work for the build for a much better price than expected due to it having a split that I was able to work around. Within two days of my original proposal, the second proposal was accepted and I was off to buy the material.

 

My point is this. If you are asked to quote a piece for a client, then actually write up a quote. Find out what your costs are, (and yes your hourly wage is a cost), then you will be armed with the correct information for the client. Not some BS number you pulled from the sky.

 

As your demand increases, so does your hourly rate. Everything else stays the same. Naturally the shop supplies/costs increase due to it being a total percentage, but you get the idea. 

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I disagree. Atleast, this is not how I do things.

 

Problem with the, "you're a great customer, here's a discount" is that's is total bs. It might work, but it's not ethically sound. The best thing that happens, is you get the job for the lower rate anyway, the worst is they know you're full of beans and shop somewhere else. If someone tried this garbage on me, I would spend my money elsewhere. Either way, the client knows damn well that you were trying to get them to pay more than they should. Not a good way to foster a good relationship with a new or existing client.

 

Moving on...

 

A recent build of mine (the recipe box) went a little like this: (I will leave the dollar amounts out)

Client had a list of ideas, including using padauk and ebony. There were some extra things she wanted, so I wrote up a proposal reflecting everything she had asked for. This included carving words on the top, and on the inside of the case. When she received the proposal, I was asked why it was so much for a box. I explained that the cost of materials was "x" amount, and that my time was estimated in there, and there is also a certain percent of up charge for shop supplies ect, as well as a shipping cost. After sending a detailed breakdown, we discussed what her budget was and I made some changes to the original design to accommodate this. We agreed to use walnut instead of ebony, and to not include the carving. Now we are set! Luckily, I was able to purchase a small piece of ebony that would work for the build for a much better price than expected due to it having a split that I was able to work around. Within two days of my original proposal, the second proposal was accepted and I was off to buy the material.

 

My point is this. If you are asked to quote a piece for a client, then actually write up a quote. Find out what your costs are, (and yes your hourly wage is a cost), then you will be armed with the correct information for the client. Not some BS number you pulled from the sky.

 

As your demand increases, so does your hourly rate. Everything else stays the same. Naturally the shop supplies/costs increase due to it being a total percentage, but you get the idea. 

Again I am not selling woodworking for a living but, I don't see how this is not ethicly sound. I think math is ethiclly blind so let see what math has to say about this.

We will only look at the first senario since that seems to be the unethical beast in the room.

You quote your client a cost ( that they agree too) lets call that cost X. Then there is the "real" price you wanted to sell the item for lets call that Y.

X-10%=Y done.

 

Also remember that your client has agreed to X already so for no reason your client pays a lower cost. If you don't "like your such a great customer" you could insert many other saying like:

I over estimated the time this would take.

Material cost were lower than I anticipated.

I am getting better at this and just wanted to pass the savings on to you.

 

Doesn't matter what you say the client is still getting a discount on what they agreed to pay.

 

Unethical? If you say so but I would call it a windfall for your client.

 

One other thing to remember the client never pays more than the "real" price established by the builder in either scenario.

 

As far as seeing through my BS I don't see that working either. It's not like I would give a price then add 10% and re-quote the price. If you are saying that when the finished product is being delivered you would say "what 10% discount? I think you are trying to screw me! take that overpriced pile and trash it I will not pay you any less that what you quoted."

 

Well that just seems silly to me.

 

Just my 2 cents.

But since your are such a good customer I'll take 10% off and call it 1.8 cents

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I am with Mel here. Certain fields of purchase like the haggle. Certain clients will not feel they got a deal unless they " talk you down." This is not the client I work with. If they walk away, I have saved myself a major headache. My clients want no-nonsense and absolutely see through the bs. People generally perceive when they are being manipulated. This may be regional, but I also see it as ethical.

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Also disagree.

Since you only charged me 1.8 cents I'll tell you why.

Artificially inflating the price to give the discount is not an ethically sound practice.

All of your scenarios are based on this, yet avoid calling it as it is. Trying to get over on the customer. Don't quote it higher, and have the audacity to call it a "windfall" for the client if they call you on the higher price with your bs "good customer" routine.

Seems straightforward to me.

I'll give you the full .02

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Just got a bill back from my mechanic about the car.  In the bill, there's a listing for "Shop rate," which is the code for labor charge.  (Maybe I should become a car mechanic?)  This was estimated based off the book that every mechanic has access to (and everyone else, if they go to the library, can see it) that projects how long a given project will take.

 

Is there something similar for woodworking?  Or is it merely a matter of knowing your own practices and build times?  For example, is there a set time on how long it should take to build a curio cabinet?  Or is it all variable, as each board is going to be different from the last?

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In my business (not woodworking), I have a small group of customers, and I won't disclose why they are separate from other customers, that insist on a discount. You could quote these people on a roll of toilet paper @ 40% below your cost and they would ask for a 10% discount and ask that you give them 2 extra sheets per roll. That's just the way they do business. Therefore I know going in to give them a quote, usually 15% above my regular price and I will come 10% off of that at the table. Now I've made an extra 5% for having to put up with that kind of crap! If he declines (and usually he doesn't because he figures he has screwed me out of 10%), then I concentrate on customers that appreciate a fair price for a good service/product.

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Found this online. Don't know if it applies....

Labor + materials = cost

Cost x 2 = Wholesale Price

Wholesale x 2 = Retail price

Materials + Labor + Expenses + Profit = Wholesale x 2 = Retail

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The general idea is that for a product with a well established market and retail price, you need get your costs to half retail before your breakeven and ideally to 25% of retail or lower. In a highly competitive retail world, you don't mark up your cost to get to a price. Instead you sell for the established wholesale or retail price (whichever applies to your situation), then find a way to get your cost low enough to make money.

(Emphasis mine.)

 

 

Well said Mike.  I also think that line of thinking is what gets a lot of people into trouble with the whole "built it yourself" approach.   You can't really take the accepted prices out there and expect to beat them because you'll never approach their level of efficiency.  Similarly for the customers...if they don't want either (a) the corners cut to achieve that efficiency or (B) the lack of customization of a standard piece, then they have to pay for it and it's going to be more (potentially a lot more).  Custom stuff is a reversed situation compared to trying to sell stuff retail.

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Not that I'll ever be doing anything for clients but in my middle class neighborhood there isn't a single person I could sell say a $5000 bed to. They'd look at me and head straight to Ashley furniture. How does a true craftsman find that customer base? Just curious.

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New Canaan isn't THAT expensive!  There's a nice 1400 sq/ft cape on the market for $535k right now...  :ph34r:

 

Mike's advice is dead on, especially the part about the appreciation of different styles.    Different areas definitely have different tastes, and New England tends to appreciate antique styles, hand made newer stuff in antique styles, and/or situations where the customer knows something about the maker or the story behind the item.   It's no surprise that SAPFM was born in Boston. 

 

There has to be both a will AND a way for a product or service to be viable.

 

BTW... we also dislike chain restaurants and expect the owner of a pizza shop or deli to be on-site, maybe even preparing the food...   :D

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Not to mention referring sandwiches in hoagie-style buns by the correct name (and toasting them as a matter of course).

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I give a price for the entire job after I figure out my cost and labor.  If they want the job done they sign a contract that I state what and how things will be built along with the total cost and the amount of  the down payment.  I also state any work added will be a extra charge. This is the way I have always done it with roofing, siding and woodworking. Maybe a breakdown works better for some.

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My advice is based on the fact that they are a repeat customer. They already know your high quality craftsmanship and you have a certain level of the clients trust.

I would draw it up and at your meeting with the client, discuss the material cost but emphasize the labor cost of the piece.

You can then have alternative designs which are less labor intensive that will meet their needs or wants and expectations 

They may even decide that its to cost prohibitive to be built the way they want and choose a alternative design that will give them the same thing.

They also may decide to not have it built or go to someone else. Either way you have maintained their trust and your rep is not tarnished and have not compromised you quality standards .

In this industry IMO client trust, honesty and maintaining high quality standards are a must.

 

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