Building Custom Furniture on commission ($$$)

[HoboMonk]

The "materials X factor" pricing model assumes that the buyer thinks of pricing in terms of materials.

As a professional, I know that the buyer is looking for a total price, irregardless of my the costs for materials.

Also, as a professional I'm probably much better at buying better quality materials at lower costs than amateur woodworkers. Example: If an amateur charges 4X the costs of materials, should I charge less because I buy at lower prices? I make a particular thing that local amateurs tell me they pay about $50 dollars for materials. My costs, using better quality materials purchased smartly and in volume, costs me about $10 - $12 dollars per item. Also, my productivity is more efficient and I have name recognition. Should I charge less?

The "materials X factor" pricing model is an "Internet Echo" that is of little real value.

Makers need to consider time and costs, but buyers want a price.

The ubiquitous pricing formulae that are oft repeated are helpful for determining costs, not selling prices.

When developing a pricing model, think like a buyer.

[Chester]

The "materials X factor" pricing model assumes that the buyer thinks of pricing in terms of materials.

As a professional, I know that the buyer is looking for a total price, irregardless of my the costs for materials.

Also, as a professional I'm probably much better at buying better quality materials at lower costs than amateur woodworkers. Example: If an amateur charges 4X the costs of materials, should I charge less because I buy at lower prices? I make a particular thing that local amateurs tell me they pay about $50 dollars for materials. My costs, using better quality materials purchased smartly and in volume, costs me about $10 - $12 dollars per item. Also, my productivity is more efficient and I have name recognition. Should I charge less?

The "materials X factor" pricing model is an "Internet Echo" that is of little real value.

Makers need to consider time and costs, but buyers want a price.

The ubiquitous pricing formulae that are oft repeated are helpful for determining costs, not selling prices.

When developing a pricing model, think like a buyer.

Hobomonk -

All good points. When I think of "Material Costs" as part of a pricing formula, I am thinking in terms of "retail costs of materials" ... that which my customer would pay at the local hardwood dealer.

But your point, I think, is value. If we are going to build furniture we need to create "value." A buyer will pay a price for perceived value and what he/she will pay is based on so many intangible factors. Human nature is that a buyer will pay X-value and no more. We simply need to recognize the factors that contribute to value and do what we can to enhance those factors. You, as the artisan, will work for a "price" ... and (hopefully) ... no lower than a certain X-price.

I felt badly when this professional cabinet maker said that he had probably been working for $10-$15/hour on his recent commissions. Again, it was hard to preach my ideas of value and artisanship to this guy who was trying to "keep the lights on."

[Chester]

Just my two cents but here is how i would charge.

1.ALL materials, wood, glue, sandpaper, hinges,glides,knobs etc etc markup 15%

then sit down and figure time this is the kicker-

One thing i do when fabricating a piece with alot of cutting of sheet goods is i farm it out to my supplier. He can cut my parts more accurately than i can and it really saves my back- besides thats not where the real skills are anyway. It gives you a jump start and it saves time. But you need to find that supplier and build a relationship with him.

Then break down your time as accurately as you can.

2.sizing parts

3.sanding before assembly

4.assembly

5.finishing

6.hardware install

7.delivery? I look at this as a labor thing but should be discussed at the start of the project.

Whats the labor rate going to be? well thats a tough one, just be fair with yourself and the customer.

I wish you luck.

After 51 great responses to this initial query ("Should I build it ... and what should I charge?"), I want to take a moment and ... AGAIN ... thank everyone. The responses to these questions have been very educational.

But, for me, the best response was fairly early in the discussion ... and it was this one from Jimmykx250. Jimmy's idea of first itemizing and calculating all of the materials and time to do the job ... was something so fundamental ... but it was something that, at that point in the process, I had not done. Then, the hard part was to apply a $/hr. amount to the time. When I took into account the cost of my tools and shop ... along with the value of the alternate uses of my time, I decided that I would need at least $50/hour. But after speaking to a number of professional cabinet makers, I realized a couple of additional factors. Because I am still a hobby-ist woodworker, my time calculations would be higher ... possibly significantly higher. And, additionally, this piece was my own design and I was inclined to want to build it. Taking these factors in to account, I decided, for now, that I would apply only a $30/hour cost to my time. After applying that figure to my estimated 40-hours to build and finish, I still came up with $1,200 plus materials (retail).

And, as you may have read earlier, this figure "sent him packing!"

The "big-PS" on this is that the guy who wanted me to build this has come back. He has told me that his 89-year-old brother-in-law might be interested in building this piece for him . And ... that his brother-in-law's wife might even do the finishing ! He has asked me if I could furnish some print-outs of the design with dimensions for the pieces ... because his brother-in-law is not good with computers and certainly would not know what to do with a SketchUp file.

I basically told him that I had a lot of time in the design already and was not interested in doing more. Stay tuned ... I think that he will be back to ask me to build it. Not sure what my answer will be now. I have moved-on and am working on a fairly-major Greene & Greene design for a low China cabinet.

[HoboMonk]

Hobomonk -

All good points. When I think of "Material Costs" as part of a pricing formula, I am thinking in terms of "retail costs of materials" ... that which my customer would pay at the local hardwood dealer.

My buyers buy my furniture, not raw materials. To them, the cost of materials, whether wholesale or retail, remains moot. Besides, I use materials that are hand-selected, unique (yet not exotic) and not available to the general public. Part of what my clients are buying is my "artist's eye" for selecting and using materials - good or bad.

FWIW, I haven't been in a neighborhood lumberyard or even a "big box" store in over ten years.

However, I spend a lot of time in the woods and working closely with artisan wood mills.

Example: I've currently got a studio full of old growth Southern Yellow Pine that was first milled around 1930.

There is no retail price on this type of wood. However, educating the perspective buyer can produce a desire to acquire that outweighs the sum of the time and materials.

[Chester]

My buyers buy my furniture, not raw materials. To them, the cost of materials, whether wholesale or retail, remains moot. Besides, I use materials that are hand-selected, unique (yet not exotic) and not available to the general public. Part of what my clients are buying is my "artist's eye" for selecting and using materials - good or bad.

FWIW, I haven't been in a neighborhood lumberyard or even a "big box" store in over ten years.

However, I spend a lot of time in the woods and working closely with artisan wood mills.

Example: I've currently got a studio full of old growth Southern Yellow Pine that was first milled around 1930.

There is no retail price on this type of wood. However, educating the perspective buyer can produce a desire to acquire that outweighs the sum of the time and materials.

Hobomonk -

I think that you make a very strong case for a blog that I posted recently that basically says that " what we do as woodworkers is art ... and people will pay for art." But, furthermore, it is "functional art" and people should be willing to pay even more for functional art.

http://woodtalkonline.com/blog/66/entry-772-the-value-of-hand-made-custom-furniture-as-art/

[Chester]

My buyers buy my furniture, not raw materials. To them, the cost of materials, whether wholesale or retail, remains moot. Besides, I use materials that are hand-selected, unique (yet not exotic) and not available to the general public. Part of what my clients are buying is my "artist's eye" for selecting and using materials - good or bad.

FWIW, I haven't been in a neighborhood lumberyard or even a "big box" store in over ten years.

However, I spend a lot of time in the woods and working closely with artisan wood mills.

Example: I've currently got a studio full of old growth Southern Yellow Pine that was first milled around 1930.

There is no retail price on this type of wood. However, educating the perspective buyer can produce a desire to acquire that outweighs the sum of the time and materials.

So, HoboMonk, I guess the question I forgot to ask you is "how do you establish a value (price) for your pieces?"

[HoboMonk]

So, HoboMonk, I guess the question I forgot to ask you is "how do you establish a value (price) for your pieces?"

I use a "jurying" technique, with adjustments, to determine a selling price that meets my needs and intended market.

I teach a craft pricing class titled "Worth-M.O.R.E.", that explains natural and proven techniques for deriving a price.

Basically, it's derived from how buyers approach purchases and focuses only on crafted products, not T&M woodworking services.

I'll write more (M.O.R.E.) about that at a later date.

[bois]

Pricing always sparks controversy especially in fine woodworking which is really a blend of product, service, and art. I wrote a blog post on FWW a few months back applying market-driven product pricing to the equation. As you can imagine I got quite a few passionate responses. But this is a proven methodology that really boils down to supply and demand. Cost-plus pricing unfortunately ignores all market factors and really just relegates your time to a commodity. Not where most of us want to go. Check out the blog entry:

http://www.finewoodworking.com/item/31828/the-price-is-right-or-is-it

[HoboMonk]

Pricing always sparks controversy especially in fine woodworking which is really a blend of product, service, and art. I wrote a blog post on FWW a few months back applying market-driven product pricing to the equation. As you can imagine I got quite a few passionate responses. But this is a proven methodology that really boils down to supply and demand. Cost-plus pricing unfortunately ignores all market factors and really just relegates your time to a commodity. Not where most of us want to go. Check out the blog entry:

http://www.finewoodworking.com/item/31828/the-price-is-right-or-is-it

Interesting blog.

I, too, see the same kind of responses when I do presentations on my Worth-M.O.R.E. pricing model.

The responders tend to cluster into two groups:

1. Professionals that are profitable generally agree with me.

2. Hobbyists do not agree.

Real world pricing requires looking from the outside-in, as the buyer sees it.

Crafters that are successful learn to earn, based upon understanding how business works.

I, too come out of the consulting world. So far, my toughest client has been me.

A market determines THE price.

The maker determines THE market.

[Bobby Slack]

That was a great blog too. I take the price aspect as:

1. if this customer is cool and a friend and will advertise for me, I will consider giving a deal. Exposure is very important.

2. If the customer is loyal and gives me many projects ... he/she gets a deal ....

3. No free design anymore

4. I am stepping out of the bid work because the customer who will sell you for a penny and is not loyal is a customer you don't need.

Interesting blog.

I, too, see the same kind of responses when I do presentations on my Worth-M.O.R.E. pricing model.

The responders tend to cluster into two groups:

1. Professionals that are profitable generally agree with me.

2. Hobbyists do not agree.

Real world pricing requires looking from the outside-in, as the buyer sees it.

Crafters that are successful learn to earn, based upon understanding how business works.

I, too come out of the consulting world. So far, my toughest client has been me.

A market determines THE price.

The maker determines THE market.

[Grixxly]

The "materials X factor" pricing model assumes that the buyer thinks of pricing in terms of materials.

As a professional, I know that the buyer is looking for a total price, irregardless of my the costs for materials.

Also, as a professional I'm probably much better at buying better quality materials at lower costs than amateur woodworkers. Example: If an amateur charges 4X the costs of materials, should I charge less because I buy at lower prices? I make a particular thing that local amateurs tell me they pay about $50 dollars for materials. My costs, using better quality materials purchased smartly and in volume, costs me about $10 - $12 dollars per item. Also, my productivity is more efficient and I have name recognition. Should I charge less?

The "materials X factor" pricing model is an "Internet Echo" that is of little real value.

Makers need to consider time and costs, but buyers want a price.

The ubiquitous pricing formulae that are oft repeated are helpful for determining costs, not selling prices.

When developing a pricing model, think like a buyer.

Maybe I should have been more specific. I quote on what they would be able to buy the materials + 3-4 times material. For example I don't go to the local hardwood dealer and pay 7$/BF for black walnut/cherry/etc. I go to a sawmill not to far from me and pay 1.50-2$/BF but I figure my costs as to what the local market is for the wood (not who I buy from).

[HoboMonk]

Maybe I should have been more specific. I quote on what they would be able to buy the materials + 3-4 times material. For example I don't go to the local hardwood dealer and pay 7$/BF for black walnut/cherry/etc. I go to a sawmill not to far from me and pay 1.50-2$/BF but I figure my costs as to what the local market is for the wood (not who I buy from).

Generally, my clients are unaware of my cost of materials, whether wholesale or retail. I know my costs. Using reverse math, my prices are usually in the range of 10 to 50 times my cost of materials. More importantly, my clients don't see a causal relationship between my costs and what they are willing to pay.

If I think like a buyer when setting my price, I come out better. If I apply a pricing formula where the elements don't have a casual relationship, the selling price is way off the mark.

[thewoodwhisperer]

Almost like being in a time machine. Let the conversation continue!

[thewoodwhisperer]

All of the off topic posts were removed so as to not raise questions for folks who weren't here for the original event.

[Chester]

If you are just seeing this thread for the first time ... take a few minutes and read from the start. There are some great posts!

[HoboMonk]

Almost like being in a time machine. Let the conversation continue!

"Where are we Mr. Peabody?"

"I don't know Sherman. I forgot to calibrate the WayBack machine!"

Pricing strategies should be aimed at those who pay the price – the buyer.

Any pricing formula that makes sense (and cents) to the buyer will be better received then trying to sell based upon a maker-oriented formula.

War story:

I recently visited a local craft show hosted by a high school. I was there to buy not to exhibit. I met a local woodworker who was selling some nicely made wooden boxes. He had six on display at his table with a price of $30 each. I asked him how he determined his selling price.

“Simple,” he replied. “I charge four times the cost of my materials.”

I asked him how much it cost for the materials to make a box.

“About $20 per box,” he quickly replied.

I asked, according to his pricing formula, why he didn’t charge $80 per box.

He replied, “Because people are only willing to buy my boxes for $30.”

We discussed his pricing formula a little more and he was convinced of his math.

I asked him where he bought his materials and he named a local big box store.

I suggested that if he bought his wood at local lumberyards or private wood mills he could probably reduce his costs to come closer to his “4X” pricing formula.

He told that “I just don’t understand how it’s done.”

We parted with a smile.

[Chester]

I do understand that it should "have nothing to do with the cost of the materials" ... or the amount of labor (for that matter). Someone inferred earlier that "the market is the market." What a buyer is willing to pay for anything "is what it is." But, by the same token, can't we as sellers/artisans/craftsmen ... help enhance the understanding of a buyer as to what it is that we produce, along with the care of production and the uniqueness of the materials? The other big factor is the difference between custom-built one-off pieces and manufactured pieces and communicating that difference.

My most recent "walk-away" by a prospective buyer (I think) was based largely on his lack of understanding of some of these factors. And, after really looking at him and the way that he lives, I do not believe that he would understand these factors ... even if I chose to try to explain them to him.

In retrospect, those factors of "differentiation" should have been communicated right at the beginning of the process (and before "the pen hit the paper"). We all know what it is to try to communicate with someone and watch to see if the "light goes on." If I had tried to communicate in this way at the beginning, I am sure that I would have seen (in the eyes of this prospect) that the lights were not even flickering. In the future, I will certainly know to do this at the beginning, rather than waste my time.

[Vic]

This is a large part of the reason I'm building a portfolio before going "public". That gives me an opportunity to have a body of work I can refer a customer to, along with associated pricing. That way they will know what style, quality and price they can expect.

[Chester]

This is a large part of the reason I'm building a portfolio before going "public". That gives me an opportunity to have a body of work I can refer a customer to, along with associated pricing. That way they will know what style, quality and price they can expect.

Vic -

I have to ask what does "building a portfolio" really mean? Do you build pieces that you like and place them at galleries and high-end gift shops? Or, do you build and hold?

[Vic]

My first piece was Gretchin's Cradle. My next several are for our home. It helps I don't plan/need to make money on my pieces for another few years. But, yes, I do plan on showing at galleries in a couple years.

[jHop]

My first piece was Gretchin's Cradle. My next several are for our home. It helps I don't plan/need to make money on my pieces for another few years. But, yes, I do plan on showing at galleries in a couple years.

Are you also going to keep the stereotypical artist's portfolio as well? (that collection of high quality, high gloss images contained in leather bound binders or wooden box binders (that are yet another example of your work) that prospective clients can peruse?

[Vic]

Are you also going to keep the stereotypical artist's portfolio as well? (that collection of high quality, high gloss images contained in leather bound binders or wooden box binders (that are yet another example of your work) that prospective clients can peruse?

Yes, that is my intent. As some pieces will be sold, good photography is a must to convey the quality of design and workmanship. At least, I believe so.

[jHop]

Yes, that is my intent. As some pieces will be sold, good photography is a must to convey the quality of design and workmanship. At least, I believe so.

This brings up an interesting issue, then. Possibly one for another thread. Not everybody has the knack for photography. Do you (and everybody else reading this entry) feel that a professional photographer is a must for this kind of work? Keeping in mind some photographers can come out to your location, most require you to visit their studio. Do you factor this cost into the formula (if used) for the valuation of the work, or is this more of an expense that is related to the business side of woodworking, and therefore exempt from the costs passed to the client? (Meaning does it come out of the "profits" of the sale, and is not included in the estimate of the project?)

[Vic]

I just plan to buy some good back drop material and a couple more lights and reflectors.

[R Jones]

Mind you that this incorporates much of what Beechwood Chip was saying. But, I'm assuming that's gonna be some quality ply and hardwood. I wouldn't charge less than $1500. But, like I said, I think like Beechwood Chip on price because I have a full time job and only want to do pieces I want to do. Plus, I'm not a fan of building straight up cabinets. My next furniture project will be an entertainment center. Yes, that is a cabinet, but you can design as much of yourself into a piece as you wish. Let us know what happens.

I agree with Vic on $1,500 not because it's not something I would want to do but because that's what it's worth at the very least to a professionsl.

Materails 200-300

Design time 4-5 hours

pick up materail 1.5 hours

Machine materail 1

Cut machine and assemble 20

Build doors 3

Finish 9 hours

35.5 hours @ $30 1,065 + Tax 1,162

Now I figure my overhead at about $20/hour that's the number I need to make on a project before I get an hourly wage or any profit. So for poops and giggles figure my shop rate at $50/hr*35.5 1,775 plus tax...

Funny thing I read posts all the time where people talk about pricing and no one ever talks about overhead:( If you even slightly thinking about going pro knowing your actual costs is a must if you are going to succeed!!! Start now or fail later!!!