Thread: Pricing your work

Originally Posted by Osage

G'day all was curious to know how you would draw your conclusions on a price for items you've made I ask this as I've been making alot of one off things then getting friends to give me there opinion as to how much they think it should sell for , talk about getting prices miles apart from each other hence the question,look forward to more opinions cheers osage. ..

I've come to the conclusion that it comes down to a combination of "what the market will pay", and "what the seller thinks they can sell them for". What the products are actually "worth" is in my opinion, an irrelevant question .... provided that you are receiving a payment that meets your expectations.

I made a run of silky oak Bread Boxes with tambour lids earlier in the year - my first woodworking product built for sale. A friend put three on the craft stand that she takes around the local craft fares. She sold only one over a period of three weekends. She thought that they were too expensive at $40.00 each.

I then found a contact at a craft shop in New Farm (a trendy inner Brisbane suburb). The bloke there initially took four on consignment, and with my agreement, priced them at $98.00 each (which included a $15 sales commission for him). All five sold in less than two weeks at that price. He was very happy and I now have semi-regular shipments going to him on consignment - with the range now up to five products. He does a stocktake of my products at the end of each month and sends me a cheque for the stock that he's sold that month. When I deliver new stock, we both add it to his stock inventory, and together we work out an acceptable selling price (he inevidably suggests a price that is above my expectations). We have a written Consignment Sales Agreement (his standard contract) which spells out all of the details.

One item that I've made two batches of so far only nets me an average of 5% profit over my materials and labour costs. That product is currently too labour intensive to make, so I need to simplify the design, and/or value add the design to justift a higher price. I'm embarassed to say that one woodturning centric product that I've made five batches of so far (meat tenderising hammers with home made textured brass hammer faces) nets me in excess of 150% profit when it sells at the New Farm shop. Viewed across the whole product range those extremes of profit average out to an acceptable average profit.

Early in the process, when I asked my friends to value the Bread Boxes, I also got widely varying responses. I think that was because none of my friends were in the market for the products I was selling, and didn't have a clue.

• So, pick your target market, and then design your products for that market.
• Pick your outlet carefully. An upmarket outlet in a trendy suburb will generally command higher price for a given product. The same product, placed for same at a weekend craft market will generally manage a lower sale price, or may not sell at all.
• Visit outlets in your target market to find out what roughly similar products are selling for.
• Work out what it costs you to make each item, or each batch of items. When I work out my costs, I consider the following:
  
  • Cost of all materials (including freight I've paid to get them).
  • Cost of all consumables (e.g. finish, sand paper, etc -including freight I've paid to get them).
  • My labour rate.
  • My cost of transporting the finished product to the retailer.

As I'm semi-retired and not aiming to run a stand-alone business I do not accurately calculate in the cost of my tools and machinery, the cost of running my garage workshop, the cost of electricity, the cost of designing new products, and lots of other costs that are associated with running a woodworking business - but I do include a percentage markup on the other costs to cover these miscellaneous items - then I add a markup for my profit.

Hope that helps.

Regards,

Roy

Cheers aussie roy your reply is very detailed and informative and has given me alot to think about I really appreciate your input thanks again
osage

You have asked the second oldest question in business. The first being, "where the h3ll are all the customers?"

My personal experience is like AussieRoy. I'm in the same boat.

I often let customers do one of two things. If they are enthusiastic, I anchor-price them high. Think of an arbitrary number and add half to it. (i.e cost is $1000, say ~$1500) When they squirm, or counter-offer, they can knock off ~30% (i.e $1500 is now $1000) and feel they "have negotiated" (I will admit, I like the argy bargy, but its missing in Oz). Or, I listen very very very carefully to their needs, find the time to enthuse myself about their needs/wants and let them then anchor-price me.

I usually advise these points as honestly as possible before the above:

- My actual costs. I tell them my shop costs me $100 a day. This is a blunt, flat, basic cost of depreciation, sharpening costs and materials. (I always use sandpaper, glue, 9 inch nails, I need the TS blades sharp, the lights on, "rent" paid, etc). They are ALWAYS 100% cool with this. It is a basic inescapable CODB.
- A close guestimate to materials. I never rip them on this, though I always round up (miscuts and mistakes!)... such as: one sheet of 12mm mdf, a couple of MPG10 90x45's @ 5.4m (my favourite!) and a bunch of bits (call it $68!) and therefore "the materials are $x.". They LOVE this.
- Advise them of at least 6 steps of the build.... "I design this in sketchup, cut this/these, flatten that, prep this, glue that, domino this, glue, wait, trim, sand (which takes X hours), finish and then 3 coats of....".

I find people are really receptive to this. Its engages them. They feel they know the process and understand more about how their thing is made. This then lets them think, "ok, this dude will need X time to make it.".

I try to anchor on $30 an hour.*

I also NEVER EVER EVER do written quotes. Verbal only or argy-bargy via email.

After explaining above, I reinforce a few big-hour bits... the cutting, the prep, the sannnnnndddidnnnnnggggg, the coats of finish, etc to explain the time. It works very well. When they know something takes 30 hours to make, they feel pretty stingy about that $1000 price.

Of course, this has nothing to do with repetitive jobs like boards or shop sales, etc. I DO have experience with this and will write it up as others may be interested.


* this is my end price. I do off-the-head cals at $50 as the maths is easier and I'm a simpleton.

Cheers evanism you also have given me alot to consider your reply was very informative and I greatly appreciate it cheers
osage

Local craft fairs are a lot like school fetes when the school asks you to donate a cake for the cake stall - the cake that cost you $8.90 in ingredients ends up on the $4 cake table. Craft fairs are for simple stuff made from pine studs from a builder's skip and a single coat of 'it was only $15 for 4 litres' estapol.

Anything more artistic than a picture frame made from old hardwood fence pailings that you scored free from the neighbour will end up underpriced at a craft fair market (I should know, I always look at craft fairs to see if there are any poor suckers woodworkers pricing down to the market.)

Originally Posted by Master Splinter

Local craft fairs are a lot like school fetes when the school asks you to donate a cake for the cake stall - the cake that cost you $8.90 in ingredients ends up on the $4 cake table. Craft fairs are for simple stuff made from pine studs from a builder's skip and a single coat of 'it was only $15 for 4 litres' estapol.

Anything more artistic than a picture frame made from old hardwood fence pailings that you scored free from the neighbour will end up underpriced at a craft fair market (I should know, I always look at craft fairs to see if there are any poor suckers woodworkers pricing down to the market.)

School fetes - better to give a donation at times. I grew palms as a hobby & literally gave our primary school many thousands of palms over the years but had a reliable cheap potting mix & nothing exotic exactly for the reasons given above. It was a very good fund raiser for them, however you still had the fete customers wanting "quality indoor" potting mix etc etc....

Pricing wood ware - know your market, do your research & know what your inputs are, labour, materials, consumables, fixed costs (rent, power etc), taxes etc. Then decide what you are seeking - a return to offset your hobby outlays or is it going to be a part / full time business? Be mindful of other wood workers who make a living from their skills when setting prices, but remember price collusion is illegal. (works for fuel companies).

As AussieRoy says some of your items will be "profit centers" that make you real money and others "loss leaders" that generate interest. Knowing which is which & getting the balance right so you are profitable is the trick of sales & marketing.

This is a topic I am grapling myself - what is realistic for direct sales or wholesale as many of the items I make are very labour intensive, so have to be priced accordingly but that severely limits market potential with high price points.

It's now past midnight here and I am still in my shed. I will chime in when I get time on this subject. I am so busy I have to let some customer go somewhere else and only focus on high value-low time product. I have spent over 60k on my machinery and tool purchase this year and I have made half of it back already. And that's doing part time like 2 hours a day and on weekends, occasional midnight work like now.

looks like most of the pricing tips has been mentioned, so I wont elaborate more on what has been said already.

I generally leave some DIY work to the customers so they feel like they have done something and this makes them excited, normally this is the finishing/varnishing/oil or the assembly, this way the work is actually done by the customer, but you need to sell it so they dont feel like they are doing your work, you need "smell" that they are wanting to do this otherwise its a no no.

I dont have a lot of products, I only make 2 products, and some 1 off from time to time, the one off is just to keep me interested, you need to have a product that you can mass produce but it is still "sellable", the mass produce process is expensive (machinery purchase and space) and I personally think this is where the money is, unfortunately you have to spend money to make money in this instance.

I have tried to make product for a market but it has not worked well, nowadays I just let people come to me with ideas of what they want and from there I get ideas of what the market wants.

I always make myself very clear in an email to the customer with their spec and the prices they will be paying. this way the customers feel secure and knowing there will be no surprises, and I feel secure because the spec is there, I then print the email and make the piece to the spec, I dont make decisions for the customer regarding the dimensions, I only suggest whats typical, I make them tell me the dimensions they want so if they didnt like it, its their decision

Big thanks to all who replied I have to admit I was suprised at all the detailed replies ,it's much appreciated I have a local school market coming up soon so I guess I'll start learning the whole process of what as been discussed cheers osage. .

I think the trick is to find a wooden product you can produce in a home workshop, cheaper than it can be imported from China.
Do that, and you've found the Holy Grail.
Pricing it then becomes the easy part.

Originally Posted by Shutterbug

I think the trick is to find a wooden product you can produce in a home workshop, cheaper than it can be imported from China.
Do that, and you've found the Holy Grail.
Pricing it then becomes the easy part.

The gap is already there, people are willing to pay more for a product that is actually made here (either thats NZ/AUS), and if you have good presentation of your product (web design, photos, maybe even photos taken by professional photographer with proper lighting/staging) it is going to be a seller, it is fine if your asking $ is more than what they can find on the market/internet/store, its the uniqueness, the service and the supporting your economy that they are buying. I will never compete with imported furniture, this has been tried and failed with many NZ business...

once you find your product you want to sell, the prolem is:
1. Do you have the time to cope with the orders?

I do this as part time only and never intended this to be my full time job, but now I work more hours in my shed than my daytime job per week. I havnt had a weekend off for the last 3 months.

2. Do you have a partner that will support you regardless?

Yes, this is a problem for me and I am yet to find a solution other than stop the work and spend time with wifey