The topic of how to price your work comes up all over the woodworking forums. Everybody has a different opinion on how to go about it, and rarely are they sufficient.
When I first started out building furniture, I was happy just to get a few dollars to cover the cost of the materials and have a little left over to buy a new tool. After all, at that time woodworking was more of a hobby than a means to provide for my family. Pricing my work in this manner was a great way to build my experience and to increase my tool collection. It did have a down side, I never really made what I would call “good money” at least not enough to compensate for the time I had invested in each project. I justified this by telling myself “it’s just a hobby, I’m still learning the craft, and I’m not a professional so why would anybody pay full price for my pieces.”
However, that got me thinking, what was “full price” and how do you decide what full price is for a custom made piece of furniture? When I decided to get more serious about selling my work, I had to answer that question and come up with a better way to price my work.
At the time, I was still working for another company as a salesperson, selling flooring products. In my sales position, I was paid by commission. The commission was figured by what the profit margin was on each sale. Naturally, I started to use a percentage markup, as a way to figure my pricing for my. Most of the products I sold at work had a 50% markup on them, so I used that as my benchmark for my pricing.
This worked great when I was building furniture out of a moderately priced wood, such as walnut or maple. However, when I built something out of a cheaper wood like pine, I made very little for the time invested. On the other side of the spectrum, when I built projects using more expensive exotics, the final price was so expensive, it was hard to justify the price to my customer.
To solve this I decided to figure my materials and labor separately, and charge by the hour for my labor. The challenge I had was determining how long it would take me to build each piece. As a custom furniture maker, I rarely made the same piece twice, and each piece had varying degrees of difficulty. One bed could take 30 hours to make, the next bed could have a ton of spindles to cut and take 50 hours.
It became apparent; I needed a better benchmark to gauge how long the different woodworking process I used to build the furniture would take.
To create this benchmark, I kept track of how long it took me to complete each task as I built the project. For example, I timed how long it took to cut the mortise and tenons, sanding, and applying the finish etc. Now, I know what you are thinking. A mortise for a little spindle takes less time to cutout than a mortise in a large bed frame leg. What I’m after is the average. For example, how long does it take me to cut out a mortise and matching tenon.
If I average out the time of all the mortise and tenons I cut over the last year, I think it would be safe to say that I could cut out another one in about the same time. The key to having an accurate average is to keep track of your time on as many projects as possible. The more you build the bigger the data set you will have, and the more accurate you can estimate your time needed to build the different projects.
Now my bids are much more accurate and fair to my clients and myself. Once I complete my shop drawings I count all the mortise and tenons, multiply it by my average time, and hourly shop rate to determine the charge for that portion of the project. I do this for all the tasks needed to complete the project, add them all together along with the material cost. I then have arrived at an accurate bid.
Now my only remaining problem in developing this pricing structure was what to charge as an hourly rate. I’m sure everybody would love to make over $100 an hour, but if you are not a well know woodworker, such as Sam Maloof who can sell a single chair for $10,000. You may have to settle for a lesser hourly rate. Be honest with yourself and ask yourself what you would pay as an hourly rate for the kind of work you do. Plug that number into your formula, and compare it. Look at what other furniture makers in your area are charging for similar designs, and quality. Then ask yourself. Are you in the ballpark? Can you justify a higher price with better quality? Can your target market afford what you are charging?
If your price is much lower, then great you can afford to give yourself a raise. If on the other hand your price is higher than what the market can bare, you will have to determine why. Are your expectations of what you want to be paid realistic? If so, you may need to figure out a better processes to build your creations faster. Maybe you need a better set of chisels that stay sharper longer, thus reducing the time spent sharpening. Maybe you need to look at your work ethic. Do you get distracted with text messages, and Facebook notifications as you work. Working efficiently will always maximize your profit and time.
Adam Savage from the Mythbusters once said, “The only difference between science and screwing around, is writing down the data.” So don’t screw around, keep track of your time and materials, and organize the data to create a benchmark you can use to accurately price your work.