The topic of how to price your work comes up in every woodworking forum. Everyone has a different opinion on how to do it, and they are rarely enough.
When I started building furniture, I was happy to come up with a few dollars to cover the cost of 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 of supporting my family. Pricing my work this way was a great way to build my expertise and grow my collection of tools. It had a negative side, I never really made what I would call “good money”, at least not enough to make up for the time I had put into each project. I justified this by saying to myself “it’s just a hobby, I’m still learning the trade, and I’m not a professional, so why would anyone pay full price for my parts?”
However, that got me thinking, what was the “full price” and how do you decide what the full price of a custom made piece of furniture is? When I decided to get more serious about selling my work, I had to answer that question and find a better way to price my work.
At the time, he was still working for another company as a salesman, selling flooring products. In my sales position, I was paid on commission. The commission was calculated based on the profit margin of each sale. Naturally, I started using a percentage markup as a way of calculating the price for myself. Most of the products I sold at work had a 50% markup, so I used that as a benchmark for my prices.
This worked really well when I was building furniture with a moderately priced wood like walnut or maple. However, when I built something with a cheaper wood like pine, I gained very little for the time invested. On the other end of the spectrum, when I built projects using more expensive exotics, the final price was so expensive that it was hard to justify the price to my client.
To solve this I decided to calculate my materials and labor separately, and charge my labor by the hour. The challenge I had was determining how long each piece would take me to build. As a custom furniture maker, I rarely made the same piece twice, and each piece had varying degrees of difficulty. One bed might take 30 hours to make, the next bed might take a ton of spindles to cut and take 50 hours.
It became obvious; I needed a better benchmark to measure how long the different woodworking process I used to build the furniture would take.
To create this benchmark, I tracked how long each task took me to complete as I built the project. For example, I calculated the time it took to cut the mortise and tenons, sand and apply the finish, etc. Now, I know what you’re thinking. It takes less time to cut a mortise for a small spindle than a mortise on a large bed frame leg. What I’m looking for is the average. For example, how long does it take me to cut a matching mortise and tenon?
If I averaged the time of all the mortise and tenons I cut over the last year, I think it would be safe to say I could cut another one in about the same amount of time. The key to having an accurate average is to track your time on as many projects as possible. The more you build, the larger dataset you will have, and the more accurate you can estimate the time needed to build different projects.
Now my offers are much more precise and fair for my clients and for me. Once my shop drawings are done, I count all the mortise and tenons, multiply that by my average time and the hourly shop rate to determine the charge for that part of the project. I do this for all the tasks needed to complete the project, I add them all together with the material cost. Then I have come to a precise offer.
Now the only problem left for me in developing this pricing structure was what to charge as an hourly rate. I’m sure everyone would love to earn more than $100 an hour, but if you’re not a well-known carpenter, like Sam Maloof, who can sell a single chair for $10,000. You may have to settle for a lower hourly rate. Be honest with yourself and ask yourself how much you would pay per hour for the type of work he does. Plug that number into your formula and compare it. Look at what other furniture manufacturers in your area are charging for similar designs and quality. So ask yourself. Are you at the ball park? 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 it’s great that you can afford a raise. If, on the other hand, your price is higher than what the market can offer, you’ll need to determine why. Are your expectations of what you want to be paid realistic? If so, you may need to find a better process to build your creations faster. Maybe you need a better set of chisels that stay sharp longer, thus reducing sharpening time. Maybe you need to review your work ethic. Are you distracted by text messages and Facebook notifications while you work? Working efficiently will always maximize your profit and your time.
Adam Savage of Mythbusters once said, “The only difference between science and play is writing the data.” So don’t waste time, keep track of your time and materials, and organize the data to create a benchmark you can use to accurately price your work.