Article - January 14, 2010
Over the last few years of running this website and doing my show, I have been asked one question repeatedly: “Why don’t you ever shave?” A close second to that question is: “How do you price your work?” I am more than happy to share my method with everyone, with the understanding that I am NOT a business consultant. I don’t claim to know what’s best. I only know what worked for me. And like all things in woodworking, there are many “correct” ways to get the job done. So after reading this, I hope you’ll share your own pricing strategies in the comments section below.
Pricing can be done in many ways. And no, taking 2X or 3X the material cost is not good enough. Wood can vary in price from $1/bf to $50/bf, so you can see how that system falls apart quickly. But for many hobbyists who are selling pieces to family and friends, with no real concern for profit, that system is better than nothing. But as a business, pricing based solely on material cost is incredibly inaccurate and it isn’t really fair to you or your clients. My pricing strategy, like many things in my life, is based on the K.I.S.S theory: Keep It Simple Stupid! As a one man shop, a simple and flexible system is just what I need. But if you are pricing jobs as a full-scale cabinet shop, you will need to streamline things and come up with some sort of linear foot pricing strategy that includes all of your overhead (something I know nothing about).
If you are a hobbyist selling projects on the side, I still recommend learning how to price accurately, and then making the “common sense adjustment”, as I like to call it. If you are building for family, friends, or the church, you are probably not going for maximum profit. But you will at least have an idea of how much of a “discount” you are giving these folks. Plus, you’d be surprised at how helpful pricing the job can be in keeping the project organized on the whole.
Every bid starts with materials, and I have two methods for estimating how much wood I will need for a given project. The quick and dirty method involves getting an approximate total board foot count for the entire project and adding 20% as a buffer for waste, error and selectivity. Then I head to the lumber yard and pick up the material based on that calculation. The risks you run here are being stuck with less than ideal stock and possibly having to make a second trip to get more wood. So this one could very well bite you in the butt!
The second, and more accurate method is to sketch out the project completely and generate a rough cut list ahead of time. Realistically, you need to do this to build the project anyway. So why not use it to estimate your materials? Now you’ll know exactly how many board you need and you can even pick out specific boards for specific parts when you are at the lumber yard. This is by far the better method and your projects will look better as a result. But it does take more time and effort. I may also buy one or two extra boards, just in case I screw something up. But for the most part, there is no reason to purchase an additional 20% stock, because you are buying exactly what you need. One thing to keep in mind is that this method also requires patient lumber yard workers. Some yards will NOT let you dig through a pile to pick the perfect boards.
Regardless of which method you choose, both will yield a materials cost. I usually take that number and add 10% to cover any miscellaneous costs: extra boards, gas money, your time at the lumber yard, etc.
Now comes the hard (and most important) part: estimating your time. I suggest breaking the project down into separate parts to create a workflow. For example, a simple cabinet could be broken down into 8 sections: cutting carcass and door parts, joinery for the case, assembly of the case, joinery for the door, assembly of the door, edge treatments, finishing, and hardware installation. Now look at those tasks and estimate how much time you expect each activity to take (being honest with yourself). You’ll get better at this over time, but if you are anything like me, you will always underestimate. Clearly, I am under the illusion that I am much faster than I truly am!
The final thing to consider is your hourly rate. How much money do you want to make? Alas…..if it were only that simple! I used to have a stated shop rate of $50/hr. But every time I would price out a job, I would get to that final number and realize there was no way the client would accept the bid, so I would make “the common sense adjustment”. Eventually, I realized that one of two things had to happen: I either needed to work faster, or I had to lower my hourly rate. $35-$40/hr turned out to be a much more appropriate number. With the pace I work, $50/hr was just wishful thinking. One other thing to keep in mind is that this number is also where the overhead costs live. Electricity, rags, and sharpening services have to be paid for somehow. But since these are part of every job, I factor them into my hourly rate.
To sum up, here is my simple formula:
materials cost (+10%) + (hourly rate x project hours)
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