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Thread: woodworking as a business, profit margins?????

  1. #1
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    woodworking as a business, profit margins?????

    well this isnt really a question but a observation i had last friday..

    i have a quilt rack that was asked to be made for a customer.
    priced the materials, got a approx time to make it and then asked for a second opinion on pricing..chkd on line to see what the market was and made a decision on cost..

    now here is the question.. it would cost approximatly 30 dollars for materials and the assembly time is around 6-8hrs finished..for a price of 150 -175 depending on wood and styling.. so that breaks down to around 20 dollars a hour and that doesnt take into consideration overhead on a shop to manufacture it..

    yet in other types of business, like printing for instance a simple 2 color letter head and a run of 3000 pieces would cast around 200 dollars with a material cost of say 30 dollars which is high and total time to do this job is a hour..so that relates to 170 dollars per hour..that is great wages but not much skill needed just load paper and add ink and turn on a switch and watch for registration movements...

    now after this comparison, look at your job that you do and see how it compares to the dollars per hour you can get and ask ourselves why is woodworking not profitable????
    you have to love the craft to make it worth while in my eyes because it doesnt seem to pay the bills very well in my world at least..

    so how things should be different those that do this and are tryun to make a living at it must have some different methods or feel they can live on less and enjoy there lively hood. so what say yee,, what am i missing here???
    If in Doubt, Build it Stout!
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  2. #2
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    What you are asking really isn't a factor in my house as I don't make a living from my woodworking and do it mostly for the joy of the task. Another factor to be considered though is how many of the $170 per hour jobs do you get vs how many $20 per hour jobs... If you get $20 per hour for an 8 hour day vs only one $170 per hour job, you will essentially earn the same income (more or less)... I know you said it takes 6-8 hours to complete the quilt rack, but all of that time isn't spent in working directly on the QR... you have to allow for finish to cure, glue to set, etc... so part of the work time could be spent on other things. Example, this weekend I sold a bowl for $90... the actual turning time on the bowl was about an hour... the finish time was over a period of 10-20 days (it probably took 5 minutes to wipe on each coat of finish and there is probably 10-15 coats)... the wood was free wood I only had to drive a short ways to pick up and cut into bowl blanks... my only cost was 4 or 5 gallons of gasoline and my finish products... plus I picked up a total of a small pickup load of the wood at the same time.... in the meantime, I was working a number of other projects and had several pieces being finished at the same time....what would my price/labor per hour be?
    Last edited by Chuck Ellis; 08-23-2010 at 12:48 PM.
    Chuck
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  3. #3
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    Not sure Larry
    Your printing business example doesn't take into consideration the money the company has invested in machinery, basic overhead, actual employee costs, rent, shipping, advertising, design, customer service, salesperson costs, federal and local taxes........... The $170 profit they make isn't nearly as much as it appears.

    If I was going to sell something I made I think that I would research how much a decent store bought one would cost and add at least 25%. Since I am a pretty slow woodworker charging or considering an hourly rate would put whatever I make pretty much out of anyone's price range. Either that or I would be working for a few cents per hour .
    I guess what I'm saying is I would have to judge what the most the customer is willing to pay for a hand made piece and figure out if it's worth my time in material and potential profit.
    Last edited by Bob Gibson; 08-23-2010 at 12:56 PM.
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  4. #4
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    whats the reason for making something for profit if it really isnt profitable at all?

    chuck, so all in all you turned over a profit on that bowl.

    did you consider the cost of machinery? Electricity? Cost of chisels? Supplies?

    I know you purchase them for you hobby, but it still has to be figured out into the cost of items.

    Its a grey area.

    If someone is making log runs for turning blanks, do you add that to the cost? If you werent driving to get blanks, maybe you could be working at the regular job and making alot more money?

    I understand its more fun and its more desirable, but were talking profit and walking away with the most money.
    Last edited by allen levine; 08-23-2010 at 01:00 PM.

  5. #5
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    I think you are right, there are some jobs that you just have to love to keep doing them, as the money sucks, ask most cops or firemen, or EMTs, they are not getting rich doing the job they do, but most of them, thank goodness, do it because they want to.

    While what you say about your example of printing is true, the overhead in a printing shop can be high, can it not? Seems to me them printing machines are not exactly cheap, and they are always coming out with some newer better one, while the tablesaw you buy for your wood shop will most likely last your whole lifetime. All the computer stuff related to the printing shop needs constant replacement too, I would think.

    I also think you are comparing apples to patio heaters with the example of printing shop and woodworker.

    While there might be a few printing shops in your town, they are not competing against world wide corporations like Ikea, or stuff made in a factory in China shipped into the US.

    The work the printing shop does is one off, basically "Bespoke" work, not something you can buy at Wallmart or at Ikea.

    A much better comparison would be someone who makes custom bespoke woodwork, stuff that the customer orders and that there will only ever be one of.

    Look at this >> link <<

    That took me seconds to find, and I see well over 100 wooden quilt racks offered for sale from around $25 to about $250.

    I have absolutely no doubt that the racks you make Larry are better than even the $250 racks, but to the average consumer, they will not be able to see the difference, which is a shame, but it is also reality.

    That is just the numbers part of it, I know some guys that do a job they hate, and I mean that, they are stressed out and they hate it, but it pays so very well, that they cannot leave it. I know others that have a job that pays the bills and they are doing OK, but they LOVE the work they do, they really do enjoy going to work, I guess one has to make a choice about what is important to them.

    I hope that makes sense
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  6. #6
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    stu, you can love something, but if you cant pay your rent and feed your children, well, its time to rethink things.

    It seems to me, its a question of pride. Woodworkers like to see someone buy something they made, even if its not a big price, because they know they turned out something someone wants to pay for to own it themselves. Its a good feeling. An ego boost.
    Having a total stranger tell you your talented is a good feeling.
    Pride doesnt have a place all the time when it comes to bottom line profit though.
    Its nice to be able to have pride in your work and turn over a huge profit, the best of both worlds.
    Last edited by allen levine; 08-23-2010 at 01:06 PM.

  7. #7
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    Quote Originally Posted by Stuart Ablett View Post
    I think you are right, there are some jobs that you just have to love to keep doing them, as the money sucks, ask most cops or firemen, or EMTs, they are not getting rich doing the job they do, but most of them, thank goodness, do it because they want to.

    While what you say about your example of printing is true, the overhead in a printing shop can be high, can it not? Seems to me them printing machines are not exactly cheap, and they are always coming out with some newer better one, while the tablesaw you buy for your wood shop will most likely last your whole lifetime. All the computer stuff related to the printing shop needs constant replacement too, I would think.

    I also think you are comparing apples to patio heaters with the example of printing shop and woodworker.

    While there might be a few printing shops in your town, they are not competing against world wide corporations like Ikea, or stuff made in a factory in China shipped into the US.

    The work the printing shop does is one off, basically "Bespoke" work, not something you can buy at Wallmart or at Ikea.

    A much better comparison would be someone who makes custom bespoke woodwork, stuff that the customer orders and that there will only ever be one of.

    Look at this >> link <<

    That took me seconds to find, and I see well over 100 wooden quilt racks offered for sale from around $25 to about $250.

    I have absolutely no doubt that the racks you make Larry are better than even the $250 racks, but to the average consumer, they will not be able to see the difference, which is a shame, but it is also reality.

    That is just the numbers part of it, I know some guys that do a job they hate, and I mean that, they are stressed out and they hate it, but it pays so very well, that they cannot leave it. I know others that have a job that pays the bills and they are doing OK, but they LOVE the work they do, they really do enjoy going to work, I guess one has to make a choice about what is important to them.

    I hope that makes sense
    i had done the net search stu.... and was looking at that as well.. i wasnt saying mine was any better than there's i was just using some numbers tha i had gotten from other sources.. and i still feel that the wood worker that is tryun to make aliving doing this or even the part timer isnt getting there just dues.. and was looking to see if there was something that was missing that would lengthen the gap between cost and profit.. thinking outloud here and the new guys on the block looking to step out and try there wings in market that may or may not be profitable.. i understand the ikea story all to well,, got daughter that thinks they are great and even compared there stuff to something from me.. which is another story....that wont go into here.
    If in Doubt, Build it Stout!
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  8. #8
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    I think I'd have to agree with Chuck that 6-8 hours is probably not all time spent on the rack, unless you're doing a lot of hand carving or engraving.

    If you're comparing to mass produced items, the pricing isn't apples to apples either. If you mass produced items, you'd probably get discounted prices on woods and other materials for the quantity. You'd also be building in a assembly line method of producing several at once, which probably would cut a lot of time, but add some overhead depending on the space you had to work in.

    I think one big factor is in the cost of materials, it can add up quickly as the price the average hobbiest pays for wood and other materials can be quite a bit more than what a cabinet shop would pay that buys in larger quantities.
    Darren

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  9. #9
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    Comparing with a printing shop is not a good measure, IMHO.
    How much you make is what counts.
    I'm not the craftsman you are, Larry, but my experience is that the first item of a new project always takes much longer than subsequent ones. And, with quilt racks, you could cut pieces for several and assemble in not much more time than just one.
    If you compared prices and are happy, what else matters?
    BTW, I have noticed hourly service charges have gone up dramatically in the past two years. Independent auto repair shop is now $65.00 per hour, backhoe same price, semi-retired electrician has gone from $12.00 to $40.00. My SS has gone......

    Another BTW, we have several quilt shops in the area. I once considered making racks to sell to them. But they have sources, retired guys, who make and sell to them for what, I am sure, is less than their cost. No way to compete.
    "Folks is funny critters."

    Think for yourselves and let others enjoy the privilege to do so, too. ~Voltaire

  10. #10
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    Larry the short answer is price has nothing to do with cost in todays world.

    The market will pay what the market perceives the value to be at that point in time.

    There is also a matter of supply and demand. Take the auctions Steve goes to. If no one pitches and the sale is going ahead the price is low as heck. If there are a ton of buyers and they all want the item then the price goes up.

    To make money you need to target a market and excel in that market. Understand the need and meet the need. The days of "selling" as in persuading etc are gone. Good sales today are done by becoming the specialist in the area and understanding the customer need. Only when you meet the need in a specific area will you be able to command a good price.

    Take Don and the Church furniture. He met their need. It was for more than simply making some furniture. They wanted a design that met their needs and someone that would be understanding of their needs and their "church and its culture". They wanted someone that would work with them on evolving that need and would build to suite their schedule.

    Completely different than turning a quilt rack into a commission.

    Just take the cabinets Tom and Alan have made for their homes. Compare them to what the Borg offers and what most Kitchen places would offer. The mass market suppliers will have standard sizes they work to. To get a job done like Alan or Toms look at what would be involved and look at the process and need. Tom and Alan had a need for cubboards that are designed to fit how they want them and with some element of uniquness. That attracts dollars if you target the right people. People with beer money know they aint gonna get champaign but they try to and in so doing get short changed somewhere. Take the cabinets Chuck had to fix recently. Those people paid top dollar for junk. Their own fault in my view. But they were well sold by whoever did the selling job.

    Part of Marketing and Selling is to properly understand the need. Not the initial need but the real need. This you do not find out without sustantial interaction with the client. You need to probe to understand what they really want. How many people are out there with a real high dollar kitchen that does not get cooked in. At most its used to pour out milk onto some cereal. Their need was not for the most well make cabinets on the inside but for cabinets that look wow on the outside. Their need was for show cabinets that no one else would have and that would say wow you got money and maybe you got taste. Their need was for status one upmanship etc.

    As woodworkers we might find it hard to understand this mentality but its real and it is what drives the market. Its human things like this that create need. Not the practical functional element we look at.

    If you examine BMW as a company right now, their results are going through the roof. I aint a BMW fan just using them as an example. They have created a good mix of a bunch of things that people relate to with their brand right now. Yet its pretty much 4 wheels to get from A to B.

    Woodworkers that want to make money in their one man business need to understand this aspect and target people that have the money to satisfy their needs.
    Last edited by Rob Keeble; 08-23-2010 at 02:00 PM.
    cheers

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