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

larry merlau

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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???
 
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?
 
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Not sure Larry :dunno:
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 :D.
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.
 
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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.
 
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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 :D
 
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.
 
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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 :D

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.:)
 
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.
 
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.
 
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.
 
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Some good insight all.

Once upon a time I taught a class called Woodworking as a Business. Here is the condensed version.

The greatest overlooked item in the business plan is overhead. The list of line items under overhead is nearly endless. And the greatest one in that category is time.

We tend to think of time for labor as only the time spent actually building. There is time for planning and marketing, for paperwork and cleaning, for driving for a hundred related reasons.

There are utilities and ROI costs to consider. Pension and insurance. Permits, licenses, and advertising. Machinery repair, replacement and upgrades. Vacations costs and occasional outside labor. There are consumables, right down to the toilet bowl cleaner.

And the above is by no means an exhaustive list. And procuring those items all takes time.

Bottom line, what one thing costs, say material, has no monetary relationship to any other, say labor. They are all simply costs that must be considered.

That said, and I was in the woodworking business for nearly 2 dozen years, I never even heard of an individual(sole proprietor with no employees) making a living from doing one-off's that didn't also have a spouse who worked and provided insurance and retirement benefits.

Nor one who didn't also teach, write, sell other items (tools and jigs, etc), as an example. Look for successful people you admire as an example. If you can find one that is doing what you want to do, emulate them.

And 100 hour weeks with no down time allowed was soup de jour. Time is the one commodity that cannot be banked.

You are either in business or trying to make a couple of bucks from your hobby. You get to decide.

And at the end of the day, what you get from the piece is only what the customer is willing to pay. That holds true for Ikea and WalMart and you. The customer's perception of the value of your products has nothing to do with the cost of providing it. Your daughters are telling you that.

The thought process and research you are now doing is simply to help you decide whether you want to trade some hours for some money and call it a good trade.

One last thought. An individual whose work experience is only as an employee for wages is ill-prepared to be a business owner. There are just too many things with which they have no experience. If you really are interested in perusing going into business for yourself, then take the business, marketing, and bookkeeping classes. That holds no matter the business or product.

BTW, my 13 week class has 10 guest experts, from bankers to insurance people, from advertising and marketing, even a medical practitioner, people 'in the business,' and more.

We wanted the facts so we got them from people who's business it was to know.

At the end of the semester, each student had a reasonably complete business plan, depending how much effort was put into it. And only one person after 4 years actually pursued his plan.

Then his wife lost her job (and benefits) and he to find a job that paid them.

Others came to the conclusion that to make a few bucks IN ADDITION to whatever else was providing them a living was the way for them to go.

Sorry if this was a cold shower. But better a cold shower than a stinky body! And it comes from one who has BTDT!
 
Some good insight all.

Once upon a time I taught a class called Woodworking as a Business. Here is the condensed version.

The greatest overlooked item in the business plan is overhead. The list of line items under overhead is nearly endless. And the greatest one in that category is time.



One last thought. An individual whose work experience is only as an employee for wages is ill-prepared to be a business owner. There are just too many things with which they have no experience. If you really are interested in perusing going into business for yourself, then take the business, marketing, and bookkeeping classes. That holds no matter the business or product.


At the end of the semester, each student had a reasonably complete business plan, depending how much effort was put into it. And only one person after 4 years actually pursued his plan.

This is the best advice i have seen in a long time.Trouble is so few people follow it. But this is priceless advice.

I come across people daily with NO BUSINESS PLAN, yeah they might have done one to get the loan at the bank in the beginning then it went into the draw and never came out.

Too many dont see labor hours as cost. They will sit in meetings with a staff of 10 execs and not consider what is being burnt per hour round the table while achieving nothing.

Most have no idea of return on investment and business is first and foremost about making money. Securing a profit of 5% at the end of the day is not a worthwhile investment. Yet most small businesses make little more than 5% on sales bottom line.

Why put your money into one investment where you are central to the return on that money when you can put it into 100's across numerous industries and even parts of the world today. This is spreading the risk and you should be able to do better than mere 5%.

If there is no Business Plan and its not updated regularly to keep pace with the changing environment and evolving vision for the business then there is little likelyhood of success and i call it gambling. Just like the guys who pick stocks on the basis of what they heard at the water cooler or a tip from a friend or what they heard on TV.

Business Plan lets you see the pitfalls before you spend a dime. If it cannot stack up on paper dont go there to make money.

Thats why franchises are big business today. Normally they have proven the business model and shown its repeatable if you follow the plan. But you need to like the business or you wont have the motivation to follow the plan.

Here is my quote

"Fail to plan then plan on failing' :D:thumb:
 
...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...

Actually, it probably would take about 6~8 hours of actual work, unless you're into air nailed assembly and spray can finishing:

To cut and rough shape the various components would take the least time - maybe an hour. You might cut that average time if you're making multiples, but not for true custom work.

For mortise and tenon construction - even with power tools - add at least another hour, or probably two.

Fitting and gluing will take another better part of an hour. We're up to about 4 hours now.

After allowing time for the glue to dry (but not counting that time) we're on to sanding. For a nice varnished or poly'ed finish base, sanding will consume at least an hour. That's five hours, now.

Brushing finish on will take half an hour. Spraying it will take ten minutes, but don't forget the time it takes to clean the gun.

Between coats, it'll take twenty minutes of sanding/steel-wooling

Then a second coat of finish (see above times) and we're now up to about 6½ hours.

The final rub out and waxing will take another 45 minutes, so we're ready to put the quilt rack into the sales booth, with just over 7 hours of actual work.

So, we put it into the booth with a $175 price tag, and the first ten folks who look at it say something like "But the (newly retired) grandpa six booths down the line is only selling his (made of #3 common pine) for $20.00.

We have to wait - sometimes weeks or months - for that one potential customer who recognizes true quality work. Is it worth it? I dunno...:dunno:
 
I've looked at this topic before and read some, few thoughts on it:

1) One of the fine woodworking editors, I forget who had a interview on this. He specializes in mission style furniture. I think he typcially charges over $100/hr for shop time. He said sometimes customers bring him pictures of retail furniture to make and he tells them to just go buy it. There is no point in copying something mass produced (quality product at least) because the price is rediculous. Custom woodworking is for people who want something that isn't available any other way according to him.

2) There are some people like myself and probably many here that woodwork as a hobby, but generally will make things to sell. It's not a business. I honestly try and make a little money per hour to make sure I'm not swamped with requests and to spend the money on tools. My wife doesn't care how much money I spend on my hobby IF it's coming from hobby profits (electrical/building not included) I have no illusions of making it a business though, I know it doesn't pay the bills. I try to use it as a self sustaining hobby instead.

3) From my trains, quantity really matters. It took me 5 hrs to make a train. It took about 14 hrs to make 10 more. Building enough of something that the design and setup times are a small portion of the total time spent to make a batch goes a long way to making a product more competative. The same with quilt racks. Sure 6-8 hrs to build 1, how long does it take to build 100?
 
What Carol said,. I could not have put it as "easy to read" as she did, but it is "spot on".
Just remember, when you start looking to make it a profit center, It becomes a JOB and not a hobby anymore. (at least thats the way it is for me).

Without boring everyone with meaningless details, I have a passion for firearms, both new and old alike. About a year ago, I decided to start a part time business dealing in firearms. I can say without a doubt, it was one of the best financially fulfilling decisions I have made in my life, but I have lost my "passion" for them in the process. When I have "downtime", a gun is the last thing I want to see, but just cant get away from them now that it is a business.

Darnit, I am rambling on.

What I am trying to say is make sure you dont loose the "fun" of woodworking by making it a "JOB".

Regards and good luck with whatever you decide to do.
 
i have seen the writing on the wall from some of the big boys like carols mentiones,, and i was just looking to get some of this that has risen out there to the rest of us that are scratchun to keep our hobby afloat.. jeb mentioned using his income from the trians to offset the hobby he has and i too am just tryun to offset but the offset isnt really there if you look into it far enough and that was what i was after in this thread ... the grass looks green but i REALLY isnt.. and with that thought then we need to look at what should we do in the future???
 
Being in the middle of a business start-up, I'm going to chew on this one a bit more after I get out of work today, but my quick .02c is that I cannot re-iterate enough the need for a solid business plan. I'm following my own plan, have set realistic goals, and am working on the steps needed to get my studio from the 'gee I wish I could someday' stage to the hard reality of making a living at it.

Luckily my business can get by without a brick and mortar at this point, I'll go to the clients wherever they may be, and can do post processing at home initially. I'd Love to have a turn key studio setup to go to, but that's not going to happen for a few years, at Least.

Thanks Rob for bringing this thread to my attention. Larry, good on ya for mentioning it Mr Ambassador!
 
from what I see on Long Island, and the entire northeast, the woodworking business sucks.
90% of the custom cabinet and furniture shops are gone over the past 10 years.
Money is tight. Clients with money who were looking for custom made stuff has dwindled down considerably.
Any business today is tough.
This might be the worst time in American history, maybe world history, to try to make a go at being in business.
IF you have a strong stomach, prepared to work long hours, make little money, take a shot. If you expect to feed your family, dont go into the woodworking business unless you have a list of clients a block long to keep you busy.
Thats my opinion.
Business owner for 30 years. Non woodworking.


*just want to mention. There is a huge difference between someone selling 4 cutting boards and some pens at a show and someone going into the woodworking business.
The first is done to kill time and prove to yourself you can sell a product. the second is to build a future and send your kids to college.
And Im not talking about contractors who build extensions on homes, or handymen who install shelving or maybe build a closet.
 
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David points out very well what I experienced when shoeing horses. My love for a good horse was still in my heart, but after 12-16 hours a day under horses trimming and shoeing them, the last thing I wanted to do was deal with another horse, even if it was my own.
My pens started making money, but lost the initiative to turn after spending three or four hours a day at school helping kids turn. It isn't that it isn't fun, I have enough jobs demanding my time. We are working on our plan now for Lou to stay at home and run her own business. We think we are one year out from that being a reality. This summer with paying for two weddings out of pocket and her not getting a paycheck until a couple of weeks ago has shown us that we are in reality not dependent on her check which we thought was so but had not "lived without it" until this summer. It also is a testament to our daughters frugality (if that is a word) and their concern for their dear old dad's wallet. Hopefully it was also my years of preaching to them a wedding is a one time event, I would rather help them buy a house, provide a half a beef or a half a hog to their freezer before throwing money away on a wedding.
With that said, I think this is a hobby that can make money but the more you make the more demands it will make on your time. Your quilt rack is a small ticket item that is in that ballpark that many feel the quality is money wasted as it will be hidden behind/under the quilt it holds. Your abilities with cabinets and custom cabinetry, now there is a niche that I firmly believe you can make a higher quality cabinet than what is being sold for as custom and yours would be better and at the same money. Just my thoughts.
 
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