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GrampaJoel

Och! My Cost Factor!

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Hi all.

I thought I had a pretty good handle on my cost to sales price ratio, but damn, I learned another lesson today.

I was commissioned to make a few show halters for Llamas with matching lead lines. The top grain Moc leather was ordered from Goligers, Watts brand buckles ordered and the other hardware was purchased locally. Now finished, and going out to the customer on Monday.

I actually sat down today and figured to the rivet, glue, thread usage, the cost of producing these special halters. I quoted a price of $35.00 per halter and lead line, and was sure with that price that I could make a few bucks and sell something at a reasonable price to friends.

OMG!! my actual cost not including electricity, wear on my tools and labor, I have double checked, and calculate to be $60.65 for each halter. :head_hurts_kr:

I guess I better be more careful in the future. :bawling:

How about you guys? Do you ever figure it out totally what your cost is to create your products?

Joel

Edited by GrampaJoel

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How about you guys? Do you ever figure it out totally what your cost is to create your products?

Joel

OUCH!! I can't say I have actually figured out the cost. But I feel for you... nothing worse than finding out you've paid someone to take your things.

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Well...

I learn that lesson still.

Normal Bench rate is between 30-45 per hour and materials.

Some people charge more, some charge less, but that is what I am comfortable with.

I would guess that each custom halter would be between 90-100. Just because they order more at one time does not mean they get a discount, that only means more work, and wear and tear.

I think I am pretty reasonable, and fair on folks. They want custom stuff and I give it to them; at a price I would pay if I where them.

The general rule for carpenters is time and materials +30 percent on top of those numbers combined for oversights.

Being a carpenter I like to take the same approach to leather.

Maybe some other folks will chime in, but I think most people don't like to talk about what they charge, but it is something that should be talked about a lot more.

I see people making custom guitar straps for 75 bucks when they should be charging 150+ so I guess it just boils down to what do you feel is a fair price for what you have done, and don't be afraid to show some pride in your prices!

I give away a lot of small stuff like bracelets and little stuff like that all the time because I make those and wear them until someone says "Hey that is cool I like that"...then I just say oh ya , well here it is yours:) Normally almost every single time they come back for more real stuff.

I call it leather chum...hahahaha LOL.

Anyway, maybe this helped maybe it didn't, but I thought I would just throw down the hammer and try to make a dent for ya:)

I would call them and tell them, hey after configuring out all the costs this is the price...but I am willing to split the difference. So 47 should be a fair enough upgrade for ya and still fair to them...and lesson learned. You used the best of the best materials; so it is what it is...the best! So now it is time for them to pay for the best! Whats a few bucks between friends anyway??? I am sure it won't be a big deal.

Another lesson is not to give a final cost up front only a ball park estimate and tell people it could be more, but you really don't know until it is done and during the time you are working on custom items keep in contact with the client to let them know how it is going and send pictures that way they feel like you are doing everything in your power to stick with the plan, but they are a lot more understanding when and if you have to tell them the price is double what you originally thought. IT DOES HAPPEN!

Anyway, best of luck!...to all of us:)

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I would have to agree with Chancey. For things you've turned out a ton of times and know your time for, you can set a final price. For custom work, you need to give yourself some wiggle room. I'm still only about a year into this work, so I set my personal hourly at $25. So straight cost of something that took up a square foot of leather, some misc. hardware, and some finishing products, and took a half hour to make would look something like this:

Leather: $6.50

Hardware: $2.00

Finishing: $0.45

Labor: $12.50

My Cost: 21.45

That's still not what I'd sell it for. I would double that for the final retail price.

x 2

Final Price: $42.90

Does that feel over priced to you? It sure did to me at first. But it's a fair price. You are doing two jobs. You are the craftsman at the bench who deserves that $25 an hour, but you are also the manager / owner making the final sales. If you were to hire someone to do one of those two jobs so you could focus on the other one, that's what you'd have to charge. If you want to be generous, knock 20% 25% off the final retail price. Your friends will still get a deal, and you'll still get value out of your work.

.

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Well I see 96 views and only three replies. So, either I am in a pretty big group, or else we three are the only ones to pay others to take our stuff. :evillaugh:

I will be honoring my original quote, and I will just kiss good bye $75.00 in my cost plus the labor cost and be a happy guy. But I will not make any more for the same price.

Lessons learned the hard way stick pretty good around me.

I just can't believe I missed my quote by that much. :blush:

On the good side is that I now have an actual price per piece of hardware and leather figured out for the future.

I also won't be making any off hand price quotes for my special leather creations, in the future either.

Think happy thoughts. :rofl:

Joel

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Honestly, that's exactly what I'd probobly do. You made the deal. I'd personally never go back and say oops took longer then I thought, you owe me more. You have to stick to your word, even if you have to eat a mistake. Lesson learned. My guess would be that this customer will be back and happy to buy again, even at the higher price.

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Glendon user_popup.png

Honestly, that's exactly what I'd probobly do. You made the deal. I'd personally never go back and say oops took longer then I thought, you owe me more. You have to stick to your word, even if you have to eat a mistake. Lesson learned. My guess would be that this customer will be back and happy to buy again, even at the higher price.

This customer is a prominent figure in the Llama show ring around the west coast.

I am hoping for business to be directed into my shop due to my customer being in the show ring and winning ( which they constantly do) while wearing my product.

So I guess if I take this view it makes the cost to build loss an advertising investment instead, :evillaugh:

Good things to you all!

Joel

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This customer is a prominent figure in the Llama show ring around the west coast.

I am hoping for business to be directed into my shop due to my customer being in the show ring and winning ( which they constantly do) while wearing my product.

So I guess if I take this view it makes the cost to build loss an advertising investment instead, :evillaugh:

Good things to you all!

Joel

Joel, that's the best way to look at it. You do your best to give a good quote, and then supply what you promised, even if it turned out to cost more than you figured. It's like sewing seeds for your your pumpkin patch. You get those "big" seeds, prepare the ground, fertilize, plant them, add water and nutrients and some time it really gets you what you want, sometimes you learn what you will do different next year. Lessons learned that way, always stick better. Personally I usually charge $35 / hr, plus material. That usually gets it done with a good profit. If I am not sure about how much I will have in it, because it is a first, and still have to give a good quote, I do the best I can, and stick to it, and when the customer picks it up, that's the price he/she pays, however; if it has proven out to be more than I expected, I let them know not to give out the price they paid, because future product will cost more. I usually make out good, unless I have given out a price and then find out that there has been a price increase on something (like sheepskins!) .

Anyway that's the way I do it. Bottom line, you can't give it away because you don't want charge too much. If they want top quality goods, they should pay for it. I hate when someone comes to me with a "sows ear" they bought on ebay and want me to make into a "silk purse" and complain that the cost is too much. The old saying "you get what you pay for" Is alive and well.

Bob

Bob

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Hey everyone!

Sylvia & Chancey77 thanks for the insight. Good thoughts I'll log into the memory bank.

Bob I guess I got greedy thinking I could enter a new field and sell more stuff.

I like the design and creation stage of leather working, and a fine finished product puts a glow in my heart. I bet a lot of leather work is done that way.

I have just not been that interested in doing the paper work. My weakness.

I never really stopped to add up my total cost on anything I just gave a rounded guesstimate of what it would cost me, or looked at what someone else was charging and moved on from there. I didn't want to seem to high priced.

But from now on the paperwork will be in the upper most part of the design stages. That's for sure.

From this point out I will just say let me figure it up and I'll give you a price, or else I will just create what I want and see if anyone has a need for it at my totally figured and re-figured out prices.

Joel

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Joel,

I think those of us who do this as a hobby tend to underestimate the costs involved. In part because we normally buy things when they are on sale, to have a stash,rather than for a specific project. So the price isn't as tied in our mind to the specific article. I think the other part is, we REALLY don't want to know how much we have spent on our hobby, or we don't wan't someone else to know so we tend to deflate the cost a little lol . Many of us just have a hard time charging what our products are worth. That old confidence issue makes us undervalue our time. I do feel you did the right thing though, honouring the quoted price. Fortunately it was only for a few items and hopefully the advertising value will greatly exceed the loss. And your customer is likely very happy, most people like to feel that they got the bargain of the century.

Rosemary

Edited by rosiart

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Wise words of wisdom. Thank you Rosemary. I agree completely.

Well for me I don't have to make a lot of money with my leather products, as I am retired, and doing ok.

All things being equal though, I do prefer to break even with my leather work costs and making a few dollars extra is very nice also.

But I am striving more for the art aspect of the leather work and not so much the dollar / production factor.

Don't get me wrong, I do prefer to make money. Plus I don't have an unlimited bank account.

The art and skills are what I am truly after. I love seeing something that is a one off come out of my shop.

hence my surprise when I discovered just how much I had underestimated the cost of these halters.

Oh well, Live and learn.

It's a nice day here in SOCAL. I spent yesterday at a local horse event and my world is right again.:thumbsup:

Joel

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There are a few things I have bought that have really paid me back. One was a marriage license. The other was Bob Brenner's book - "How To Establish Price For The Saddlemaker or Leatherworker". You don't have to get hung up on the actual numbers he uses in the examples, just learn the principles. These aren't probably anything new for making anything, but his application of them to the leather business makes it more "real". After I read Bob's book I made up several worksheets to determine costs of materials and pricing that. Then allow for waste and incidentals used but not priced out like rivets, thread, finish, etc. I did time studies for my common procedurres - average time spent for a measurable unit like time cutting a piece, prepping, tooling like basket stamping an area vs. time, tooling a common floral or oak corner, length vs. time for handsewing or machine sewing, finishing based on sq/ft worked best, etc. I added the time and that is my time estimate. I still check myself every so often now and compare actual vs. the estimated time. I can add the materials and time estimate and be pretty close for something I haven't done before. Bob's book is usually listed for sale in the classifieds of the LCSJ.

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Honestly, that's exactly what I'd probobly do. You made the deal. I'd personally never go back and say oops took longer then I thought, you owe me more. You have to stick to your word, even if you have to eat a mistake. Lesson learned. My guess would be that this customer will be back and happy to buy again, even at the higher price.

I agree whole-heartedly. A person's word is their bond....

That said I would probably ask the person that bought them to let others know that the normal price is $80 (or what ever) a set.

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All good advice. The only thing I can add that I do, which seems to help the leery buyer, is give a range estimate upfront. The size of the range will vary based on the item, but at least then they know up front how much they could expect. So, taking a Kindle cover for example. I told my wife that when people ask about it she should tell them it would be between $300 and $400 for a similar style, but a simple sleeve the same size would probably only run them between $250 and $350 depending on the artwork and coloring requirements. My "base" rate is about $20 p/h right now because I'm still pretty new to it and I feel I'm pretty far from perfection. But, I'll also adjust as needed, so the ranged estimate gives me about 5 hours to play with just in case I get really hung up on something. As I speed up and get a lot of the physical design stuff all figured out then I could still charge the same total price, but basically give myself a raise. All the more motivation to put out better work quicker and quicker.

So, using the kindle cover as an example, there's plenty of room for all the odds and ends that we don't usually add up when pricing work. Estimated amounts since I did it for my wife.

1 sq/ft of 8/9 oz = $6

1 sq/ft of 1/2 oz liner = $3?

Dye = $1 (if that)

5 yd 1/8 lace = $5

Total material - $15

The total time was around 20 hours or so. That leaves me lots of room to work on my speed to build a better profit while still charging similar prices to what other people charge.

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Bruce - Thanks for the Bob Brenner heads-up... You always have the inside tips. I'll look the book up.

Cyberthrasher - I agree an adjustable estimate range is the way to go. Good advice.

Thanks all

Joel

Up date.

The customer received the halters today and loved them. They said they had already lined up other customers that have interest in having me build for them.. :yeah:

Bruce - I found that the Bob Brenner book is available through PROLEPTIC also.

Thanks again everyone.

Edited by GrampaJoel

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I still struggle with this on custom work after nearly 30 years in business. Although usually my intuition is good on some things, when it comes to pricing it's not. I almost always underestimate the time it will take me to do a custom job. Like you I feel if I do give an estimate I need to stick to it. One way to handle it is give a preliminary estimate and say, "this is off the top of my head, let me take some time to figure out the details and I will call you back with a more accurate estimate." The other thing is to give a range, then if you can hit the bottom end of the range the customer is really happy. I've actually found if I think of a price off the top of my head and then double it, it comes out about right. I hate it though when I give an estimate and the customer says, "Oh, that's way less than I thought it would be".............Then I know I probably estimated low.

Just one little comment about not needing to make money if this is a hobby. I don't think the value of the work should be based on how much you NEED it. the work is a skill that we should all be proud of and that we deserve to make a decent wage for. It also makes it more difficult for those of us who DO need to make a living at it to price our work at a fair price. Chris

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This subject was covered in my blacksmithing forum Iforgeiron.com . Time, and materials are easy to figure, what isn't is the perceived value. This is the value that the customer feels it is worth, and really comes into play with artistic items. Then there is the Walmart affect which sounds like " Why is that ( hand thrown custom glazed ) ceramic mug $30? I can get one at Walmart for 99 cents." Some people just don't realize, or appreciate craftsmanship. Personally I hate time and material quotes, and preferred giving a set price with a possible 10% overrun when I had my machine shop. From a buyer's point I also don't like them, as I like to know what my final cost is for budgeting. This will also help to avoid starting a custom item that the customer may say later is now too expensive for them. Now what do you do? Set a price, stick to it. If you missed it, learn from it, and move on. BTW I NEVER charged enough when I had my shop. Example; when I worked at the Jelly Belly Candy Company as a mechanic I was asked by the purchasing agent how much I would have charged to make an item they just got in. I looked at the simple aluminum plate, and asked "how many?" 20. "OK after setting up it would take less than 1 hour each to make with minimal material cost, I would have a hard time telling you $100,and it probably would have been closer to $60 ea." Then he tells me that they paid $300 each, and it was less than the OEM wanted. So I was willing to quote $1,200 on a job that someone else got paid $6,000. I charged for my time , and materials. Someone else got the perceived value on top of that.

Another method is described in one of my gunsmith kinks book. Say a guy wants a recoil pad installed. Watch his face and start by saying that will be $25 for the pad, no reaction, $10 for disassembly, and reassembly, no reaction, $40 for refinishing the stock, see a twitch - stop there, as you have reached his pain level for price. Some will be lower, some will be higher. It is the sliding scale of pricing and perceived value. Some folks are leery if you don't charge enough, as they believe $$$$ = quality.

I agree that you need to let your customer know that their price is not what you will be charging others, so please do not quote that to others who are interested in getting one made.

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As I pay more in Canada for leather etc., along with if I have to ship it in. If I ship it in it is the cost of goods, shipping, what I am hit for gst and customs along with brokerage. I charge $30. per hour on top of it for my labour and tooling, I like to leave a little wiggle room and people always whine I am too expensive. However they will go to the GAP and buy cheap crappy leather made in some sweat shop and pay twice the price. Then it will either fall apart or crack and they just wasted $600. on a crap vest.

Randi-Lee

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