How to compete with Cabella's

[BruceGibson]

As to the topic at hand, pricing is ALWAYS a tricky subject. When I started as a "craftperson," it was making bullropes for bull riders around the USA, Canada, and Australia. Nobody would show, or teach, anything, because it was (and still is) considered a "top secret cowboy art."

I spent a couple of years picking up what I could here and there...mainly a tidbit of information dropped by a braider that by its lonesome was of very little use. Over time, and many conversations, I pieced these bits of information together, and combined with what I was able to figure out through trial and error, I got to where I could actually make a rope. The first half-dozen were terrible. As a former bull rider, there was no way I'd use one, so I'd throw them away and start over.

When I got to the point that I could create something I'd actually USE, then I started riding with my own ropes. When it got to where other guys would actually ask--admiringly--where I got my ropes, then I figured I'd reached the point that I could let someone else use them. At that point, I GAVE A BUNCH TO A SELECT GROUP. The contingency for a freebie? If you have ANY problem with it, or don't like it for ANY reason, PLEEEEEZE come to me FIRST. That gave me the opportunity to fix the problem, and send a customer out with something that had been tweaked to their satisfaction. Ultimate goal? To have a bunch of guys on the road saying good things about my ropes...and about me.

What's it got to do with pricing? Well, not long after I had a dozen or so competitors actually using my stuff out in the big world, I did a little research on rope prices. At that time, you could get one that had been imported from Mexico for around $60 to $80. From a custom-maker for $140 to $180. What I did was take the "to" part of the price list and make that my starting price. In other words, if Maker A's ropes were $140 to $180, and he was the most expensive, then my starting price became $180.

My ropes were the most expensive in America at that time. Were they the "best?" I would never say that. Were they "as good" as the "best?" Absolutely.

I took over two years (actually closer to three years) to make darn sure that my rope would stand up to anyone else's. Long story short, I stayed booked an average of 6-months out for several years. Price was never an issue. I always stood firmly behind my work, fixed any problems IMMEDIATELY, and refunded, in full, if it was ever requested. Never, ever, get into an argument with one of your customers--the most you'll ever lose is the amount you refund when they return the product. If you argue, or refuse the refund, they'll badmouth you until they stop breathing.

The same applies to my leatherwork--whether it's a pair of chinks or chaps, or a roping saddle. With these items, I'm not the highest, but I never price anywhere near the lowest. I make saddles that start at $2500.00 and go up. My materials costs, before an ounce of labor, run close to $900.00 per saddle. Labor, goofs (and you'll make 'em) overhead...lights/phone/internet/website/glue/thread/stitcher maintenance/stamping tools/mallets/head knives/shipping/etc., etc., etc., figure into the $1600 gross profit. I might make a thousand dollars on a saddle I build if I get it done in a week, and there's no major disaster. But that never happens. Ever.

Real world example...a few weeks ago, I was cutting a saddle seat to fit a tree. I shouldn't admit this, but I did it, so I'll confess to it. I wasn't paying attention and I cut an ear (saddle part) off the piece I'd chosen for the seat. That's roughly a 9-square foot piece of premium Hermann Oak 13/15 ounce skirting. Around $65 worth of cowhide. I can make gun holsters from it, so there's a salvage factor there. Herein lies the problem...

You generally get ONE seat from a side of Hermann Oak. Or any other brand of veggie-tanned leather. Just ONE. No "do overs." My $65 boo-boo turned into a $175 boo-boo (plus shipping) because I had to buy another whole side to cut another seat.

The point of all this? Be good...be very good, at what you do. No matter what it is, just focus on being among the best at it. When you feel you've reached that point, then CHARGE ACCORDINGLY. Think about the multi-thousand dollar Hermes handbags...what's so dang special about them? Seriously. But they get their price, and create value in the minds of their owners. That's a win-win situation.

Compare the depth, and richness, of hand-carving or hand-tooling to what you'll find at a major catalog retailer...the difference between their embossing, and your hand-tooling. The difference between Hermann Oak and Tandy leather. Hold a piece of each...you'll immediately see and feel the difference.

The key is exposure. The folks that desire what you produce are out there--in abundance. They just haven't found you yet.

Figure your costs, and then accurately calculate the TIME it takes and the time you need to bill...and most importantly the amount you MUST charge for your time. And charge that.

If YOU don't believe that you're worth that amount, then keep working on it until you do. Then CHARGE THAT AMOUNT. Seriously...CHARGE WHAT YOU'RE WORTH. Visualize yourself as a product on a shelf. What is the dollar amount on the tag dangling from your arm, or neck? Figure that out, and charge it. Don't be shy--it's scary as heck at first, I promise. But once you've had a little practice, it becomes second nature.

There is NOTHING to be ashamed about when you're charging what you're worth. Just make damned sure ahead of time that you're worth that amount.

[Regis]

A whole lot of great advice that you provided there Bruce. Most of what you say applies in almost any chose career or venture....even when you are employed by someone or some company. It all begins with learning, then doing the absolute best work possible that YOU can produce.

Regis

[CitizenKate]

Great post, BG! A lot of great insight there. Some of the things you mention, like how you tested your product (and the water, so to speak) before getting medieval with the pricing is right on. One thing I have always believed about marketing handcrafted leather items is to focus not on explaining to potential customers what you do to produce the item but on the difference between what they are getting from you or Cabela's. They don't care how much work it takes; all they care about is what they are getting.

I've been trying to find the best way to word this, and you hit the nail right on the (proverbial) head.

Compare the depth, and richness, of hand-carving or hand-tooling to what you'll find at a major catalog retailer...

Kate

Edited February 2, 2007 by CitizenKate

[Johanna]

Great conversation, folks. No one wants to go broke. Some things I have heard and learned...

1. A satisfied customer tells 4 people. An unhappy one tells 11. (Southland Corp. 7-Eleven)

2. It's easier to sell things you believe in.

3. You know the price is right when they gasp, but reach for their wallet anyway.

4. You don't argue prices with the plumber, the doctor or the car mechanic, do you? Especially on a Sunday or holiday.

5. There are people you should send to Wal-Mart. You're doing both of you a favor in the long run.

6. Know when to send certain specialty jobs to a trusted colleague. They will appreciate it, and toss work back to you. It all evens out in the long run.

7. If you do custom work, insist on a deposit. That proves the deal is sincere, and if you never hear from the person again, you're not out your price of materials. Somewhere I have a beautiful Countess clutch purse that elegantly says "Edna".

8. If you can get the customer to hold, feel and smell the leather, you are more likely to get a sale. This is, of course, not scientific evidence, just personal observation.

9. I have charged $20 to set a rivet or two on an expensive broken designer purse with a straight face. It takes practice, but you can do it, too. Sure, it feels good to be "nice", and do it for free, but anything that calls you away from the bench costs money, and you have to charge for your time, and tool investment. You do not sell what you "do", you sell what you "know", same as the doctor and the plumber.

10. We can't compete with factories because of the volume they can produce, so our selling point has to be service, quality and custom work. In other words, to make a living at this, you have to be good. You know you are good when other leatherworkers buy your pieces as collector items.

I think one of the biggest obstacles leatherworkers have is not being good at sales, generally speaking. Very few of them enjoy the business side of doing leatherworking for a living, and fewer are any good at it. But no business can survive without sales, which is why many leatherworkers have day jobs. The Internet has become a great tool for promoting your work. If you have a website, make sure you add your link to your profile section in the User Control Panel. You might want to put your link in your signature, too. PM me if you need help.

Johanna

[Patrice]

The only thing i say is, wow, thank you!

But, forgive me if iasking 1000 of questions, but it is so intersting when i'm reading your reponses.

So, i'll risk my self at another question

How can i caluclate my price including, dye, finishes, stamps, thread, laces, sheep wool, leather and so on?

I've been never good at this exercice and just make an estimated of my time, leather and a bit of dye and finishes. :

[bruce johnson]

Patrice,

I'll kick in here. At the risk of sounding like a broken record (people who know me from other lists will attest) the best book on this subject for me is one by Bob Brenner. It is called "How to Establish Prices for the Saddle maker or Leather Worker". He usually has an ad in the classifieds of SHop Tak magazine or The Leather Crafter and Saddler's Journal. Some people get hung up on his numbers, the principles are more important - in fact my small business advisor saw mine and recommended it to other crafters not in leatherwork just for the principles. I can't tell you how much money I lost (didn't earn) before I got this book and used it.

Basically for a project to estimate costs. Materials first - I take the square footage of the actual pieces and add 20% as my waste factor usually. Large odd-shaped pieces higher waste, smaller pieces - still keep the 20%. I multiply this by the cost plus shipping for the leather. I add in any hardware. I total this and add 15% to account for the miscellaneous like thread, oil, finish, tacks, dye, things consumed in the piece. (I got this 15% figure as a recommendation, and looking back on a few years records - it is pretty darn accurate). Then I multiply the total by my markup rate. Everybody is comfortable with different rates - really depends on how fast you are turning over materials inventory and how much you have tied up in it. This gives me my materials cost - non-negotiable in any deal.

For labor, I figure overhead and a labor rate. Probably takes a couple years records to average out the overhead. Total them up and that is the hourly "shop rate". I have timed myself on different steps and know pretty closely how long each step takes. For instance - Cutting - I charge a flat rate of 15 minutes. It takes me that long to get the side out, cut a piece, roll the side and put it away. Sewing - I handsew at 5 minutes to prep a thread and then 1"/minute. Machine sew at 5 minutes (machine prep/maintenace) plus 1 foot/minute. I do a medium basket stamp at 1-1/2 sq ft/hr. A flower and two leaves or two oak leaves take me 15 minutes, and so on. I use a kitchen timer to measure how long each step takes me based on size or length on several things, and take a high average. Every so often I time myself again to see if I am still close.

This sounds tedious, but I made up work sheets, and now have them as customized templates in my spreadsheet program. I enter in the type leather and size - it spits out how much I am using with the waste factored, enter the latest cost, the hardware, and it totals up my materials cost. For labor I enter the square footage of the project for things based on that like stamping, oiling, applying finish. I enter the linear measurements for things that are linked to that like sewing and edging. Then enter the time to install hardware. Any special tooling like flowers are added up and multplied by the time and added in. If this is a new pattern not to be reused, or lettering for a name - add it in. Then total the minutes for the estimate and multiply by the shop rate. The first few times you do this - shock and awe looking at the calculator.

These are the basics of what is in the book, but he goes into a bunch more detail and covers some more points that are pretty important.

I do mostly custom orders. Someone can call me and tell they want a checkbook cover with a their brand as an inlay, and two oakleaves, and I can kick out an estimate that will pretty right on. Same with a belt, photoalbum, or most anything. Even things I have never done - I figure up the measurements, what they want on it, and it spits me out a price for materials and labor. Makes life easier for me and the accuracy is scary at times. Beats guessing off the top of my head. I always guessed way low. Doing this also keeps me from trying to or having to compete with the lower priced items. Some of these things are priced lower than my materials. I can go into my shop and know how much money I am going to make. Before When I would price based on market comparisons - I made $7/hr on a headstall, and $35/ hr on a leather covered toilet lid. Bad thing was, I always had a lot more headstall on order than toilet lids. Now labor is all equal.

I used to do some wholesale work for a couple of mobile tack businesses that went to rodeos, horseshows, and set up booths at trade shows. I priced their work with a lower labor rate, since it was usually batched items, and efficient time use kind of made up for the lower rate. It kind of filled in some light periods then. I have kind of priced myself out of that now, but have one good customer left who takes custom orders and I have lower labor rate figured for them. Still works out for me, and gives him incentive to take the order. He does all the dealing with the customer, and I don't have to worry about him paying me - he's good. Also gets my work out where it gets some notice by markets I don't always see. Probably more than you might have wanted to know, but that's how I do it.,

Bruce Johnson

[Oscar B]

This is very good information. Know from experience that was not charging enough for my stuff. Was not having sales so tacked on about twice the price and starting selling more, then went to three times a much and had more work that what I could handle.

[BruceGibson]

Ain't it wild how that works? I know there are times I'll cringe at a high price, but it's almost always the result of better quality and attention to detail. I was talking to a friend of mine about price, quality, and the "tiny details" today. The quality (greater cost/better quality) of the raw materials provides a much nicer canvas for us to create on than the lesser quality (cheaper) stuff. And the little details DO matter.

[Oscar B]

I found this web site and will give some idea of what other charge.

http://www.leathersmith.com/

[AKRob]

A sale without proffit is just a gift.

An excellent little book on CD ROM called Artisans and Money really summed it all up well for me.

I started selling holster full time 3 years ago, worked a full time job for about 9 months and then just took off with it.

MArketing your products is the key. I use the web and it still amazes me how well it works:-)