Pricing

[PapaWolf]

What do you guys use as a means of determining how much you would sell something for? Obviously you don't wna to scare people off, but at the same time you put a lot of work into hand crafting something and you want to get your money's worth. So how do many of you go about doing this?

[Temporary]

The easiest why to determine pricing is to see what others are selling their works for. That will give you a good idea, then you can always come in a few bucks lower :D

[bruce johnson]

Papa Wolf,

As one who has made about all the mistakes you can make and still be floating, here' s how I do it now. Some of this I got from a small business advisor, quite a bit of the principles as they apply to leather from Bob Brenner's book "How to Establish Prices for the Saddle Maker or Leather Worker", some from talking to other guys, and a lot from keeping books and tweaking my formulas. It seems unwieldy at first, until I realized how much I was losing by not accounting for it both in materials and labor. I used to do this all by hand, but have since made up spreadsheet templates in my computer that do the calculations. I use these formulas for pricing all my personal and custom items.

Breaking it into materials first:

For each piece of leather used in a project - width x length in inches, then add in a 25% cutting waste factor. If it goes into the scrap bin, I am still not getting paid for it on this, so it is waste. Divide this by 144 to get a square foot measurement.

Multiply the square footage by the cost per square foot with shipping figured in. I use the highest price I paid in the last year to figure this. I add in special hardware like zipper tape and slides here too. This gives me a materials cost sort of. To allow for things like oil, dye, finish, thread, rivets, etc. I add 20% to the total leather costs for a project. It has been borne out to be about that (maybe a little less on some things) from past years records. This gives me what my costs really are, I then double it.

Labor:

I kept timesheets on a lot of steps. I did enough wholesale and award stuff, I got my timerates down to be pretty consistant. Everybodys will vary. These are based on measurements of the final project.

Cutting time - I struggle with this, but for the sake of calculations I made it a flat 15 minutes. That pretty well accounts for getting out the cutting pattern, unrolling the leather, cutting, and putting the leather away. Obviously you are going to make it on a checkbook, and go over on a briefcase with pockets. The 15 minute average is ..... average. I add 5 minutes to tape backs and case for small things, 10 minutes for larger.

Stamping - I can medium basket stamp/simple border about 40 minutes per sq ft. Larger baskets and geometric stamps are a little faster, but I still use that same 40 minutes per sq ft. Special stamping like simple floral or oak corners are 15 minutes each. Again, an average. Other stamping by guesstimates.

Assembling - glueing in linings, trimming linings, glueing pockets, - 7 minutes /sq ft

Sewing - handsewing - 6spi - 1 in/minute plus 5 minutes for threading needles, polishing awls etc. Machine sewing - 10 inches per minute with a minimum of 10 minutes to account for machine oiling/cleaning/maintenance/changing feet and plates.

Zipper - It really doesn't seem to matter much whether it is a planner or a rope bag, it takes me about an hour to make up a zipper from scratch, sew it to a gusset, and fit it. I just add 60 minutes.

Edging and finishing - Averaged out, it takes me about 15 minutes/sq ft to run an edger, slick an edge, apply finish, etc. Background dye, special treatments, etc all add in plus too.

Installing hardware - buckles, conchos, Chicago screws. Depends on how many, but 5 minutes at least to punch the holes and screw a couple down, guesstimate past there depending on how many.

I add up the minutes and multply it by my rate. Add materials and labor to get a price. These numbers are all based on a "one-of" item. Obviously there is econmy of labor by doing several at a time, and I try to do that when I can. My labor time rates are not the same as probably anyone else's. Every so often I will hit the kitchen timer, and then not look at it again until I am done with that step to check times.

That's how I do it.

[ryan]

I agree with Mr Brenners book, "How to establish prices for the leatherworker." The information is up to date and very informative. Brace yourself though, you might find that you've been charging half of what your stuff is worth (like me). If you are doing this for a living the book is very helpful, however, for the part timer I think it's more difficult to apply IMO. I know what you mean by not wanting to scare people off! I am quite certain if I followed Mr. Brenners advice to the letter, I wouldn't get a lot of these jobs. I am quite certain location plays a part in what you can sell things for but I could be wrong. The best advice I can give is don't give exact quotes if you haven't made that particular item before (I can't tell you how many times I have burned myself that way). And try to steer clear of doing work for friends and family; at least don't expect to make money if you do. Once a person has a good idea how much time you have into the items you sell the most, then using Brenners advice is smooth sailing. But you will always have those strange requests that will leave you wondering how much to charge.

Ryan

[PapaWolf]

Thanks for all the info guys, I really appreciate it. Small leatherworking has been a hobby of mine for about a year now. I decided about a month ago to sort of "go for it" and learn a little more so that I could use my hobby to make a little extra oney on the side. Married with a 2 year old boy, another boy on the way in May, 3 dogs, full-time job and full-time nursing school really hit the pocketbook and run into my time. Figured this would be a good way to still be home and make some more money instead of trying to get a second job again.

[Chief31794]

Pricing is something near and dear to my heart. I agree with nearly all of the comments, however, will add the following:

I use the double + 1 method of pricing which is an industry standard for retail sales that implies you double your cost and add one. For example if your total cost is $10.00 then you are dealing in Dollars so the Retail Price should be $21.00. If the Total Cost were $60.00 then your price would be $126.00 (Actually $20.99 and $125.99 respectively, that's another sales technique)

Make sure you calculate your costs accurately, determine your per hour labor charge, then the cost of all the materials (Leather, D-rings, Lining, etc), and then the cost of stock supplies (Dye, Finishes, Edge Coats, rivets, snaps, lacing, thread, etc). Your labor should actually be on a "Flat Rate" basis to be easy. For example, "Belts - Plain .75 hour, Stamped Design 1.5 hour, Stamped Design with Name 1.6 hours, Hand Carved 3 hours, etc, these are what I use, just examples) it shouldn't cost your customer because you got lazy and took 6 hours to stamp the belt as opposed to the 1.5 hours it would have taken if you'd been working diligently.

Takes a little work but once you determine your costs for each project it is easy to set the sales price, another policy I have is never discount sales, discounted sales are for volume markets where quality might not be very important, if you make a quality product you cheapen the value of the product if you discount the sale. I'd prefer not to make a sale than to have people think their buying "Cheap, discounted goods", hand carving particularly is unique one of a kind art, even if you always carve eagles or horses, no two are ever exactly the same so they should pay for the Art.

Just my opinion, didn't mean to get on a soap box.

Ken

[Bree]

Ultimately, your price will relate to how much the market will bear and just how brutal you wish to be to your customers. Some people don't like to think of their work as business and give away their work at less than fair market value. The market has an infinite capacity to absorb free or dirt cheap work. Others think of it as nothing but business and charge as much as they can possibly get away with. Usually they are crafty, old codgers who have learned many business lessons over time. I suppose most folks fall somewhere in between.

The bottom line is that you have to charge enough to pay your bills and have enough left over to cover the value of your time and the risk you assume by being in business. So the $64,000 question is... how much are you worth? How much do you want and need to make?

You can begin from an answer to that question and start reverse engineering what it takes to get you to that figure. The guys are right in what they said... you must carefully figure ALL of your costs and I mean everything. Don't forget things like the cost of insurances, licenses, permits etc. Do you want to have a pension plan for when you retire? You better figure the cost in or you won't have one! You will work unto death. And if you aren't collecting your money in advance, make sure to compute estimated losses for accounts receivable that can't be collected. (As an aside... The formula for avoiding disaster is NEVER EVER allow the customer to have BOTH the goods and the money. Get the money upfront, if possible. The more risk shifted to the customer, the better for you.)

I could go on and on. I'm sure that you get the picture. When you know all of your costs of doing business and have projected your sales activity across a time period... say a year... you can compute the percentage mark-up that you need to apply over and above the actual cost of goods sold to achieve your financial objective. You can apply this to any particular job. Nobody can really say what it will be until you determine how much you are worth and what you wish to walk away with at the end. So start there... work backwards to your mark-up... cost out the particulars of your job... mark it up and voila! you will be making money if that's what you want to do.

Prices are one of the last things you can pin down when you are doing a business plan. They depend on all the planning that went before. And they are ultimately tested in the reality of the marketplace. If your expense assumptions are wrong, the marketplace will punish you. If you are able to outperform your asumptions, the marketplace will reward you.

[Wyvern]

How do you decide what your time is worth? We are talking about an artform, are we not? I have been struggling with this for almost a year now. Charge too much, no sales. Charge too little, no profit. Very difficult to find that "magic" number!

[cdthayer]

How do you decide what your time is worth? We are talking about an artform, are we not? I have been struggling with this for almost a year now. Charge too much, no sales. Charge too little, no profit. Very difficult to find that "magic" number!

I had the same problem back in the 1980s when I was tooling and lacing belts, buckles, and checkbook covers that I made at my home after working my regular job in west-central Oklahoma. I never did feel like I came up with a good way to price my work back then. I agree with Ryan that your location makes a difference in what rate you can charge. I was competing with the Department of Corrections, who were using leathercraft in their programs (still do, I think), plus, there were a large number of other leathercrafters in the area that were doing it part-time just like I was. It seemed like handmade leather items were for sale everywhere. A local Western Wear Store consigned my work, but very little of it ever sold. I priced the items and paid them a percentage. They told me that my prices were in line, and they seemed to like my work.

Now that I'm doing "repair your item" type of work in Southwestern Oklahoma using machines in our store, we have an hourly rate of $10/hr, plus a minimum of $5 per job. The wife has a few flat rate prices for common alterations on cloth garments and we sew patches on both cloth and leather for $3/patch ($6 for the big back patches) because it goes a long way with our local bikers and law enforcement folks, and brings in other business that we can get paid our regular rate. It's word-of-mouth advertising, and we think that's the best advertising you can get. We also have a set rate for setting (all types) snaps ($1), sewing on buttons (.50), and putting in button holes ($1). Otherwise, we quit quoting job prices after getting bit several times. Of course, doing repairs means that I seldom do the same thing twice, and trying to quote a job price is nearly impossible when I have no idea how long it's going to take until I get into it. When I tell the customer my hourly rate, the next question is usually "how long do you think it will take to do it?". LOL. I usually give them an estimated "range" that is so wide that it doesn't ever pin me down too much, and helps sort out the ones that don't want to pay for the services anyway, or helps them realize that it will cost more than the thing is worth and they can buy a new one cheaper. The ones that know how much it costs to have machines and keep a store aren't any problem. The ones that don't will just have to trust me. It costs money to operate a business.

Our hourly rate won't pay the bills by itself. It only supplements our retail sales and makes use of our time when no retail customers are in the store. If we had to depend solely on our labor rate for our income, we'd have to raise it to a level that we probably won't get here. That's partly why a lot of leather repair shops have closed down. Hard to make it on labor alone when replacements are so cheap. We're in an agricultural area that has a median income per household of about $22,000/yr. That works out to an average wage of about $10.50/hr, so we're close to being at the average labor rate in these parts. About 20% of the population is below poverty level. These figures are according to the latest census. If you're depending on the local population to buy your items/services, maybe you could look up your city/town census and use that data to help you set your rate?

[HarryB]

OK, this may be a little drawn out but here goes. I got the following from a wood carving magazine and I don't see why it wouldn't apply to us, too: Take your MATERIALS cost (actual leather cost PLUS 20% for waste, hardware, cement, thread, etc. Don't short yourself in this step!) add LABOR ( I figure mine @ $25/hour, figure yours at whatever skill level you think you are). Take MATERIAL and LABOR X 15% for your OVERHEAD. Figure PROFIT at OVERHEAD + 15%. The BENCH PRICE is MATERIAL + LABOR + OVERHEAD + PROFIT. The bench price is what I charge if YOU come to ME to pick up your order. If I am going to a show to set up, I add SELLING EXPENSES: BENCH PRICE X 20%. My WHOLESALE PRICE is then the BENCH PRICE + SELLING EXPENSES.

Example: 50" x 1 1/2" belt strip would be .52 square feet of leather at $6.50/ square foot will be $3.38 PLUS 20% ( 68 cents) = $4.06 for leather. Plus 2 chicago screws, dye, and finish (figure $1.00) gives you $5.06 for material. I round my numbers up to the nearest quarter ($5.25). Say 30 minutes labor for a plain belt @ $25/hour = $12.50. That's $5.25 + $12.50= $17.75 for this step. OVERHEAD will then be $17.75 X 15% = $2.66 ($2.75) for the OVERHEAD. PROFIT is $2.75 + 15% = $3.16 ($3.25).

BENCH PRICE is (M)$5.25 + (L)$12.50 + (O)$2.75 + (P)$3.25= $23.75. SELLING EXPENSES will be $23.75 X 20% = $4.75. WHOLESALE PRICE is $23.75 + $4.75 = $28.50.

So, $23-$24 if you come to my shop and pick it up. $28 - $30 if I take that belt to a show. If you are a retailer, I will charge you the bench price minus a discount for quantities and you can charge whatever you want to your customers. I try to stress to new crafters: do not be intimidated by business owners to lower your prices. I am a skilled craftsman and artist, not a factory. The retailer simply can not get the same mark-up for my individually made goods as they can for a mass-produced item. Thank you for your patience and letting me ramble a little.

Use this formula for EVERYTHING you make and don't short yourself. If you cutt back on this price, it comes out of YOUR pocket; not your suppliers or the utility company's! You can always play with the percentages (a little bit) and your hourly rate. Hope this helps out.

Edited November 29, 2008 by HarryB

[Luke Hatley]

HARRY, THANKS A LOT IT MAKES SENSE....