Costing Tips And Tricks

[BDAZ]

You stated you get two sets of blanks for $160 which is $80 a case for leather. I am guessing at an additional $20 for dyes, oils, hardware, etc. I was assuming 2 hours labor at $40 an hour to make $80 and an additional $20 (just a guess) for lights, rent, etc., even if you are working from home. Your cost would be +- $200. Then a typical manufacture margin would 100% resulting in a wholesale price of $400. From a few calls I have made, the retailer is looking to double his cost so the final cost to the end user is $800.

Scenario 2, also plausible: Your costs remain about the same at $200 and you mark it up 1/3 resulting in a wholesale price of $266. The retailer (maybe online with lower margins) only marks it up 1/3 as well resulting in a retail of 353, which would be in line with some of the prices I have seen. These are NOT the percentages I have encountered but maybe in the pool que industry they would work?

If I have made some wrong assumptions, please let me know where I have erred.

Thanks,

Bob

[RiverCity]

You stated you get two sets of blanks for $160 which is $80 a case for leather. I am guessing at an additional $20 for dyes, oils, hardware, etc. I was assuming 2 hours labor at $40 an hour to make $80 and an additional $20 (just a guess) for lights, rent, etc., even if you are working from home. Your cost would be +- $200. Then a typical manufacture margin would 100% resulting in a wholesale price of $400. From a few calls I have made, the retailer is looking to double his cost so the final cost to the end user is $800.

Scenario 2, also plausible: Your costs remain about the same at $200 and you mark it up 1/3 resulting in a wholesale price of $266. The retailer (maybe online with lower margins) only marks it up 1/3 as well resulting in a retail of 353, which would be in line with some of the prices I have seen. These are NOT the percentages I have encountered but maybe in the pool que industry they would work?

If I have made some wrong assumptions, please let me know where I have erred.

Thanks,

Bob

At this point I don't know if you're trying to insult me or you have NO clue about leather work and what it takes to actually produce something. If you think a case can be made in 2 hours you're off base. If I could make a case in 2 hours a wallet should take what? 5-10 minutes start to finish?

I have about 100 material cost in a case depending on options. The rest of my retail is my labor cost. And it is fair pricing for the market which you have no clue about other than looking at a website or 2 with factory made cases.

You like to over think and over analyze things. That much is obvious. So enjoy your economics class formulas, I'm speaking from 25 years experience in retail and working with product production and buying wholesale from vendors.

Chuck

[BDAZ]

I did go back and look at your products extensively and as I mentioned earlier they are beautifully made and I am absolutely not trying to offend you. I figured $80 for labor whether it's 4 hours at $20 or 6 1/2 at $15. Just a guess as I have no clue how you value your time. No need to get upset. And let's not confuse thinking with over thinking. All I am interested in finding is how to cost the leather accurately so I can establish wholesale prices. Buying wholesale is a bit different from selling wholesale, and I have been doing the later for more than 35years. So what seems like over thinking to a retailer is just SOP for a manufacturer who has to worry about every additional cost being magnified up the distribution chain.

One of my businesses uses three tier distribution. I sell to my master wholesalers, they sell to their dealers and the dealers to the customer. Add $.10 to the cost and it's $.50 or more at the register.

Thanks RC for your help but so far I really haven't got anything I can use other than you turn your scrap into dog collars.

I thought there might be some more commercial leather manufacturers that have distribution experience, that could point me in the right direction.

Cya!

Bob

Edited May 9, 2014 by BDAZ

[DavidL]

you could cut off the shoulder and belly and sell those for a price. Maybe wholesale bracelets or something that can be made several times easily with a die on the belly or shoulders.

[BDAZ]

I have stated buying drum dyed veg tan so I can produce consistent product and have been buying double shoulders and double bends but it's still problematic because i need continuous pieces up to 30" cut length ways so I need to come up with a smart way to cut as well as costing to allow for waste so I can keep my prices as low as possible to get volumes up while still making a profit.

I am looking at a clicker press and dies to make some form of small item that would turn scrap into profits, but it will be a different market.

Thanks for the suggestions.

Cya!

Bob

[stelmackr]

<<<snip>>...The only problem I have is leather, which I obtain from a few different sources at differing prices. I know how many square inches each product takes but I have no idea how to cost the actual yield from a hide...<<<snip>>>

This many be off the track of what you are asking, but I assume that you are anticipating figuring the COGS (Cost of Goods Sold) for the Schedule C of the IRS 1040.

Each side of leather I receive, I record the cost (including shipping), the square footage and I actually weigh the leather (in ounces, not the thickness in ounces). Then at the end of the year I weigh the what is left from the side and a simple spread sheet yields the leather used and takes into account whatever waste occurred.

Hope that helps.

Bob Stelmack

Edited May 9, 2014 by stelmackr

[BDAZ]

Brilliant idea! All component purchases, in this case, leather, thread, dyes and other consumables are allocated to COGS so from an accounting stand point it's all a wash at the end of the year. Once sales and overheads are allocated then I have an accurate accounting of P&L but that doesn't help me, at this stage, with initial costing.

Again, I do like your idea of weighing the scraps from a piece after it's used and comparing it with the original weight. Probably the bsts method to compute waste percentage.

Thanks!!

Bob

[NVLeatherWorx]

There is a highly recommended percentage to use when trying to calculate your overall USEABLE materials and that is 15%, it is considered to be the industry accepted standard for what WE do, not those big sweatshop factories. This percentage can be applied to any bulk materials such as leather, fabrics, snaps/rivets/eyelets, threads, lace, liquids such as dyes/stains/Antique and then the remaining items are just consumed. Anyone who wants to try and calculate out the amount of adhesive that they use on any one item is thinking way too deep into the equation. These items are just simple incidentals and that is it.

To calculate out your true cost of goods you need to know how much any given unit of a material cost you based on the USEABLE amount. For leather, take your known square footage and multiply by .85 to get your final amount that can actually be used. If you pay for your leather by the piece then you first have calculate how much you pay per square foot by taking the purchase price (plus any charges such as shipping, taxes, etc.) and divide by your known square footage. Then you can calculate the remaining costs from there. For calculating your threads/lace you take your known length of the full spool and divide that by .85, then you take your useable material number and divide that into the price you paid (all inclusive) for that spool. The same goes for every bulk material item that you purchase. When it comes to calculating your dyes/stains/Antiques it gets a bit trickier but you can do it if it is really that important. I tend not to waste my time on the liquids side of the equation as I don't feel like acting like a Chemist and portioning out every little drop to get a cost number.

To ensure that I get my liquids and other consumed incidentals covered, I add 15% to my overall materials cost and that more than covers it. I don't do wholesale because there is always a huge issue when trying to deal with these retailers that want to help you get your stuff in their customers hands. Their intentions are rarely to help you as much as they want to help themselves even more. I also do not do consignment for much the same reason. The comments provided regarding the waste bin are the best thing out there though and that is because, you have already made your money on that material as it has been factored in to the costs of the other items that have been made from it. Anything made from scrap bin material is pretty much pure profit if you did your math correctly on everything else and that is a beautiful thing.

[BDAZ]

I was thinking of this very issue as a pulled out a new side and started cutting. I was thinking +- 20% but 15% is close enough. I weighed the hide and will weigh all the scraps on completion. Wholesaling is not a problem in my market because I am dealing with the manufacturer of the product I am making the cases for. I have limited my color choices to what is available in drum dyed veg tan..more expensive but cheaper when time, consistency and cost of dyes is factored in.

I have always been thrilled when my wholesale customers (in other businesses) make lots of money selling my products!

Thanks!

Bob