Question On Figuring Out Material Cost

[Windrider30]

Ok setting up a database for my business, the chainmail side of things is easy to figure out, how many links, type of item, type of clasp and all that good jazz, what I want to do is set up something for the leather working side of things, such as how much does it cost me in material costs (not adding the time in that is a separate spread sheet). Lets say with making a belt, the buckle, and any do-dads (don't want to get to technical here lol) are easy enough to figure out how much it costs me to add to the belt, but the leather that is another thing all together. As I do not plan on using pre made belt blanks what is the best way to figure out how much each belt would cost me? Could I simply make one belt then simply lay the strap down on the hide and simply start figuring out how many belts I can get out of one hide? Or is there a better way to figure out material cost for projects such as belts, wallets, bracelets and what not?

Thanks for all the help that all you lovely people have given me, and to people like me that are very green in the field!

[Chief31794]

I measure everything is sq ft, since that's the way I buy leather. For example a 1-1/2" belt, normal size (You need 50") is 1.5 X 50 = 75 Sq In 75/144 = .52 sq ft. If I'm buying my leather for say $7.50 a sq ft (including shipping it to me) then the cost I would use for the belt would be .52 X $7.50 = $5.40 X 1.15 (15 % waste factor) = $6.21 that would be actual cost for the leather. Keep track of your waste and even if you use it for something else still calculate the waste actually for cost. Any profit you make from the waste just improves your profit margin. This is just an example, make sure you cost all your materials this way, then include incidentals, findings, overhead (shop cleaning supplies, light bill, blades, sharpening supplies, etc). A lot of people don't calculate the cost of indirect labor (overhead) time and materials. You should also calculate them into your shipping costs (packaging material, tape, time to pack, etc). Real quick down and dirty, hope it helps answer your question.

Chief

[Windrider30]

Thanks Chief!

That really does help and will keep that all in mind as that is a great way to factor the cost, and Thanks heaps about the waste factor that is something that I have not bothered figuring in since with the chainmail stuff I do there might be less then 5 cents of waste so I do not bother factoring that in. Now as for the incidentals I always include those if there are any but I tend to include those more towards the end of the process or month.

Thanks again!

[Dwight]

Some leather is sold by the square foot, . . . some is sold by the hide, . . . but there is a sneaky little way to beat both of them.

Leather is generally measured as "Ounces", . . . 4/5 oz, . . . 6/7 oz, . . . 9 oz, . . . 12 oz, . . . etc. What that means is that if you cut out an exact square foot of that leather, . . . it would weigh that many ounces.

Therefore, . . . if you get a $20 digital fish scale, . . . hang it up, . . . put a clamp on the bottom of it, . . . you can weigh your piece of leather you just bought from Ajax Leather Emporium, . . . when you cut off a piece for a project, . . . re-weigh the big piece, . . . subtract that from the original weight, . . . you then have a fractional figure you can use to comprehend how much this project is going to cost you, . . . down to the exact penny.

It won't take long until you will have a fairly good handle on what it is costing you for each product you do.

BUT, . . . the really big advantage is not in every day use, . . . it is in the "one of a kind" pieces you will do, . . . that take so much 8 oz, so much 4 oz, and a hunk of that 12 oz stuff too. The weight factor will nail your cost far closer than any other way.

What Chief said is also good, . . . taking nothing away from his process, . . . but it is only applicable if you buy it by the foot. Weight will take care of all of it, . . . including different types of leather.

I am in the process of finishing up a very special gun bag for a friend, . . . one which I am basically doing for cost. It has concho's, buckles, veg tan leather of two different thicknesses, chrome tan leather, and sheepskin is also involved. If I did these for a living, . . . weight would be the only way I could see for sure what my up front cost would be.

May God bless,

Dwight

[Windrider30]

Another great idea, thanks Dwight and yeah I can see where weight would really help for the one of pieces especialy as you said if your using more then one thickness of leather.

Thanks to both of you for the great ideas!

[DavidL]

Im curious what some business owners would do in this situation, entirely fictitious numbers:

if your item cost 10 dollars for materials and your fixed cost like your electricity, labour and rent, website fees, supplies ect..: push that item to 18 dollars a piece if you make 300 pieces. The price you set will also change the supply and demand. In that situation I would sell at say 45 making 27 dollars per piece.

if it cost 10 dollars in materials... fixed cost...rent,website,fees, supplies ect...: push that item to 24 dollars because of raise in prices of supplies and rent for 300 pieces. Would you attempt to continue to sell at 45 making 21 dollars profit to not effect the Supply and demand and take a loss or would you raise prices up to 50.

[Windrider30]

Personally I would raise the price, mind you I would raise it slowly after all you do know when they are going to jump your rent, and what not a little before they do it, so you could easily raise the price of your items just so long as its not a sudden and huge mark up. And a lot of times marking your product up could actually help you.

[Dwight]

So far, . . . price has been a non issue with my customers. It's almost one of those: If you have to ask the price, you cannot afford it, . . . type deals I guess.

I have raised my prices a couple of times, . . . for various and sundry reasons, . . . and have yet to hear someone gripe seriously. A raised eyebrow now and then, . . . but that is all.

One of the things I've found out about the "leather" industry, . . . these are not your typical Walmart shoppers, . . . and none of them are looking for the weekly leatherwork coupons.

They pretty much are savvy enough to know leather is what they need, . . . vinyl won't do, . . . and kevlar is for plastic fantastic shooter bangers, . . . so they come to us.

Good industry in my book.

May God bless,

Dwight

[Chief31794]

So far, . . . price has been a non issue with my customers. It's almost one of those: If you have to ask the price, you cannot afford it, . . . type deals I guess.

I have raised my prices a couple of times, . . . for various and sundry reasons, . . . and have yet to hear someone gripe seriously. A raised eyebrow now and then, . . . but that is all.

One of the things I've found out about the "leather" industry, . . . these are not your typical Walmart shoppers, . . . and none of them are looking for the weekly leatherwork coupons.

They pretty much are savvy enough to know leather is what they need, . . . vinyl won't do, . . . and kevlar is for plastic fantastic shooter bangers, . . . so they come to us.

Good industry in my book.

May God bless,

Dwight

Agree, a lot of my customers seem to like having to pay more for unique, custom made, etc. I actually get more sales when the prices are up than when they are down, people seem to equate low price with low quality, set the price high if you sell lots of them, think about raising the price if you don't sell as many as you thought you should in your market think about reducing the price. Pricepoint is another business concept, there is a pricepoint for most items that people expect to pay, arriving at the price point for your items is an art and sometimes is easier accomplished with a ouiga board. Make sure you cover your costs, to include labor, get a respectable profit at a good volume and you'll be successful.

Chief

[Windrider30]

Yep its easier to set your prices higher then work your way down to see if you sell something then it is to set your prices low and try to bring the price up where you want it to, and in the eyes of the consumer price 9 times out of ten is directly related to quality, the higher the price the better the quality or so they seem to think.

[NVLeatherWorx]

@DavidL: Using your fictitious numbers problem above, your retail price should actually be more like $90.00 as the $45.00 price tag should be your wholesale price which is then multiplied by a factor of at least 2. This give you a truly fair profit margin/amount to work with that covers all of the "other" things that go into your product plus it makes it a bit easier to absorb those annoying price hikes that we see without hitting your overall profit as negatively as it would if you just worked for wholesale pricing level. Remember, as a business you have to make enough to pay all of those things plus maintain financial stability to remain in business.