Please- PRICE ME!!
Please PRICE ME!
Let me assure you that no matter what you may think about your inability to calculate a proper price for your handmade item…………you are not alone. Psst, the boat is quite full……….make sure you grab a life jacket while you can.
Secondly, I should as a matter of honesty, tell you that I am but a messenger here and not the Mastermind behind the calculations we will discuss. The concept for this blog article is based in a pricing formula that I received from a friend in Canada. I have a good friend up there by the name of Dave Elliott, he is maybe the leading Bit and Spur Maker in Canada. Dave is a talented craftsman, who knows how to make the best use of his time, taking advantage of every time saving opportunity that comes his way without ever compromising his desire for quality workmanship. For those of you who are aspiring students, I suggest you take time to look Dave’s work up. For those of you who are building collections, then by all means your time will be well spent in finding Dave and Louise Elliott up in Granum, Alberta.Canada at 403-687-3000.
Now, lets get to the third part of this literary revelation, that being the realization of a need for an article such as this, one that revolves around product pricing and being smart about it. I recently attended the GRS -Gathering of the Grand Masters held in Emporia, Kansas back in October of 07. May I first make a strong recommendation to all my faithful friends out there, that YOU also would do well to attend this weekend engravers seminar. I had such a great time, and so much was learned and shared by those who attended. But, more to the point however, was the meeting held for those who attended, over coffee and doughnuts in the GRS Training Center Meeting Room. Not some pretentious affair, just a loose knit group of folks who engrave at differing abilities on items as diverse as knives, guns, coins and cowboy gear. The meeting took in a wide range of topics for some two and a half hours, but the three most heavily discussed where #1-Pricing, #2-Photography, and lastly was a web presence of some form. Yes, even the most masterful of the engravers struggle with proper pricing. Just sitting in on this meeting and hearing the points of concern from men and women who share a desire to be paid for their hard work, and too know that they are in no different business shape than my saddle making friends or my Bit & Spur making friends. In truth, it was this realization that was the impetus for writing this blog article. I hope you enjoy it, and if it happens to somehow offend you………..well, I will apologise now for that but encourage you to read on and see if you can find some truth I the words shared here.
Lets be blunt here since we’re all somewhat friends, can we take the whole phrase of “FAIR PRICE” and toss it out the window onto the scrap pile of real backwards thinking. Since when has the local auto repair shop asked around to see what local cowboy wages are ?? Since when have you walked in to buy the hard pressed ranch wife a new Fridge, and had the Big Box Store salesman say………..”now lets see if we can’t find a FAIR PRICE for you since you work on a ranch at the end of a gravel road with a generator and carry the water to the house from an outside well…………surely to goodness there must be a special fair price somewhere in this book”??? Ah ha…………didn’t ’think so!
Fair Price has to give way to PROPER PRICE, by that I mean a price that allows shop profitability to you as a craftsmen, meaning something you can put in the Bank, enough to pay the bills for power and silver etc, and maybe even print a small catalog or flyer, buy an ad in the Western Horseman etc. Move forward at being in business. Another point about our pricing is that many of us end up placing items in local stores on consignment, or maybe in Galleries, but our pricing is structured so that the entire drop in product price comes directly out of our pocket. Maybe it would be better if we thought ahead and priced our items so that we had the room to negotiate and still leave ample room for profit to you, what do you think?
So, let’s walk thru this process. I first have to tell you that you DO NOT NEED to be an accountant to make this work, however it does help if the IQ is a little higher than a fence post. If you flat hate to keep track of any thing in your shop, including the materials, the time and the amount of rain or when you turned your Bulls out…………..well buddy, we will Pray for you.
THE BASICS REQUIRED ARE-
TIME- you have to have a somewhat accurate assessment of time. Not a guess as you have in the past. It would be better if you took the time to get a little more structured assessment of time. I am a bit of a fanatic about this portion and do it by the minute and second…………….yes, yes, a bit anal but I have employees and want to know as close as possible where my shop time is spent.
MATERIALS- this is maybe the simplest to track since a bill for silver is fairly easy to calculate and track in a per square inch format. Don’t forget you also have steel and welding supplies etc. There is a portion of the phone bill, maybe a little for shop heat etc. There is no need to make the accounting of this portion to demanding.
LABOUR RATE- what are you worth per hour. This may be the very hardest part of this entire calculation but oh so necessary to move forward. Please stop and think, the bricklayer or plumber do not come and ask you what they should charge for their time. I will end it there, because I could be accused of leading you to making an assessment in regards to labour charges.
LETS PUT THIS TOO WORK FOR US, Once you decide on this Labour rate you must Multiply you hourly rate by .6 twice or two times. For example: If you are worth $40.00/hour then ($40.00 x .6= $24 x .6 =$14.40.
Next step, use this labour rate in the following equation:
Materials $______
Hours x Adjusted Labour Rate $______
Total ________
Total divide by .6= $______ this gives you a wholesale price
(.6 gives you a 40% margin)
Total divide by .6= $______this gives you a retail price.
Here is an example:
Materials Cost $ 20.00
Hours 15 x $14.40 $216.00
Total = $236.00
Total of $236.00 divided by .6 =$393.33 this gives you a wholesale price
Total of $393.33 divided by .6 again =$655.55 this gives you retail price.
Of course the final judgment is also to look at the existing market and compare your price with what the market can bear as well. If your final price comes in a long ways over what you think the current market price is there are a few places you can begin to look. For instance your assessment of actual time may be a long ways from accurate. Lets assume that your portrayal of construction time is accurate, here is where it may become rather offensive to some of you. It may well be that you are doing things in a rather archaic manner, not taking advantage of time saving steps that are available to all but the most remote ranches in USA today. Lastly if your impression of current market price is based in what others who are also underpaid may be getting for the same type of work in your area………..then may I suggest a general meeting at the local coffee shop and the immediate formation of the Texas Concho Constructors Cartel or TCCC as it will be known. And lets hope that your first chapter President does not stutter, or it just mmm-may never ggg-get off-fff the ground!
This may not be the manner in which Google or Microsoft develope the pricing of product, but it beats the heck out of a coin toss or stab in the dark pricing. And remember that bringing the lowest of our prices up does more for our industry than forcing the highest priced work down. There are after all, a limited number of seats at any SOUP KITCHEN.
Again my thanks go out to Dave Elliott. I have bragged about Dave and his work as a Bit & Spur maker as well as an accomplished silversmith……………but there is an attribute to Dave’s character that is even more endearing to me. Dave is the best darned “Pie Smith” that you have ever met. My wife’s pies stopped our dog from begging at the supper table………….Dave’s could be the cure to world peace they are just that good. They are the only pies that I would put on a par with the pies I ate at Frannies on my bike ride.
Hey good night and God Bless you all, I hope you read and enjoy it.