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Make Money Woodworking - Pricing Do's and Don'ts
Learning how to make money woodworking shouldn't be a mystery
once you've given some thought to some business basics.
One of the costliest lessons learned by many small shop woodworkers is
where the money has to come from when you don't charge enough for the
items you sell.
It doesn't matter who you sell to,
whether it's your favorite aunt or the president of a large
company, it costs you the same to make. If you don't charge
enough, then the lost money comes out of your pocket.
So, how do you make sure you're not losing money? Easy, to make money woodworking instead of losing it you have to plan all aspects of your projects before starting to make them.
1. Would
anyone really want to buy it? There's
a lot of stuff out there that's easy to make but the market is
already flooded with imports and items from other woodworkers
that, unknowingly, the sole
profit is a pat on the back.
Making an item like this for yourself is one thing but to include this
in your portfolio of sellable items then you will
lose time and money!
2. If you want to make money woodworking, hire
an accountant. If you're planning to turn your
woodworking skills into a small business then let your
accountant help you set up your costs of running a shop.
You'll need to hire one before tax season anyway, so do it
now. If you choose a accountant that's familiar
with woodworking shops then he/she can help you set up a
business model that will be profitable from the start.
3. Make
a list of all your costs to make each item.
When making your list you can now include the fixed
costs set up by your accountant. These fixed costs are what
it costs you per day just to have a shop.
Insurance, rent, upkeep, etc. Then
include all your material cost, even including glue, nails, and screws for that particular project.
4. Don't
forget to include labor costs and a set percentage for your shop.
Some woodworkers set their labor costs low and
don't include a shop income. This is a shop growth
killer. If you set your prices based on materials
alone you will probably get very busy with a lot of work,
but, no money at the end! One thing you should
remember is when your shop grows so does your expenses.
5. As
an example, if you set your prices without including all your costs
such as paying yourself. Then, you
get busy and start to grow. You have to hire someone to help with all
the work. Since it's almost impossible to raise
prices after word gets around about your great work and cheap
prices, you immediately start losing more money to
pay for the extra help. The extra cost has to come out of your pocket
because it's not included in the price. In order to make money woodworking you have to include all your costs.
6.
Now, look at cost by volume. If you decide to
make an item, how many can you sell in one month or maybe
three months? To get the full use of your shop, schedule each
item to be made by how many you expect to sell in any given
time period. Plan the entire month by the
amount of days it takes to make a quantity of each item.
This way you will have a
better feel for how much it costs for each and how
much you need to add to make a profit.
7.
Start your professional image when you start your shop!
Your image is one of the key factors in how much money you
can charge for what you make. If you conduct
yourself as a professional with ethical values and
treat each customer with respect, then the perceived value of
your work is worth much more to them. The price actually
becomes secondary to the pleasant experience of purchasing an item made
by you. Every time your customer looks at or uses the item
you made, she remembers the professional treatment while the price
becomes almost forgotten. As a matter of fact, when she shows off
what she bought from you , she'll tell her friends " Look at this great
looking piece I was able to find!". She'll never say
"Look at this cheap thing I was able to find."
Be
professional........., work less......., make more money!
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