Getting the price right for your work...

[Connexions]

I also think your highly underestimating the price. Double the calculation at least in my opinion. Its custom work. At the very least change hourly rate to £50ph.

 

[cjd]

Just for the avoidance of doubt, I don't think many people here are suggesting you go into full scale mass production - although maybe one or two are - we're just saying that you should look to get the best prices for your products because we think you'll find it difficult earning enough to live off basing your work on cost-based pricing.

At £250ish, your log burner is outside the range of a price-based buyer decision and it's an optional fashion item to boot. It'll demand a high price in the correct market.

 

[AllUpHere]

My next, and most likely biggest issue is marketing - this has been an excellent thread so far, anyone fancy rolling into marketing plans and strategy??

Just when it looks like this thread is getting somewhere you go and say something like that.

Your marketing strategy should guide all of the decisions you have to make. You don't plan the business and then tag some marketing on the end. You work out the marketing strategy and build everything around it.

Done properly, your marketing plan will tell you what to make, how much to sell it for, where to sell it, what equipment to buy, which materials to use, when to have your lunch, and every other thing you need to know.

This is a business type that will require very little paid promotional marketing if you get the fundamentals right first. Put the strategic work in now and reap the rewards of a very small marketing spend going forward.

On the point of the £25 per hour. Yes, you could easily achieve several times that, but IMO, £25 self employed pounds is worth £100 quid an hour as an employee. In fact, to temp me into regular employment the hourly rate would probably need to be somewhere between 3 and 400 pounds per hour (and nobody is ever going to pay me that as an employee), so it looks like I'm self employed for life.

The life enhancement of spending your time pottering about in a workshop can never be over estimated.

 

[MBE1]

Nice product, I wouldn't have been suprised at a £299 or £399 price tag, why not produce a few photos of our work, both day and night and put four prices next to them, and ask 50 people to indicate what price they believe is the correct one, ie £299, £345, £399, £445. That will help you see where the clients perspective on pricing will be.

As for a pricing model, if you feel you need to charge using one, I would work out what level of income you need to earn, divide it by a third of a working week and multiply by how many weeks of the year you work, ie 45. Bear in mind you will be having unpaid holidays etc and will not work every hour of the week, few self employed people do.

With your product though finding the market rate is going to make you a lot more money than an hourly rate, you could easily sell enough through the web for a comfortable living for yourself.

 

[MOIC]

Eventually, you will accrue stock, buy more machinery, need extra storage, expand your sales and become a business (whatever that may mean), paying taxes and requiring to adhere to safety standards as they become more stringent.

Your labour charge enables you to keep this hobby.

The "profit" you make on top will allow you to keep investing in your hobby/business.

A business doesn't stay at the same point, it either moves forward or backwards.

 

[Davek0974]

I also think your highly underestimating the price. Double the calculation at least in my opinion. Its custom work. At the very least change hourly rate to £50ph.

Agree but have to find the correct outlet I think.

Nice product, I wouldn't have been suprised at a £299 or £399 price tag, why not produce a few photos of our work, both day and night and put four prices next to them, and ask 50 people to indicate what price they believe is the correct one, ie £299, £345, £399, £445. That will help you see where the clients perspective on pricing will be.

As for a pricing model, if you feel you need to charge using one, I would work out what level of income you need to earn, divide it by a third of a working week and multiply by how many weeks of the year you work, ie 45. Bear in mind you will be having unpaid holidays etc and will not work every hour of the week, few self employed people do.

With your product though finding the market rate is going to make you a lot more money than an hourly rate, you could easily sell enough through the web for a comfortable living for yourself.

I agree it could carry the £399 tag, maybe a little more, I just need to get into that arena.

Just for the avoidance of doubt, I don't think many people here are suggesting you go into full scale mass production - although maybe one or two are - we're just saying that you should look to get the best prices for your products because we think you'll find it difficult earning enough to live off basing your work on cost-based pricing.

At £250ish, your log burner is outside the range of a price-based buyer decision and it's an optional fashion item to boot. It'll demand a high price in the correct market.

You are right on all points there, i really do not want mass production here, but now agree that i need to look at maximising return on lower volumes.

Just when it looks like this thread is getting somewhere you go and say something like that.

Your marketing strategy should guide all of the decisions you have to make. You don't plan the business and then tag some marketing on the end. You work out the marketing strategy and build everything around it.

Done properly, your marketing plan will tell you what to make, how much to sell it for, where to sell it, what equipment to buy, which materials to use, when to have your lunch, and every other thing you need to know.

This is a business type that will require very little paid promotional marketing if you get the fundamentals right first. Put the strategic work in now and reap the rewards of a very small marketing spend going forward.

On the point of the £25 per hour. Yes, you could easily achieve several times that, but IMO, £25 self employed pounds is worth £100 quid an hour as an employee. In fact, to temp me into regular employment the hourly rate would probably need to be somewhere between 3 and 400 pounds per hour (and nobody is ever going to pay me that as an employee), so it looks like I'm self employed for life.

The life enhancement of spending your time pottering about in a workshop can never be over estimated.

Yes but my comment reflects the way things have evolved, the business grew from nothing, without any thought or idea about marketing, it was just eBay in the beginning and few very cheap items. Now I know i can do better and have better equipment/knowledge etc I need to learn how to market my product properly and cost effectively.

Don't forget I didn't do a business start-up, it just grew and evolved slowly - it's not quite the opposite of a normal start-up but not the normal way either

 

[Davek0974]

Eventually, you will accrue stock, buy more machinery, need extra storage, expand your sales and become a business (whatever that may mean), paying taxes and requiring to adhere to safety standards as they become more stringent.

Your labour charge enables you to keep this hobby.

The "profit" you make on top will allow you to keep investing in your hobby/business.

A business doesn't stay at the same point, it either moves forward or backwards.

Yes but surely it does not need to move from a small friendly concern doing bespoke stuff to a full-on mass production facility overnight, or even at all.

Already paying tax
H&S is no bother as it's part of my day job.

 

[AllUpHere]

I think if you let the hobby run into a business you will struggle to do things in the right way. I'd be tempted to draw a line under what you've done so far and start again. Not because you have done anything wrong, simply because the goal has moved.

 

[Davek0974]

I think if you let the hobby run into a business you will struggle to do things in the right way. I'd be tempted to draw a line under what you've done so far and start again. Not because you have done anything wrong, simply because the goal has moved.

Ok, thats going to take some learning and understanding though I feel.

 

[AllUpHere]

Ok, thats going to take some learning and understanding though I feel.

Marketing is at least 90 % common sense. I've read threads you write about technical server/ database/ migration issues and they go straight over my head. If you can understand that, you can certainly understand marketing. It's not the dark art many experts would lead you to believe.

 

[Davek0974]

Fair enough, but where/how to learn is the point then

 

[MOIC]

Yes but surely it does not need to move from a small friendly concern doing bespoke stuff to a full-on mass production facility overnight, or even at all.

Full-on mass production . . . . . .Where did that come from?

Already paying tax

That's good and should be factored in.

H&S is no bother as it's part of my day job.

It will get more and more expensive to comply with all the regulations.

My point simply is the following.

Charge for your labour.

Then add 20% for your profit to invest and cover losses (unsold items, items sold at a loss etc etc).

 

[Root 66 Woodshop]

Trying to get a feel for how long it takes to actually make one fire pit... is it the simple case of in one day you can have it made up ready to be sold - or is it the case of in your own time, out of working hours you're making these products? If so, then I'd hazard a guess that one unit could technically be two - three physical days? Please correct me if I'm wrong here...

With regards to marketing:

You've already got them on Amazon, how are they selling on there?

Are you getting the same customers ordering new products off you every other week/month?

Who is your current market. I.E. who's buying the products?

Above are just three questions I'd be asking myself if I were in your shoes...

as mentioned previously by both cjd and myself - your photo's are your marketing for the fire pits - get the right photo and I'm certain they'll sell... honestly, if I could afford one of those African Jungle fire pit's I'd be on the phone right now (or ordering online )... they look amazing at night - that's what they're for though, so I think they've got the right idea with the night photo's.

 

[Davek0974]

Trying to get a feel for how long it takes to actually make one fire pit... is it the simple case of in one day you can have it made up ready to be sold - or is it the case of in your own time, out of working hours you're making these products? If so, then I'd hazard a guess that one unit could technically be two - three physical days? Please correct me if I'm wrong here...

A fire-pit would take around 4 hours of fairly solid work so i could probably get two done in one day, paint the next, which is fairly fast. Currently I would do this at a weekend.

With regards to marketing:

You've already got them on Amazon, how are they selling on there?

Amazon is the slowest outlet, very low sales on there.

Are you getting the same customers ordering new products off you every other week/month?

Most customers are one-off only, there is only so many times you need to buy a bracket etc

Who is your current market. I.E. who's buying the products?

Currently anyone who sees them on eBay, amazon and my site.

Above are just three questions I'd be asking myself if I were in your shoes...

as mentioned previously by both cjd and myself - your photo's are your marketing for the fire pits - get the right photo and I'm certain they'll sell... honestly, if I could afford one of those African Jungle fire pit's I'd be on the phone right now (or ordering online )... they look amazing at night - that's what they're for though, so I think they've got the right idea with the night photo's.

 

[Davek0974]

Full-on mass production . . . . . .Where did that come from?


That's good and should be factored in.


It will get more and more expensive to comply with all the regulations.

My point simply is the following.

Charge for your labour.

Then add 20% for your profit to invest and cover losses (unsold items, items sold at a loss etc etc).

There was mention of needing a massive goods yard, lorries delivering tons of steel etc earlier on in this thread

 

[Root 66 Woodshop]

Hi Dave,

Have you tried to contact any local or large Garden Centres with your products?

We have a local Garden Centre called Newbank - majority of things that they do are "bespoke" manufactured or selling product by "artists" or local such as hand made ornaments etc etc.

I think your fire pits are an ideal thing for this kind of place - two built a day - lets say you went at it for an order of 20 units that would take 10 days to manufacturer, normal delivery dates for such items would be 3-4 weeks so you wouldn't be putting too much "over" effort in to it...

The price that you've suggested should be the trade price (wack it up to £299 - offering them to sell out for £699 - this would give the garden centre some movement in the price if they wanted to sell cheaper than that... it would be there choice to be fair...

OBVIOUSLY I don't know how many fire pits you yourself "stock" so, I'm assuming as you've said "one off fire pit" it's literately a one off - such an item could become a "stock" item if you really push it towards the Garden Centres.

 

[Davek0974]

Yes, i have two possibilities locally that i know of, both are on my target list as soon as i get a strategy together, I'm not going to go waltzing in with a half baked pitch, i'll need to be clear on pricing, turnaround, payments terms, product photos etc before i go.

These are currently made to order as this gives me the easy ability to alter if needed and uses no storage room. Obviously if needed, I could pre-build and store.

 

[john1989]

If you plan on just making a steady business from this, £25per for labour is absolutely nowhere near enough.

You will have time talking to clients, taking orders, dealing with tyre kickers, going to suppliers, etc etc.

 

[Cyberhorse]

I have to disagree with your self proclaimed lack of creativity - I wouldn't have thought of it. It seems to me you are an artist anyway whether you think you are or not. At the moment you're following a process to make intrinsically valuable sculptures of everyday cheap objects! In my humble but none the less correct opinion, (!), - I'd follow the advice of finding reference books, work some higher value items, and, just to please those who wouldn't pay so much, some characteristic nik-naks showing your style, a bit like potters that make super-expensive traditional farmhouse pots and then also make many little egg-cups in the same style. See what other artisans are doing.

 

[MOIC]

There was mention of needing a massive goods yard, lorries delivering tons of steel etc earlier on in this thread

It's probably best not to quote a paragraph if you are relating your answer to a different post, or at least quote that specific post you are referring to.

(I imagine that's the whole point of individual quote boxes)

 

[Davek0974]

Ok, chewing numbers, messing around.

There is a flavour in this excellent thread indicating that I am not charging enough, or as some say "selling myself short".

I can see now that my £25/hour plan is fine and dandy but only if I am actually producing 7-8 hours a day 5 days a week, I had not grasped this before - too used to working in a paid job.

I can see now that this idea does not function too well and does not allow for lunch, going to the loo, answering the phone, emails etc - basically if I am not producing actual work, I am sliding towards my break-even line below which lies a loss.

So, i tried upping my hourly rate to £50 from £25 and crunched a few numbers,
It now makes my previous example £374 from £260 which seems to fit in with the higher price idea, and a couple of similar projects would be £241 up from £166 and £355 up from £230, all of these items in the right arena should bear that cost OK i think.

However, it fails I think on my profiled brackets which go from £26 to £37 and house number plaques which would be £25 up from £16 - both of these would then be above the average of the rest of the market.

As was mentioned earlier, using my price but adding 20% to the end also gives an increase, not as severe but might work, still pushes the lower priced items too far though I think.

So, I still can't see a way to calculate sale prices, at least I don't think I can, not without guesstimating or pulling figures from thin air - neither of which are acceptable to me.

Am I missing something here, or is really just a matter of pricing on a standard framework then fudging the result upwards depending on how I feel it can take it??

 

[cjd]

The bit that you are missing is that some pieces of work can command higher prices than others and that the market price is not related to your costs. With your brackets what you're finding is that the market price you can charge is below your fully allocated cost of production.

What you need to do in these circumstances is concentrate on work that has high perceived value and leave the low value work for those with low cost of production.

But, bear in mind that your brackets are not loss makers, they're contributing to your overhead, it's just that if they were all you made you'd be working 8 hours per day without holidays to make enough to live off. So they're good infill work but not good only work.

Find stuff that you can sell in the £500 mark but that doesn't requires 20 hours work. That's why most of us are suggesting you get into the art/designer stuff.

 

[Davek0974]

The bit that you are missing is that some pieces of work can command higher prices than others and that the market price is not related to your costs. With your brackets what you're finding is that the market price you can charge is below your fully allocated cost of production.

What you need to do in these circumstances is concentrate on work that has high perceived value and leave the low value work for those with low cost of production.

But, bear in mind that your brackets are not loss makers, they're contributing to your overhead, it's just that if they were all you made you'd be working 8 hours per day without holidays to make enough to live off. So they're good infill work but not good only work.

Find stuff that you can sell in the £500 mark but that doesn't requires 20 hours work. That's why most of us are suggesting you get into the art/designer stuff.

Thanks, interesting reply.

The bold bit is the odd bit though, I can't conceive anyone having lower costs than me - own workshop, own business, paid-up machinery etc etc ????

 

[Carl Mintern]

Economies of scale ; division of labour - production line workers on <£7/h

Buying stock in bulk etc...

I'm far from an expert but would suggest that's how others can churn out the simple stuff "cheaply".

 

[Davek0974]

Thats the bit though, with the profile brackets I make, there are maybe 2-3 other suppliers in the UK doing similar stuff, none of them are going to be running production lines etc, pretty certain that all but one are doing the cutting and building in-house. Yes they would be a larger concern than me but definitely not prod-line size in this country.

I could probably improve my cost ratio by making batches and sending them out to powder-coat, currently my stuff is all to-order and coated per item as a one-off in-house.

So it seems the tricky decision is going to be - standard B&B product, normal price, up-market target, enhanced price.

Of course, now I have to find "up-market"

 

[cjd]

As a generality, things that are big and heavy tend to be valued more highly than the opposite - specially in your preferred medium. But big and heavy doesn't need to equate to more hours of work, which is your most precious commodity. Low labour input, big, heavy, pretty and designed would be a good set of rules to start with.

 

[Davek0974]

As a generality, things that are big and heavy tend to be valued more highly than the opposite - specially in your preferred medium. But big and heavy doesn't need to equate to more hours of work, which is your most precious commodity. Low labour input, big, heavy, pretty and designed would be a good set of rules to start with.

Well, those three were my original focus anyway so i'm part way there

 

[MOIC]

Concentrate on unusual items that can command a high perceived value.

Research and target potential customers that you feel will appreciate your work.

Compare and price your products to other artisans making similar products.

Contact interior designers, upmarket pubs and hotel suppliers.

Advertise your services in high end magazines.

Create a brand name.

Sometimes you have to discard your equations for pricing a product and view each piece as a work of art.

If done correctly, you will be (in time) commissioned to do work.

Your skills as well as many others are being "lost" and not passed down to the next generation.

Don't waste it.

 

[Root 66 Woodshop]

The bit that you are missing is that some pieces of work can command higher prices than others and that the market price is not related to your costs. With your brackets what you're finding is that the market price you can charge is below your fully allocated cost of production.

What you need to do in these circumstances is concentrate on work that has high perceived value and leave the low value work for those with low cost of production.

But, bear in mind that your brackets are not loss makers, they're contributing to your overhead, it's just that if they were all you made you'd be working 8 hours per day without holidays to make enough to live off. So they're good infill work but not good only work.

Find stuff that you can sell in the £500 mark but that doesn't requires 20 hours work. That's why most of us are suggesting you get into the art/designer stuff.

This...

With all due respect @Davek0974 The brackets are not the favorable contribution to your product line, your design work etc etc these are the pardon the pun here... the Brackets for the foundation of your work... they're the mortar as it were to your business... everything else you manufacture and sell are the breadline... hope that makes sense?

 

[Davek0974]

... hope that makes sense?

Hmm, make the brackets but concentrate on the big value stuff??

Use the brackets to fill in the gaps?

 

[Root 66 Woodshop]

got it in one... err, two?!



I knew it would make sense to someone... just wasn't sure who!

 

[Davek0974]

It's slowly making sense, the hardest part is switching mindset from employed=paid regardless to self-employed=no work, no pay.

Will be picking up some high-end mags this weak for target research, my main concern is making the right decision in the right area so as not to waste cash needlessly on a wasted ad or campaign.

There is also targeted Adwords I suppose, based on postal areas, just need to find the right method.

 

[AllUpHere]

It's slowly making sense, the hardest part is switching mindset from employed=paid regardless to self-employed=no work, no pay.

Will be picking up some high-end mags this weak for target research, my main concern is making the right decision in the right area so as not to waste cash needlessly on a wasted ad or campaign.

There is also targeted Adwords I suppose, based on postal areas, just need to find the right method.

You are quite right. You are certainly going to need a slightly different mindset. Don't worry though, you twig pretty quickly when you cease to get a regular amount deposited in your bank account at the end of every month.

I'm glad that most of those in the thread who initially liked the cost plus pricing structure have been swayed to a more business like approach.

I help people in exactly your position sort out this sort of stuff for a living. As such, I spend a lot of time doing exactly the kind of research you are going to need to do now, and subscribe to a lot of trade publications that you can't buy off the shelf. I'd be more than happy to stick a couple of them in the post to you, to give you an idea of the kind of lines of research I would be following.

 

[Davek0974]

Thanks, PM sent.

 

[MBE1]

As mentioned use the lower profit items to keep cash flow coming in, having a good mix is usually good for business. If you have a spare couple of hours make a few brackets rather than sitting around waiting for something to happen.

A buyer of a bracket might end up buyer higher end more profitable pieces.

Looking at things in a slightly different way, you have your fixed overheads/costs, you need to cover these no matter what, after that apart from the cost of raw materials you have in effect 100% profit potential, since you have covered rent, rates, salary etc already. So if you get halfway through the year having paid your way already, a firepit would be near total profit apart from material cost and taxes etc.

 

[MOIC]

It's slowly making sense, the hardest part is switching mindset from employed=paid regardless to self-employed=no work, no pay.

You need to change your mindset from an "employed person" to a business person.

That's what you need to grasp.

Not sure you're there yet, but with all the help you are getting on this thread, many posters are encouraging & pointing you in the right direction.

It's for you to grasp it.

Hobby or not, it's a business which you will be controlling.

Good luck.

 

[Root 66 Woodshop]

Just for a bit of fun...

Can you make a delorean please? I've seen that you've made a working steam train - now let's see you really go at it...

make me one of these!

We shall call it...

Davelorean!!

[Disclaimer]I can't afford one - therefore I will relinquish all knowledge of the request if you attempt to make me pay for it[/disclaimer] I am not who you think I am... mwuhahahaha!

 

[Davek0974]

Ok, thanks for the order

Trouble is, finding the steel that rusts so quickly

 

[Cyberhorse]

I'd do a targetted facebook ad, targetted to the right age-group, with interests such as "country living" "bespoke" and so on, with a super picture of my highest end thingummybob. And I'd do it today, for Christmas pressies.

 

[AllUpHere]

Trouble is, finding the steel that rusts so quickly

That's easy. Just ask Mercedes what they use for their vans.