Product Margins?

[HFURN]

Hi,

I have recently started my own b-spoke furniture making business and I'm struggling a little on what to charge.

I don't want to be charging ridiculous prices, but on the other hand I don't want to go in to cheap. My items are very well made and all made from quality materials. I would describe them as mid to high end.

I would like some help on what sort of profit margin I should be making on my products?

I sell my work privately, but in the new year I will be trying to get my furniture into some independently owned shops. Obviously the owners of these will want a cut. What would be acceptable?

I would be very grateful for any feedback and help.

Thanks

 

[Mr D]

As a minimum work out your costs to make the furniture and add on a cost for your time.
That's your minimum, zero profit figure.

Work out what profit you want as a minimum - add that on top. Now you have the lowest point you want to sell for to retailers. Are you sure you want to go down 'sell to independent with them taking a cut' route? Rather than sell to independent retailers?

 

[Gecko001]

The mark up that furniture shops have vary but I would imagine they are generally high as furniture requires a lot of display space.

 

[BigPhill]

I've got experience in the furniture industry buying for independent retailers, it does depend on the type of furniture and the brand, equally it also depends on the quantity being ordered.

In my experience, the general rule is around "times 2.5 markup" for the shop.

For example, let's say I purchased a product for £100 from a manufacturer.... i would times that by 2.5 to get the Retail price.....

£100 x 2.5 = £250

£500 x 2.5 = £1,250

You should also be aware that "most" independent retailers deal with 'furniture agents', who also get their commission on each product sold. These agents tend to be employed by the brands

Equally if you want your product on display on the shop floor, this usually has to be negotiated too.

Some retailers will get free items in return for lower wholesale prices, other retailers pay for display models, it really does depend on each individual brand.

 

[Root 66 Woodshop]

Hi,

I have recently started my own b-spoke furniture making business and I'm struggling a little on what to charge.

I don't want to be charging ridiculous prices, but on the other hand I don't want to go in to cheap. My items are very well made and all made from quality materials. I would describe them as mid to high end.

I would like some help on what sort of profit margin I should be making on my products?

I sell my work privately, but in the new year I will be trying to get my furniture into some independently owned shops. Obviously the owners of these will want a cut. What would be acceptable?

I would be very grateful for any feedback and help.

Thanks

What you should be charging is what you think people will pay.

for instance, I have built a number of items myself, and I've sold them for a reasonable price... i.e.

A Large TV Cabinet - built from pallet wood sold for £100. If I'd had used some nicer untreated wood I'd most probably have doubled that price for the same product, and I reckon I'd have got it too. It's got a door on it now on the right hand side

 

[Mr D]

Nice.

 

[Paul Norman]

As a retailer, the margin I require will depend a bit on the deal. But if I am buying your stuff, and stocking it, I will want to basically double the wholesale price. So if you sell an item to me for £50, I will want to retail it for £100. That would be a minimum.

I would suggest a trip around local furniture stores selling original stuff might be worth their while. Then you would see what other people charge, and compare that with your own ideas.

And then, work back. If an original, unique, cabinet is selling else where for £400, and you reckon yours to be worth similar, you will be selling it to retailers for between £150 and £200. The question, then, is whether you are able to make a living at that level.

 

[Annie Richmond]

Hi Guys, just wanted to pick your brain as you're discussing something that is quite relevant to me at the moment

I am selling my product to retailers who I have been advised work on a 2.5 rule when buying from suppliers.I know what the RRP is for the product as I sell the product direct to consumers through my website.

The question I have is, does the 2.5 rule inc the end VAT. For example if I sell a product online direct to consumers at £25 gross which inc 20%VAT does that mean the retailer buys the product from me at £10 (x2.5 = £25) or £7.33 (x2.5 = £18.33) which is the retail price ex VAT!!! When they make a bulk order I will charge VAT on the wholesale price also...

I've read that you shouldn't really worry about what retailers sell the end product for but I would need to know this to work out the 2.5 rule right???

Totally confused!!!! Thanks in advance for your help.

 

[MikeJ]

You're selling to consumers at 20.8 + VAT. Therefore you sell to retailers at 8.33 + VAT. They then sell at 2.5 x 8.33 = 20.8 + VAT.

 

[FuturePro]

Selling on-line via your own web site could be a alternative route. All your business costs need to be worked out including labour/materials cost spent manufacturing etc. Then individual delivery costs need to be included. All plus VAT.
The end result sales margins are all yours. As payment is at the point of sale now waiting for invoices to be paid.

 

[Annie Richmond]

You're selling to consumers at 20.8 + VAT. Therefore you sell to retailers at 8.33 + VAT. They then sell at 2.5 x 8.33 = 20.8 + VAT.

This is really helpful thank you!