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Davek0974
03-07-2008, 03:37 AM
Hi all,
I'm looking at supporting my struggling day job with a secondary one, i believe it's called feathering my nest?

It's ornamental ironwork, so its something that i can do, with little equipment outlay and involves metal so it cant be bad:)

I need guidance on pricing. I have the materials costings sorted but not the extra costs. I was advised by a family member to add a charge equal to what i would pay someone per hour to make the same product and then treble the total.

This would price me out of the market as its quite tight on costings. I will be working from home, in my own time and have most of the tools already, i am willing to write off the small outlay on new equipment as a hobby expenditure so i have no machinery to pay for as such.

On a plus side, i have already got a local garden centre interested in viewing my products when i have some samples ready. So it looks like i need to be able to supply trade and retail.

Any ideas?

thanks in advance
Dave

small.planes
03-07-2008, 04:01 AM
When I sell model helicopter bits I charge what I think the market will bear. As long as the material costs and electricity etc are covered then I'd probably be making something on my machines anyway, so the income essentially pays me to learn is how I think of it. As a plus it ends up as cash thats separate from the normal household stuff, so I can spend it how I want without feeling bad :D

Do be aware that people will keep wanting you to make things, and it can all snowball, so you end up behind in other things you want or should do.

Dave

Peter N
03-07-2008, 04:18 AM
Dave, in business you would be looking at a gross margin of anywhere between 40% -70% if selling to an end user. Gross margin is the difference between your selling price minus the cost of direct materials and direct labour.

However, for a garden centre these are not end users, but another step in the retail chain, so they would be looking at a discount on what you might retail at. The more they buy, the larger the discount they expect.
Not too many years ago, retail used to sell at a markup of 100% plus VAT, but these margins are mostly gone for western manufactured good (though may still apply to low-cost import items), and these days I would guess their markup on goods like this may be around 25-30%.

So...you need to work out what your hourly labour cost is (you know the materials), work out a markup, then compare to an equivalent product for sale out there to set your pricing.

The exception to this would be if you are making something quite unique and unavailable elsewhere, in which case you can price it as high as the market will bear.

Peter

Davek0974
03-07-2008, 04:58 AM
When I sell model helicopter bits I charge what I think the market will bear. As long as the material costs and electricity etc are covered then I'd probably be making something on my machines anyway, so the income essentially pays me to learn is how I think of it. As a plus it ends up as cash thats separate from the normal household stuff, so I can spend it how I want without feeling bad :D

Thats exactly how i thought of it. Butr what i dont want to do is go in with a low price and have to increase badly when things take off.


Do be aware that people will keep wanting you to make things, and it can all snowball, so you end up behind in other things you want or should do.

Yes, i do have that feeling, but i look at it as "I will cross that bridge when i get to it". I'm getting really fed up in the day job but it pays the bills, maybe when the mortgage is gone, i can think differently about my ventures. In an ideal world i would like to work for myself as 28 years of being told what to do is getting me down now and i'm not getting any younger.

Dave

Your Old Dog
03-07-2008, 08:29 AM
I don't know if this is any use to you but I've always snatched my prices from thin air and on the high side. It was a mistake as it kept me from getting a toe hold in my endeavors. For me it would have been better to raise prices as demand increased. It's tough enough getting a venture off the ground so don't add ballast to it by going too high on pricing. JMHO

Davek0974
03-07-2008, 08:53 AM
Thanks YOD, so if i understand you correctly, you are saying get your foot in the door first, get some orders out or stock movement, then gently increase the price as and when possible.

That would fit in well with my plans and was pretty much what i had in mind. I dont want to kick off at a price that would include X amount of profit, X amount of labour and so on as it would definately make it hard to start up.

I have got the materials costed and am now working on a price that makes it worth my time as well as giving me some headroom for discount as i will be selling direct and to retail outlets who will naturally want a lower price. I am ignoring electric, tea, coffee and mig welding wire:rolleyes: to start with as i would be in the workshop anyway so those costs would still exist. I can factor them in later if it kicks off well.

I have now got prices for the few bits of equipment i need and even screwed a 10% discount out of them if ordered together. I will survey the local market tomorrow and sit down to do the final calcs this weekend.

Dave

kf2qd
03-07-2008, 12:33 PM
Are you selling to the garden center, or are they offering to sell your stuff as a way of putting more interesting stuff out there for their customers in order to create more traffic for their goods? Or do they want some nice stuff to display their goods on and are not really interrested in selling your product? If they are really looking at selling your product, are they planning on buying some number of each item, or are they interrested in selling on commission, where they make no up front investment? If they are interrested in selling on commision then their part of teh markup should be much smaller than if they are buying the goods from you and then re-selling them.

In my experience - you probably won't make a whole lot in the end, as your time will have to be discounted rather steeply.

BUT - sometimes it does work out better, but go into this with a clear head.

ptjw7uk
03-07-2008, 01:00 PM
One thing to bear in mind is that you will be in direct competition with people making similar items full time. In so doing your items should be better in some way, more involved no straight ends to scrolls etc.
You could also think about jigs to help and also a small mass production setup in which you could use several scrolls of the same size. Also think of buying shears and a punch as cutting steel and drilling are slow in comparison.
Peter

Davek0974
03-07-2008, 01:49 PM
More interesting stuff, food for thought.

I have only got as far as the garden centre saying they are interested and want to see samples when ready. I take that as being very encouraging as i was expecting to be brushed off straight away.

As to how they will sell, we will have to talk that over with a coffee when i go in with some products.

Yes i am in direct competition but only with people who all make standard items of standard quality, usually imported. I am hoping to give a better product with the further option of custom designs etc. I am not trying to corner the market, just make my mark. I have already got a couple of ideas i have not seen anywhere else.

As for straight ends on the scrolls, i'll see how that goes, i could always cut them off after but the former i am looking at only leaves a small end anyway. Shears are on the list but i do have a decent bandsaw so i could easily stack several strips in the vice at once. Bench shears would be good though.

I prefer welded joints over punching, all of the failed items i have seen (although caused by overloading) have failed at the rivet hole so i am going with mig welds and powder coating.

Dave

38_Cal
03-07-2008, 02:40 PM
Marketing...be sure, if you have instructions or even a label for the work, that you have a full color (colour?) Brit flag on it, and "Made With Pride in ..." Really set yourself apart from the imported junk. That will help justify a higher price to help you keep beans, rice and tortillas on the table!

David
Montezuma, IA

Davek0974
03-07-2008, 02:48 PM
Marketing...be sure, if you have instructions or even a label for the work, that you have a full color (colour?) Brit flag on it, and "Made With Pride in ..." Really set yourself apart from the imported junk. That will help justify a higher price to help you keep beans, rice and tortillas on the table!

David
Montezuma, IA

Damn straight! That is one of my reasons for thinking of doing it. There are still people around that believe in our country. I am one of them. No instructions but there will certainly be a swing-ticket with the flag on it:D

Dave

Ries
03-07-2008, 04:25 PM
Its tough to compete with the low end of the market- as usually you are competing with factories, who have hundreds of thousands of pounds worth of equipment that enable them to do each process for pennies, who buy steel by the ton, who have their own in house powder coating lines, and so on.

I dont even try- I only do jobs for people who are willing to pay for higher quality. This presupposes that you are able to provide higher quality- and, in ornamental iron, that isnt quite as simple as it might seem.
As in many metalworking trades, besides equipment, you need experience- and that is never cheap.

In Britain, you have some incredibly good metal artisans- are you aware of Baba?
http://www.baba.org.uk/

I price my metalwork in a variety of ways.
One way is by calculating cost, including materials, of course, but not forgetting paying myself a wage equivalent to what I would have to pay someone else- and then adding on a healthy amount for overhead- utilities, taxes, consumables like welding gas, filler rod, abrasives, drill bits, and so on. Rent? Insurance? something for when tools break, as they always will? There are a lot of expenses beyond just materials and labor, and you will have to pay them, so you should be including them in your prices.

Another method is to use a multiplier on the cost of materials- I use 5 times as a starting point.
Although, in actuality, on some of my very complex forging jobs, which then involve shipping and installation, I have been finding that ten times materials is more accurate these days.

Or, you could use a square foot price- again, this takes some experience to develop- you need to run a few projects thru and track actual costs- I used to use $50/sq foot as a starting point, but with inflation these days I doubt I would use a number that low, for what I do. But what you do, in terms of costs and prices, could be very different, so you need to develop your own number.

Another way to look at it is by the week or month- I know about what it costs me to run my shop per month, based on years of doing it- all my costs together, including buying everything, and paying everybody, runs pretty constant, and so I can estimate a jobs time, and then allocate costs that way.

All of these methods are dependent on local costs, of course- yours are no doubt different from mine.
And to develop prices from them requires doing a few jobs, and figuring out your actual hours and your actual expenses.

Davek0974
03-08-2008, 04:11 AM
Thanks Ries, more food,

I am going out today to survey the various outlets to look at what is on offer but with an eye to "can it be made at that cost" rather than the usual "that looks good" observation.

I have compiled a quick spreadsheet calculator that lists the basic raw materials and i can the punch in different labour rates, markups and discounts on final cost to see what happens to the figures, hopefully this will make it quite clear whether or not the idea is viable.

Even if i cant compete with the run-of-the-mill stuff, i still may have a go but only doing things that are slightly different or unique, I dont want to be mass producing the same thing 500 times a week, i would rather make and sell one individual item a week as i still have a day job to contend with. This may sound self-defeating but i dont want to start a factory, its a home-business idea, hopefully something that will provide a little income in retirement by doing something i enjoy.

Dave

Ries
03-08-2008, 09:37 AM
One quick cost story-

I used to make several designs of bar stools, and sell them to stores around the USA.
My wholesale price was $125, plus shipping, which usually ran between $8 and $15 (this was a few years ago, when oil prices were still around $30 a barrel)
I had about the same amount in materials, and then another $15 to $20 each for powdercoating, and probably an hour in labor, at my then current shop rate of about $50/hr, which included overhead.
So I was making what seemed to me a healthy 100% over my costs, more or less.

And I sold, for me, what was a reasonable number, and I was happy.

And then I went into a large consumer furniture store, and saw bar stools from china, powdercoated, made of actual steel, and shipped to the USA, for a retail price of $15.

Yep, their final sales price was about what I paid for powdercoating.

Of course, their designs were clunky, their craftsmanship poor, and their materials cheap and light- but to the untrained eye, it was clearly a bar stool, you could sit on it, and it cost $15.

At that point I knew that trying to compete with something like that on "what could I make for that price" was madness.
Actually, I knew it before, as it took me years to get good enough, well tooled enough, and experienced enough that I could make a barstool for $125 and not lose my shirt. Many arty types who make 1 chair, and feel its a sculpture, realize that even at $2000 they are not making much money.

So I would reiterate, you must not get on the treadmill of trying to compete with Asian imports on price- you can never run fast enough to catch your tail that way. Your work must be BETTER, and you need to be able to explain why, and show it to prospective customers easily.

J Tiers
03-08-2008, 10:46 AM
There is another issue that people ALMOST ALWAYS FORGET.

WHY does "volume purchasing" reduce the price?

There is NO MAGIC.

The answer is that WHEN a manufacturer has a volume customer, they can afford to provide systems and support which are capable of larger production volume. Molds vs machining, stamping dies, automatic machines, etc, etc, etc.

And, of course carload shipping is often less expensive.

if the blacksmith makes can openers by hand, there is NO price advantage in volume, if volume means hiring more blacksmiths to make more in the same way.

Somehow the labor per unit must go down.

Now, for ornamental iron, there are standard shapes, and custom stuff.

The ONLY way to go is custom, because the chinese can bend iron cheaper than you. They can BUY iron cheaper than you, even when they pay more for scrap over here.... go figure.

But at least SO FAR they cannot do custom, and don't want to. Therefore you can have a distinct advantage.

loose nut
03-08-2008, 10:53 AM
The only way you can survive in the market to day is to make one-off artistic items that are not being poured into your country, and made with a higher quality, some people are still willing to pay for that.

Davek0974
03-08-2008, 01:52 PM
Thanks so far,

playing around with my spreadsheet, i can clearly see that the labour rate has a massive effect on price. Materials are minimal.

I have a feeling that it will need to be unique items that do it, i am now scribbling up things that come to mind that i havent seen around, then crunching the numbers. So far it seems to be viable if i can sell what i come up with:D by that i mean that the prices are not coming up in silly land and i am not doing it for nothing.

I did spend the morning visiting outlets and have found that i could compete on quite a few things. The best part was that i did not see anything that was not run-of-the-mill i.e. nothing exciting or different. Most of the low end stuff was spray painted and i know that this rusts in a matter of days(of little importance to the manufacturer i guess) so hopefully a heavier, better designed item that is powder coated will be appealing.

I'm not looking to make a living out of it instantly as i still have a job. I would be quite happy to sell one item every week or two to begin with, at least it shows public interest.

Even allowing for the taxman to take a cut gives quite happy numbers at the end and obviously there are those "massive" :rolleyes: business overheads to offset before he gets any;) ;)

Decision time is approaching i feel...

Dave