Pricing and pace… what’s a woodworker to do?

28 Jan

I recently gathered with my fellow woodworking graduates to have a catch up session. They are at the half way mark in their apprenticeships. The issue of pace came up. This was one of my worries, what pace does industry run at? It varies!

I learned that one of the shops was scary fast. All operations carried out with speed in mind. Production had to be quick.

In another shop the owner admitted to being the slowest worker he knows. He gets teased for it but insists on working at his own pace.

This led me to thinking about how price and pace are linked.There are a myriad of different ways to run a successful business but to simplify:

 

There are those who focus on speed to keep costs down.

And

There are those who focus on quality to keep prices up.

I realize there is a large grey area in between the two. As I said, all kinds of business models lead to success. And success is a  subjective term.

But this thought process helped me to plot out a definite direction for my future business. I decided I want to head more towards quality and a slower pace. Especially since I envision staying a one man shop. I don’t want to manage a larger shop. I also don’t want to spread myself too thin trying to work at the speed of light every day AND stay safe AND still take care of the administration, marketing, sales, accounting, and designing. Of course the direction you choose will be unique to you and the goals you have for your own business.

So with the pace figured out for myself I move on to pricing…

 

Do you charge based on  materials + markup + hours+ overhead?

or

Do you charge based on the value and quality of the product?

Can’t I just make some hybrid of the two? If  I can, I probably will.

In the research I’ve done on the topic, most people start small, selling to friends.  At this point you’re not charging on an hourly wage, nor on the value of the product, you’re giving a discount. It’s a trade-off for building a name for yourself and starting to spread your network to get that target client that you need. Then gradually you build the right clients and start to price according to that market.

Some Pros and Cons for both types of pricing

Cons: sticking to an hourly wage that was prematurely high or just ran over the time estimated can scare off clients when you’re just starting out. Whereas if you do a job based on the value of the product and you find you’ve lost money on it,  that doesn’t make sense either.

Pro: Pricing by the value of a product could help you profit from a product line, where production is fast and quality is predictable.

Pro: Knowing that the materials, time, and the cost of the shop will all be taken care of in the pricing can set a business owner’s mind at ease.

Pro: Pricing by the value and quality of the product can remove limitations to a project. When the limit is however much your clients are willing to pay, you could potentially build a whole different type of furniture by pursuing this pricing model. The highest of the high-end, always challenging yourself more than you would when you have a set hourly wage.

PERSONAL Conclusions

I think that pricing by the hour is for businesses that want to do well financially through strategic pricing, but pricing by the value of the product can mean that you are not worrying about getting by, you just want to be a creative free spirit and the client is happy to pay for that end product.

So… ultimately I guess what I’m saying is:

I’ll probably start  my business by charging by the hour with all my costs etc.

But I’ll aspire to raise the level and quality of my work until I don’t need those training wheels anymore!

I expect as I gather more and more information that I might even change my mind about this, but for now this is where I am and I’m documenting it as such. EVERY single woodworker that I’ve spoken with or whose opinion I have read has had very different ways of tackling pricing, so it’s definitely worth forming your own opinion.

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