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How to Set a Price for Woodworking Projects from Your Home Workshop
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Setting a price on home woodworking projects Everybody agrees that masterful woodcraft comes at a price, what what that price should be is the subject of a lot of debate.

Have you ever wondered what to charge for something you made? In a gallery? Selling to a neighbor? Virtually every handmade product has a “right price.” Charge more and it won’t sell; charge less and you’re losing money.

Finding the right price requires five separate calculations to determine costs for materials, labor, overhead, profit and selling expenses. You can calculate these by hand, or use your computer and a spreadsheet. For instance, let’s price the round-top table featured in the October 2005 Woodworker’s Journal. For starters, it took two and one-half hours to make. The materials consist of the actual parts used to make the product: the cost of the wood, plus any mechanical parts, such as hinges, mechanisms, etc. The table has 12 board feet of oak, at $3.25 a board foot, so the material comes in at about $39.00.

Labor is calculated by the hour. Suppose you want to make $75,000 a year. If you take four weeks vacation a year and work 40 hours a week, then you will work 1,920 hours a year. Divide 75,000 by 1,920, and you get $39.00 an hour. The table took 2.5 hours to make, so multiply $39.00 by 2.5. The labor cost for the table is $97.50. Add this to the materials cost for a total of $136.50.

Overhead consists of the rental and utilities of your shop, tools, glue, nails, sandpaper and finishing materials. An industry average is 15 percent. Multiply your total (of materials and labor) by 15 percent. For the table, multiply $136.50 by 0.15. Add this amount, $20.50, to $136.50. The total cost (materials, labor, and overhead) for the table is now $157.00.

Profit is the amount added to cover business expansion. Add 10 percent of $157.00 ($15.70, but round up to $16.00), and you have a price for the table of $173.00. This is the value of
the finished table sitting on your workbench (the “workbench price”). If someone comes to your shop and picks up the table, you could charge them $173.00, because you haven’t incurred any selling costs. At your workbench price, all of your shop costs are covered. However, if they bought the same table in a store, it would cost them $400.00 because of selling expenses.

Selling expenses consist of two calculations. The first, the cost to put the table in a store, amounts to 15 percent of the workbench price. This could be used to pay a sales rep, have a booth in a trade show or to advertise the table in a magazine or newspaper. Add 15 percent of $173.00 ($26.00) to $173.00, and you get the wholesale price of the table: $199.00.

A store or gallery will mark up your wholesale price to cover their expenses. This is called the retail markup, usually 100 percent. To calculate the (suggested) retail price for the table, simply double your wholesale cost, $199.00, and you have a final price for the table, displayed in a store or gallery, of $398.00.

If you create a spreadsheet with your computer, you can calculate the price of many products quickly. You will only have to enter the number of hours to make a product, the salary you want to make in a year, and the cost of materials. The spreadsheet will calculate the workbench price, wholesale price and retail price instantly. Once you know the right price for your work, stick with it. Don’t settle for less.

posted on February 1, 2008 by A.B. Petrow
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6 thoughts on “How to Set a Price for Woodworking Projects from Your Home Workshop”

  • donald caesar

    The BEST ! Thanks A.B.Petrow, Great info.

  • Dale Hoebel

    Interesting, but I believe it ridiculous to believe that table onle took 2.5 hours!

  • J De La Concha

    Thanks for the tip, was really struggling with this.

  • Jordan

    People always seem to struggle with product pricing - especially if it's something they made themselves. Always undervaluing their time and not choosing the correct comps. I think it's a poor idea to set your price based on the amount of money you *think* you should/want to make as you recommend. Price is a reflection of value. What if, for example, it only took you 1 hour (fake number for illustration) to make the same piece (after improving your craft) - should the product be priced lower? Not at all - it should be priced HIGHER as it's presumably a better piece, considering you can make it faster because you are better than you were before. Except in commodity markets, price should never be a function of cost, rather, it should be a function of value. I would recommend shopping retail stores for similar products, and BEGINNING your price at 10% above their price for the next similar item. Identify where else you can add value (ie free conditioning for life, lifetime warranty, etc), and NEVER feel guilty about charging the value of something, not simply a cost plus markup (which is what you're teaching people here).

    Happy building!

    PS I manage pricing for a mid-size B2B company when I'm not covered in sawdust.

  • John Cook

    I have owned eleven small businesses over the years. I take plenty of pride in what I do and I charge for it. Regardless of the product, I will be the highest price competitor. When I owned a boat canvas shop, I charged via a program I wrote that included what you suggest here. I was about 15-22% higher than the rest and provided a three year warranty on the products that even included vandalism. We became the top shop in our area because of that program.

    However the program was not found acceptable by west coast canvas shops. They were use to selling the job by feet of fabric. A practice they liked but was inaccurate.

    I recall one shop owner selling dinghy covers for $XX. A price that was below his cost for fabric alone. I called on him to point out what my program showed the correct price to be. He just laughed and told me he made up for it in volume. Nothing I could do to help. He was out of business three months later.

    Correct pricing is essential but too many seem to succumb to thinking they must sell a product as cheaply as possible.
    Don't get caught in that fallacy.

  • John

    This great for larger projects but doesn't work for smaller one off projects.

    I made 2 sets of salt and pepper shakers and using your formula I would have to charge $50+ a set. I cant justify selling them for that when you can go to walmart and get glass ones for $5.

    You don't want to under price your work but don't price yourself out of the market.

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