Tips For Starting Your Woodworking Business - Part 2

In the previous post, I talked about ways I approached getting started and finding possible clients. Now I want to talk about pricing for these new clients. Before I get into it, there are many ways you can go about this and many opposing opinions on the topic. I do not really care about any of that and I am simply here to share how I did it.

I broke my pricing into four categories. Materials, Labor, Shop Fee (Overhead), and Tax. Below I will break down each one specifically.

Materials

When figuring out my materials cost I would figure out all the materials that I would need and then add 10% more to cover any miscalculations, mistakes, unusable wood, etc. Let me provide an example. Let’s say I was building a dining room table. The table calls for 50 board feet of lumber. I will calculate the cost for 55 board feet. Additionally, this table would require finish. I would add the cost of that to the equation. Finally, for this I would add the method that I want to use to attach the tabletop to the frame. That is pretty much it. What about glue, screws, dominos, biscuits, etc.? I do not put these into my materials cost anymore because they are what I would consider consumables/expendables. I will explain this more in part three.

My calculations didn’t stop there. Once I had my materials cost, I would then add a 10-15% markup to the cost. Markup is a standard business practice and should be no different for you and your business. In the beginning, I would look at my receipt and charge the exact amount for materials. However, why would you do this? You are the one going and purchasing the material. If I client wanted to provide the material to me, then that is a different story. You can even increase these margins even more. If you have a registered business and an EIN, you more than likely can get materials and supplies at a lower rate with most companies. Here’s an example. If I am buying legs from X company, and the suggested retail price is $100 I would immediately be charging $110. However, that company man have a trade partner program where I am able to get the same leg for $75. See how this can be beneficial? All it requires is a little work on your part to find these sorts of discounts and the result will be more profit for you.

Labor

There are many ways that you can do this. I can’t tell you how much your time or quality is worth, and quite frankly, it doesn’t matter. Various items can play a role in your labor rate. Early on, I was charging $25 an hour, and then made my way to $50 an hour, then $75 an hour. As the demand, complexity of projects, and my experience increased, so did my rate. I have heard some with the opinion of $100 an hour should be the minimum and anything less undervaluing yourself and fellow woodworkers. I think that is ridiculous and here is why. The clients I want are not the ones that want a pine farmhouse table out of construction grade lumber for $300. However, it may be a client you want as you are just starting out. Therefore, it does not affect me AT ALL. My best advice when it comes to labor is this, set the price that YOU feel comfortable with and adjust as needed.

Now to break down how I calculated labor. I struggled with this in the beginning. Mainly because I was never very certain as to how long something was going to take me to make because I would typically try to make new things that I hadn’t tried before. One day I figured it would be a good idea to start tracking how long each task would take. What I mean by that is take a table as an example. I would break it down into groups. Picking up the material, X hours. Table top – Milling, X hours, glue-up, X hours, finish prep, X hours, etc. I would do that for the top and the base all the way through finish. After a while of compiling the data, I was able to get a very good idea very quickly, on how long a table would take me. I hope that makes sense. By breaking it down into specific tasks, I was able to estimate labor costs on multiple different projects that may have similar tasks efficiently. If a project was going to take 20 hours, then the labor cost at $50 an hour would be $1000.

Shop Fee (Overhead)

This is a topic that I have heard many conflicting opinions as well. Again, it is irrelevant and this is why I like to charge one. In the beginning, I felt like I had to break down every individual item to a single unit cost. Yes, I had an Excel spreadsheet that had the individual cost of a biscuit. Silly I know, but I thought this was the best way to do it when I started. Well, let me tell you that got very old very quick. One day I went back and did some math on invoices I had already completed and what I found is the individual cost of all the “expendables” was typically around the 10% mark of the materials cost. From that day forward, I began charging this fee instead of racking my brain trying to figure out how many screws, dominos, glue, etc. There were a few times I had customers ask me what the shop fee was, and it was very easy to explain. “The shop fee covers my overhead and expendable items such as glue, screws, sandpaper, etc. and is 10% of the materials cost.” That is all I would say and never had an issue. Typically, the clients just need/want to understand the process. Do what will work best for you.

Tax

I think this is straightforward and I don’t really need to get in the weeds on this one. To calculate the tax, I would just look up the local tax rate for the state and charge accordingly. I would not charge tax on the labor cost though. Only for the materials cost.

In closing a couple of additional notes. When applicable, I would have delivery and/or install fees. Delivery was always free if it was within 25 miles. Outside that radius there would be a $100 delivery charge or I would give the client the ability to pick up if they wanted (which never happened). When it comes to install, I just approached this as an hours based charge as well. If I thought the install would take 3 hours, I would charge accordingly.

I hope you found this article helpful. It is a topic I receive many questions about. I figured this would be a great opportunity to share exactly how I went about the process. If you have any additional questions, please leave them below so everyone can learn from them and the responses. Also, please share your thoughts on this article below. Talk to you guys soon!

Jason