I hope your friendship survives this appallingly unbusiness-like
arrangement. If your friend has reimbursed you for your materials, then
all that remains is to determine a fair value for your labor and your
expertise- but of course you will each have radically differing views on
"fair value". You really should have figured this out at the start of
I doubt you can analyze this very clearly. I suggest you simply float a
number you like, hope she agrees, compromise somewhere in between the
numbers and remember to never do this again without clear structure.
NO ! ! !
You labor has nothing to do with her selling cost. They should not be tied
together. If it takes you two hurs and her ten minutes, you'd get nothing,
she'd make out well.
Nothing to consider here. You work on an hourly basis, not a percantage of
h er selling price.
Things that she or I have mentioned include:
Her problem, not yours. She is looking at your service as labor, not a full
blown partnership. Unless you are a full partner, get paid for the work you
Yes, this is a factor.
Unless the tool is to be use strictly for her product, the cost of the
tooling is on you. When you buy a new car, they don't add in extra for new
tooking because the fenders are new this year. That is factored in to total
cost, but not a line item for sales. The punch press may last for 20 years.
Same with your router, saw, etc.
How many hours did you invest? What rate do you think fair? It is not
going to be the same as what you earn in your regular job, it has to be
fixed according to your woodworking skills. It must be realistic. If $20 is
a good rate, it must also factor in the skill level. Just because you are
slow, you should not get paid for an hour of labor for a job that a pro ww
can do in 15 minutes. Yes, you should get paid for time spent buying and
doing setups. If the work tends to be multiples and you can build speed
over time and find shortcuts, you can go a little lighter on your time
estimate, but it it is strictly one of a kind, little gain will be had on
job #50 over job #2.
If you have only 3 hours into this, $500 is great. If you have 50 hours, it
is strictly a fun thing for beer money. If you have 75 hours, you will get
more pleasure from doing volunteer work for a charity.
I hope you at least had an orgasm, because she is screwing you with the 10%
This is a matter I've had to fight with recently, with my web design
business. I've been doing subcontract work with a company, and have been
billing them twice a month. Then the owner of the company doesn't pay on
time, and says "We're still waiting for our check from XXXXX company, when
it comes in we'll pay you what we owe you for the project for that
Well that's BS, and you're in the same situation if you are really taking
those two factors into account. It is none of our concern what payments,
or in your case sales, happen between our clients and their clients. Our
agreements are between ourselves / our businesses and our clients. If our
client's business isn't doing well, too bad, we didn't sign on to care. It
doesn't matter what our client does with the work we did, they could
deliver it to their client and collect on their own payment, or they could
cram it in file 13. It doesn't matter to us, our part of the agreement was
If our payments are to be determined by our client's clients' payments,
then that makes us partners not subcontractors.
It is of interest to note that while some dolphins are reported to have
learned English -- up to 50 words used in correct context -- no human being
On Sun, 31 Aug 2003 12:01:16 -0500, "Digger" <DW> wrote:
In the news in the past few months, there have been articles about Al
Sharpton owing some travel company > $100K and Mike Tyson owing more than
$100K in limo charges. (For anyone who cares or is concerned, I mention
these two only because they have been in the news lately, nothing more.)
Now, how these vendors got in that deep, it is a bit surprising -- at least
to me. Maybe in for a penny, in for a pound. Yet, especially for limo
services, it would seem to take some time to roll up >$100K in charges. I
can't even quite fathom how a small business carries such an A/R. For a
casino or a bookie, maybe, but for a legit small business that has to pay
Mike Tyson's former home is currently for sale here in the Hartford,
57,000 sq/ft, four bars, a disco, a theatre. All yours for about $6M.
The place looks like a Watch Hill resort from the outside.
Probably you both need to be working on your business skills. Your price
negotiating position after supplying the work is nowhere. Her entering into
a business and selling products without knowing her cost of materials is
just plain silly. Like someone else said, I hope your friendship survives
It's called business because it isn't friends playing. Keeping it business
like is the way to keep your friend. It may be too late now.
Assuming your arrangement is as a supplier of a product rather than a
partner, her costs of selling are immaterial. Your cost of tools is
immaterial to her other than as an amortized cost. In other words, you
don't charge her for your new $1500 saw as a lump sum -- you prorate the
cost over it's life and it is included in your overhead costs. Your time
and vehicle costs picking up materials is appropriate. It is a cost of your
business. Would you do this free for your regular employer?
I'd also suggest your consider just what your arrangement was -- you said in
your post that you were "interested in getting some tools". Was your
discussion such that you gave her the impression you were going to do this
very cheap? Or did you later decide that this was a bigger job than you
expected and want paid better? Or that she's doing better than you expected
and you want a bigger piece of the action?
Anyway, good luck to both of you.
I don't know how helpful this will be but ...
On a business-like basis, there are only two ways you can be paid:
Time and Materials for one-off pieces, or piece work for
How much you charge for your time is a function of the quality and
quantity of your work, balanced against what others would charge for
the same quality and quantity. How much you charge for piecework is
a function of your true costs balanced against the competition. You
would be paid on completion, the risk of selling or not selling would
be hers alone.
But you're not on a business-like basis -- you're a hobbyist and she
apparently is a wanna be ... trying to get started up. How you
resolve what has gone before depends on how much you want to keep on
doing this, how much you want her friendship, etc. etc. My
understanding is that many of the people doing this are retireds and
hobbyists -- that there really isn't much profit in it for anyone.
Another route would be to produce the piece and have her sell it. How
the "take" is split between artist and gallery owner is subject to
wide variance -- the greater the demand for an artist, the greater his
share. But I'd suggest you at 40 for production and her at 60 for
marketing would be a place to begin talking.
Disclaimer: I am a starter my self so I have not all the answers
my recommendation would be this way:
Back ground: (simplified)
When you make a product you have 1. overhead (stuff like tool cost, parts
cost, sharpening, electricity) Then you have Materials (self-explanatory)
and finally Labor.
Overhead is Indirect, you usually don't charge directly for it. You make a
big enough profit to cover it.
So to figure out a price figure out how much time you have put into this
project (figure/estimate even time traveled for material pickup, discussion
of piece etc.) multiply by your "per hr. basis" how much do YOU think your
worth? How much would you be worth if you could do something else with your
time? Ok you sound like you are a relative beginner. What does an
apprentice or laborer get in your area? In my area its around 12-15 an hour
easy. So lets say 15.
Add price of materials (and the tax you paid). Ex. $150 for lumber and
Then you multiply that buy a "markup" percentage. In carpentry it is often
15-30% depending on Cost of living, overhead, demand. Let's go with 20% for
the example because that is reasonable.
you work 10 hours to make a simple table that cost 150 in materials. So
that is 300 for the table. Since you want a 20% markup you (please follow)
do not multiply by .20 but instead divide by .80 (trust me this will get you
a mark up) so you get $375. The $75 will pay for the overhead (anything
from gas to electricity to insurance). since you are getting started that
$150 in labor may also help pay for new tools, bits, blades (not always a
good practice but since this is also a hobby......)
Since your friend has paid for materials then you get what I would call
"Labor Only" Figure the labor and multiply that by the Markup number.
From now on I Recommend a "sub Contractor" relationship. You make the piece
"on commission" and "sell" it to her.
However I realize you may not entirely want to do it this way because she is
a friend, you don't/may not want to really want to do this as a business,
and labor cost is sufficient for you. However I do want to warn you that
making money this way may subject you to IRS scrutiny so consulting an
accountant/Tax preparer may do you a world of good to see what your options
I hope my explanation doesn't confuse you but helps a bit.
"Violin playing and Woodworking are similar, it takes plenty of money,
Did you enter into this as a partner? If so you get a percentage of the
earnings based on a formula that you two agree on.
If you are only selling items to her as a contractor it is totaly different.
Buy your tools, figure out how long they will last (no more then 10
Cost of shop per hour used (electricity, lights, heat, upkeep)
This is your fixed overhead cost (I figure about $0.90 per hour)
Cost of expendables (sawblades, tools)
This is your base cost
Base + overhead = operating cost
Table 10 hours to make :
base cost $2
operating cost $11
Materials for table $12 (wood, sandpaper, finish)
Total base cost of table $23
Labor (How good are you) $6 per hour x10 hours = $60
Total finished cost of table $83
One way to figure costs.
Another way to figure is base cost x 3 or $69 for table
Retail on table woud be either $166 or $138
1. Is it better to cost based on a fixed percentage of the list price of the
Does all this come out before the percentage is figured i.e.
$500 for tools, $500 for material, her labor $500, Time at shows (20 hours
at $10per) $200, $300 for show costs etc. per show. (Yes they can run that
high or higher even for a small show. For me to do a show is entry fee
$100, tent $1000, Displys $500, inventory $3000. And that is just what you
need for a local run of the mill show) You have now run you $500 down to
$300 or less but you are not out on the tools or wood. You could eaisly
being doing this for a loss at this rate.
I did this on bird houses, My cost per house was $15, houses sold for $200
my cut was $20, net profit $5 not to bad could afford to take a loss on a
few if they did not sell. What is she selling them for?? if it is less 10
x your cost not a good deal, I would go with straight price per item,
otherwise it is a gamble.
There are no friends in bussiness dealings, if you want to keep any friends
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