What do you charge then?

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I never said you shouldn't know your costs. In my first post in this thread, I said you had to know your costs to be able to calculate profit to determine if the product is worthwhile for you financially. Hint: the market still doesn't care about your cost. It's reacting to a change in the competitive landscape. If your material cost went up 10% tomorrow, could you just tack on 10% to your price? If you gave your employees a 25% raise could you increase your product price commensurately? I doubt it. If someone else came along next week willing to sell the product for the same price your competitor was selling it at (albeit at a loss), where do you think the market would set the price? Presto, once again the market doesn't care what your costs are. Would the other company be foolish to do so? Probably, but the market doesn't care.
todd
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"Todd Fatheree" wrote in message

You might not have meant it like it reads, but you clearly said price should not be a _basis_ for cost, and that is simply not true:

You ALWAYS use "cost as a basis for price" in some manner, if you want to stay in business that is.
AAMOF, "basis" is the operative word here. You had better know PRECISELY how much your widget cost to get to market before you set a price and that _is_ using cost as a "starting point" and "basis" for price. If your widget cost you .50 cents in materials, labor and overhead to market, you damn well better not plan on selling that widget for .50 cents or less if you want to be profitable. After that point a myriad of other economic pricing factors come into play, just a couple being "what the market will bear", competition, and economy of scale.

Don't give up your day job.
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The boy is right - cost is not a basis for pricing in a competitive marketplace. Knowing and controlling costs is a requirement to make a profit and stay in business over the long run, but is definately not a factor in setting price in a free market.
jim
"Todd Fatheree" wrote in message

You might not have meant it like it reads, but you clearly said price should not be a _basis_ for cost, and that is simply not true:

You ALWAYS use "cost as a basis for price" in some manner, if you want to stay in business that is.
AAMOF, "basis" is the operative word here. You had better know PRECISELY how much your widget cost to get to market before you set a price and that _is_ using cost as a "starting point" and "basis" for price. If your widget cost you .50 cents in materials, labor and overhead to market, you damn well better not plan on selling that widget for .50 cents or less if you want to be profitable. After that point a myriad of other economic pricing factors come into play, just a couple being "what the market will bear", competition, and economy of scale.

Don't give up your day job.
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I think we're caught up in semantics here. What I'm trying to say, contrary to some of the earlier posts, is that figuring out your costs, then adding some arbitrary factor (like 3x) is not a proper way to arrive at a price. The price should be "whatever you can get". Of course you want to know what the cost is (I've done my share of multi-level cost buildups). If you want to say it's a basis insomuch as you want to know it before you determine your price, fine. I'm just saying it's not a number you plug into an equation and out comes your price.

Nice. Because we disagree, I have to be stupid. Let's try to focus back on the original question, which was how much to charge for a bookcase. I recently built a maple & padauk table for an acquaintance. I figured out what my material costs would be before giving him a price, but the price I gave him was one that was based upon what custom-designed furniture went for and what I thought he was willing to pay.
todd
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"Todd Fatheree" wrote in message

Those are your words, not mine. I've read too many of your posts to believe that.

Finally ... we're back 'in context', sans Eco 201 mumbo jumbo, and getting somewhere.

Hmmmm ... that sounds real familiar.
>but the price I

IOW, _after_ you figured your "costs", you then practiced the art of being a good businessman in your final pricing.
Just for grins ... and be honest now ... just exactly what was the ratio of the price your customer paid to your cost on the maple & padauk table?
I'd be willing to bet that it falls very close to one of the cost multipliers remarked upon early in this thread.
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Perhaps there is an alternate interpretation of "don't quit your day job" that I'm unfamiliar with.

You have mistakenly assumed somewhere that I said you shouldn't know your costs beforehand. That's not what I said. I said that you don't take that number and calculate your price based on cost plus something. "Cost" is not a variable in the equation that determines "price" in my book.

My original estimate put the material cost at about 40% of the price. (I don't do this for a living, so I'm not real careful about keeping track of costs and I'm sure where things ended up). Had the maple been ebony like he originally wanted, the ratio of material to price would have been a lot higher.
todd
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"Todd Fatheree" wrote in message

<snip>
That's probably a good idea, considering.
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Any time you want to stop being an ass will be fine. In fact, I've done it for a living. And if you are under the impression that a product is priced at some point other than "whatever you can get", you're sadly mistaken. I'm tired of explaining it, so if you have any more derogatory comments to make, you're on your own.
todd
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"Todd Fatheree" wrote in message ...

Next time you may want to consider changing your ideas about how to price your goods in relation to what it costs to produce them.
And if you are under the impression that a product is priced

Hey bubba, don't look now, but _you_ jumped into the thread of your own free will, and apparently with such a piss poor argument to backup your contention that you can only ultimately defend it by name calling.
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I called you an ass for being insulting (twice). Up to then, I made my argument without trying to disparage you, which you had done twice to me. But I don't have to be rude to make my argument, so I apologize for my previous statement. How about we agree to disagree?
todd
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Tue, Dec 7, 2004, 6:22pm (EST-1) snipped-for-privacy@yahoo.com (ToddFatheree) says: <snip> "Cost" is not a variable in the equation that determines "price"in my book. My original estimate put the material cost at about 40% of the price. (I don't do this for a living, so I'm not real careful about keeping track of costs and I'm sure where things ended up). Had the maple been ebony like he originally wanted, the ratio of material to price would have been a lot higher.
You lost me there. Going by that, it seems to me that different prices on wood does make cost a variable that determines price.
Or, are you saying that the price, over and above the materials cost, would have been the same in either case? If that's what you're saying, then I would say I agree. Except I probably would have said it different.
JOAT Be who you are and say what you feel, because those who mind dont matter, and those who matter dont mind. - Dr Seuss
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(Todd Fatheree) says: <snip> "Cost" is not a variable in the equation that determines "price"in my book.
You lost me there. Going by that, it seems to me that different prices on wood does make cost a variable that determines price.
Or, are you saying that the price, over and above the materials cost, would have been the same in either case? If that's what you're saying, then I would say I agree. Except I probably would have said it different.
I'm saying that a table made of ebony would command a higher price in the market. My main point of disagreement is that I don't start with "cost" and work my way up to "price". I start with "price" (what the market is willing to pay) and work backward, taking "cost" out to end up with profit.
todd
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Wed, Dec 8, 2004, 6:56am (EST-1) snipped-for-privacy@yahoo.com (ToddFatheree) says: I'm saying that a table made of ebony would command a higher price in the market. My main point of disagreement is that I don't start with "cost" and work my way up to "price". I start with "price" (what the market is willing to pay) and work backward, taking "cost" out to end up with profit.
OK, I can understand an ebony table costing more. Stands to reason, because ebony costs more.
And, now I think I can see what you're saying, in how you figure. But, I just can't agree with it.
The guy who put the new roof on my house quoted me $1600 (which is what I actually paid). He came out, got on the roof, measured every which way, discussed types of shingles available, their cost differences, a couple of minor roof repairs, then did his figuring. That's when he came up with the $1600. He obviously figured in cost. We shook hands, he sent out a guy (one), a few days later, he helped the next day, and it was done. Not a line was laid out, but the shingles look like they were laid out with a ruller. Excellent. They even took off the shigles, roofing felt, and cleaned it all up later. We were both happy.
I just don't see any other reasonable way to figure it, and, as I see it, that would apply to custom furniture, or any other type of job, except those involving labor only.
JOAT Be who you are and say what you feel, because those who mind dont matter, and those who matter dont mind. - Dr Seuss
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(Todd Fatheree) says:

I'd put roofing in the category of "unskilled labor" and for good or bad, unskilled laborers get paid basically for their time (materials x markup + time x rate). In contrast, I put a good cabinet or furniture designer/maker into the skilled category. Skilled workers end up with a product that is not necessarily merely a product of materials plus time. A few highly skilled craftsmen can command prices higher than average on the basis of unique design, great execution, or just the fact that their name is on it. I've watched (on television) Dale Chihuly create stunning works of art with glass and I've seen his exhibits. Many of the individual pieces do not take long to make. Do you think he sells pieces at the cost of glass plus his hourly rate?
Here's something to consider. Let's say you've agree to build a table. You figure the material is going to cost $300 and have agreed on a price of $900 with the buyer. When you show up to buy the material, they're having a closeout sale and you get the material for $100 instead. From what I can tell, in your world and Swingman's world, your sales price just dropped. In my world, I'm still charging $900.
todd
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Thu, Dec 9, 2004, 10:38pm (EST-1) snipped-for-privacy@yahoo.com (ToddFatheree) claims: I'd put roofing in the category of "unskilled labor" and for good or bad, unskilled laborers get paid basically for their time (materials x markup + time x rate). In contrast, <snip>
Sounds like you've never done any roofing. Skilled, or unpskilled, it's hard labor. I've done it, and wouldn't care to do it again. In my view, "unskilled labor" usually means something that is a lot of hard work, only takes a little training or instruction to do, and the pay is usually lousy. Also, in my view, way too many people in suits and ties, getting paid some pretty serious bucks, just for telling somebody else to do the work that they don't know how to do themselves. I think most of those people should get a cut in pay and the money used to raise the people doing the "unskilled labor" jobs other people don't want to do. If people want to have big shot jobs, fine, just pay them less. And the people that want more money, fine, put them in the sewer maintenance jobs, and others, that nobody wants.
At a bare minimum, it would rate roofing as semi-skilled labor. But, when you get where you can lay out the shingles, in a straight line, without any reference at all, you would definitely be in the skilled labor category - my roofer was skilled.
You want unskilled labor? Go to any fast food resturant. Funny tho, because it's inside work, no hard labor, there's a bit of training, people call it "semi-skilled" labor. This with people who use a cash register that can figure out the correct price, and the correct change (because most of 'em can't make change of a dollar on their own), and those semi-skilled workers still screw it up.
Do you think he sells pieces at the cost of glass plus his hourly rate?
Maybe, but I don't know without asking him. What I know is, I've seen artistic, custom, stuff listed for big bucks - and not selling well. Maybe that's why so many of those artistes do one-off custom work, they know they won't get more than one idiot with money. And, most of it, I wouldn't buy if I had Biull Gates' money.
Here's something to consider. Let's say you've agree to build a table. You figure the material is going to cost $300 and have agreed on a price of $900 with the buyer. When you show up to buy the material, they're having a closeout sale and you get the material for $100 instead. From what I can tell, in your world and Swingman's world, your sales price just dropped. In my world, I'm still charging $900.
Can't speak for Swingman on that; but for myself, yeah, I'd probably do that. I know I'd appreciate someone doing it for me. I try to treat others like I'd like to be treated. Plus, I like to feel good about myself, and I know I'd feel bad if I didn't. I sure wouldn't be losing anything if I did, and whoever might do me a good turn one day. Anyway, good karma.
JOAT Be who you are and say what you feel, because those who mind dont matter, and those who matter dont mind. - Dr Seuss
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"J T" wrote in message

of $900 with the buyer. When you show up to buy the material, they're having a closeout sale and you get the material for $100 instead. From what I can tell, in your world and Swingman's world, your sales price just dropped. In my world, I'm still charging $900.<<
Can't speak for Swingman on that; but for myself, yeah, I'd probably do that. I know I'd appreciate someone doing it for me. I try to treat others like I'd like to be treated. Plus, I like to feel good about myself, and I know I'd feel bad if I didn't. I sure wouldn't be losing anything if I did, and whoever might do me a good turn one day. Anyway, good karma.
Actually, you did a damn good job of "speaking" for me ... thanks!
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Fri, Dec 10, 2004, 12:39am (EST-1) snipped-for-privacy@nospam.com (Swingman) says: Actually, you did a damn good job of "speaking" for me ... thanks!
Yeah, I thought you'd agree. No prob.
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(Todd Fatheree) claims: I'd put roofing in the category of "unskilled labor" and for good or bad, unskilled laborers get paid basically for their time (materials x markup + time x rate). In contrast, <snip>

You assume too much. I have, actually. A full tear-off and re-shingle. It's very hard work (I'm not looking forward to doing it again), but not terribly difficult to understand.

Sounds like you and Karl Marx would get along fine. Power to the people!

If you were doing this as a business, I hope your accountant has a good way of accounting for "karma" in the financial statement.
todd
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"Todd Fatheree" wrote in message

Hmmm... I wonder how Robin Lee's accountant handles "karma" for Lee Valley? It seems to be one of their definitive business practices.
My bet is that they go to the bank with it.
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Hmm ... Karma...
Tibetan for "able to sleep well at night"....
Cheers -
Rob
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