pricing formula

I have read about a formula for pricing your work. Something about the price of lumber times the time spent on the project or something like that.

Can anyone shed some light on this for me?

Thanks, Mac

Reply to
Mac
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Some people seem to think that pricing work at 3X material cost is profitable. It may be, but it may not be.

You have to look at material cost plus labor plus overhead to determine a price. Once your price is established, you have to determine if people are willing to buy the item at that price. If I can make a widget in 20 minutes and sell it for $15, but it takes you 2 hours, that does not mean you can sell it for $90. The market will just not accept that so it is up to you to find a better product or a better manufacturing method.

Another example. I make a widget out of expensive material that cost $50, take an hour to make it and sell it for $150. No bad. You make a widget out of cheap wood that cost $2, take the same hour of labor, but at 3X material, you will sell it for $6. Not a good idea.

For more details, do a Google search on the subject as it has been discussed here a few times. Ed

Reply to
Edwin Pawlowski

You know, I don't think this has ever come up before here on the wreck. Seriously, unless you're making something that's really one-of-a-kind, see what others are charging for something similar and go from there.

todd

Reply to
todd

Follow that formula and you'd end up doing the same job requiring the same amount of work for prices dependant on the cost of the stock. And that is without figuring out labor and materials for different finishes on the same job.

You want to know what a commission is going to cost you and figure your profit from there get a program like Cutlist Plus, plug in ALL the costs associated with a job INCLUDING labor charges for various functions required by the job IE. costs of going to get the materials, shop overhead for when you are working on the commission, labor for milling, assembly, finishing (I use different rates for each function since the skill and labor intensity varies with each), materials like sand paper, screws, brads, glue, and whatever, all that and what seems like a hundred and one other things. Don't forget taxes on what you have to buy and any shipping costs for things you have to mail order.

Once you have that all down you can figure in your profit or build it into something like the labor rates since that is something that doesn't take any out of pocket money.

By the time you finish I think you'll be a bit shocked in what it really cost YOU to do a job for someone.

Note: I use two sets of labor rates. One I call standard and the other preferred. I use the preferred rate for friends and especially relatives who are looking of a deal and are "of course give you something for your trouble". That way when they scream when I tell them what that "something" equates to in dollars I can show them in black and white what I'd charge someone off the street. It doesn't hurt either when my wife gives me the look when I tell her that "simple little thing" she wants done is going to cost four hundred dollars (with no labor or overhead figured in).

Reply to
Mike G

What does she charge you for something like a Thanksgiving dinner?

-Jack

Reply to
JackD

She doesn't, I cook.

Reply to
Mike G

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