Re: *** SURVEY: THE IDES OF MAY ***
R.J.Whelan
>Ellis ... this may not all be useable, but maybe there are a few useful bits:
First, let me state that I am a full-time professional furniture maker, so my opinions are informed by the demands of the profession.
Amateur/Hobbyist vs. Professional
As a hobbyist your only financial concern may be to simply recover the cost of materials and the occasional new tool. This is fine, and it�s certainly your right to price your work accordingly, but here�s the rub: when your work is displayed beside that of a professional who has bills to pay, kids to feed and health insurance premiums (believe me, a lot of furniture makers don�t have health insurance), there is going to be a big price disparity. Many hobbyists produce work that is every bit as fine as the best professional; the only difference being the professional may produce the work more quickly. Now, as a consumer, if you�re offered two similar products (and the style of either is acceptable), you are going to choose the less expensive piece every time. So the professional, with all of the previously mentioned financial burdens, is going to miss a sale. Morally there�s nothing wrong with this scenario; it is pointed out as informational fodder to consider. Believe me, if you make the move from hobbyist to professional, you will hate to see your retailer accepting work from non-professionals, work that will sell for far less than your price.
Figuring Wholesale Cost
Cost of Goods � You have to keep good, accurate records. If you buy cherry for $4/ft and then buy some more for $2/ft and then use your $4 cherry to build a desk you have to remember that your cost for that piece is $4/ft. I generally pencil the cost on each board and then keep track of what I use.
Mark-up � There are, basically, two ways to approach this:
� Multiply your cost of goods by some factor � for instance 1.33; most people think this is a 33% mark-up but it�s actually 25% - this method is called �profit on cost�
� The better method is to divide your cost by the reciprocal of your desired profit (profit on selling price)
� Example 1: $10.00 X 1.33 = $13.33 (selling price)
� Example 2: $10.00 / .67 = $14.93 (selling price)
Labor � Figure our how much you want/need to make per hour and keep accurate time records of how much time you spend designing, building and finishing. Don�t forget the time spent chasing material and delivering the finished piece.
Other cost factors: � Keep in mind there is going to be a fair amount of paperwork involved in even a one-man shop: invoicing; general ledger entries; income tax; resale tax report; county and city property and inventory tax reports. I have found that adding one hour of labor for every thousand dollars (selling price) is reasonably accurate.
Commission � Depending where you live and how well known you are (locally) you are going to pay commission on sales through a gallery; where I live this can range from 25-50%. Most galleries won�t have a problem if you just tell them how much you want to �net� from the sale.
The Competition
If your work is carried in a gallery or store along with other craftsman you have to decide whether you want to compete on price (don�t) or try to establish a pricing niche where there is some distinct price differential between your work and that work most similar to yours (it�s OK to be higher). If you price your work too high there are positives and negatives to consider: profit per sale will be good; sales will be slower; and, you may sell so slowly that the gallery won�t want to give you premium floor space.
Doing Shows
Before you commit to doing a show make sure that your retail sales locations don�t have a problem with represented craftsman doing the show � most will object. Be sure you can build enough inventory to make doing the show worthwhile. Remember that you�re going to lay out cash for materials and spend hours building that may not have a payback for several months. I do one show per year and typically start building inventory 8 month in advance; I try to have six to eight pieces at the show and hope to sell half of what I take and hopefully take at least 3-4 orders for custom pieces based on what I had at the show. I have a friend who does one show per year and does $35-40,000 in three days (dining table and four chairs - $12,000; very high style) � this is the major part of his year; my experience has not been as good, but generally good enough to keep me going back.
Advertising
As a minimum you�ll probably want a yellow page ad in your area. I run a small newspaper ad that runs for four consecutive weeks each quarter. This ad costs me $120 (really small ad), but there is an added benefit: I have a �one-day gallery sale� each year and the paper does a free story about me and the sale � were I not a regular (albeit small) advertiser, they probably would not run this piece. As a result of this �free mention� our local TV station did a three-part interview with me and I got a nice little rush of business following what we humorously referred too as �RJ the Miniseries�.
Paying the Bills
Try to resist the temptation of dealing with your suppliers on an �open account� basis; if you come down to the end of the month and bills have to be paid and the piece isn�t done yet you�ll be faced with the temptation to cut some corners or to put in extra hours � my experience is the extra hours are almost never as productive as they should be.
Working for Friends
Don�t! You won�t charge what the work is worth and unfortunately they will tell all of their friends and they�ll expect the same deal. It may sound harsh, but don�t work for relatives either � if you must build something for Aunt Sally, just give it to her.
Invoicing
Writing the invoice is probably the most profitable act of the sale. If you drop off the piece and then wait 15 days or so to send a bill, you�ll probably wait another 15 to 30 days to get paid � that�s at least a month when you don�t have use of the money.
Deposits
Be sure to get enough money on the front end to cover your cost of materials. Some makers charge 50% and have no problem; where I live, a deposit this high can cause hesitation and might kill the sale. My deposit is an amount equal to total material cost plus half of the mark-up.
Refunds
Sometimes a customer will change their mind about having something built: this can come about for a number of reasons ranging from buyer remorse to finding the product for less money somewhere else. How you deal with these situations will have an affect on how you are perceived in the community (especially in a small town). If you choose a �hard nosed� approach you will pretty much guarantee never doing business with that person again � there�s an old axiom that goes ��a happy customer will tell two friends; an unhappy customer will tell everybody�. Keep this in mind when formulating your refund policy. My policy is to give a full refund if I haven�t purchased materials yet, or if the materials are common enough that I will be assured of being able to use them. In the case of a cancelled order occurring after I�ve begun work I tell the customer I will finish the piece and refund the deposit when the piece sells at retail � this has only happened once in the last thirty years and I refunded the money about six month after the cancellation; the customer was delighted and ended up commissioning several pieces over the next couple of years.
A Production Trick
If you have a signature piece that has a proven track record of selling quickly consider building two pieces simultaneously: with me, this takes the form of a tall dresser that wholesales for between $2500 and $3000 (depending on material). When I build a singe dresser it takes me about 88 hours from start to finish: when I build two I can complete them both in about 125-130 hours � this is a tremendous time saving.
That�s about it � good luck with selling your furniture.
- rj -
