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- Your New Woodwrking Business – Knowing What To Charge
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## Your New Woodwrking Business – Knowing What To Charge

When it comes to selling woodworking projects, an important aspect of your woodworking business is what you charge for the finished product. If your prices are too high, you will lose customers, but if your prices are too low, you risk the possibility of having a profitable business that will provide you with the income you need. This is a challenge that many woodworkers face when starting a new woodworking business.

A good formula for determining a good price point for any particular product is to calculate material costs, shop supplies, shop expenses and any subcontractor fees.

The total of these costs is multiplied by whatever number gives you a product price equal to your expected profit plus your costs combined. Although it is quite simple, it can be a bit complicated.

Here’s a simple way to calculate all the cost factors involved.

First, base the material cost on the price of the wood used and add 15% for waste. Include all fasteners, hardware, and shop supplies such as sandpaper, thinners, solvents, etc.

The next step is to develop a general hourly rate for your store. The best way to do this is to combine your store costs with what you want to charge for your time and labor.

Start by calculating all the costs of your woodworking business, such as rent or mortgage, utilities, machine maintenance, advertising, and other shop-related expenses. The easiest way to find an hourly figure for your time is to determine how much you would earn if you worked for someone else.

There are an average of 4.33 weeks in one month, and if you plan for a 40-hour week, that comes to about 175 hours per month. Add up all your store expenses and divide the total by 175. Now take that number and add it to the amount you want to charge for your personal work and you now have your shop’s hourly rate.

You now have a basic overview of how to calculate prices for your products. Here is a simple example:

Let’s keep the numbers simple and assume your store expenses are $875.00 per month. That would be $5.00 per hour for a 175 hour month.

Now add that you are your personal salary. Let’s use $20.00 per hour for this example.

So the hourly wage for the shop would be:

$5.00 + $20.00 = $25.00

The materials for this project cost $300.00 and took 30 hours. Your project price should be:

($25.00 x 30) + $300.00 = $1050.00

At this point, you need to decide whether or not to include an amount as your profit margin. This is important for any woodworking business and should be included. The industry standard is 15%.

For this example, the profit margin would be 15% of $1,050.00 or $157.50 and you add that to get the final price.

$1050.00 + 157.50 = $1207.50 Final Price

It’s a fairly simple approach to calculating product costs based on your overhead costs, and it’s effective. Of course, if your costs are very low, your prices will also be lower and more affordable. On the other hand, high spending has the opposite effect. A good reputation is very important to your woodworking business, so be honest and give good value for money.

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