Margins ????

[Mojo]

I was just wondering if any of you have set percentages you shoot for when pricing materials.
In other words what margins do you routinely apply to fabric and other materials when pricing a job ?

Do you build your prices and quotes based on an hourly figure then add in materials which includes your margins ?

We work off a 45 % markup on fabric and thread/binding. Then we calculate an hourly rate at $ 50 and then take this entire sum and add a multiplier. The multiplier covers our admin costs, rent on the shop, various other expenses and then of course our profit. The $ 50 per hour is a figure we use based on hiring an employee to do the work which includes all employee expenses ( insurance, taxes, etc. ).

I know Catalina Rick is probably one of the very best I know at nailing down entire expenses for a job. He uses Excel and has it down to a science. He can calculate everything for a job including the amount of thread he uses. We use some of his techniques in calculating our costs. He was kind enough to share how he calculates everything and while I thought he was crazy at first, it really is a good way to stay on top of costs and overall pricing for jobs.

With my wife having a masters degree in Math, she has the ability to really crunch numbers and is a cost control and numbers freak. She has all kinds of ways to dissect all our numbers so we can see exactly what everything s costing us.

How do all of you manage your pricing ? Do you have set margins on materials ?

Chris

[baileyuph]

Chris,

Some similarities, but on furniture yd goods, tried for long time to discourage consumers from buying their own (COM).  But consumers understand price better than quality and
workmanship.  So, on furniture, as a consequence, we have to charge for every minute of our time but find material sales and consequently markup difficult.  Our time and mileage cost, get $50 plus mileage when travel is involved.  The gov. figure of .57 cents per is used and it covers the total vehicle cost.  Driving time, etc. is treated as work time.

The vinyls we can still sell and do a markup similar to yours.  These big box stores (Jo Ann's etc.) don't seem to hurt us there. 

I can see where your volume marine type materials purchases offer better protection from discounters but you have to produce when buying in such volume and have a lot of inventory (considerable investment).

At the end of the day (year) on a $100,000 worth of sales, we pay taxes on about 65% of that.

Business is tough, you have to be smart about business, just as much as smart about the craft.

But, in reading, large business have the same issues with cost, overhead, and all associated expenses, as us smaller business people. 

Bottom line for us small business; is watch your time and maintain a high skill base, that enables you to get paid for all your time - selling time included  Time is precious, can't make up for it,  "efficiency is always an instinctive driver is how we conduct business every day!  Paramount, that is, in every decision made.  How one manages the hours in the day - a big or biggest factor.

Your canvas volume and the prices derived is the biggest advantage but it still makes your daily time valuable, and cannot be wasted.

Doyle

[MinUph]

I have had price lists for labor for most of my years in business. It is a starting point for figuring labor only and it is for C.O.M.s. I will discount fabrics if they buy from us. Fabrics are retail price to start and I try hard not to discount this. The upholstery business is not a huge profit business. Fabrics are the salad of the business and where the profit can be.
 

[SteveA]

Materials shipping costs and the time you spend with customers deciding what they want.  They sit on different foams  trying to decide which one they like for a seat and back.  Areas I never seem to get compensated for -
SA

[MinUph]

Spending time with a customer to make sure they get what they want is part of the deal. Sometime I will spend a half hour or so and sometimes 5 minutes. So it averages out. And I don't  really charge for that. It's all part of the overall sale.

[SteveA]

What about when you spend the half hour or more and even visit the residence, 2-3 phone calls, but don't get the job -
Yes you can't charge but look at the time away from your work that's taken - can you average those occurrences somehow ?
SA

[MinUph]

Well in reality you should be able to figure the cost of doing business, how much a job costs per hour on average overhead and everything else that costs you money to come up with a figure of this is how much it costs to product a chair on average. Then add some profits in for yourself and the business and you have what you need to make again on average. I heard a formula when I was first starting out that 3x your cost of goods and you will never loose. I do use this to check myself once in awhile. This all get more and more confusing when payroll is added. I'm pretty much winging it still for the 2.5 yrs with employees. But so far its working.

[SteveA]

Sound advice - and it seems like we all find a way to make it work whatever formula is applied.  Last week there were charts in the paper showing how all these big retail stores are closing outlets all over the Country.  We keep it going and they are folding left and right - slow and steady is the formula - never rich but always find a way to pay the bills.
SA

[RiCat]

This is a fascinating subject for me on the cost and time involved with conducting business. The main question is, "how much money is being made"? I have a theory that everything involved with a job has a cost and it takes the price of the job to pay the cost. Problem for me is charging the fair price - determined by how much I want to make off of the job - that covers all the cost. A fact told to me by my sister - she being a old school book keeper - is if one is honest with oneself and not afraid of numbers, numbers can tell a true story. Like Chris shared, I try to track everything I can on cost and time. With the excel spreadsheets I have developed, what has gotten me to the point I am at with them now is asking questions and then seeking the objective in a spreadsheet to find the answer to the question. The thing I see that has to be addressed is what is taking away from the base price of a job. Material cost with markups - for me - is the easy part of it. The time issue is the hard part. I keep very specific spreadsheets that calculate - per job - bench time to do the job, then other time factors involved. Admin, cleanup, load / unload, final cleaning of project for delivery, travel time. Each one of these category's carries a specific cost per hour charge. Other than bench times to do a project, the thing I really like to see on the spreadsheets is the averages. Especially admin time elements. The time spent on admin can be very interesting to examine with numbers - from initial conversation of project with customer to depositing the check in the bank - these time totals per job, broken down then to averages, compared then to total job cost, that figure can then be inserted in a initial estimate to start with. With keeping careful notes during a project, and then reviewing these notes, I then have a very reliable source of information for future project estimates that are like what I am estimating. It is like building my own time charts for upholstery.

I have developed a extensive per job work order that does these calculations automatically that I am going to test with a close friend that has a cabinet shop / custom wood working business. If I let him give me input back to tweak it, I might try to market it later on for service oriented businesses.

Rick