Cost of Doing Business

[Glenn]

Cash flow goes in two directions. We should try to keep it flowing in the positive direction if at all possible.

One of the things I have not seen is now do you arrive at the cost of your product ?

Fuel cost for the forge, Utilities cost, Equipment cost, Labor cost and Stock cost ("FUELS") all must be paid before there is any profit. All "FUEL" must be in place before any stock can be cut or bent, and it is paid for up front by you. Also notice that all "FUELS" are labeled "cost" as in no profit.

The equation is now FUELS

You also have to add Transportation costs (T) to the mix. You go to meet with the customer to work out the details, and then deliver the finished product to his door. Your also running your truck to the steel yard for stock, so you have costs of the truck, insurance, gasoline, oil, tires, etc. You giving all that away ?

Oh yes, Insurance. Who pays when you get hurt? Or someone else gets hurt and wants you to pay?

And you want some profit in there somewhere.


The equation is now FUELS + TIP

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I would like to see how you folks go about the business of business.

UP FRONT
Give us your next project and your selling price up front.

THEN
Keep complete and acurate logs. Show us all related costs on that project. All - every little bit of the Fuel, Utilities, Equiptment, Labor in hours, Stock cost, and Transporation in miles. We can estimate insurance. Oh yes the labor in keeping track also. All this is COST - NO PROFIT. This is your "CODB" Cost Of Doing Business.

We can then subtract your CODB from your selling price and the difference is profit.

Now there is a challenge - any takers ??
It is only for one project. Should be real quick and easy. But be fair and count every bean - no freebes.

[HWooldridge]

I may not fit your request because I do very little custom work. I don't figure any materials in the job but figure out how long it takes to me to make something and divide into $100/hr then that's what I charge for a finished piece. If the piece doesn't sell at that price to the public, I drop it from my website and catalog. Even if I like making a piece, I won't continue to develop the process if I think it takes too long to make. I build all sorts of jigs and fixtures to make things go faster and almost all of my 22 years experience is in production work.

I don't like to make one of anything - although that does come along on occasion. For instance, a local ornamental ironworker asked me to do some custom piecework. He had no ability to do the job because it required a power hammer plus I charged him only $50/hr as I thought I was doing him a favor. However, no good deed goes unpunished since I got the distinct impression it was too much money so I've decided not to pursue that any further.

If you want actual numbers for a product, I'll give you an example. 1/4x12' CRS square is $3.75, which yields 12 pieces 10" long so steel cost for one S-hook is $.313 each in material cost. My gas forge will run about 40 hours on 25 gallons - at $60 per tank, that's $1.50/hr. Steel and gas come to $.81 each so that's $6.19 each. I can make 30 hooks an hour without killing myself and I sell them for $7 each. Total material cost is $24.30. That's $210/hr gross minus material = $186 but that doesn't count time to finish, which is another hour, so for those 30 hooks I'm at a little less than $100/hr.

For what it's worth, a local guy who does nothing but custom gates and rails told me he figures 3 times material - but he is getting a lot of work and complains he is not making any money so I'm not sure that is a good formula.

Electricity is practically nil for me and all equipment is paid for so I don't count that but vehicle fuel and that other stuff you mentioned does add up - sounds like it's time to get a real job... :mrgreen:

[JPH]

Hello:

I have cost wise about $35.00 and change in my "average" sword. Blued steel and wire wrapped grips a few dollars more. I sell all I can make at around $650.00 or so. It takes me about 4 1/2 hours to make a sword. A little longer for blued steel...the bluing takes aout 1 1/2 hours, but that is time in the soup, so I am more or less free to do other things while it cooks.

I am not rich but I am comfortable. I do not need to advertise, folks hunt me down...Granted I have been doing this close to 40 years now so...someone just starting out will have a lot rougher time of it.

All comes down to the work itself I guess. Good work pays, shoddy work does not...

JPH