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I am in the process of turning my bobby into a business. I thought I'd share my findings and experiences.

My hobby is blade smithing, straight razors in particular. That's what I am making a business in. I still have a day job, though I am currently working 4/5, and 1/5 on my blades. Before I did this, things were pretty much the same, though I got less things done. Might be I will need to go 5/5 again, but then I can still do this in evenings and weekends.

Starting of in the hobby phase is good, because I can re-invest all money I make into the shop. I don't rely on this money for making a living. Plus I get normal benefits at work through my day job. There is no risk to me. this means I can reinvest everything, and also take on interesting projects that may take more time that I anticipate.

I registered as a business owner, and got myself an accountant. This costs money, but you get someone to give you qualified advice about what you can deduct as an expense, how to create invoices, and many other financial things. Formally registering as a business also has the advantage that you can register things as cost, and (partially) deduct personal costs you'd make anyway, such as e.g internet and other things. The accountant can also do my taxes better than I could do myself.

I use facebook, twitter, a personal webpage, and participation in topical forums to put my work out there and to market my products. If people don't know me, they won't become customers. I also put some thought into which demographic I wanted to reach. I make functional works of art. This means I have to invest in design, and high quality standards. My prices are high, but then I also need a lot of time per item. This is not better or worse than other approaches, as long as you put some thought in where you want to go, how you can get there, and what this means for your business.

One of the benefits I have is that I don't have to perform works via contract. I make something, I sell it, and I get the money in full before I ship it. My only issue is people backing out. This happens, though rarely. I never ask for an advance payment. People backing out is rare, and when it happens I can sell the item to other people without a problem. It also means that I can work as if I am beholden to no man. Another benefit is that I have no legal obligations, and I've found that especially in the more high end market, people with money, especially senior people in the communities I am part of, appreciate being taken as men of their word.

In the blade world, you also have to build up a reputation and a brand name so to speak. This takes years. That is another reason why starting from a hobby and doing this as a limited part time business has the advantage. Initially you don't have long waiting lists and not always a lot of well paying projects. That doesn't matter, because you don't really need the money. You can do it for the enjoyment of the art. After several years, when you have a good rep, and a steady influx of projects, you can turn pro if you want, without a whole lot of unknowns. Because then you have customers, processes, suppliers, fans, a reputation, etc. You can switch from hobby to pro without a whole lot of risks and unknowns.

That is more or less the plan I am following. I am in no rush. In 15 years time, my mortgage is paid and my kids out of college. By then we have far less costs than we have now, I will have a good view of how much I can earn on a monthly / yearly basis as a bladesmith, and we are in a place where we can deal with less month to month financial stability.

In the meantime, I have a hobby that pays for itself and for some of my personal expenses.

 

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Sounds like you have a good plan. I've seen many personal businesses fail, not because the person couldn't do the work, but because the person couldn't run a business. Many times it's all the little costs that sink the business, not the big ones. People don't forget to figure in the price of major tools, and steel, but they forget about things like grinding disks, belts, fuel/costs to go get materials and stuff like that. If you don't track all of that as well and account for it in your pricing and billing, it all comes out of your profits.

 

I've seen a number of hobby guys doing welding or construction on the side who think they are doing "great" because they got to stick $50 in their pocket for a small job over the weekend. However when you figure out what all the small things they didn't account for in the bill, it ends up that they paid their own money to complete the job for some one else.

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DSW's comment brings to mind the concept of job costing.  Everybody tends to under estimate what it takes, labor, materials, consumables and overhead to perform a job.  The only way to mitigate this tendency is to keep notes everytime you work on the project.  At then end total up everything used including your time.  Don't be surprised if that 20 hour job really took 35.  It is all part of the learning experience.

Edited by LawnJockey
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You may know about this site already, but just in case. www.badgerandblade.com that is where I go for info on straights, and a Gillette safety razor I recently found at a thrift store. Turned out it is a cased Executive , the only fully Rhodium plated razor they made, and for only 2 years -1949, 50. My $4 investment is worth more like $200-$300 today.

 

When I had my machine and fab shop I was able to cash flow the whole operation-zero debt.  Keep it small, and grow the business as the money comes in.

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Iforge has a member who has been posting some comprehensive writings about doing business, from figuring overhead, bidding, performance, etc. etc. Very comprehensive posts from a professional. Darned the TBI I can't recall his name/handle.

SnailForge: It is refreshing to see someone who actually HAS a plan and knows he needs to refine and develop it. Too many people have an idea but no plans and are sunk before they start.

Starting as a semi pro hobby is a good method. As you say, you can build your expertise while building a "Brand" and clientele. Hiring an accountant to show you how to count the beans is really important unless you're already well versed in accounting. We like to take shots at bean counters and what they someties do to an otherwise viable business. Truth is if you're going to go into business counting beans is the only way to be successful. Just don't let them make too many decisions, business is their forte, not blades.

Ease into it brother you'll do well.

Frosty The Lucky.

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I know badger and blade. I don't go there because I am administrator at straightrazorplace.com.  There is bad blood between the respective owners of those 2 sites, and as admin this could cause problems. And for info on straight razor making, we have a lot more info and makers. We have a vast workshop and forge section dedicated to razor making.

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Oh yes I forgot: about counting beans.

For every single thing I make, I fill in a little report card I made myself. On that, I note down the cost of material, cost of handle material, cost of consumables (belts etc). And also the number of minutes on each step: forging, rough grinding, finish grinding, polishing, making scales, etc. All of that goes into a spreadsheet that takes those numbers an tells me how much I've made, and how much I've made per hour.

This way I can identify the areas where I spend the most time, and optimize there. And it also allows me to make better estimates. After all, a fixed handle hammer finish razor is a lot faster to make than a suminagashi razor. But regardless of what I make, this way I can come up with a realistic price for each tpe of razor I make, after a couple of razors, so that I make the minimum amount per hour I have set for myself.

This is after all a business. No matter how much I like this, a business has to be run by the numbers.

I have set myself a minimum rate of  dollars per hour. I am sure that many people would think that with that rate, I am getting rich. But those people have not thought about paying VAT, paying social security on the profit, and then giving the final pound of flesh to the IRS. If you can't gross 250 - 300$ per day, you might as well quit, because after paying all thos things I've mentioned, what remains is a whole lot less.

Edited by SnailForge
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Doing that shows you are well above the average guy trying to turn a hobby into a business. Heck I know many guys who work FT who don't go into that sort of detail on records. Sounds like you may manage to do well at this if you stick to your plans.

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For every single thing I make, I fill in a little report card I made myself. On that, I note down the cost of material, cost of handle material, cost of consumables (belts etc). And also the number of minutes on each step: forging, rough grinding, finish grinding, polishing, making scales, etc. All of that goes into a spreadsheet that takes those numbers an tells me how much I've made, and how much I've made per hour.

What format is this spreadsheet you mention? I would like to see a blank copy if you'd be willing to share. I'm starting to keep notes now as I plan to start selling some things in the near future and I think seeing what you have come up with might be helpful.

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It is not complicated. every project consists of the same steps when you get down to it:

forging, rough grinding, post HT grinding, polishing, making handles, sharpening. those columns are all in minutes. if a columns is not applicable, simply put a 0

then there are cost columns: steel, handle material, misc (pins etc), consumables (belts, charcoal in my case, etc)

Then you have a column for the price, and in the results you have profit per hour, and total profit.

total profit is price - sum of all cost columns

profit per hour is total profit divided by the sum of the time columns converted to hours

The sheet also contains customer details, date of sale, a unique order number, a link to the pic of the finished product, and a status of the order (waiting, in pogress, ready, paid, done, held, cancelled)

From the very moment  start a specific project, I make a slip of par on which I can write the number, and the paper goes in a small plastic box tha is large enough to hold the blank during each phase of the project, together with the scale material, pins, etc. That way everything stays together, and it is easy to store many projects without losing things.. This is also very easy forthenon commissioned projects. I regularly make razors according to my own design, and I stop after the heat treatment or finish grinding stage, and I just put the boxes away. That way I have a small stock of things to be finished upon customer request.

 

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As to the financial side:I don't haggle. I calculate the price of a commissioned project up front, and I don't back down from that. It will cost what it will cost. If that is a problem, I will work with the customer to change the design or he materials to cut costs, but never ever do I lower the price without simplifying the design. That is just bad business, and tells your customer that you were overpricing to begin with.

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Thanks, I'm gonna put one of those sheets together. Even if I don't make a sale I think it could be useful to keep up with all those details anyway.

Picts can also help, especially if you take process picts each step of the way. Along with this notes as to lengths of stock and size, lengths before and after certain steps like how much stock you needed to draw it down to a certain length for say a tenon, how much a bar shortened when you slit upset and drifted etc. This can be a great asset if you need to reproduce an item later after an extended period of time.

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About pricing and never discounting a product. Truer advice has never been given, lowering your price only causes the customer to think you'll go lower still. NOBODY buys something like a hand made straight razor because they're cheap. If you were to lower the price cheap is exactly what the customer would think it is.

I know I've said this till folk are getting tired of seeing it but we who make hand forged products are selling bragging rights, there's almost nothing we make that can't be purchased at a hardware, home decor, garden supply, etc. People buy what we make because they WANT unique, one off hand made and if they're not willing to pay the bill then they really don't want it. The world is full of looky loos, I'm not about to price my product for them. Let them go kick tires in a discount store.

How's that from a hobbyist? Well, I have the occasional lapse and folk are usually willing to pay me dearly if they can talk me into taking on a commission.

Frosty The Lucky.

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DSW, you make a good point, I'll have to try to think about pictures during the process and detailed notes from now on.

Frosty, I just tried to explain that very thing to my father in law recently. Because I'd like to make a little bit of money on knives I feel forged is better. He tried to convince me to just buy the steel and cut/grind out the knife from the raw bar. I told him almost the same thing you did, people are going to pay better for a quality forged item than they would for something ground out. If they wanted something like that then why pay me a bunch of money when they could go buy one from the store for less.

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DSW, you make a good point, I'll have to try to think about pictures during the process and detailed notes from now on.

Frosty, I just tried to explain that very thing to my father in law recently. Because I'd like to make a little bit of money on knives I feel forged is better. He tried to convince me to just buy the steel and cut/grind out the knife from the raw bar. I told him almost the same thing you did, people are going to pay better for a quality forged item than they would for something ground out. If they wanted something like that then why pay me a bunch of money when they could go buy one from the store for less.

Then don't try to convince him, he has his logic and it's intuitively sensible. As a last word if he brings it up again just say you're not marketing to the WallMart set and not say any more. The less I say to my Father in Law the better he likes me. NO fooling.

Frosty The Lucky.

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Thankfully my father in law actually has enough respect for me and my views about things I have some knowledge about (as I do him) to not argue with me. We discussed/debated the topic for about 30 minutes and I think he either finally understood my logic or he just decided I knew a little more about this than he did. The same happens when we go to build a house I'll say 'hey, why don't we do it like this...' He will explain it to me and I might debate a few points but at a certain point a shut up because I realize his 35+ years as a home builder means he knows more than I do with my almost three years of experience. My problem is when the mother in law starts. That's when I sit there and 'listen' and 'agree' with everything she says and then wait till I'm well outside of earshot before I even think anythin bad lol.

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You're right: forging does add some 'je ne sais quoi' to the steel. At least from a marketing point of view.

That said, forging the blank to size makes a lot of sense for razors. Razors have a thick spine, a thin edge, and a tapered tang. I can hammer out a wedge shaped blank with a tang and tail in far less time than it would cost me to stock remove that awful lot of metal from a 1/4 thick piece of stock, which would also cost me a 40 grit belt.

And if you work with expensive metals such as Damascus steel or suminagashi or wootz, the difference in required stock can have a substantial impact on the price.

I know of 3 razors that were made in Pendray wootz by a stock remover. I cannot fault the quality of his work, that is functionally without a fault. But the fact that more than half the wootz ended in his grit bucket still makes me cringe. I could have made 3 razors from the whatever was ground away. Well, not after grinding of course, but there was enough stock for 6 razors instead of 3, if the blanks were forged to size.

Edited by SnailForge
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Great thread, and thanks to Snail forge for raising this. I am planning something similar in the not too distance future and would like to develop a range of hobbies and bring them to next level so to speak. I have a two & three year old kids to raise and also taking on a mortgage. Bit of a hill to climb I know but I believe an extra income can only help. I want to be proactive and go about it the right way and avoid a stinker of a bill from the tax man..I just need to be careful.

Edited by HIGHSIDER
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Snail, how do you figure your power for your shop? I get my power from my house meter and have debated on getting another meter just for the shop but haven't done it yet. There is a minimum bill from the power company and I don't know if I use enough to  justify another meter.

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M Cochran,

Overhead like utility bills should be accurately calculated in proportion to their cost.  What I mean is, if you've got a minimal monthly electrical bill, it's probably not worth the trouble and expense to figure things out to the kilowatt hour for the shop versus the house.  That being said, there can be significant utility swings depending on the season.  I'd recommend taking the past year's total to work out an average overhead cost so you're able to accommodate those costs.  It doesn't do much good to sell something when rates are cheap, and make something when rates are high. 

Your time is worth quite a bit, so you don't want to get in a pattern of spending hours analyzing data that's consistently worth less than your time.  If you make an investment to figure something out, it should pay dividends by simplifying matters thereafter.

If the electrical bill is high enough to merit greater investigation, there are some options.

There are watt meters you can plug in between the outlet and the power tool to get a handle on what they're costing you per minute, hour, and so on. 

If you know a local electrician with a clamp-on Amp meter, they can conduct a few tests to define the running KWH rate of each piece of equipment.  Once you know that answer, you keep track of time and your local rate to calculate the cost.  Stuff like compressors and welders have duty-cycles that drive nearly all the electrical cost of using them.  So even if they're "on" all day, they might only run at full load a fraction of an hour.

Finally, it's often possible to install a shop sub-panel meter which will report energy usage.  They're called "EMON DMON" meters. Depending on the size of the loads involved, you're looking between $500-$1,000 installed cost.  Splitting  a residential electrical service will typically cost more than that, and some utility companies will not allow it unless there's a separate address.

 

 

 

 

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Thanks, rockstar, my power bill has been up noticeably and I've spent a bunch of time in the shop lately. I honestly didn't plan on  spending time each month trying to figure power usage in my shop just looking to figure out an a arrange. That said, thanks for the suggestion of an emon dmon. I also have an electrician friend so I might go that way instead.

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M Cochran,

Glad to help. Just make sure your monthly average factors the seasonal fluctuations in energy costs.  Stuff like HVAC tends to make electrical bills higher in the summer and gas bills higher in the winter.

Once you've got a full year under your belt, you can check your overhead averages against the actual costs, and make corrections.

You said you noticed a big jump in the bill, if you can estimate the amount of hours you were in the shop for that month, you could do a rough calculation on the difference you saw in the bill.  That would provide a handy check number against your other calculations.  Of course that assumes your home's electrical usage is consistent.

If I lived closer, I'd be happy to help.  I'm glad to hear you know an electrician. 

 

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