Pricing Example: a Simple Cabinet

      A simple pair of free-standing cabinets, with a long discussion on pricing, bidding, and relating to a competitive market. July 5, 2006

Question
Now I know what it's like to be outbid by a garage shop. No offense to those working out of a home shop - I am doing the same, but I am running a legitimate business and have to make a living. We all started somewhere and it wasn't long ago when I was doing it on the side and fairly cheap. But, the clients I did work for were generally people I knew or through someone I knew and weren’t looking for a competitive bidder. They only had it made because I could do it cheap. Otherwise, they would never have had it made. Maybe that doesn't make it any better, I don't know.

Anyway, just for example, I have attached a picture of a unit that somebody just had me bid on. She actually wanted 2 of them, 96" tall, the bottom unit 24" high and painted black. These were roughly $1000 each in the book. I bid $3200 including a black lacquer finish. I lost the bid to some guy who is doing them for $1200 for BOTH! I had $800 in materials alone. It wouldn't have bothered me if the guy had come in just under my bid at $2800 or maybe even $2500. But, how could anyone possibly make those for $1200 a pair?

Sorry for the ranting, but is my price way too high or is the customer just too cheap? I could have dropped my price by probably $400-500 by letting the customer do the painting themselves, which they mentioned in the beginning. But, no way could I match that low of a bid unless I give them away.

Just a word of advice for the hobbyists - if you are doing woodworking on the side to learn the trade or just keep busy, that is fine. Charge a fair rate and enjoy what you are doing. If you are advertising trying to obtain business, please charge at least a minimum going rate. This is what will put shops like mine out of business. Larger, established shops can afford to lose some bids because they are probably pretty busy to begin with. Small shops like mine rely on job to job.

I am looking for advice on this. I really tried not to take this bid loss personally. I just don't have the luxury right now of losing bids. But, I refuse to give away my work just to get a client. A discount maybe, but I figure $40/hr is already a discount for custom, one-off furniture.

Forum Responses
(Cabinetmaking Forum)
From contributor A:
As another small shop, I would have probably bid them at about $1200, each, with no painting (I hate painting, and if the customer volunteers, that would be great for me). You might consider following up after they are built and see if you can take some pictures of the finished product. By the way, what was the time frame for building them? I’ll bet the schedule doesn’t get met.



From contributor B:
I wouldn't lose any sleep over a lost black lacquer job. Learning how to pass over cheap clients is a good thing. Your price was in line.


From the original questioner:
Thanks for the response guys. Actually, we didn't get far enough to discuss a timeline. I bid what I thought it was worth assuming I started the next day and had a normal time frame to complete the job. If she would have come back and said I need them tomorrow, I would have told her it was going to cost her more for quicker service.

I could have seen doing them for that without painting. But, like I told her, I prefer to do my own painting since I can spray it and it shows my work better than someone brushing crap onto my work. Nothing wrong with a nice, brushed on Impervo or other high quality enamel paint. But, most people don't know how to brush it on that well. I am actually pretty good at doing that, but would still spray it because I can. If she would have come back and asked me to drop my price, I would have thrown that out and done it all primed. I refuse to deliver unprimed furniture.



From contributor C:
Your price seems fair to me and about the same that I would charge. (I'm a one-man shop for reference.) Don't waste time worrying about the ones that got away, unless they're all getting away. By the way, that's a pretty cool piece - a nightstand with a bookcase on top.


From contributor D:
I have one question for you - how you came up with $800 in materials? All I see is about $170 per each in materials.


From contributor E:
You were right on. What I have found is that most people do indeed expect a cheaper price from a shop. That being said, what are your business practices? I have purchase agreements with suppliers - in exchange for my loyalty they give me good prices (and I will not cheat them). I use only suppliers that have a big web presence and do not sell retail. I buy 500-1000 dollars at a time it keeps me competitive and I can point my customer to that web presence, giving more sales power.

Sales staff at my product manufacturers’ know my name and business. I have agreements to use their logo on my business cards etc. - more sales power. If a company offers training and I can afford it, I go - no questions asked. Once your supplier knows you are serious, so do architects and designers (they communicate more than you know). I use my suppliers as a reference for bigger jobs. How about Design software? Do you have any?

Another item is this - according to my plan I should handle two to three kitchens a month or equivalent work. I expect to earn (net salary) 3800 a month. That means my profit margins need to be adjusted for my salary and my expected workload, not what I have today, but what I will have in a year. This really hurts in the beginning. I could produce those for around 500-600 no problem 1 full day (12 hours) in the shop, 1/2 day with my sprayer. The doors would be ready to install in one week assuming you are using MDF because I bet that is made out of machined MDF then covered with a shellac primer or clawlock and then sprayed latex or catalyzed lacquer.

If I had a lot of stuff going on I would shoot the cutlist to my supplier and get the pieces cut and edgebanded (if it was melamine) for about 7 dollars a part. Then I could spray and assemble or just assemble. I guarantee the measurements would be right on. If they would have been okay with Melamine (which I would have offered) I would have cut it out in a day, and there would be no issues of quality of workmanship - maybe material – but that's not my issue.

Right now I am booked through June, and I am not the cheapest guy around...as a matter of fact about 40 minutes ago I just referred someone to the other guys, (they have a shop) because I don't produce that kind of stuff at that price range.

Always take a look at your practices and business model. There is always room for improvement. After all, when we work from the house our overhead should allow us to build the business to suit our markets.



From contributor F:
Chin up - maybe when Uncle Bob's Hobby shop gets done with this thing it'll tear itself apart in a year and she'll be back - or maybe not. The point is you stuck to your guns, your business plan, and your wallet. It’s not your customer, at least right now anyway. This is the same feeling I get when someone comes to me and says "I just went cabinet shopping at Ikea - what can you do for me". The answer is probably nothing until we re-focus them on the budget. It’s a numbers game, you need to find those 20-50 people a year that are going to recognize the quality of your work and want to pay for it - the rest are just taking away from your time to find the one's you want and that want you. My dad used to call that separating the sheep from the goats.


From contributor G:
I'm a garage guy - licensed, bonded, insured, incorporated etc. It is a great way to hold down overhead. I charge the same rate that the typical shop does in my area. Anything less is not fair to me or the other guys. There are a lot of projects I cannot compete with, and thus I do not. I offer what I believe is the best product and usually is one off that the other guys do not want to take - curved work etc. I learned long ago what I am good at, and what I am not.

Some projects are just not worth it to get in a bidding war, no matter who it is. For your project, I would do it for 2800.00. So you’re in the ball park. Black lacquer and paint I usually avoid like the plague - that gets subbed out. The way I look at it, the guy that won the bid is not going to eat very well.



From contributor E:
I agreed with his price, out of principle. I can produce it cheap, and I have a plan for that scenario. However, I would have charged a around 1300-1400 each. If they want it cheaper then they know where to get it. My business partner and I call them tire kickers and time burglars, and we have strategies to weed them out straight away. It seems to be working as of now.


From the original questioner:
Thanks for the support. Glad to hear I'm somewhere in the ballpark. To contributor D: I looked back through my numbers and to be honest, I'm wondering that myself without going back and analyzing it. It does include maple drawers and fronts, birch veneer core for cabinets, full length sliders, etc. I don't do it the cheap way. But, even if I'm off by a factor of 2, that is still $2800, more than twice the other guy.

To contributor E: I honestly don't know how you could build these at the level of quality I try to achieve for that amount. If you are setup to crank out melamine panels for euro cabinets or something - maybe. But, to me, this is a piece of furniture and should be built that way. No offense, but everyone has their niche. I prefer to aim at the higher end market. A lot of companies like Bush and O'Sullivan probably make a good profit making cheap particle-board furniture. That is the market they aim at. But, that is not why I got into woodworking. I like to build quality furniture. I do use MDF where applicable, but I draw the line there. It will always give the impression that it is cheap.



From contributor H:
If you have $800.00 in material you are buying it at the wrong place. I am a full time shop in business over 25 years. In my area I would have easily done them both for 1200.00, one day to build and one day to finish. Note I said “In my area”. Geography has a big part to play in the difference in our pricing. But you are paying too much for material.


From the original questioner:
To contributor H: You are the second one who has said that. I think I need to go back and analyze it. Even so, just thinking off the top of my head, there is easily $300-400 in materials. I am a one man shop, so I don't have the luxury of buying 50 sheets of ply or a truckload of lumber at a time. I do get my lumber from a local sawmill for about half the cost elsewhere. Everything else is onesy-twosy kind of stuff. That's the cost of doing one-off work. But, there are plenty of people out there willing to pay the price for custom work. I just have to find more of them. Still, I don't know how you could build both of those cabinets in a day. Even with solid maple dove-tailed drawers? Maybe I'm just too slow. But, people love the quality of my work and that's why I take my time and do the best I can.


From contributor I:
It is much better to lose a job here and there, than to lose your reputation competing with Ikea prices. Whoever is building that unit is obviously not going to build it to the same quality you would have, and so the client is the real loser here. My guess is if they have any clue about quality, they will realize they were burned once the unit is delivered.

I wouldn't worry too much about the cheaper guys. In my limited experience there is room for everybody. I am a one man show with a 2k sq. ft. shop and all the expenses that come with it. With any job I bid there are guys who can do it cheaper, and guys who will be much more expensive. If you do quality work that's what will sell you, not being the cheapest around.

I have two separate clients who will wait and pay me more than market rate to do smaller jobs, because they know and trust my work. I explained that even though I'm working at their homes I still have to account for my overhead and they don't mind at all. If I am slow I can jump into some finish carpentry work and keep money coming in. The only problem is I seem to end up making more on those jobs than on cabinetry!

If you’re really that slow that losing this job hurts, you may want to start doing some marketing. Get some nice pictures of your jobs, and get your name around.



From the original questioner:
I have gradually been doing some marketing (i.e. brochures, flyers, website, etc.). I have gotten my biggest response from Craigslist. So, I have focused more lately on keeping that updated. With limited funds coming in at the moment, my hands are tied as to what I can do for marketing. Everything else seems to cost so much. A little while back, I spoke to some shops in the area in hopes of acquiring some turn-down business. Nothing has come of that yet, but it is time for me to get out there again. Unfortunately, that is the most difficult marketing thing for me to do. I don't like soliciting. I know it gets easier. But, it's just not my personality to be a salesman.


From contributor J:
I'm in Jersey and I am just a woodworker. I don't sell anything to anyone, so I'm out of the pricing game, but I can tell you that if I bought the material to make that for myself (and it is pretty nice looking I might say) I could make them for less than $200 in material using solid softwood or $250 for hardwood. I could make them in just about any local species for that money except walnut and cherry. My price would go to $300 each for that. Now, that is the price I would pay, and I would also mark it up to cover my expenses - joint, plane, drive time, purchase time, and a burger for my sawyer friend. Now, add $40 an hour (which honestly is what I would charge if someone wanted something from me) and I'd say 4- 8 hour days total from start to finish because I am slow. Now you are talking $1280 plus material. I'd be about 2K I'd guess for the pair.


From contributor K:
Don't be surprised if the customer comes back to you after the competition has botched the black lacquer job. I would like to see the look on their face first when you tell them it will cost them a grand and second when they hand you the check.

You should not use the garage shop stereotype. I like to think my quality and service far exceed the local medium size shops. I charge the same rates or higher. Every year my overhead goes up. This year I had to start paying for our health care while they are busy paying for their new edgebander. I currently work out of a historic carriage barn. I guess it qualifies as a garage with a little more grace.



From contributor L:
I would make them out of soft maple. Since I was painting, I might use popular. Maple ran $2.65 a bd ft last time I ordered. I usually order in min of 50 board foot bundles. So for this project I'd figure using:

Approx 100bd ft maple = $265
Slides, soft close = $100.00
Finish supplies = $60.00
.5 ply for the backs = $60.00
Crown, feet, misc = $50.00
Standard shop fee = $20.00

Total of $555.00 for materials plus markup (usually 1.5). The only number I looked up was the board foot cost of maple. Popular would be a little less. The rest of the costs I'm estimating on what I think they are without looking them up. Without figuring too much, I say retail you are about right in the $3200 range. However, I'd caution the customer on the design. This piece will be quite tippy. They really need to use a restraining strap.
I can just imaging little Timmy coming over to Grandma's house and seeing a pretty thing on a shelf and trying to climb on the front. Little Timmy tips it over and you get sued. Wonder if the $1200.00 each guy has liability insurance?



From contributor m:
Since it's black lacquered you'd be a fool to make it out of anything but MDF.

Cabinet - 2 sheets 3/4" mdf- $35
Drawers - 2 sheets 1/2" birch (5'x5')-$40
Backs - 2 sheets 3/8" mdf-$20
Crown/frame/fronts/ -20 ft. soft maple$40
Primer and lacquer-$100
Slides- $25
Total materials-$260 (call it $300 j.i.c.)
Material mark up-$100
20 hrs labor @$40 per hr.-$800
Grand total=$1200 for both

This would be the economy version and I guarantee it would be better than the one in the picture, which is not a "high end" job anyway. You have to be aware of your customers’standards and expectations if you want to cater to different markets. When they showed you the $1000 dollar one in the book you should have realized their expectations and walked away without wasting time on the bid. You should definitely look for a better supplier. You don't have to buy 40 sheets at a time to get better prices.



From contributor E:
I do what is appropriate for the client - not what is appropriate for me.I wish that people would walk in ask for hand cut dovetails and book matched this and all that cool stuff because I really dig it and if I can throw a good twist on job I will, everytime. I don't charge extra. If I’ve got the material or the time they get it no problem. I did not learn how to use melamine and edgeband grudgingly. I noticed a lot of cool stuff was made out of it and I could offer that option to my clients if they wanted it, so I learned how to cut it, edgeband it, etc. I learned the different types all of that stuff.

When I make a sales call I bring my Conestoga Binder, Blum binder a few photos of my stuff and my sample blocks from Roseberg and Panolam. If they want Melamine I will do it up. Face Frames - no problem. Frameless - no problem. Melamine always gets a second look when I tell them the price.

Same as drawer boxes - I have my own, Conestoga and Blum Metabox/Tandem Box. If they want lacquered dovetail drawers, no problem - they pay. If not they can try another option at another price. Custom cabinets are custom to the client not my tastes. I would rather have stainless steel drawer sides with a melamine or hardwood plywood bottom anyday over dovetails.

MDF does not mean cheap. It means smart, recycled products, easy to shape and cut, easy to spray, inexpensive, you name it. Once Roseberg makes a green MDF I will always recommend it first for painted or colored projects.

But I do not misrepresent MDF furniture. I tell the client upfront what it is, why it is inexpensive and the upside and downside of each product choice. That's my job as I see it.



From contributor N:
To contributor M: Do you think you can put a black lacquer finish on 2 of those things inside a 20 hr time frame and $800 labor cost?


From contributor O:
I find that customers have one of 3 concerns when they come to you. Their major concern is either price, quality, or time. They may want all three, a cheap price, quick turn around, and high quality. But when it boils down to it, one is most important when you tell them that they cannot have all 3. Your job is to determine which one of these is most important to them, and see if it fits the way you operate. It looks like these people focused on price. They are more concerned with the price than your quality or timing. You can build the highest quality furniture out there, but if people don't care about the quality then you have fed you ego at the expense of your bank account.

You need to learn to qualify your prospective clients, and quit worrying about someone working out of his garage or what is coming from China. When people come to you with a picture from Pottery Barn, they generally expect you to build it for less. Otherwise, why wouldn't they just buy it from them? If they want something custom, then you need to explain to them the difference between mass production (millions of dollars of equipment and no flexibility in outcome) and a small shop (setup is not dispersed over thousands of units). It is going to cost them significantly more for you to build a one-of-a-kind piece. If they understand that then you should continue talking. If they look down or away, you need to send them to someone else who is willing to work for nothing. Stay away from Black Lacquer! It is impossible to get perfect, and every flaw is magnified. Spend some time understanding your customers. Spend time on the ones that fit your operation and don't worry about the ones that don't. And finally, ask your suppliers if they have an outside sales person, and if they can give you better pricing. Some will give a break to the little guy in hopes of earning his loyalty. And then, look him/her in the eye and say, "Is that the best you can do?" It costs you nothing to ask. The worst thing that could happen is they say "no." The best thing, you could save some money here on out.



From contributor P:
I took the time to draw the cabinets and run them through my costing software. I came up
with a price of $2385 for the two. These were solid soft maple boxes with maple dovetailed drawers. The drawer boxes are clear coated and the cabinets finished with black lacquer. No distressing. I didn't show the black lacquer in the drawings because it hides any details.


Click here for full size image



From contributor Q:
Your philosophy of business determines your pricing. Our philosophy is to make more money now and into the future and to work less doing it so we can slow down as soon as possible and spend time w/our children and grandchildren. In order to do that, you have to price as high as possible. Your pricing looks great!

Just as a side note, I would take contributor M’s labor hours and multiply them by at least $100/hr. = $2000 then double material costs which would give you your bid price. We have been able to inch our hourly up to an average of $150/hr. and sometimes more. It has taken years of carefully screening our work and customers. It can be done. It is true we are in a large city area (Las Vegas) but many of my friends are in rural areas and getting near as much. You find the upper end customers to work for and charge accordingly. At $40/hr I would ask - do you pay all insurances/bonds/licenses? Are you able to replace your equipment regularly - truck etc.? Do you put away for retirement inevitabilities?

I just figured my driving costs yesterday - I get 14mpg in my new diesel van and drive around 100-150miles/day. That's $30/day in fuel which eats up $4/hr. plus cost of vehicle /insurance/repairs/maintenance = $4000/yr. = $20,000 over 5yrs or 100,000 miles = another $.50/mile = $75 or another $9/hr. for a total of $13/hr. for my van alone. Add to that an hourly wage of even $40/hr. would add another $80 (minimum) or $5/hr. for a total of $18/hr. for my work vehicle.

My van makes me a consistent $75-100/hr. every day of my working year when I drive. It is figured into my pricing. I charge a minimum of $125 for a service call. I believe you have to think this way or end up another of the tens of thousands of struggling woodworkers just barely making it – which, by the way, I was for nearly 35yrs! This is just my "reality thinking" that has really changed my outlook on business.



From the original questioner:
Well, there are a lot of varied responses here and I appreciate all of them. It looks like the majority agrees somewhere near my pricing. I could have made some adjustments and got the price under $3K without much of a problem. But, I refuse to reduce the quality of my construction or workmanship to please a cheap customer. I have my standards and if that is too expensive for a particular customer, then they need to look elsewhere or shop at Wal-mart. There is a market for my quality of work and I believe there are quite a few here that will stand behind that.

To contributor E: I'm not saying that you don't do good work. I'm sure your cuts are straight and your joints are tight. And, I'm sure your cabinets will please many customers. But, there are also plenty of customers out there that can appreciate dadoed cabinets, dovetailed drawers, solid hardwood parts, veneered plywoods, etc. I chose to aim at that market. Is it harder to find those people? Yes, at least for me. But, I still stick to my philosophy and if I don't make it, then I will go to work for someone else. I'm not in it just to make money. I don't believe in doing whatever it takes just to stay alive. I do have pride. You chose to be very flexible for a wide range of customers. That's great and works for you. I'm flexible to a point, but I draw the line at competing with IKEA or Home Depot.

As far as MDF goes, I don't have a problem with using MDF in paint-grade cabinets. If you looked at those built-ins, the cabinets were MDF and the hardwood was poplar. They turned out very nice and the customer was very pleased. But, those are hidden in a cubby hole, not freestanding where they can get kicked and dinged.

This has been a great thread. It made me think about my costs, time, workmanship, etc. But, there are enough replies here that reaffirmed my pricing. I just threw it at the wrong customer. To contributor P: Thanks for taking the time to model those. They look awesome! I don't know if that is eCab or not, but it makes me want to spend more time learning it. I use Inventor to do my designs because it is what I know and gets me the results I need. Unfortunately, it is just a modelling program and has none of the cabinet-specific features that I really need to be efficient at getting a design down all the way to a cut list. I always end up doing that manually. Anyway, thanks again. I don't feel as bad now about losing the bid. It was just the wrong customer.



From contributor R:
To contributor P: Did the costing come from E-cabs or something else? How much info can you pull form that drawing - material list, Cut list, drawings, nesting etc.?


From contributor P:
That was done in eCabinets. Make sure you get a copy of Version 5 when it is released in the next few months. It is going to be truly spectacular software. You won't have a need to use anything else.

To contributor R: From the drawing you get a complete bill of materials, cut list, line drawings, sheet optimization, and all nesting info for a Thermwood machine. It will also do your complete job cost and automatically place an order for hardware, outsourced doors and drawers and other components if you wish. At present I don't like the way eCabinets calculates labor costs for very custom work ( hoping to get them to change it) so I use eCabinets to get my material cost and use info from the eCabinets drawings in a spreadsheet I created to calculate my labor costs. I then use eCabinets to write the proposal for the customer.



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