Quick and Dirty Rough Pricing

      Thoughts on how to price before you've learned how to price. December 14, 2009

Question
I am looking for rules of thumb for pricing kitchen cabinetry. I'll be using pre-made doors and building the boxes. The client wants to keep some painted boxes and put new cherry doors on them. How can I convince her to start from scratch?

Forum Responses
(Cabinetmaking Forum)
From contributor A:
Material Cost + Labor Cost + Overhead Cost + Profit = Selling Price

That's about as "Rule of Thumb" as it gets!



From the original questioner:
That is what I typically do. I should have been more specific. I was thinking about
price per linear foot. Does anyone have any formulas for price per foot using someone else's doors?


From contributor B:
The problem with Rule of Thumb is what does a "foot of cabinets" consist of? Uppers, lowers, uppers and lowers, corner cabinets, tall cabinets, melamine, particle board, cherry plywood? Radius corners, furniture feet, pilasters, corbels? Roll-out shelving, or adjustable shelves? Plywood or maple dovetail drawers? 89 cent epoxy guides or soft close guides? Crown or no crown or stacked crown? Finished or unfinished? Installed in a small town in the Midwest or an apartment in New York City? There are just too many variables for a thumb measurement.


From the original questioner:
OK, point made. Thanks.


From contributor C:
Give her a price for the doors and then charge time and material for installing on old cabinets and whatever work you need to do to the old cabinets. I try and give my customers what they want even if I don't agree with it. If you insist on all new, you could lose the job completely.


From contributor D:
Are you cutting the parts by hand or with a CNC router? Do you have employees, or are you a one man shop? I understand what you are asking. I also would like an easy, simple way to price a job but like contributor B said, there are just too many variables.


From contributor E:
The information contributor A gave is the true story of how it is done using sound business principals. Some guys have it totally together and actually write business plans, study business, determine their monthly overhead, decide on a profit margin etc. before they actually even go into business.

The rest of us who have surprisingly succeeded in spite of ourselves have learned how to bid and make money doing woodwork the hard way. We have taken jobs that earned us less than we wanted to make per hour along the way. With each job we completed, we had a clearer understanding of how long certain procedures take with the equipment and tools we work with daily.

I do have to say that there actually is a rule of thumb that has been around forever and was told about when I had to ask the same question out of my own inexperience some thirty odd years ago.

The rule of thumb is:
"One Third Materials, Two Thirds Labor"

It is a desperate measure, but when a guy is starting out he often doesn't know what his overhead is and what his profit should be. That leaves labor and materials to contend with. I hope no one lectures me on how this rule of thumb is as full of holes as a picket fence because I realize that, but you can use it as a starting point.

Figure the cost of all your materials and then triple it. Now sit down and start to visualize the labor involved in the job. Break it into each phase and based on your experience and memory, start writing down a running tally of your estimate of the labor hours for each phase. Multiply the hours times the amount you need or want to make per hour. Add that to your known materials cost. Compare that figure with the simple tripled materials figure. Now you have an educated estimate on labor and known materials cost as well as an estimate based a very iffy rule of thumb.

Since you are just starting out, the chances are (based on my experience) that your estimate of your labor hours will probably be way less than the time it will actually take you. Again, for a guy just starting out, using all of the above to arrive at the figure you will finally give to your customer is:
One Third Fact
One Third Gut Feeling
One Third Voodoo

I hope you get this job and learn from it. If you earn even half of what you want per hour on your first job, you did well, in my opinion.



From the original questioner:
We have always used contributor A's formula:
"Material Cost + Labor Cost + Overhead Cost + Profit = Selling Price"

But, as noted above, there is always a homebuilder who tests you with "how much per linear foot", and I reply with "Do you have any plans or specs?" I run a two man shop and hire on temp help when I need it. We mostly build built-ins and custom furniture, and those things are priced also with the same formula.

When you get cornered by a client or builder and whether you get the job or not depends on a question or two about ballpark pricing, it's nice to be able to show them that you know your stuff, off the top of your head.



From contributor F:
I use this rule of thumb a lot, but sometimes you have to realize that if youíre not buying pallets of wood, you're getting a higher price than your competition. Therefore you canít compete on price as much as you would like.

Iím just getting started in business so I wonít claim to be an expert. I sometimes donít make as much as I can and bid low in order to get the job. I sub out a lot of work if Iím busy (not assembly or installation, just parts). This way, I can meet deadlines more efficiently and keep the work coming in and going out.

Therefore, my materials price may be higher so profits are down, but I got the job I look forward to the day when I decline a job because itís not as profitable as I want. Itís important to weigh your goals when pricing a job.



From contributor E:
Whenever a contractor or a customer asks or pressures me for a ball park number or rough estimate, etc., I politely tell them that I don't have enough information and it would be a disservice to them to quote a figure at the moment. I explain that I need to have all the facts about the job under my thumb in order to give them factual pricing. Once I have all the drawings and specs, as well as knowledge of the job site, I give them a real cost.

This works for me and the type of clientele and grade of work I am after. I avoid lineal foot pricing altogether. Even if I take my cost from the above method and divide it by the lineal foot, it is not reliable due to tall cabinets, differing heights of wall cabinets, etc.

Typically people who would ask for a linear foot price are shopping for price alone and not my market.



From contributor G:
To me, the best way is to get close to the contractor and sell with the price you can get away with (it should be higher than your cost calculation). Keep yourself close to the contractor. Remember, even if your price is the best in the world, you cannot get all projects you bid, period! 80% of your sales come from 20% of your paying clients.

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