I would like to know what others think about working for friends. I am full time military and I have a small business setup for custom furniture. Do you charge the same rates as normal customers? I gave a friend a price on two Honduras mahogany bookcases ($500 materials and $350 labor each bookcase). He wants to get the price down so he mentioned he would like it in maple instead. That would drop the bd/ft price from $10 to $4. I also did up a CAD drawing after I received a rough sketch but he wasn't happy with it and wanted some changes made. How do you incorporate charging for your design time? Between sailing, other jobs, family and work around the house I am busy enough. I don't want to work for $4/hr (I have done that before). Any input would be appreciated.
(Business and Management Forum)
From contributor A:
Treat him like a normal customer. You might want to search this forum for pricing information. There are many different ways to do it, and there have been many good discussions on the topic. However, for the sake of time (reading all of them will take you quite some time) I present the following.
One method is to add up all of your material costs (don't forget glue, screws, etc.); add up all of your labor including design and delivery time, include your overhead costs (electric, shop rent, insurance, or whatever applies), then add on a markup for profit. Yes, even on the raw materials. They didn't magically appear in your shop did they? Count all of the labor: design, picking up materials, client meetings, actual woodworking, all finishing, delivery, installation (if it applies).
Another word about your costs: My clients never see any breakdown of materials, labor, etc. They get a delivered (or installed) price. If they want to make changes, then I compute a new price on the new project. Also, if I can buy wood at a wholesale price because I have established myself as a professional business, obtained a business license, insurance, hired an accountant, hired an attorney to set up my corporation, etc., then I am sure not going to pass along the benefits of receiving a lower price to someone else. So, yes, the raw materials do get marked up.
You may be tempted to lower the price for a friend, but if you expect to be treated as a professional, then run your business like a professional. I lowered my prices for a friend when I was getting started for a short period of time. It helped me set up my shop and get some of the bugs worked out. Once that was done, I conducted business professionally, even with the same friend. There has not been any strain on our friendship. If you do not want to work for $4/hour then do not do so. It is your business. You get to set the rules.
For close friendships that have included sacrificial help I am happy to cut them a deal. These very close friends are usually rare - but there have been a few who have treated my family in such a way that I feel that I would not be able to pay them back. For these dear friends I am often happy to do things for them if they desire. Of course, true friends are unwilling to take an advantage of you, so usually they approach you desiring to pay. Sometimes I will knock myself out to make the project more than they expected.
Don't forget to treat your neighbors well, though. I saw up a sheet of plywood for a retired guy down the road once in a while; he builds furniture in a tiny shop and hasn't the space or a cabinet saw. He brings me all his wood scraps now to burn in my shop stove.
Based on my current costs, you're marking up the wood. That is good. There are costs involved in getting it in your shop that are not covered without a materials markup. One rule of thumb that seems to work in most shops is material is someplace between 20-30% of the total cost of the job. That is for a quick estimate. All formal estimates get a work up. And this mahogany versus maple distorts the 20-30% material to total ratio - but only on the mahogany end, not the maple.
I break down each step from initial design to cutlist to milling to sanding to assembly and so on, until I get to install. Then I estimate time taken at each step until the project is complete then total time up and multiply by the shop rate. The reason I'm going through this is because if you are a part time woodworker who is doing this professionally, and you have all the tax stuff and insurance etc., then you are worth much more than you are charging. Commercial shops charge $50, $75, $100 and more per hour of labor. I know you have much lower overhead than they do but pocket the money, not undervalue your skills and abilities. It hurts not only you but all the full-time shops in your area. You will find that even at such an outrageous price, if you are good, you will have more work than you want.
Of course, all this assumes that your part-time business is a true business endeavor and you really want to make money doing this. As far as doing work for friends, that is a personal choice as to what you charge. I found that one of three things happen: full price, materials only or free. If they change from mahogany to maple, the labor is the same, so only reduce the price by the material change.
As to pricing breakdowns, why should that be a secret? If you are a professional then by definition you are in it to make a living, and also to make a profit. Why not show somebody - this is my cost for these materials, this is the mark-up, this is my shop rate, this is how many hours I think it will take, this is my profit margin? I think that most people can understand this, particularly other professionals like architects or contractors. I can see where refusing to show this could make someone feel they are being cheated. I have at times used my bid sheets to support my price, i.e. this is what it takes to do this work to the standards that we hold to, and if they are getting a lower bid elsewhere, where are the other bidders cutting corners. If they want a lower price, it has to come from simplifying the design or substituting materials, not from my margins. For example, if someone sees that you are allotting 15 hrs to do the bow front on the center section of a vanity, they may decide that it really isn't that important to them after all. Think of it as a way to educate your clients as to the value of what you do, and what is involved to make it happen.