Pricing question

[Sam Murdoch]

From the OP - "but I'll never have to make a living at this - thank god - just play money." If I read that correctly and in the right context, he is not operating a business - just reaching out to an opportunity. The prices upwards of $12,000 reflect more accurately what such a project should cost but I'm guessing, based on my reading of his posts, that he will not venture much past the $$s he has already discussed. Someone will get a great deal and he will make some play money and be challenged and having fun (I hope) in the doing.

[Wayne Lomman]

Rick, since this is not your first kitchen, you have an idea as to what times you need to allow. From my perspective as a professional, 200 hours is enough time. That's 25 x 8 hour days or 5 standard working weeks. What I am a bit more concerned about is your charge out rate. The final decision is yours but do not sell yourself too cheap. If you are too cheap, you and your work will not be respected. A fair price is better than a cheap price unless you are doing charity work. Do some local research on what other cabinetmakers are charging for their hourly rate. That will put you into the market. Cheers

[John TenEyck]

If there is one thing I learned from the Marketing guys it's that price has nothing to do with cost. Of course you need to understand your material and labor costs, and your profit expectations/requirements, but pricing is not based on those numbers, they are there only to protect you from taking jobs you shouldn't. Pricing is based on what the customer is willing to pay for something. Figuring out what that is isn't easy but key to getting work where both you and the customer are happy with the transaction.

As an example, you could build the same item, let's take your kitchen, for two different clients, one in a modest neighborhood the other in an upscale one. Even a novice business person would bid higher to the client in the affluent neighborhood. Why? It's the same kitchen with the same costs. The obvious answer is because he knows they can afford and are willing to pay more. Your job is to figure out what your clients are willing to pay. If that's more than all your costs and profit expectations, great, you will both be happy. They got what they wanted and were willing to pay for and you made more than your minimum profit expectation. And that works all the way down to when you determine your clients would be unwilling to pay enough to even cover your minimum profit expectation. You won't make as much on some as on others, but you have maximized your profit (or at least gross margin) from each customer. And when you determine your bid can't even cover your minimum profit expectations then you either no bid, or bid it and hope for the best but shouldn't be surprised if it's rejected.

John

[Harold Balzonia]

$2k on materials + $4.2k labor for that job is way under bid in my neck of the woods. I was on a 4 man crew building exactly this kind of stuff and that job would have been over $12k time and materials back in 2001-03.

range exhausting, upper deck microwave installs, long face frames, and things like matching existing trim (crown moulding?) are time eaters especially for a one man crew.

if you really love the work and are just looking for a challenge and not a profit, there is something to be said for that. But I think you're way under if you're comparing yourself to professionals. (or maybe you're just extra generous!)

by the way, for the amount you quote, make sure you don't make any mistakes! Extra material adds up quick, too!

[Joe Jensen]

I'm not a pro but that labor (shop rate) is too low. The shop rate needs to also consider blades, bits, etc that wear. Keep in mind you will be paying almost 16% in payroll taxes too. Bet that really looks like $15 an hour before income taxes.

[Michael Larson]

Rick,

I think you could triple your rate and that a reasonable shop rate outside of a guy that is doing it as a hobby. Shop rates where I live are all between $60 and $80 per hour. That puts you between $14,000 and $15,000 which is around 5 percent of the home value, others may disagree but that's where I would start without install.

Good luck,

Michael

[Martin Wasner]

I'm not a pro but that labor (shop rate) is too low. The shop rate needs to also consider blades, bits, etc that wear. Keep in mind you will be paying almost 16% in payroll taxes too. Bet that really looks like $15 an hour before income taxes.

If I'm not grossing over $100/hr per man, I'm losing money.

[Yonak Hawkins]

Here's my take on pricing for the semi-professional : If you charge what the professional shops would charge, your work, installation and follow-up better be professional level. If, however, you make it known you are giving a "buddy price" then they should expect "buddy service". That is, more according to your timetable and they shouldn't expect you to come back for every little thing if they can just as well take care of it themselves or, if it's just too picayune to bother with or, you may wish to let the little things slide until you have a list of things to do and it makes sense to make the trip, at which time they may wish to take you to lunch or give you a six-pack.

Regarding pricing, I like to price by the week or month rather than by the hour. Figure how much money you need to make in a week or a month, adjusting for whether you will work on it full time or some portion of full time. Then decide how much work you can do in that period of time. I find trying to figure hours is way too taxing unless you're a professional.

Either way, I recommend having everyone sign a rudimentary contract just so it's clear what everyone's responsibility is and pricing, even for buddy pricing.

P.S. I think $21 / hour is low but not real low in my area (exurbs of Atlanta).

[Rick Alexander]

Thanks a lot for the advice guys - lots to think about. I did up my labor by 3 (9K total) thousand based on what was said. Frankly - I really am not that concerned I won't get the job but I am concerned I will put myself in a box that I end up not enjoying. I never want this hobby of mine to seem like a job so if the guy wants to use my services he's going to have to make it appealing to me to give up my shop time for the next few months.

Again - thanks - and I'll let you guys know how it goes.

[Tim Bueler]

I didn't see where you said what style of cabinet. Face frame, Euro w/overlay doors/drawers or inset drawer/drawer. Labor cost is different for each style.

Another phenomenon I've seen/heard in my 30+ in the construction industry is one tends to attract a clientele commensurate with their rate. Anecdotally, if you do $5/hr work you will attract $5/hr clients. If you do $20/hr work (assuming you're capable) your quality of client will increase accordingly. Can't tell you how many guys I've seen complain about the crappy jobs they were getting who couldn't believe I could stay in business charging so much. I semi-retired by age 53, all those low-ballers have either moved on to other careers or will be still be trudging along until the day they die.

Material costs are easy. So are fixed costs if you take the time to figure them out - i.e. consumables and operating costs - at your stage of development this # will be a projection. What I build into my shop rate is what I want to live on, how much extra spending money I want and that's also the money I'll pay income tax out of. I'm in a decidedly rural area of N Idaho, some might even call it backwards. My shop rate starts at $60/hr and goes up depending on how much a PITA the client is. Yes, I charge more for problem clients. Haven't had to dip into my retirement savings yet. As others have said, don't undersell yourself.

[Phillip Mitchell]

Your labor rate is way too low, even for a rural area. I wouldn't call the burbs of Atlanta rural, either. I'd be more in the $50-60/hr range (minimum) for shop time billing, assuming you have the proper space and tooling to work efficiently building cabinets.

Installation is potentially a different rate and something to be figured in addition to your shop time billing.

You may not be a professional, but it appears you've done this before (3 times) and you're not working for friends and family...no need to discount your time and labor. Charge what you're worth. It helps you and all of us in the trades to make a proper living wage. It also helps clients understand what this level or work is really worth and costs.

[Eric Van Cronk]

I’m a general contractor in the Los Angeles area, the rule of thumb for custom inset cabinetry is $250 per linear foot for lowers and $200 per linear foot for uppers. That’s for standard Blum soft closing hardware, painted and installed. Knock $50 off per linear foot for Baltic birch instead of maple prefinished ply and overlay doors. Glass doors for uppers is an upgrade as well as thicker stock for face frames and doors. Appliance panels are also an up-charge. We used to run a full cabinet shop but we were losing money at the prices stated above and found it’s cheaper to pay a sub by the job vs our shop by the hour. Anyway, I admire anyone who wants to tackle a full kitchen as a side job. I’m just now setting up a shop in my garage so that I can build out my own kitchen. Because of my personal lack of skill, I will order the doors and drawer boxes.

Examples of the work below (I couldn’t figure out how to link pics)

https://www.pintaram.com/u/mvcbuilders

[Julie Moriarty]

I'm an electrician and I've done a lot of side jobs. I learned early on that after I had estimated my labor hours for a bid job I needed to double them for the bid. And when I was done with the job I found that doubled number was almost always spot on.

After about 20 years in the trade I got an offer to be a project manager/estimator. I spent 8 years doing that and learned a lot. When I first started, I was shocked to see the actual numbers contractors used to bid jobs. They were substantially higher than I expected them to be. There are so many factors I had not seen before when doing side jobs - vehicle expense, tool depreciation, estimating, design, sales and so many other things. I quickly learned those contractor numbers were necessary for survival.

Materials are easy to figure, it's the labor that will make or break you. Don't cheat yourself just to get the job. I agree with those who say $21/hr is low. Considering you are just outside of Atlanta I'd say that number is very low. The best way to know what the competition is charging is to get bids from them. Obviously you don't share that with the customer but it will give you an idea where you stand with local competition. Take those numbers and subtract your materials estimation and you can derive approximate numbers on labor rates, overhead and profit. Then insert those numbers into your formulas and see where you stand compared to your original estimation. And if they seem high, don't be afraid to use them, unless you are doing charity work.

[Edwin Santos]

Lots of interesting discussion on pricing and bidding on the front end of a job.

I'm interested to know how many of the pros make a habit of evaluating the profitability of a project after the fact. In other words, tracking and allocating hours, overhead, materials, unforeseen costs and then comparing them against the revenue collected on the job. Basically this would be creating a mini P&L on the job itself.

Does anyone do this or work for someone who does this?

[Mark Bolton]

We track everything through quickbooks pro for each job. I wouldnt say we have it dead accurate down to the last screw, quarter sheet of sand paper, and drop of wood glue but the bulk of it is in there. A lot of items are purchased in bulk (fasteners are bought in several thousand count boxes, wood glue bought in pails, and so on). Those items get rolled into the shop rate as do consumable tooling items like saw blades, sharpening, replacement knives, hand and power tool depreciation and wear, and so on. It can be tricky too when you have multiple jobs running to be dead accurate on hours into each job down to the minute. Hard core LEAN shops probably come close to 100% on numbers like that (single piece throughput and so on). We are small and trying but not there yet.