Custom Knife Pricing-Educational Discussion

[Danbo]

Who would give Kevin $1,500 or better if he wanted to sell this one today? Danbo, if you had the $$$ just laying around, would you?

Best Regards,

STeven Garsson

Well, I'm not sure I'm the right person to ask this, as I've never come close to paying that much for a knife in my lifetime. I will say this, though. For the kind of work Nick is putting out now(pretty much as good as anybody out there, IMO), I'd have to say that price isn't out of line. And, yes; if I had it "Laying Around", I'd probably pay that much for the knife in question.

 

[Kohai999]

Well, I'm not sure I'm the right person to ask this, as I've never come close to paying that much for a knife in my lifetime. I will say this, though. For the kind of work Nick is putting out now(pretty much as good as anybody out there, IMO), I'd have to say that price isn't out of line. And, yes; if I had it "Laying Around", I'd probably pay that much for the knife in question.

Ok, thanks...you obviously think it is beautiful, as do I.

Best Regards,

STeven Garsson

 

[Kevin Jones]

As you said before, they will probably not be subject to the same possible contention because Nick's is a unique case......however, I think that in order to have the maximum understanding, we should examine and discuss any case, and do so with open channels....no golden calf makers excluded.

For the record, I personally like the knife of Kevin's we are discussing, but I would not be interested at that price....I would be interested at $975.00 for the knife, including a Nick Wheeler sheath. This allows me some upward mobility on the aftermarket. There are many makers who do work I find exceptional, and who were once fantastic values that have priced themselves out of my interest level. Obviously, in this case, there are numerous others that do not have an issue with Nick's price.

Who would give Kevin $1,500 or better if he wanted to sell this one today? Danbo, if you had the $$$ just laying around, would you?

Best Regards,

STeven Garsson

Steven please don't invite offers for my knife here as I have a hard enough time keeping my knives that aren't for sale as it is.

However in addressing your post, I'm not sure if I could get $1500 for it today or not. However, I do know I could get enough for it that my profit would pay for my one day/night's hotel bill for the San Antonio show.

In addition, I do not buy on impulse (haven't in years), however have a rigorous criteria that every knife I buy has to pass which includes it's potential for price appreciation. This knife passed the test with flying colors.

 

[Kohai999]

Steven please don't invite offers for my knife here as I have a hard enough time keeping my knives that aren't for sale as it is..

Fair enough, and apologies to you for trying to make a point, Kevin.

Best Regards,

STeven Garsson

 

[Mike Quesenberry]

Roger

Thanks for validating my thought process.:thumbup: The buyers are very pleased with their purchases and ordering more. My question is; When does a $400 hunter go to $450 and so on. Are there benchmarks that I should look for? If you get a full page write-up in Blade does that warrant a 10%-20% price increase or are there other factors involved?

One of the talking points that we didn't quite reach at Ashokan: "Beware of the inflationary effect of a small group of enthusiastic buyers."

An obvious corollary should be: "Beware of your competition telling you to raise your prices."

When a customer buys a knife and feels they are getting more than what they paid for, he is more likely to buy another. When the knife is "fully valued" at the initial point of sale, that has a stifling effect on the secondary market.

Roger

 

[sheathmaker]

For the record, I personally like the knife of Kevin's we are discussing, but I would not be interested at that price....I would be interested at $975.00 for the knife, including a Nick Wheeler sheath. This allows me some upward mobility on the aftermarket.

Stevie, it appears that you and Kevin are saying pretty much the same thing. You said it in print and Kevin said it with his wallet.

If you back the custom sheath and the zip case out, then Kevin is about at the $975 figure you mentioned you would pay..........but, it is now a fairly well established fact that a really good custom sheath will, in fact, enhance the value of a knife when sold as a package and in many/most cases make the sale much easier. Taking this into consideration, then the secondary value is not on the knife alone, but on the package. There are those who recognize this and those who don't or won't. The latter is not someone to spend much time on trying to sell the knife.

In this case, I know you understand thoroughly what I'm saying, and I also know you have added a second sheath to many of your knives either for your personal enjoyment or to enhance the package value or both.

Notwithstanding, is the fact that your unyielding personal standards make many sheaths just unacceptable.....and that's a good thing.

Paul

 

[Kevin Jones]

If I were a knifemaker I would create a foundation for my pricing structure something similar to the below. I believe the perfect product "pricing" plan is a combination of the maker using a tool such as below while being fully engaged and knowledgeable of the market he competes in.

• Complete time studies documenting hourly duration required to complete the various basic types/styles knives you make. Example: Hunter 7-9” OAL = 11 labor hours, Bowie 10”-14” = 18 labor hours etc. Update this information as necessary.

• Calculate your raw costs or overhead including material, supplies, power/fuel, depreciation on shop and equipment, marketing/advertisement (ads, show expense, dues etc.), insurance and office expense then add a % mark-up to cover salary and living expenses. Then convert this information into a “rate per hour”. Update this information as necessary.

• Create a component up-charge calculation sheet. Example: Damascus add = $600, frame handle construction add = $800 etc. Update this information as necessary.

• Create an Excel spreadsheet to assimilate and calculate the above information into an automated pricing tool. Here I want to be able to list a knife description or component make-up into the spreadsheet resulting in it spitting out a suggested price based on the three categories of information listed above.

• Periodically (perhaps quarterly), check your pricing structure against maker’s prices who you see as your competition for like knives.

• Periodically (perhaps quarterly) check your pricing structure against what your knives are bringing on the secondary market.

• Use the information from the two above categories for your spreadsheet to calculate a “gut check” or a “market condition” up or down charge adjustment to your price. If your raw costs and labor model are in-line with the industry, this adjustment shouldn’t vary much either way. If it varies widely the maker may need to look at his business model.

• Finally add a spreadsheet line item to discount your knives 5-6%. This gives your collectors equity or value at purchase of your knives. IMO this is a good marketing tool especially for the maker who sells upper end knives.

After the initial task of identifying and assembling the information to create your excel spreadsheet (or having someone create it for you) the maker can get a price for any knife in the time it takes him to type in it’s description.

Not saying this would work for every maker, just throwing it out there for consideration or ridicule of all or part of it.

 

[Kohai999]

Stevie, it appears that you and Kevin are saying pretty much the same thing. You said it in print and Kevin said it with his wallet.

If you back the custom sheath and the zip case out, then Kevin is about at the $975 figure you mentioned you would pay..........but, it is now a fairly well established fact that a really good custom sheath will, in fact, enhance the value of a knife when sold as a package and in many/most cases make the sale much easier. Taking this into consideration, then the secondary value is not on the knife alone, but on the package. There are those who recognize this and those who don't or won't. The latter is not someone to spend much time on trying to sell the knife.

Notwithstanding, is the fact that your unyielding personal standards make many sheaths just unacceptable.....and that's a good thing.

Paul

Paulie, you are right!!!!

I misread Kevin's post about the price, read(not sure exactly how, comprehension is usually quite good) that it was $1,175.00 NOT counting the sheath and case.

Color me dumbass.:foot:

Best Regards,

STeven Garsson

 

[Lorien]

just some random thoughts here;

Any knife maker who is clever enough to come up with good designs, and a process by which to make them, and overcoming all the hurdles associated with both, is going to be clever enough to run a business. Whether or not the knife maker makes the investment toward learning how to run a business, is going to determine their success in the long run.

I wonder how many guys who work for The Man, (whomever he might be) get stars in their eyes looking at all these other guys working for themselves, making knives for a living? It is largely held true that 3 in 5 new businesses fail within the first three years. It is damn hard to run a business and to keep it running. Optimism is a huge factor in success, when running one's own gig. But it's hard to feed optimism under a crushing defeat by errors of judgment when it comes to the business.

I now know that I will make more knives. I don't know how many, and I don't know for how long. All I know is that that is what I want to do. I already have an optimistic outlook, which has been tempered by the fire of running my own business, so it seems like a no brainer to me what the outcome will be. But, I'm in no rush and I don't need to invest a lot of money to do what I'm already doing. Maybe in ten years I'll be making knives, selling them and covering my costs plus a little for my time. Or maybe not. Point is, I'm certainly not going to rush into anything. I'm content doing what I'm doing now.

Some guys you see, though, go all out- quit their job, buy their memberships, take out loans, buy a bunch of equipment make some knives and then- poof! There's a whole variable to running a business which is kind of intangible, but the guys who are really good make it look so easy. I chalk that down to attitude. If what you want is easy, I say, keep your job and make knives because you want to.

I'll tell you, not everyone can deal with running their own business. It is very very difficult and requires a much longer break in period than many things. But it also has rewards like none other, (not financial) esoteric awards, maybe even spiritual ones. Yes, one can run a business and gain significant financial independence, but that kind of person is even more rare than one who can run a business and lead a relatively comfortable life, on par with anyone who is making a reasonable wage. (But it ain't 9-5, it's 24/7).

So, when it comes to pricing, I think that really all boils down to the maker's potential to keep their business running. Sometimes the maker doesn't even know that, and when I see knives priced below their value, (knife to knife comparison here, name and reknown totally aside) it makes me question the maker's confidence in the future of their business. If I saw a good maker who was pricing his stuff too low, (apples to apples) I would advise him to take some business courses and maybe ask whether or not he has a business plan of some sort.

It all depends on you when you run your own gig. You HAVE to care about the future of your business, because as soon as you don't, you're done. And you'll be forgotten. And none of this will matter to you, because you'll be on to the next thing. And that's ok, it's not for everybody.

I know a fair number of people who owned their own business, then quit when it got REALLY hard and gone back to a regular job. But I don't see that as an option, therefore my success is guaranteed!

 

[Kevin Jones]

Paulie, you are right!!!!

I misread Kevin's post about the price, read(not sure exactly how, comprehension is usually quite good) that it was $1,175.00 NOT counting the sheath and case.

Color me dumbass.:foot:

Best Regards,

STeven Garsson

I left out that Nick had included $100+/- allowance in the $1175 for a professional photo thus bringing net cost from him down to $875. However I declined and instead purchased photos on my own and sent Nick both electronic and hard copies.

Why would I do something so stupid as throw away $121? Because I look at things "big picture" rather than how I can benefit today. I'm cultivating a friendship and a positive maker/collector relationship with Nick that I hope we will both benefit from for many years.

And I believe Nick will prove to be in this for the long haul.

 

[Lorien]

And I believe Nick will prove to be in this for the long haul.

already has been. Just needed a break is all. :thumbup:

 

[Les Robertson]

Hi Kevin,

You made some good points: However this one:

• Finally add a spreadsheet line item to discount your knives 5-6%. This gives your collectors equity or value at purchase of your knives. IMO this is a good marketing tool especially for the maker who sells upper end knives.

What exactly do you consider the starting price point for "upper end"?

Two things.

1) your number for this will probably not include between 90 and 95% of the custom knives for sale out there.

2) Quite frankly, those who are selling knives at your upper end number....at this point have probably figured out their pricing structure long ago.

BTW, time studies, spread sheets, etc. Man you are taking all the fun out of knife making!

 

[Don Hanson III]

I left out that Nick had included $100+/- allowance in the $1175 for a professional photo thus bringing net cost from him down to $875. However I declined and instead purchased photos on my own and sent Nick both electronic and hard copies.

Why would I do something so stupid as throw away $121? Because I look at things "big picture" rather than how I can benefit today. I'm cultivating a friendship and a positive maker/collector relationship with Nick that I hope we will both benefit from for many years.

And I believe Nick will prove to be in this for the long haul.

Kevin, you (and a few others) have also done this for me and it is very much appreciated!

 

[Kevin Jones]

Hi Kevin,

You made some good points: However this one:

What exactly do you consider the starting price point for "upper end"?

Les, I don't think if matters what I consider "upper end" because every maker and collector's interpretation of such varies depending on which playground they play on. One thing that makes custom knives so interesting is the huge quantity of UN-definable terms. Josh Smith made a post the other day (you have referred to it several times) identifying "low end" knives at $1500. I'm sure in his market a $1500 knife is low end. I know of other successful makers (I'm know you do too) who would say $1500 is extreme "high end".

Two things.

1) your number for this will probably not include between 90 and 95% of the custom knives for sale out there.

2) Quite frankly, those who are selling knives at your upper end number....at this point have probably figured out their pricing structure long ago.

I'm not so sure Les. Some makers even though at the top of the food chain hate promoting themselves and hate the business side and are lacking in it.
I started a thread the other day on another forum regarding my curiosity that some makers don't employ "business managers". Many artists of all kinds, fine craftsmen, entertainers and professional athletes do with great success.

There's people who could take some makers to a whole new level of success for modest % of their sales, while giving the makers much more time to concentrate on what they do best, Make Knives.

BTW, time studies, spread sheets, etc. Man you are taking all the fun out of knife making!

Unfortunately, I think some makers are finding the "fun" is over.

 

[RWS]

Figuring out the optimal price for a product is one of the most difficult things for any business to do.

Many things come into play when marketing any product. Of all the things in the mix of marketing components(like the item you're selling, the promotion and distribution costs, etc.,), price is the only one that generates revenue. All the others generate costs.

There are a lot of short-term and long-term pricing strategies available and they're all driven by an organization's objectives at some definitive strategic point in time. For example, are you currently trying to maximize profits or are you trying to increase market share, or are you just trying to somehow survive this economy?

Obviously, the biggest long-run thing in pricing knives is to cover all costs.

However, in the short run (like when the economy takes a dump, which is in fact "long-run"), you may be forced to kick into a survival mode and temporarily ignore both fixed costs and desired profits as part of the short-run pricing strategy. In this instance, the temporary lowering of sales prices may optimize cash flows to help cover some of the fixed costs that must be paid no matter what. This, however, would be a very dire situation for a standalone, one division operation like I imagine most custom knife making businesses are.......It's impossible to defy the laws of financial gravity for very long.

I may be wrong, but I would think that a knife maker's pricing strategy success will be influenced mostly by two things: 1)the level of product differentiation that a knife maker(or the knife market) can get a buyer to believe exists in a particular maker's knife to warrant the price, and 2)current economic conditions(and imo, current economic conditions are not going to get any better here in the US for many many years. I believe they will get worse over the next five-seven years).

Great topic, STeven. :thumbup:

 

[Les Robertson]

Hi Kevin,

I keep mentioning the "Low End" price point mentioned by Josh so readers understand where certain people are coming from.

I know of other successful makers (I'm know you do too) who would say $1500 is extreme "high end".

Exactly right. So for the purpose of educating members on this forum, it is best to talk to the majority...not the very small minority. That is my point.

I'm not so sure Les. Some makers even though at the top of the food chain hate promoting themselves and hate the business side and are lacking in it.

Granted. My point was that most makers who have gotten to that point have been around for awhile and have figured out when and how much they need to raise their prices.

Again, I think this would be the minority of makers. We need to speak to the majority. As they are the ones in need of education/advice.

Unfortunately, I think some makers are finding the "fun" is over.

The fun is always over for some maker...good times or bad.

Too many makers look for excuses for poor sales outside their shop.

 

[brownshoe]

All of the discussion about discounts, hourly rates, including the costs of belts, glue, etc., your position within the collector's mind-set and "the after-market" (are you guys selling cars?)falls away if you're a true artist. An artist creates because they have to; if their work is seen, admired or bought, it is a privilege and a gift from life. Many artists bastardize or bend their muse to fit into a profitable box, however these are not the happiest of men.

Do you want to be an artist, a craftsman, or rich?

Loveless's well known and acurately expressed disdain for collectors should be an abject lesson in futility of finding a "formula" for pricing "custom" knives.

 

[RogerP]

Roger

Thanks for validating my thought process.:thumbup: The buyers are very pleased with their purchases and ordering more. My question is; When does a $400 hunter go to $450 and so on. Are there benchmarks that I should look for? If you get a full page write-up in Blade does that warrant a 10%-20% price increase or are there other factors involved?

Here's a simplified response that I have plagiarized (and paraphrased) from someone who knows a lot more than I do: The price on your $400 hunter goes up when you sell every one off your table at every show and take home orders for more.

Seriously - I don't think there is any single factor you can point to that says it's time to bump the price (though the apprentice - journeyman - master transition will generally see a corresponding increase). Certainly a magazine article has the potential to generate more orders, but I don't see it as a reason to up prices across the board.

Know the primary market you are selling in; be brutally honest in your assessment of the quality of your work (design and execution) and your market position. Honesty won't hurt you here Mike - both are very good. Then see what similar knives (again, brutal honesty here) from similarly and slightly higher positioned makers are commanding. Shows, dealer sites, maker sites, etc. If you are offering a bit more and asking a bit less, that's a great place to be.

A maker asking you what you really think about his pricing is a lot like a woman asking you if this dress makes her look fat - both are in some doubt and neither generally want an honest response. But there are people you can talk to to get both an honest and an informed opinion.

Believe me, I have a LOT of sympathy for makers struggling with pricing - it's tough - period. But the biggest failing I see is guys who simply have no idea what they are competing against. Secondary market is important too - but if you don't first have an understanding of where the primary market is at, you're stumbling out of the blocks.

Roger

 

[RogerP]

All of the discussion about discounts, hourly rates, including the costs of belts, glue, etc., your position within the collector's mind-set and "the after-market" (are you guys selling cars?)falls away if you're a true artist. An artist creates because they have to; if their work is seen, admired or bought, it is a privilege and a gift from life. Many artists bastardize or bend their muse to fit into a profitable box, however these are not the happiest of men.

Do you want to be an artist, a craftsman, or rich?

Well, if you want to feed, clothe, house and educate your children even in part on what you make selling knives, you'd better give some thought to the business side of things and price is kind of central to all of that. If you're happy to have your family starve so you can bask in the glow of your own idealized sense of artistic purity... well....

Roger

 

[Kohai999]

"Being good in business is the most fascinating kind of art. Making money is art and working is art and good business is the best art."
Andy Warhol

Regardless of how you feel about Coca Cola silkscreens or other Warhol stylings(I like them).....it is an interesting perspective.

There is NO art in starving by following your muse....that is an overly romanticized notion and an archaic one.

Best Regards,

STeven Garsson