Custom Knife Pricing-Educational Discussion

[stephanfowler]

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.

That is almost exactly how I built my spreadsheet and I use it the same way,

if I could figure out how to make it a downloadable file from my website I would make it available for anyone in this thread to see

 

[NickWheeler]

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. Roger

Holy crap is that ever the truth!!! :thumbup:

I'm slightly sorry I opened my big mouth as THE LAST thing I was trying to do was draw so much focus on something so distinctly surrounding me.

On the other hand though, hopefully it will help some others out.

I THINK I've established myself as being about as open and honest around here as possible, as well as willing to take some criticism.... So I apologize if I came off as short.

Just for the record, I sold the damascus fighter to Kevin for $1125 (I wrote it down and stuff )..... WITH the case and the Paul Long perfection. I know Les would say I should have value priced it at $400, but I at least gotta be able to buy new grinding belts :foot:


I am MOST APPRECIATIVE for Kevin buying the knife and supporting me in the first place, but EVEN MORE for how awesome he has been with me in general... and getting the photo from him is proverbial icing. I would have gladly paid for it, but it sure was nice getting it as a gift!!!

I appreciate the support here folks

I won't make any forecasts about my future as I've learned in a big way the last few years that ACTIONS speak so much louder than words... So I'll just say keep an eye out for my actions and we'll see where it goes

 

[Kohai999]

I'm slightly sorry I opened my big mouth as THE LAST thing I was trying to do was draw so much focus on something so distinctly surrounding me.

On the other hand though, hopefully it will help some others out.

I THINK I've established myself as being about as open and honest around here as possible, as well as willing to take some criticism.... So I apologize if I came off as short.

As slightly sorry as you may be, I'm WAY sorry, as a whole argument was based upon a misunderstanding of pricing.

THAT is a lesson for everyone, because misunderstandings on the way things are priced, and what you are getting for that price are common.

Best Regards,

STeven Garsson

 

[RWS]

I'm not very good at making things with my hands. If I were a knife maker, I know my knives would be extremely ugly. So, I'd resort to some lame marketing gimmick by telling everyone, "sure my $2,000 knives are ugly, however, they are made with a secret super-radioactive resistant steel that can withstand any nuclear bomb explosion."

 

[Kevin Jones]

Just for the record, I sold the damascus fighter to Kevin for $1125 (I wrote it down and stuff )..... WITH the case and the Paul Long perfection.

You are correct Nick. I wrote $1175 from memory but will be 54 in a couple weeks so memory isn't so good anymore. My trusty spreadsheet confirms that the beauty was $1125. A screaming deal IMO. :thumbup:

 

[Mark Knapp]

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!

Good stuff in here, man

 

[Les Robertson]

Hi Lorien,

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.

Interesting comment.

First, pricing their knives too low? Compared to what or who.

More times than not when a maker asks another for pricing advise...they are told to raise the prices.

Second, define a "good" maker. Is this because of their talent, the demand for their knives or they are a favorite on a forum?

Now once you have defined a "good" maker and why their knives are too low...now you have something.

As you pointed out that within the first 5 years most 3 out of 5 business's will fail. In the US (according to SBA, it is higher than that)....looking forward in the first 10 years 9 out of 10 business's will fail.

The ones that fail in the first 5 years, the primary reason is failure to manage cash flow properly.

The ones that fail after that, it is their inability or desire to adapt to market pressures or changes.

For the first 3 years of running a business, you should expect not to draw a salary.

What does that mean for a knife maker? That "shop or hourly" rate you thought you were going to make...well your not. That money needs to go directly back into the business.

The good news is that you are being paid to learn. People are buying your "mistakes".

As a new maker, the object of the exercise should be:

Get as many knives into the hands of collectors as possible.

How is this done? Value Pricing. Not giving them away...but pricing them to sell. Priced to sell is different than the selling price.

Any way, it is a good thread and Im looking forward to reading more of what other people have to say.

 

[Mark Knapp]

"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

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

Now we are getting to the reality of this thing, no matter how much you love to do something, you can't do it if it don't at least pay for itself, not long term anyway. Or most of us can't. Thanks guys.

 

[Gary Mulkey]

I have made my sole income for the last 14 years from my knife sales and can say without reservation that this is a business that doesn't follow your "norms" as to normal business policy. I have over 50 college credits in business and though there are some constants, many of the basic principles don't apply to hand made items. At least in my experience and from a makers view point, time & material pricing just doesn't work in pricing custom work be it knives or any other hand made item. It is quite simply what the market will pay. Granted that some business practices help greatly such as market exposure, controlling costs & overhead but not to the degree that they do in other types of business (referring solely to maker sales).

I have made knives that took many times longer to build than others and I sold for less simply because they didn't have the appeal to the knife buying public (and vica-versa).

Also, there are days in the shop when everything works perfectly and the knife seems to just fall together just right and there are days when nothing goes smoothly. You can't charge more for a knife simply because it took you longer then a similiar piece which was made more quickly.

Pricing is probably the most difficult part of being a custom maker and for which I know of no hard & fast rules. I wish that I did. A very subjective business! I sometimes liken it to that of an artist. It would be interesting to know if DaVinci or Michaelangelo had the same frustrations as to the value of their work.

Either way, all that I can say with certainty is that I will continue to price my work at what I feel is a marketable rate.

I appreciate the views of all who deal with this business regularly. Threads like this are always beneficial to those of us that support ourselves through knife sales.

Thanks,

Gary

 

[Kohai999]

Either way, all that I can say with certainty is that I will continue to price my work at what I feel is a marketable rate.

I appreciate the views of all who deal with this business regularly. Threads like this are always beneficial to those of us that support ourselves through knife sales.

Thanks,

Gary

As long as you are selling knives and keeping food on the table, you probably are pricing "correctly".

We do have threads like this come up from time-to-time, and they can be of value....there are the "art" camp people, and there are the "keep food on the table" camp people and for the vast majority, there is the in between the two. If you think it is hard for you guys making "regular" knives to set prices, imagine how hard it is for Wolfe Loerchner or Arpad Bojtos...where EVERYTHING made is truly rare and one-of-a kind.

I spoke with Wolfe about this once, and when the dust settled, even though the finished piece was quite relatively expensive, it turned out that he was making less than $5.00/hour.

While we have friends that are makers or collectors, the fact of the matter is that it is also a business relationship, with the maker the seller, and the collector the buyer. Marketing to your buyer seems to be one of the most difficult aspects of this relationship, and the makers don't want to be seen as too prideful....and this marketing is all part of a process of pricing, as has been said by Daniel Winkler and others....shows are NOT a vacation, first and foremost, they are part of your business...and the costs of doing said shows must be factored into the prices of your knives....all the time, not just at the shows.

Please, let us continue.

Best Regards,

STeven Garsson

 

[skyman]

Here's my take, simplified, and not in response to anyone particular:

Forget about spreadsheets or how many hours it took you to make a knife. That's got nothing to do with arriving at the proper price.

You make up a figure- That's right, you pull a figure out of the air, based, of course, on your position in the market and the price point at which you can CONTINUE to sell knives. Doesn't matter at all how long it took you to make it.

You can, of course, impact your position by producing an excellent popular product, hard work, wise promotion, presence, integrity, personality, and in some cases, a little luck. And listening to Les, of course.

Spend time and expertise on a spreadsheet and you will see what I mean. You will just end up adjusting the derived price either up, based on demand/popularity, or down, based on what you can actually charge and still maintain sales. Common sense type stuff. You can theorize or calculate on paper all day, and still not come up with the RIGHT price.

Schuyler, ducking

 

[cnas122]

Hi Cnas,

I got your original post. Yet another post complaining about dealers pricing the knives 3 or 4 times the original value 5 minutes after it leave the makers hands.

Who are the dealers doing this?



How about an couple of examples.



What is the disposable income level of your "average joe" collector?

You tell them to contact me and I will give them numerous makers they can contact for their price range.

Now you don't get Champagne on a beer budget.

I think you (like many others) have accurately portrayed some dealers (and lets not forget that the makers are culpable in this as well....as all they have to do is choose not to sell to the dealer who "screws" your average joe collector.)

And like all the others you will choose not to name names. Which now makes you culpable in allowing these dealers (as you said some of them your friends) to continue to screw the average joe out of getting some of these incredible knives.

Les, I deleted my original post because after I wrote it I realized it wasn't the proper thread for a "bitch about dealers" rant. But to address a couple of your points...while I understand in the larger scheme of things the "average joe" would be someone who thinks purchasing a $100 knife is insane, I guess the average joe I was referring to were custom knife enthusiasts who might be willing to pay $1500 if the right knife came along and that purchase would essentially knock out their knife budget for a year or two...basically an opportunity to get their "grail" knife. And yes, I choose not to name names because I try to keep the drama to a minimum. I happen to be a "slippy" guy and most who have a similar passion (or for that matter a passion for any particular type of knife) know the good purveyors and know the bad. I have no qualms with them trying to earn a living and obviously the more money they can get for a knife, the better their business. More power to them. I've never been one to judge and that was not my intention. I guess my point is that it is unfortunate that things are the way they are.

As for the Champagne, there are many different brands and many different vintages. A man who favors a $20 case of beer might certainly splurge for a $60 bottle of bubbly on the right occasion, although that same man may not spend his weekly wage on a $500 bottle of Cristal. There are wonderful makers who make knives in that person's price range, most of those makers are my friends, and I eagerly refer them anyone who asks. Many of my best knives are not made by the several knife making "legends", but by newer makers whose quality is excellent and price their knives according to their experience and time in the shop.

As I said before, I accept the way things are, but I wish things were different. It's just the world we live in. I'm lucky enough to have many grail knives...although there are certainly knives I would love to own that are out of my reach. But I can't help but cringe when standing at a Blade show drawing and observing a knife won and bought from the maker for $1,500, which is then sold to a purveyor for $1,750 because the original purchaser didn't have the money to buy the knife (although I'm sure he enjoyed his $250 profit), which is thereafter sold to someone else 15 minutes later for $3,500.

I hope my response to your post was thoughtful, as I never like to get into heated discussions on here. I'm a folksy traditional sap...which means I'm always happy and just love looking, playing with, and using my knives

My grail knife...btw

 

[Lorien]

1. First, pricing their knives too low? Compared to what or who.

***

2. Second, define a "good" maker. Is this because of their talent, the demand for their knives or they are a favorite on a forum?

1. compared to 'what'. If the f&f, construction method, materials and design is on par with similar knives from other makers, and most elements of what constitute a knife are similar we have apples to apples. Knife to knife.

2. a good maker is one who can make a variety of knives constructed using a variety of methods, with thoughtful design appropriate to use, clean execution and consistency in these regards, knife to knife.

Sorry, that' s my quick answer, but I will give this more thought.

 

[Les Robertson]

Hi Campbell,

Just wanted to point out that not all dealers do what you are saying. That makers who knowingly sell multiple knives(4 or more) that are sought after by collectors to these same dealers at drawings (amazing how one dealer can win so many knives). Of course they do this with the help of "shills" who they pay money to, and get the knife.

Now that being said, apparently people really don't care...or they would stop buying knives from the dealer and supporting those makers.

Personally, I don't care...I seldom if ever get into a drawing.

I am a little sensitive to generalizations about dealers!

Thanks for the reply.

 

[Les Robertson]

Hi Lorien,

1. compared to 'what'. If the f&f, construction method, materials and design is on par with similar knives from other makers, and most elements of what constitute a knife are similar we have apples to apples. Knife to knife.

1) A problem would be that if you and I look at the same makers knives....what you think are apples to apples....may in fact be apples to oranges. Im going to see things you don't.

The thing about a $200 hunter...is generally the person who will buy that knife, won't see all the mistakes. So to a large degree it is about knife education.

1A) How do you compare two knives if one is forged and one is stock removal. How about a 400 grit finish compared to a 600 grit finish. Or a bead blast finish compared to a tumbled finish, or a scotch bright finish.

Apples to Apples can be tougher to find than you think.

1B) How about Fossil Walrus Ivory, compared to Elephant Ivory, compared to Mammoth Ivory, compared to Mastodon Ivory. How about coloring and checking? Are they all the same because you are using Ivory? Is Don Hanson known for OK Ivory? Can he ever get away with using OK Ivory again? Now you have people comparing one of Don't knives...next to another of Don's knives....and they may not be apples to apples.

That can be a difficult part of pricing....especially once you have built a fair amount of knives....you are not only competing against other makers...you are competing against yourself.

2. a good maker is one who can make a variety of knives constructed using a variety of methods, with thoughtful design appropriate to use, clean execution and consistency in these regards, knife to knife.

2A) Various methods? What if they only forge, single guard and mortise tang construction? Not really much variety...so can they still be a "good" maker?

2B) Ok, functional design is a plus. However, functional to who? You can get an argument that anything over a 3" blade is not necessary to dress out most game...as such a hunter doesn't need a "Hunter" with a 4 or 5" blade.

That being said...most hunters have a blade between 4 and 5 inches.

2C) What if the knife is $300...how much can the grind line(s) be off? What if it is a $800 knife...how much can the grinds be off? What about the fit of the guard?

It is very difficult to come up with "exact" criteria as most knives have some slight differences from the other. If it is no more than you like Golden Desert Ironwood as opposed to Darker Desert Ironwood.

Keep going, I think your thoughts are on the right track.

 

[cnas122]

Hi Campbell,

Just wanted to point out that not all dealers do what you are saying. That makers who knowingly sell multiple knives(4 or more) that are sought after by collectors to these same dealers at drawings (amazing how one dealer can win so many knives). Of course they do this with the help of "shills" who they pay money to, and get the knife.

Now that being said, apparently people really don't care...or they would stop buying knives from the dealer and supporting those makers.

Personally, I don't care...I seldom if ever get into a drawing.

I am a little sensitive to generalizations about dealers!

Thanks for the reply.

I completely agree with you in all respects. That's why I pointed out that most of the guys who are active collectors know the good ones and the bad ones. Hell...I'm just pissed I haven't been picked in a drawing in a couple years...because I am wayyyyyy down on the list with some of my favorite makers. Too bad I'm all about instant gratification. But it's all good...I have knives that I love and whether or not I spent too much money for them...I fondle and use them daily

 

[Kevin Jones]

Here's my take, simplified, and not in response to anyone particular:

Forget about spreadsheets or how many hours it took you to make a knife. That's got nothing to do with arriving at the proper price.

You make up a figure- That's right, you pull a figure out of the air, based, of course, on your position in the market and the price point at which you can CONTINUE to sell knives. Doesn't matter at all how long it took you to make it.
You can, of course, impact your position by producing an excellent popular product, hard work, wise promotion, presence, integrity, personality, and in some cases, a little luck. And listening to Les, of course.

Spend time and expertise on a spreadsheet and you will see what I mean. You will just end up adjusting the derived price either up, based on demand/popularity, or down, based on what you can actually charge and still maintain sales. Common sense type stuff. You can theorize or calculate on paper all day, and still not come up with the RIGHT price.

Schuyler, ducking

Sounds like a good plan as long as only your competitors use it.

 

[Kohai999]

At how many knives per year made does a knifemaker step out of the "hermit-category"?

6-12

And for how long can a knifemaker be "gone" from the knife community, due to things in his life that he or she can not control, without being put back into the same "hermit-category" again?

The maker should not be in a position where the general population is wondering who they are...there is no hard and fast rule on this.

How much does this indeed affect prices of knives?

It depends upon how the GP(General Population of buyers) views the "absence".
e I would like to learn if and how I can relate this to my own pricing.

And also to know if a part-time maker can ever be considered a Knifemaker in every sense of the word?

Wolfgang Loerchner....nuclear console jockey....knifemaker extraordinaire....past tense of the console jockey, but you get the point.

Go forth, and live as Art......SuzAnne Fauser
Future decisions may depend slightly on this.

Kind Regards
/Magnus

Best Regards,

STeven Garsson

 

[RogerP]

Forget about spreadsheets or how many hours it took you to make a knife. That's got nothing to do with arriving at the proper price.

You make up a figure- That's right, you pull a figure out of the air, based, of course, on your position in the market and the price point at which you can CONTINUE to sell knives. Doesn't matter at all how long it took you to make it.

While I don't recommend artibtrarily piulling a price out of the air, I do agree tha a spreadsheet can only tell you so much. Useful for understanding whether you are making or losing money overall - and for tracking shop expenses themselves, but it's not a reliable tool for setting a price on an individual knife in and of itself.

What happens when you factor in every possible expense and cost relating to the production of your knife, fugure out what a decent hourly rate should be, plug it into your spreadsheet and get an answer that your 4" hunter "should" cost $1,600? Hmmmm - think you will find any buyers at that price? No? Chances are you will have to travel beyond the spreadsheet to find a price.

Coop's point about getting paid to learn.
STeven's example of the Loerchner $5/hr.
Les' comment about the new business operator not drawing a wage but putting funds back in the business.
Les' point about the goal of newer makers being to get knives in the hands of collectors.

All good points to ponder.

Roger

 

[skyman]

What happens when you factor in every possible expense and cost relating to the production of your knife, fugure out what a decent hourly rate should be, plug it into your spreadsheet and get an answer that your 4" hunter "should" cost $1,600? Hmmmm - think you will find any buyers at that price? No? Chances are you will have to travel beyond the spreadsheet to find a price.

Roger

Exactly. Therefore you can only sell the knife for what it's worth, not what you have in it. You can analyze the wrong things all day long and it won't give you the right price.

Schuyler