Customs Pricing – Opinions and Views?

Getting into the straight and narrow of pricing in custom knives is a difficult subject!

I readily admit that I know very little and learn more every month. This thread has some great info!

Not trying to get a rise out of Les, just bring up some thoughts. It's VERY VERY difficult for a new maker (I'm definitely still in this boat) to spend hours and hours and HOURS fretting over a knife, grinding, regrinding, sanding, going back to the grinder, etc, etc.... then try to crunch hard and fast numbers to come up with a price as you would expect someone running a business to do. You're looking at something with all kinds of blood, sweat, and tears involved and not just some item in a box that you purchased whole-sale and are about to re-sell.

I am working every year at trying to improve my business sense in this craft, and better understand the number crunching rather than just magically coming up with a price.

I actually think that a new maker asking an established maker and dealers for their thoughts on pricing is about the best approach they can have.

It can be a bit dangerous I suppose. I was letting my prices (for the most part) be determined by a well known dealer and I felt that his enthusiasm for my potential was getting ahead of my standing in the market.

I may have been making a pretty darned nice hunter, but to ask as much for it as most Mastersmiths is a very dangerous bit of ground to try and stand on.

Fast forward to current times. I had a small, simple, forged hunter at Blade that I could have easily sold for $400, but I wanted to make sure I had something that really represented a great deal and I sold it for $300. I sold it fast, the buyer was happy, and I could have sold it about 20 times at that price. Did I do the right thing? I made it clear that this hunter was a bit smaller and more simple than most of my hunters, and my reason for making/bringing it. I don't think I convinced anyone that my price for "more standard" Wheeler hunters is going to be $300 from now on.

Maybe if your work is good enough you don't need to pay much attention to the makers around you (meaning your more direct "competition"), but I sure doubt it.

I'm still struggling to figure out how to factor in all of my tooling costs, depreciation for said costs, travel expenses, etc. etc. and STILL try to get a 20% profit for THE BUSINESS while paying myself a salary out of the whole thing. 20% seems to be the magical number most of my college business grad friends keep throwing at me. Maybe it's not possible in knifemaking... we'll see.

I'm nowhere even close yet, but I at least feel like I am on the right track.

Even though Les can come off quite abrasive, I think he has some great advice for steering folks like me in the right direction. I definitely appreciate threads like this one! :D

Thanks everyone :)
 
jdm61 said:
Eating all of those beans must have made it easy to concentrate on knifemaking because nobody would want to come into the shop to distract you:eek: :D It is interesting that you had to learn all of the tricks needed to make a LOT of knives per year so that you could build up a reputation and make a lot FEWER knives every year:D I'm wondering if you still would sell me one of those "$100 fixed blades" that you took to Kansas City? lol;)
Click to expand...

Joe, I would just give you one if I had it.:)

I gotta get to the shop, back later and see ya in a few weeks.
 
Hi John,

Generally my opinions are geared towards the business of custom knives. Those looking to make a profit and grow their business. I view pricing as a necessary long term plan. Not just merely Knifemaker X is getting $XX so I should get a similar amount.

When you are first starting out if you are thinking long term you want to get as many of your knives into the hands of potential buyers as well. This generally means you are selling to your friends and/or at a gun show. Your prices will need to be low to sell them.

As you get better your prices will go up as will the quality. Eventually many of these makers will make the move to a knife show. Tables are generally more expensive and additional expenses will be involved. As well you are re-introducing yourself to a new group of buyers. Many very seasoned. The best way to get one of these knives into that persons collection is to offer the knife at a value price.

These collectors will help you gain additional notoriety and get additional orders. Then there are the dealers, you may catch their eye. They will take your knives many times to places you do not go. Introducing you to additional potential buyers. Then there is that one dealer writing for Blade and Knives Illustrated about the makers he works with. Want to know the power of the pen...contact a couple of those makers and see how many orders they picked up just from that one article. I know the first one I wrote about Sam Butler he picked up 40+ orders in two weeks.

It is very hard to get your name out there. The better you can price your knives at each stage in your knife making business the bigger advantage you will have over much of your competition...you know the other knife makers.

WWG
 
WoodWorkGhost said:
Hi John,

Generally my opinions are geared towards the business of custom knives. Those looking to make a profit and grow their business. I view pricing as a necessary long term plan. Not just merely Knifemaker X is getting $XX so I should get a similar amount.

When you are first starting out if you are thinking long term you want to get as many of your knives into the hands of potential buyers as well. This generally means you are selling to your friends and/or at a gun show. Your prices will need to be low to sell them.

As you get better your prices will go up as will the quality. Eventually many of these makers will make the move to a knife show. Tables are generally more expensive and additional expenses will be involved. As well you are re-introducing yourself to a new group of buyers. Many very seasoned. The best way to get one of these knives into that persons collection is to offer the knife at a value price.

These collectors will help you gain additional notoriety and get additional orders. Then there are the dealers, you may catch their eye. They will take your knives many times to places you do not go. Introducing you to additional potential buyers. Then there is that one dealer writing for Blade and Knives Illustrated about the makers he works with. Want to know the power of the pen...contact a couple of those makers and see how many orders they picked up just from that one article. I know the first one I wrote about Sam Butler he picked up 40+ orders in two weeks.

It is very hard to get your name out there. The better you can price your knives at each stage in your knife making business the bigger advantage you will have over much of your competition...you know the other knife makers.

WWG
Click to expand...
Les.....are the days of a "sole proprietor" making forged users and making a living at it pretty much a thing of the past in your opinion? Do you have to cater to the collector market in order to survive?
 
NickWheeler said:
Getting into the straight and narrow of pricing in custom knives is a difficult subject!

I readily admit that I know very little and learn more every month. This thread has some great info!

Not trying to get a rise out of Les, just bring up some thoughts. It's VERY VERY difficult for a new maker (I'm definitely still in this boat) to spend hours and hours and HOURS fretting over a knife, grinding, regrinding, sanding, going back to the grinder, etc, etc.... then try to crunch hard and fast numbers to come up with a price as you would expect someone running a business to do. You're looking at something with all kinds of blood, sweat, and tears involved and not just some item in a box that you purchased whole-sale and are about to re-sell.

I am working every year at trying to improve my business sense in this craft, and better understand the number crunching rather than just magically coming up with a price.

I actually think that a new maker asking an established maker and dealers for their thoughts on pricing is about the best approach they can have.

It can be a bit dangerous I suppose. I was letting my prices (for the most part) be determined by a well known dealer and I felt that his enthusiasm for my potential was getting ahead of my standing in the market.

I may have been making a pretty darned nice hunter, but to ask as much for it as most Mastersmiths is a very dangerous bit of ground to try and stand on.

Fast forward to current times. I had a small, simple, forged hunter at Blade that I could have easily sold for $400, but I wanted to make sure I had something that really represented a great deal and I sold it for $300. I sold it fast, the buyer was happy, and I could have sold it about 20 times at that price. Did I do the right thing? I made it clear that this hunter was a bit smaller and more simple than most of my hunters, and my reason for making/bringing it. I don't think I convinced anyone that my price for "more standard" Wheeler hunters is going to be $300 from now on.

Maybe if your work is good enough you don't need to pay much attention to the makers around you (meaning your more direct "competition"), but I sure doubt it.

I'm still struggling to figure out how to factor in all of my tooling costs, depreciation for said costs, travel expenses, etc. etc. and STILL try to get a 20% profit for THE BUSINESS while paying myself a salary out of the whole thing. 20% seems to be the magical number most of my college business grad friends keep throwing at me. Maybe it's not possible in knifemaking... we'll see.

I'm nowhere even close yet, but I at least feel like I am on the right track.

Even though Les can come off quite abrasive, I think he has some great advice for steering folks like me in the right direction. I definitely appreciate threads like this one! :D

Thanks everyone :)
Click to expand...
The "salary" and the "profits" may get a bit blurred in this business model. We have to use sound business practices in order to survive,but this is still an "art" or "craft" and sometimes, biz school models may not fit completely.
 
I love threads like these as I learn a lot. I think there are too many variables to nail down a pricing structure that will work for all makers. To give you an idea, look at the following scenarios. There are more because every maker has a different scenario.

Maker A makes knives part time and makes using knives
Maker B works part time and makes high end knives
Maker C has a full time job and makes using knives
Maker D has a full time job and makes high end knives
Maker E works full time, but has a wife to supplement their income
Maker F works full time and has no other source of income
Maker G works in a shop with one or two helpers
Maker H uses outsourcing
Maker I uses in house CNC

Now this is where it can get tricky

Maker F is a full time maker with no additional income. He lives in a rural area with no wife or kids and he wants to make using knives and he does not want to charge his customers a lot of money because he wants more people to be able to afford one of his knives.
This maker lives in a rural area and maybe he has been there for while and he does not need all of the toys and trappings that are around us every day. He is content making his using knives and living inexpensively in his rural setting. Therefore, he can sell his using knives for $150.00

A lot of things could sway the prices of Maker C's knives if he wants to maintain his current prices and standard of living.

1. He gets married and his new wife does not have a job and she wants to move to the city or another part of the country. ( raise prices or make more knives)
3. He gets married and has kids ( raise prices or make more knives)
2. He comes up with a illness that limits his knifemaking ( raise prices )
4. He is just getting older and can not produce the amount of knives that he used to. ( raise prices )
5. Increase in cost of living and or cost of heath care, supplies and etc. ( raise prices or make more knives)

You can put scenarios to all of the above situations. What I am really trying to say is that as people, we all have different needs and desires. We want to live in different parts of the country for different reasons.
Some makers want to make a lot of knives and sell them for less money to reach more people. Some want to make fewer knives with a few bells and whistles and make more money and cater to a select group of collectors. Some makers may want to live in a new house, have a new car and truck and live the lifestyle that comes with all of that, while some are content to live a simple life and try to remain debt free by living in a area where it is less expensive to live. They are happy driving a 10 year old vehicle and are glad to be able to make a living at what they love to do.
If you have been in this industry for any number of years, you have seen the maker who had reasonably priced knives try to go full time. The first thing that happened was that he raised his prices so that he could make enough money to live the same lifestyle that he was accustomed to. Sometimes they made it, sometimes they had to go back to work or get a part time job until they could justify the large price increase.

This is not like a industry that says the average cop makes x amount of money or the fireman makes x amount of money. The buying public decides what the knife is worth to them. At one time I could afford a Herron, Moran or Loveless, but as the years changed and my financial situation changed, I had to pick other makers that were in my price range if I wanted to continue to collect knives. That does not mean that the above makers knives are not worth more, It means that they are just out of my reach as a collector due to my financial situation at this time.
I know makers that boast a huge back log of orders. I have witnessed many times when they would call a person up that has been on the waiting list for four years, and he has to refuse the knife. He cannot afford that same knife that he ordered four years ago because his financial situation has changed.
Well, I hope some of my rambling make sense and I'll sit back and see what others have to say.
 
A maker could actually do his monthly fixed cost calculations (rent, energy,depreciation, avertising, insurance office expence) and calculate materials, supplies, labor hours by average (example-one belt= 3 9" hunters- stag =$25-14" bowie =16 labor hours etc) quanty per knife per month one time and formulate into a Microsoft Excel spreadsheet.

Then as the maker completes a knife he would just select the knife's specifications on the spreadsheet and hit enter and knife actual cost and sales price would be generated with a keystroke. If the base information was estimated correctly the figures should be within 5-10% of actual.

I use a similar system for estimating construction jobs. This would not of course be the end all to pricing, however would help to keep you honest on the business side in taking the guessing factor out as to what your actual cost are.
 
Hi JD,

By "Sole Proprietor" I am referring to a "Tax Entity" that is recognizable by the IRS.

I was a part time dealer for 8 1/2 years. Early on I was making little or no profit. I was establishing myself in the industry.

While in graduate school getting my MBA, I was fortunate that my instructors in lieu of some non-existent business I was allowed to use my custom knife business for "home work". What an eye opening experience. I formulated many of the plans I still use today.

In graduate school is where I met my CPA. After several conversations with him I realized there were huge tax advantages to utilizing one of the business entities recognized by the IRS. The tax advantages can be huge.

Remember, it is not what you make...it is what you keep.

In addition I received another 200 + hours of training from H&R Block. Looking forward to more. Our tax system offers incredible opportunities to small business owners that few if any take advantage of. This is especially true in the custom knife market.

Find a good CPA and ask a lot of questions.

If you view your knife making as a "art/craft" and as such is difficult to maintain as a business is a bunch of crap. Sorry was I being abrasive :D

Your knife making is yours and yours alone to do with as you see fit. If you want to do it full time, you need to make it a business...period.

If you want it to be nothing but an art/craft hobby then do what you like. Charge what you want and make what you want.

If you are going to go full time, take it from someone who has been full time in the custom knife business you have to give it your heart and soul...and then some.

WWG
 
Don,

Question??

If you did not make all those knives for those years would you be getting the prices for your knives that you are now?

WWG
 
Great thread with some VERY well-thought-out responses by WWG and BB and others.

I'm not a knifemaker, but I think I can add to this discussion:

When I started my digital photo career, I was simply a guy who had some fun images and had won a few photo contests over on the CKD forum (Now KnifeNetwork.com). A local startup dealer (now defunct) saw me online and got a recommendation from the late Gib Guignard to call me...

He needed images of his knives for his website. I had a bit of a clue. So, I gave him a pricing structure of $15 per image. For that I had to drive to his home and studio, setup, and work under his magnifying glass for hours. After the first 250 images, I finally got him to let me shoot them at my own home and studio. At that point I raised my prices 25% and charged $20.

Those prices, even then, were laughable. But.... As WWG alluded to, I was being paid to learn! I completed over 400 knives for the said dealer, and the quality of my work improved dramatically from point A to point B.

I have made it to the point where I need to charge notably more now, and my schedule requires an appointment to assure fitting in. That said, there was a long period of paying my dues and slow pricing growth, nearly giving it away. I found this period as a foundation to learn the quality that is necessary to compete.

Take what you will out of these comments.

Coop
 
WWG , thanks , that is more clear to me now. Much appreciated.

Bobby B , great post , and yours as well Coop.

I have tried to price the ones I sell in a way to make sure the buyer gets the better end of the deal ( in spades ).
 
Thanks for the reponse, Les. I was not using sole proprietor in the legal sense......I have a JD, many years of experience in the advertsing and publishing biz and a few LLC's with my name on them, so I am painfully aware of the tax impliction of being in business:D My comment about art/craft should be taken in the context of what I used to do. If someone wants to buy an ad or a print job, the price per thousand is X. If he agrees to run that ad for 13. 26. or 52 consecutive weeks, then the cost per week is X minus whatever discount my rate card calls for. Yes, advertisng is an abstract "product" but you can work the numbers and come up with what it should cost. The same could be said of knives up to a point. But you are NEVER going to see one paper charging $175 per thousand circ for ad space an another charging $5000-6000 per thousand for the same ad, but in a fancier publication. Yet this is the price difference between what I could charge for a Loveless style hunter today and what a real Loveless would bring. My point was that that the spread between the cost of "labor and expertise" in any artistic endeavour can be HUGE. To cite a more extreme example, lets take a Moran ST24. When was the last time you heard of a newly minted big law firm associate billing at $300 per hour (what I could ask for such a knife) and a big time litigator billing at $18,000-24,000 per hour? In the "art" business, if you are at the top of the food chain, your income per unit is exponentially higher than someone making a very similar product who has less experience and reputation than you do, even if they are doing it just as well. Are paintings by the "School of Rembrandt" any less beautiful and really that much different than ones the master did himself OR where he did enough of the work for it to be considered "his painting"? Yet, a "school of" painting goes for around $2 million tops and with the ones that Rembrandt actually painted, the sky is the limit, but the floor is probably somehwere in the $40-50 million range:D
 
supsme said:
Seems like a shame to me that a Maker as talented as you was stuck in the current pricing system...
Click to expand...

I was not as talented then and didn't know there was a pricing system.

I don't feel, I'm stuck in the current pricing system now :D
 
Hi JDM,

A JD and a couple of LLC's, then you know as much about it as I do.

Pricing does seem to be all over the map with regards to custom knives.

With regards to the paintings. Question, how much did Rembrandt or Van Gogh get for their work? Hardly anything. It was those slimy dealers and astute collectors who got rich. :D

Van Gogh's "Sunflowers" set a record price at the time of about $40 Million sold to a Japanese collector named Yasuo Goto. He bought the knife 99 years after it was originally painted.

So it is a good news/bad news thing for the artisans. Good news is your crafts may sell for millions...bad news you will probably be dead when it happens.

Custom knives works similar to what you were talking about. Generally the top 3-4 makers in each category make much more money than those who are number 23 or 24.

You see this in most consumer products. It is referred to as the "Rule of Three". Take Ketchup...number 1 is Heinz, number 2 is Hunts and number 3 usually fluctuates between 2 or 3 competitors...but lways for a significantly less portion of the market than number 1 or 2. Look at Cola's. Number 1 and 2 are almost interchangeable Coke and Pepsi. They dominate with an almost 90% share of the market...name number 3.

Interesting note in the 1920's Coke was given the chance to buy an upstart company...they passed. Oops, name of the company was Pepsi Cola.

How many billions of dollars have Coke and Pepsi spent on advertising.

The secret to all the knife makers out there is this:

Create a niche where you become number 1. Make your knives with a style that is completely your own and be consistently innovative.

Simple in word almost impossible in deed.

WWG
 
You are absolutely correct, Les. And it gets weirder....lol. If you come up with something that our British brethren like and offer it to them at reasonable American prices, they just go into a tizzy:D Part of that is the weak dollar and the fact that they have to pay 19% VAT on good over there. Another part of it may be that the bushcraft craze has done to the simple little knives what the Strider craze has done to some rudimentary tactical knives over here as far as pricing. I put two of my knives up for sale on BB and the hunter with sheath went for $150 in 8 hours and the bowie with no sheath went for $160 in around 8 minutes and I was chatised for not charging more. These sales resulted in an order for a slightly fancier amboyna handled hunter with no sheath for $160. I have since seen a couple of more ABS guys list some knives on there. I discovered this completely by accident, but as they say down south, even a blind hog finds and acorn every so often. I happen to be going to the UK and France in September, which coincides with SICAC, so I may take a huge risk to my ego and take an extra piece or two in addition to the one I am taking as a gift to our landlord in Kent and informally "show the flag" in Paris:D I know that my best market will be the US, but I am not one to turn down any opportunity that presents itself.:thumbup:
 
WoodWorkGhost said:
Hi JDM,

A JD and a couple of LLC's, then you know as much about it as I do.

Pricing does seem to be all over the map with regards to custom knives.

With regards to the paintings. Question, how much did Rembrandt or Van Gogh get for their work? Hardly anything. It was those slimy dealers and astute collectors who got rich. :D

Van Gogh's "Sunflowers" set a record price at the time of about $40 Million sold to a Japanese collector named Yasuo Goto. He bought the knife 99 years after it was originally painted.

So it is a good news/bad news thing for the artisans. Good news is your crafts may sell for millions...bad news you will probably be dead when it happens.

Custom knives works similar to what you were talking about. Generally the top 3-4 makers in each category make much more money than those who are number 23 or 24.

You see this in most consumer products. It is referred to as the "Rule of Three". Take Ketchup...number 1 is Heinz, number 2 is Hunts and number 3 usually fluctuates between 2 or 3 competitors...but lways for a significantly less portion of the market than number 1 or 2. Look at Cola's. Number 1 and 2 are almost interchangeable Coke and Pepsi. They dominate with an almost 90% share of the market...name number 3.

Interesting note in the 1920's Coke was given the chance to buy an upstart company...they passed. Oops, name of the company was Pepsi Cola.

How many billions of dollars have Coke and Pepsi spent on advertising.

The secret to all the knife makers out there is this:

Create a niche where you become number 1. Make your knives with a style that is completely your own and be consistently innovative.

Simple in word almost impossible in deed.

WWG
Click to expand...
Van Gogh never got a dime while he was alive, but Rembrandt was quite successful, but in the context of being a very well paid artisan/businessman as opposed to the relatively ridiculous amounts of money that Picasso got for his work toward the end of his life.
Making knives that are completely your own gets tougher every day. We have had several millenia to work out all of the design features of cutlery and everything is derivative. I guess the trick is trying to combine those time tested elements into something that, as much as possible, uniquely expresses your creative vision of what a knife should look like and do. Guys like Bill Moran, Bob Loveless, Michael Walker and the lads from Arkansas among others have covered a lot of territory in the last 50 years, so it isn't getting any easier to come up with that "new twist.":eek:
 
WoodWorkGhost said:
Hi Kevin,
For new makers, actual cost doesn't enter into it. You will not be paid the same as an established maker (which would figure their costs the same way you are recommending). If they did their prices would be similar.

The new guys are going through an "apprentice" program if you will. Any one who has any experience with this understands that the apprentice makes substantially less then the trained professional.

WWG
Click to expand...

WWG, I usually agree or at lease understand your reasoning behind most of your post, but not here.

How can you say actual cost doesn't enter into a new maker pricing his knives?
No one can sell anything successfully or operate a business successfully without knowing what their cost are.

It doesn't matter if the new maker is going to be paid the same as an established maker or not. Its just as important to know your cost to determine how much you will lose off sales while apprenticing as it is to know your cost to determine where to price your knives and how much you will make off them.
 
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