Pricing vs. exposure

Brett Gatlin said:
I use a basic cost per inch of blade length plus materials/consumables to get a baseline. Adding extras such as hamon, stag, bling etc. comes after that. And as I stated before, honest research where you stand will be your final adjustment. I dont necessarily rely on an hourly labor rate.

Brett
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Correct - whether one calls that the first or final adjustment, market position will be the most meaningful factor in ultimately setting a price. Cost of materials and time are important considerations to be sure, but newer makers tend to be inefficient with both - so using this as a baseline for market price early on can be misleading. Coop expressed the market reality well in describing the early stages as getting paid to learn.

When I look at the time invested in making my first (and only) few knives, paying myself any kind of a remotely reasonable hourly rate, plus cost of materials (didn't know how much belts cost 'til I started using them up) would net out to a cost base that would already significantly exceed any reasonable market value for the knives in question. Marking up from there to "cover my costs" would be an excercise in self-delusion.

When you're starting out, developing your skills and efficiency, getting both performance feedback and critical assessment (fit / finish / design / aesthetics / ergonomics etc.) from peers and customers are what's most important. Profitability does not generally happen right out of the gate, and the reality is that it can take a little while.

On the exposure question, by all means use magazine publications and awards to their full promotional effect.
 
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The "market reality" is that most businesses which do not know their cost of doing business before setting prices will not be in business very long.

Business; a: a usually commercial or mercantile activity engaged in as a means of livelihood

If your intention is making knives as a means of livelihood, as opposed to being a hobbyist, you would do well to determine your costs first before doing
your pricing analysis and processes to set pricing structure. Knifemakers may find that they will not make money or even lose money until they become efficient, hone their skills and are able to earn a suitable market position. This will be very helpful information to insure they are prepaired.
 
Kevin Jones said:
The "market reality" is that most businesses which do not know their cost of doing business before setting prices will not be in business very long.
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Perhaps you missed this part, Kevin:

RogerP said:
Correct - whether one calls that the first or final adjustment, market position will be the most meaningful factor in ultimately setting a price. Cost of materials and time are important considerations to be sure, but newer makers tend to be inefficient with both - so using this as a baseline for market price early on can be misleading. Coop expressed the market reality well in describing the early stages as getting paid to learn.
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Nobody disputes that an understanding of costs is important or suggests that ignorance of costs is good business practice. I'm pretty sure that nobody even said that. I know for sure that I said the opposite.

The question is whether this provides a meaningful basis for establishing a market price for a newer maker. In my view, it does not - or at least, it is a far less significant factor in an overall pricing strategy. If your market position is such that you cannot expect to recover the costs of materials (very front-loaded for a newer maker establishing a shop) and time (they tend to take longer to make a saleable knife with a higher failure rate) that does not mean that you have failed as a maker. It means you need to improve skills, efficiency and market position as you work towards profitability.

Suggesting that market price can be determined by a simplistic calculus of cost plus time is wholly unrealistic, in my view.
 
Back when I first started making knives a long waiting list was to be cherished. It was not too long that I found that a long waiting list was costing me what I feel is a knife makers greatest asset. You find your self making knives that no longer interest you and start figuring out how to make them faster. I feel this is trap that can limit your creativity.

Today I make knives I want to make, I take as much time as in necessary to complete the knife look it over and see how well my ideas came together, then put a price on it.
 
RogerP said:
Suggesting that market price can be determined by a simplistic calculus of cost plus time is wholly unrealistic, in my view.
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You must have missed my statements below. I don't beleive anyone in this thread has suggusted the above. I'm only saying, any determination or even analysis of pricing is premature in most any business before your costs are determined. A knifemaker's pricing is one of the most important things he/she will do, especially if they do not have extra income to depend on.

Kevin Jones said:
The first step for accurately pricing any created or manufactured product is determining your true costs.
Then take this number and run it against the maker’s prices who you see as being your competition.
This first step should give you a gut check as to where you stand in your pricing both from a competition and profit perspective, but you are still not finished yet.
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Kevin Jones said:
If your intention is making knives as a means of livelihood, as opposed to being a hobbyist, you would do well to determine your costs first before doing
your pricing analysis and processes to set pricing structure.
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I'm glad this topic has been brought up again as knifemaker pricing and general business practices is a worthwhile and interesting subject.

On and off for several years now the CKCA has been considering conducting a Knifemaker Business Seminar, perhaps on the Monday and Tuesday after a Blade Show
in Atlanta. We have knifemakers who are very successful at their knifemaking businesses who could do an excellent job helping other knifemakers. We could have several of these
knifemaker teach at this seminar and even bring in a business leader or CEO of a successful company to teach how general business principles apply and can be used in knifemaking businesses.

The thing is we are not sure if there's great enough demand from knifemakers to make something like this practical and worthwhile.

You may ask why is a knife collectors associators interested in something like this? Well, because knifemakers who practice sound business principles are good for knife collectors and the custom knife community in general.
 
Ed Fowler said:
Back when I first started making knives a long waiting list was to be cherished. It was not too long that I found that a long waiting list was costing me what I feel is a knife makers greatest asset. You find your self making knives that no longer interest you and start figuring out how to make them faster. I feel this is trap that can limit your creativity.

Today I make knives I want to make, I take as much time as in necessary to complete the knife look it over and see how well my ideas came together, then put a price on it.
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What a great post..
I always love reading your words.
Huge Respect from Texas.
[video=youtube;AWmrFcsaOBk]http://www.youtube.com/watch?v=AWmrFcsaOBk[/video]
 
Ed,
Is that not a reason to look toward semi-production methods, or factory collaborations? (long waiting lists)
I have just been looking at the multitude of Daniel Winkler II tactical knives and axes offered on bladegallery. Surely he is doing things to speed up production that don't inhibit his (entire) time from doing what he loves, and robbing his creativity..
http://bladegallery.com/shopdisplayproducts.asp?Search=Yes
David
 
Cool vid Mike - I enjoyed your trip down memory lane.

"There's a big difference between being proud and being arrogant." Like you say, sig line material right there.
 
We're straying off topic a bit, towards business practices, but that's OK. All this info is relevant.

Mike made a point in his video about logistics and shipping: All 500 of those inexpensive quality Bosses he made, and all his others orders have a shipping address and (at least) a half dozen emails assigned to every knife. It's inevitable.

I'm in a similar position. The amount of communication that is required is astounding: For initial dialogs, in transit, arrivals, proofs, acceptances, return mailing info, publication info, prints being sent here, knives being sent there, it all adds up to time. Time well-spent, yet it adds up.

I literally have a shipping table and a large supply closet for return shipping. I'm 1/3 service dept, 1/3 photographer, 1/3 editor/printer, and 1/3 shipping clerk. Wait.... wut??! ;)

Knifemakers enjoy the exact same process. The GOOD knifemakers don't hesitate to get up early, stay up late, return dialog ASAP, and ship with brevity and prepared packaging.

I have gotten knives shipped in soft hand-me-down boxes, wrapped in towels or rags, and assorted packing cushioning. The better knifemakers will figure in the cost of a pouch and include this, OR have a standard packaging method which is consistent and protected. (USPS.com gives away good boxes: Use them.)

Shipping and dialog is a reality in this world. Make it part of YOUR better quality. :thumbup:

Coop
 
Knife pricing is variable to different makers because economic needs are not the same. The maker that loves to make knives as a hobby and has a steady source of income other than knife sales can price knives any way they want to. They can charge $1.00 an hour or $500 an hour and it doesn’t really matter. The market will sort out if they sell or not. If the maker is having fun everyone is happy. I like to fish. If I put a price per pound on the fish I catch compared to lost shop time I would be better off to buy fish at the store. But I like to fish so the price doesn’t matter. Even if I don’t catch anything I still have fun.

When a maker spends a lot of time in the shop and needs to show a return on his investment the picture changes. Again there are variables in play depending on the percentage of income needs to come from knife sales. A maker that has a retirement from another job, is working another job with a decent income or has a spouse that helps pay the bills does not need the same knife income as a maker that relies fully on knife sales to pay the bills.

Hourly wage and materials is only part of the equation that makers should use when pricing their knives. This is the easy part. Overhead expense is the hard part. Rent, interest, equipment, electricity, travel expense, auto expense, phone, computer, show fees, advertising, and taxes are a few. Then there are sander belts, glue, drill bits and other supplies that go into the product. Let’s not to forget my personal least favorite, Insurance. Health, auto, building, life and liability. When a maker is providing their full income through the sale of knives all this needs to be taken into account. Even if I were a part time or hobby maker I would try and get an understanding of what it really costs for me to make a knife.

Knowing this information makes it possible to know if I am making money or losing money and I price my knives accordingly. The price the market will bear is for the collectors, users and dealers to decide.

The hourly shop time wage a maker must charge to really show a reasonable profit may seem high when compared to public jobs. But once you deduct all the extra expenses that are not present in public employment the wage is normally pretty low. Makers that price their knives based on what other makers are charging are shooting in the dark and really doing more harm than good to the industry. Set your price based on reality not fantasy. If they don’t sell lower the price. If you get more business than you can handle raise your price.

Accounting programs like Quick Books really help when trying to figure these expenses and being diligent when keeping track of receipts and purchases is important. Don’t forget you also have to make a knife that someone wants to buy.

2 Knife - I have some DVD's that belong to you. email your address and I'll send them back. Sorry for the delay but I sort of forgot about them.
 
Calvin Robinson said:
You should charge whatever the market will bear. In my case the market won't bear very much:)
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That is neither professional, or particularly useful.

It is extremely important to set a baseline and move UP.....charging less at some point in the future is almost certainly the beginning of a professional death knell. Pricing should move up as quickly as possible without turning off the mass of your customer base.

Best Regards,

STeven Garsson
 
Ed Fowler said:
Back when I first started making knives a long waiting list was to be cherished. It was not too long that I found that a long waiting list was costing me what I feel is a knife makers greatest asset. You find your self making knives that no longer interest you and start figuring out how to make them faster. I feel this is trap that can limit your creativity.

Today I make knives I want to make, I take as much time as in necessary to complete the knife look it over and see how well my ideas came together, then put a price on it.
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Well said. I like to build knives the way I feel like making them. When done, I post them for sale or put them out on my email list. I juggled a backlog for years, NEVER again. I actually had someone order a knife with a really crazy combination of materials, then they bitched because they couldn't immediately flip it, LOL !!! Often people will catch me mid build and I'm glad to add or change minor options. Thats' why when I do post knives, often they are about 90% finished, or at least the frame is left bare. And.... My awesome book keeping and desire to be creative ended up making me more enemies than friends :( I don't work with US dealers and don't blow out 25 folders for shows 5 times a year either. I guess that all has some crazy affect on pricing too but..........you know what they say about slow and steady :D So far it's working out well.

Getting back to the Pricing VS Exposure topic. I never based my pricing on what other makers charge so I'd rather comment on the exposure part :) As far as going to shows and walking around to see what other makers charge, that could be done in minutes on FB or the makers websites. Things have changed so much over the past 15 years, I honestly don't know how I would start if I had to do it all over again. I built my following or customer base over the years on forums. Now I see guys doing well with FB almost exclusively. I dropped my wesbsite in favor of my blog. My feeling is that was a bit of exposure refining. I found people wanted to see the knives BEFORE they where done just as much as the finished ones!! To me, exposure and promotion in this business takes as much creativity as the craft itself. I'd rather be the one doing things a bit different than everyone else.
 
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