Pricing vs. exposure

Well said, Neil, Kevin, Roger and Winkler....and others. :thumbup:

I came here to share my thoughts and am instead taking notes. :D


The one thing that changed my entire view of knifemaking early on was when I was talking to a friend a while back (in marketing) about the business side of things and he started asking about margins, profits, etc. I realized that I would never be able to make knifemaking into a business unless it was a business first, craft second. Otherwise it would remain a hobby. You can be famous, sell expensive knives and it still be a hobby. If you want to operate a business, though...it's numbers first. If you don't know your profit margins, how do you know if you are actually solvent? in the black? profitable?

I base my pricing on production cost plus a certain margin. That margin has to allow room for dealers and their markup. And that margin has to be at what the market will bear, or perhaps a little under.
 
Hello!

Some great and very valid info has allready been given! Hats off to all those who are ever so willing to share their experience and insight - you have my sincere respect!

To the original poster - did I understand correctly, that you are trying to run a knife-making business or are you a "hobby" builder (i.e. getting another income)? If you are trying to run this as a business, I can not stress enough what has allready been said - you REALLY ought to get a business plan as soon as possible. Otherwise (unless you are amongst the lucky 1% who will make do without) this whole venture is like russian roulette. Just to get a feeling for it - this is far too complicated and important to be summed up here -look at all expenses you face.
On the one hand those on a regular basis, on the other hand those related to your trade, the making of knives (steel, handle material, all other small things that go into one of YOUR typical knives). Do it thouroughly and go from rent for your shop, electricity, heating, food (!), internet, phone, taxes (!), insurance, public fees etc to the very tools YOU need for making your knives (don't forget to calculate a certain lifespan and renewal costs for some tools, as your planning gets more intense). Do this for at least one year, with expense allocation (expense expectation) to weeks and months.
Once you have jotted down all of your expenses, set the real figures for how many knives you can make in a certain period of time (1 week etc) and the projected time you need to sell them (since you've been doing this for a while, you should have some of this info based on your past experience). Do these calculations for the exact period of time as above, again with allocation of your projected earnings to weeks and monthts. Calculating and summing up these projected expenses and earnings for each week, month or any other period of time you see fit will enable you to get an overview of how much you would NEED to earn to cover your expenses (to make a profit, or whatever it is you are after... ;) ). Then the fun part can begin - let's assume, that - based on your experience - you can sell 5 of your knives for 500$ in 3 weeks but could sell the very same 5 knives for 750$ if you had 5 weeks time, what would cover your expenses? Will you need external money to some extent to cover your expenses? Are you in a position to get external money when needed? Would it be better - assuming it is realisitc - to sell 8 knives for 350$ in 2 weeks? How much would public fees and taxes chew up, based on your projected earnings? Are you better off, buying your materials on a per-order basis or would stocking be more efficient based on your projections?

I hope you get my point - ANY consideration of pricing should be based on a real business plan (not the mini-fun-example above) in my view. This might not be necessary any more once you have a unique selling point that makes people WANT a Jason Fry knife, no matter the cost and regardless of the fact that 4 or so other makers could do the same for less.

Regards,
Alex
 
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Daniel Koster said:
Well said, Neil, Kevin, Roger and Winkler....and others. :thumbup:

I came here to share my thoughts and am instead taking notes. :D


The one thing that changed my entire view of knifemaking early on was when I was talking to a friend a while back (in marketing) about the business side of things and he started asking about margins, profits, etc. I realized that I would never be able to make knifemaking into a business unless it was a business first, craft second. Otherwise it would remain a hobby. You can be famous, sell expensive knives and it still be a hobby. If you want to operate a business, though...it's numbers first. If you don't know your profit margins, how do you know if you are actually solvent? in the black? profitable?

I base my pricing on production cost plus a certain margin. That margin has to allow room for dealers and their markup. And that margin has to be at what the market will bear, or perhaps a little under.
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I've worked as a machinist since I was 15. I know when projects going through a shop are profitable and when dollars are just being turned over. There are soo many more things to consider than just time and materials. Medical coverage and retirement are often overlooked, especially by new/young makers just starting up. I find many aspects of the knife business unique ONLY to the knife business. When you go to a Doctor, do new ones charge less than the experienced ones?? If so, I need to find one :) I'm paying my way medically out of my own pocket right now.
 
I make knives because I want to, if I never sold a knife I would still be making knives. There were time I had to go into hock just to buy a book about steel or knives. Today my library is one of my most prized possessions. The quest for knowledge and sharing this knowledge with all who want to listen has been my profit, you cannot put a price tag on happiness and the satisfaction that can come from learning experience.

I have on occasion thought about making them fast but worth less and find myself unable to do so. This winter I have completed 8 knives, and continue to learn. When I quit learning I will quit making knives. My ex-wives claim I am addicted and I readily admit to being a knife addict. The history of knives is so vast that no man can know it all, my specialty came naturally and I have enjoyed every knife I have made.
Many never were finished but were tested to destruction simply exploring one new method, most of which proved to be failures but the knowledge gained was worth the time and expense involved.

When it comes to money I have spent most of my life below the poverty level, when it comes to satisfaction I am rich. if I were to sell my knives with financial profit as my sole motivation life would be very boring for me
 
Ed Fowler said:
When it comes to money I have spent most of my life below the poverty level, when it comes to satisfaction I am rich. if I were to sell my knives with financial profit as my sole motivation life would be very boring for me
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There is a happy medium, Ed...we have talked about it before, it doesn't HAVE to be one or the other.

I have been rich and have been poor.....poor sucks.

Best Regards,

STeven Garsson
 
Neil Blackwood said:
There are soo many more things to consider than just time and materials. Medical coverage and retirement are often overlooked, especially by new/young makers just starting up. I find many aspects of the knife business unique ONLY to the knife business.
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Agreed. Most of the other entrepeneurs I have talked to (outside knifemaking) are baffled by this industry. We are still far behind the times in nearly every category.

Thankfully, knifemaking is a passion-fueled craft and that energy/enthusiasm keeps many of us afloat whom otherwise should have sunk many years ago.



Back on topic but only partially related - I've noticed that there is an "Echo-Effect" regarding pricing and exposure. When you introduce a new model, enough people have to see it and talk to someone else about it before they'll come back and buy into it. It's almost like shouting across a wide valley and waiting to hear your voice return. For some very popular makers, it happens quickly. For others, especially new makers and "niche-knifemakers" it takes a good amount of time. Don't confuse this with "paying your dues"...I'm talking about when experienced makers who release new designs find that it takes time for those designs to catch on and the market to adjust to it. Lower pricing can accelerate the echo-effect for any maker...to a point, of course.
 
I'm a graphic artist, illustrator, and hobby knifemaker. I've run my own business for 25 years, and managed to keep food on the table all the time, and money in the bank most of the time.

Virtually every freelance artist I know struggles with pricing their services. It's one of the rituals of passage in any business that must be done right or failure is imminent.

I'll not bore you with the usual advice about figuring out how much you need to profit in a year, and subtracting your expenses...

But the one concept for pricing that I think is most valuable: you will know your price is right when some percentage of your bids fails to be selected. In knifemaking terms, that would be when someone looks, but doesn't buy.

For my business, I track bids and try to get my pricing so that I lose 20~30% of them. If I win all my bids, I'm too cheap. If I win only half, I'm too expensive, which is bad unless I'm literally twice as expensive (which would balance out -- half the work and twice the pay).
 
Al - I was in graphic arts for 7.5 years and know what you mean. Very well said.


When you first start out, though...it's hard to know if you're not selling due to price, or due to people not knowing your name...or what to expect. Especially in this ole-timey, handshake-mentality we exist in as knifemakers. Personally, I love this environment. But it's hard to break into at first.


I'll add to your advice that it's generally accepted in the business world that you are "in the red" or rather "not truly in the black" for the first 5 years in any new business.
 
Kohai999 said:
There is a happy medium, Ed...we have talked about it before, it doesn't HAVE to be one or the other.

I have been rich and have been poor.....poor sucks.

Best Regards,

STeven Garsson
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Great Post.

Poor sucks.

Looking for that happy medium.

Much Respect.
[video=youtube;l5yCLe4fP4E]http://www.youtube.com/watch?v=l5yCLe4fP4E[/video]
 
Jason Fry said:
Over that time, both my quality and my price have improved. I consistently sell knives quickly, which makes me believe that they may be priced below their market potential. I have been relatively unknown, other than a website, a presence on several forums, and a couple of small shows. That's the backstory.

Here's the dilemma. How do I best take advantage of the exposure? If I leave my pricing alone, I'll leave money on the table and will significantly undercut the dealer. I want my customers to feel like they got a "good deal" on my knives, like they expect to pay more for that kind of quality.
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Some makers toil their whole lives making knives "good enough".....and some come out of the gate, wowing the masses.

It's important to remember that as a knifemaker selling knives...the expectation from your buyers is that the knives are going to be great. Why else would they buy? Production knives are superb, excellent function, reasonable prices....there has to be something extra in there in order to make the buyer buy.

Ed Fowler and Mike Snody writing in the same thread helps to illustrate what that extra is. The knives themselves ARE superb, much better quality, and unique in comparison to a production knife...that said, when you buy a Fowler knife or a Snody knife, you are buying the maker as much as the product. You are buying romance, mystique, character, utility, fantasy and hard, gritty truth all in one package, from the person that made that product.

Ed has mostly only himself to take care of, and thusly can charge mostly what he feels like. Mike has employees, young children and big bills, he HAS to make $$$ a priority, because if he doesn't do it right, the innocent suffer for his errors. That is a huge burden. It is completely possible to follow your muse and make market dynamics a priority. Ernie Emerson, Allen Elishewitz, Jason Knight and Jerry Fisk are all excellent examples of this.....singularly unique and desireable art/craft offered at prices that allow everyone to be happy...maybe not filthy rich, but far above poverty level.

Use the exposure you get to answer yourself and your customers "who am I". Make your knives reflect who you are, and be true to yourself. Use the momentum to network and expose yourself to broader markets. Ask good questions, present yourself confidently and clearly, and don't repeat mistakes.

Good luck, and Best Regards,

STeven Garsson
 
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Kohai999 said:
don't repeat mistakes.
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some excellent points Steven, but this one is probably the most important.

I would add that it's helpful and arguably necessary to look at mistakes as lessons. In that light, if a lesson can't be learned the first time, subsequent identical lessons will probably do more harm than good.
 
Its a business run it like one. Its all very easy-good stuff sells itself, don't get greedy, pay your dues and have lots of fun! Every year look at your price's one time then move forward until the next.
 
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I tell new makers that knives are like any other business. If you sell pizza, it better be some of the best in town. It not only must draw people, in reality it must draw in people from other pizza places. If you are lucky you could scrape out a living making average pizza. My town specializes in it :( Most people with the entrepeneurial spirit aren't satisfied with that. Combine that spirit with the knifemaking/craftsmanship mentality and you should have what it takes. Then the marketing comes into play. If everyone is advertising their pizza shop in the newspaper, rent a billboard or go with a cable ad. I would break away from the "doing what everyone else in the business is doing" concept............FAST!!
 
This has been a very interesting thread. I have hesitated on replying for some time mainly because there is no hard & fast answer. If a custom knife was just another commodity on the market it would be much easier to give an answer that worked every time but that's just not the case here. A custom knife purchaser isn't buying just a product but a piece of the man who made it as well. That's where it becomes difficult to establish a price. I usually tell a beginning maker that the hardest thing that he will do is to set a price on his work. That's one reason that this is such a difficult business at which to be successful. Yes, have a business plan and try to follow it but don't expect that you can run this type of business like any other because it just doesn't work that way. ;)Maybe that's part of the attraction.

Gary
 
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