The buisness of custom knives

[Les Robertson]

Hi Modelman,

I think most makers become knife makers through the "hobby" route. Just as most custom knife dealers become dealers after ammasing tens of thousands of dollars worth of custom knives.

The "business" of custom knives is no different from any others. While some may want to fantasize about creating exceptional works of art or the next great lethal weapon. The fact is, for the professional full-time maker (and to a degree the professional part-time maker)you have to make money...more specifically you have to make a profit. Not just once in a while...but on every knife.

Makers have to pay for equipment, materials, utilities, insurance, in some cases rent, show expenses, advertising, etc. If you are not making a profit, you cannot pay for these things. If you can't pay for these things, you are no longer in business.

Dealers pay for the same things (yes I buy handle materail and steel as well). We don't have buy knife making equipment. However, we need to carry $50,000 - $100,000 worth of inventory. I always grin when I go to a show with only $30 or $40 thousand dollars worth of knives on the table. Then have someone come up to me and ask me how come I have so few knives.

What a lot of people fail to realize and it is understandable. That a maker can do one of two things to make a profit. For example; do everything single thing by hand and charge $650 for a tactical folder. Or employ some labor and cost saving techniques, maintain their profit and pass the savings along to the customer. Thereby increasing the amount of knives they sell. This increases their cash flow, allowing them (for example) to now buy materials in bulk. This further increases their bottom line, while at the same time helps to keep prics from increasing. Again, this is just one example of how helping the custom knife maker make (and ulitmately) save money. Has a positive impact on the custom knife buyer.

Those craftsman who cannot turn a profit will ultimately have to find another way to pay the bills.

 

[anthony cheeseboro]

I think that you make some good points Les. Many people who complain about CNC or laser cutting etc. would be sick if they had to pay $600-800 for knives that now run between $300-450.

 

[RonNewton]

It's interesting how prices vary drasticly from maker to maker(comparing apples with apples) and yet many makers still stay in busininess making a profit. I'm speaking of full time makers here. There are the makers making the $500 knives, then the guys who build the high end art pieces, the guys making $1000 knives, several making the mass produced $175-$300 lower end knives etc...

I've managed to run a profitable knife business doing the entire realm. $150 knives up to $10,000 art pieces. I have found that variety reaches a broader group of clientel. I've said all this because I truly believe that variety of merchandise has kept me well off in the game of custom knifemaking.

The second thing that's kept me in the game is efficiency in the way things are done in the knife shop.

The biggest thing I'd like to comment on is that not all makers charge the same price on the same type of knife for many reasons. I've said this because I've had people say that knife pricing must be competetive. Period. I don't think that this is true 100% of the time. Not saying that it is not business smart to be competitive on pricing.

Not all of us custom makers drive a new truck for instance. We live in different cost of living environments, have different house payments, expenses, overhead, and on and on. Some have wives that work and get paid very well and the maker isn't forced to have to charge as much on his knives. Knifemaker A is twice as slow as knifemaker B when building the same exact knife. Some makers are more efficient because they came from a machinist background or are just naturally talented at what they do. I even believe some makers have better sales personalities, sales tactics and a better knack for selling knives. This list goes on forever. I've talked with makers that say they charge $12 and hour out of their knives and others that say if they are not making $75 and hour they are going in the hole. I belive this is very true because not all of us has to have the same exact amount of income to survive on. Each maker has to figure out where his profit margin needs to be to survive on and yet try to be competitive.

Then there are the makers who don't price competively because they have a reputation, a name and a following that is so big that competitive pricing is totally out of the picture.

I've had customers buy from me and say they could get a nicer product at a better price from me than what's his name over there. And there are others that feel they can get better value from someone else besides me. This will always be the case. I know where my profit margin needs to be to survive. What I'm doing works for me. But what I'm doing may definitley NOT be what the next guy needs to be doing.

But Les is right.....you must make a profit.

 

[Kit Carson]

Well said, Ron.

 

[Keith Montgomery]

Everything that has been said here is spot on as far as I am concerned. To me, it is important to once in awhile be reminded of the economics of knifemaking. All the knife buyers out there have to remember that we have to be willing to pay a fair price for the knives we buy. A fair pricing being one that will allow the maker to earn enough for him/her to consider it worthwhile to make knives.

I have never had any problem paying a fair price for a knife, and a fair price will run from $375.00 to $4,000.00 for knives I have on order. To tell you the truth, I think that the two most expensive knives I have on order are two of the best deals I have gotten.

I understand completely that a maker needs to make a decent profit on a knife and I have no problem giving a maker a fair price for my knife.

 

[Les Robertson]

Hi Ron,

You brought up some excellent points. There may be "apple to apple" comparisons. However it can be a green apple to a red apple.

Each maker has to deterimine what profit margin they need to take care of the expenses. Cost of living can have a lot to do with what a maker has to charge.

Having every knife you make pre-sold will obviously keep a positive cash flow going.

Knowing you stand a very good chance of selling out at every show you attend. Will calm the nerves about attending show.

I think the confidence a maker gets from all these things helps them to be successful. You are willing to take more chances.

Any successful business owner will tell you one of the keys to their success was well thought out risk management program.

Having a superior knowledge of your market and subsequently your customers will provide both tangible and intangible benefits.