How much mark Up do you get on a project.

[genek]

I had not really set down and done a full scale mark up calculations until today. For $50.00 worth of Cherry I am getting $1250.00 dollars worth of product. That is a mark up of 2,500%.. Not bad for my investment. All of that wood I cut in to the parts in about a half a day with my shop bot.

[myxpykalix]

Are you bragging or complaining...?? lol That's great! But to get a more accurate picture of your true profit you need to calculate your overhead, expenses,ect but no matter how you slice it you're doing something right!! Was this one specific item with a specific margin of profit or different items? Good job!

[genek]

Are you bragging or complaining...?? lol That's great! But to get a more accurate picture of your true profit you need to calculate your overhead, expenses,ect but no matter how you slice it you're doing something right!! Was this one specific item with a specific margin of profit or different items? Good job!

four items with set progit margin..

[chiloquinruss]

Don't forget your 'unburdened' costs, which are property taxes, insurance, amortization tables for equipment, propane, electricity, etc. My accountant says if I don't do a thing it costs me about $11.32 per hour for an 8 hour day to have the luxury of owning my own shop and NOT using it! ;) Of course labor is extra! Russ

[genek]

all of our expenses is about $21.00 per day.. this is electricity, mainance, insurance.. My electricity averages $5.37 per day... Our insurance is $6.00 per day. We allow about $6.50 per day for maintance and new equipment and incidentals at $3.00 per day.

[Brian Harnett]

It really depends for me I have gotten logs for free and make 3500 or more out of ten feet of it in carvings, even more with hardwood I mill into live edge furniture. But thats not why I do this I do it because I enjoy it.

When I worked in a production shop designing and prototyping the push was faster and faster, for good reason it makes sense for business but not for my life, I work at my pace now do well on some jobs peanuts on others and thats OK. After being out of that job for 12 years I still find myself falling into production mode on occasion.

[genek]

It really depends for me I have gotten logs for free and make 3500 or more out of ten feet of it in carvings, even more with hardwood I mill into live edge furniture. But thats not why I do this I do it because I enjoy it.

When I worked in a production shop designing and prototyping the push was faster and faster, for good reason it makes sense for business but not for my life, I work at my pace now do well on some jobs peanuts on others and thats OK. After being out of that job for 12 years I still find myself falling into production mode on occasion.

I postede this to bring out the fact that one can make a good liuving doing our crafts. Enjoying it is very important. Like you Brian I enjoy making products I do production runs.. I make product umntil I get a set number in stock then move on toanother.

[Ajcoholic]

all of our expenses is about $21.00 per day.. this is electricity, mainance, insurance.. My electricity averages $5.37 per day... Our insurance is $6.00 per day. We allow about $6.50 per day for maintance and new equipment and incidentals at $3.00 per day.

That seems awfully low. With two employees, it costs me over $60 per HOUR just to keep my doors open, before I even make anything for myself. For instance, my shop and liability insurance + property taxes together are $6 per hour. Electrical averages $4 per hour... etc.

[James M]

Andrew,

He doesn't have to pay for all that renewable energy costs or cap and trade costs that Ontario government has signed you up for. :D

James

[bleeth]

It's as simple as GROSS profit vs NET. If all you count is cost of materials then you have a huge profit in a business like Genes.
Clearly, as you start deducting true business expenses the Gross profit diminishes.
Expenses take two forms, those that run the business, including everything from all utilities, including phones, power, internet, water etc, and other things like insurance, vehicles and maintainence, travel, marketing costs (website, shows, etc.), building costs (insurance, mortgage or amortized expenses for building if bought outright, depreciation, tooling, equipment, etc, and direct expenses in each project, which not only includes cost of materials and labor assigned to it, as well as labor expenses (Employers share of taxes, workmans comp, etc.) If one takes a 12 month average for the overheads and divides by working hours then you get hourly burden, as Andrew was talking about costs of shop whether producing or not.

With the true purpose of assigning all proper expenses and depreciations to the business that are particular and allowable by law, then net profit is reduced, as are taxes. If you corporate and set up your business right (for a subchapter S) then the business should earn virtually no money and the owner takes out a salary and leaves the rest in owner equity.


Bottom line: You don't want the business to earn too much money. Identify and calculate all allowable business expenses. For example, your wife is a valuable part of the business doing marketing at shows. All expenses are deductible and she should get a salary or wages of some kind. Owners are entitled to health insurance and/or medical costs as an expense. If you are not doing all this then you need a new accountant to show you how. So even though Gene's NET profit is considerably lower, I bet he is still doing fine!! No doubt that making and selling properly a semi production line like his is a good business and can be much less mentally stressful than the custom shops constantly looking for new clients and having to engineer every project individually. But the other side is lots of us just like custom better so put up with the complication (or thrive on it in some masochistic manner!!)

I'm looking at how to collect SS at this point and still stay in business since I know I would go out of my tree if I wasn't going to work, but would like to start getting some of what I paid in back before they blow it all.

[genek]

That seems awfully low. With two employees, it costs me over $60 per HOUR just to keep my doors open, before I even make anything for myself. For instance, my shop and liability insurance + property taxes together are $6 per hour. Electrical averages $4 per hour... etc.
My insurance is $2190.00 per year.. My electricty cost is is $163.34 per month average. I get my prices per day. I take the cost of insurance divided by 365 days that gives the daily cost. I take the cost of electricity and divided by 30 that gives me the cost per day. If you are paying 6.00 per hour for insurance that is $48.00 per day or $17520.00 per year.. man your insurance company is getting rich.

[genek]

It's as simple as GROSS profit vs NET. If all you count is cost of materials then you have a huge profit in a business like Genes.
Clearly, as you start deducting true business expenses the Gross profit diminishes.
Expenses take two forms, those that run the business, including everything from all utilities, including phones, power, internet, water etc, and other things like insurance, vehicles and maintainence, travel, marketing costs (website, shows, etc.), building costs (insurance, mortgage or amortized expenses for building if bought outright, depreciation, tooling, equipment, etc, and direct expenses in each project, which not only includes cost of materials and labor assigned to it, as well as labor expenses (Employers share of taxes, workmans comp, etc.) If one takes a 12 month average for the overheads and divides by working hours then you get hourly burden, as Andrew was talking about costs of shop whether producing or not.


With the true purpose of assigning all proper expenses and depreciations to the business that are particular and allowable by law, then net profit is reduced, as are taxes. If you corporate and set up your business right (for a subchapter S) then the business should earn virtually no money and the owner takes out a salary and leaves the rest in owner equity.


Bottom line: You don't want the business to earn too much money. Identify and calculate all allowable business expenses. For example, your wife is a valuable part of the business doing marketing at shows. All expenses are deductible and she should get a salary or wages of some kind. Owners are entitled to health insurance and/or medical costs as an expense. If you are not doing all this then you need a new accountant to show you how. So even though Gene's NET profit is considerably lower, I bet he is still doing fine!! No doubt that making and selling properly a semi production line like his is a good business and can be much less mentally stressful than the custom shops constantly looking for new clients and having to engineer every project individually. But the other side is lots of us just like custom better so put up with the complication (or thrive on it in some masochistic manner!!)

I'm looking at how to collect SS at this point and still stay in business since I know I would go out of my tree if I wasn't going to work, but would like to start getting some of what I paid in back before they blow it all.
You are correct however I do do gross profit we are in-corporated... Tina draws a salary, and I do also.... Withy My clients I can just about figure when they will re order. That is why I have to keep such a large amount in stoock. right now we can not keep enough horse heads in stock to meet orders. Start Paying Your wife a bigger salary, Yours and Hers. As long as you do not do a draw and you do not show you work you can still draw.

[bleeth]

Andrew's insurance, like mine, is much higher in rates as we carry commercial lines insurance that includes liability for installations, etc and proper commercial insurance of that type is very expensive.
He is likely also including his auto insurance (also for commercial use with high liability as well as covering employees driving on company time even if it is their vehicles, building insurance, workmans comp, etc.. There are many ways to get cheaper commercial insurance but most established General Contractors require the full coverage to be on a per project basis. So if we have 4 projects ongoing each of them is covered to the full extent of the insurance. That turns a million dollar limit into 4 million, for example. Standard limit policies cost a fraction.
Most business burden figures are also based on 40 hour weeks Monday-Friday so the monthly number of days is 20, not 30, etc.

[genek]

I Have to carry two commercial insurnaces. One is for shows only which is a Million liability per show. Most shows require that I put them on as a rider. Then I carry a general insurancec that covers product liablility, building damages ect. Where i do not have full time employee's it makes some differance. I base my company on a 365 day. Work or no work, Expenses are still there even if I do not do work. This way, I have no hidden cost and I know what i have to come up with per day to meet my companies needs as well as My own.My product Liability is higher than a cabinets shops, but my general liability is lower. Work record and claims records help to lower your cost.

[bleeth]

Yes, there are a lot of ways that different operations account.

[Ajcoholic]

I only base my hourly costs, on the working hours in a year (based upon a 40 hour week, ie, 2000 hours per year).

I cannot work to pay for costs when I am not there, so I figure as Dave suggested, that my costs per hour are based upon approx 20 days a month X 8 hrs.

And yes, insurance, taxes, heating costs, maintaining three older vehicles and insuring them - add up to a lot off the top! Never mind tooling and belts for the sanders, etc. Things that you dont always think about that can cost a lot per year.

Plus what I pay my accountant monthly, and also to do the year end stuff, lawyer fees for keeping the records of incorporation current, banking fees - again a lot of things that you dont see day to day.

Some times I wonder why I do this??? lol. Good thing I love woodworking...

[myxpykalix]

This is why i sold my retail stores back in the 90's and got mostly into real estate. It seemed as though many people are simply "chasing their tail" ......trying to make sure the rent, insurance, taxes, employees, utilities and all other expenses were paid and whatever was left over was yours. It was either feast or famine. I have been self employed my entire life from 18 years old and would do it over again gladly but there were tough times for sure.

I have to laugh at some of these people especially government employees and younger people who want all these various holidays, ect off and recollect that i worked an average of 10 hours a day, 7 days a week, for YEARS with no vacations because i had to to keep my businesses going and growing.

[gundog]

My material is very expensive I don't look at it to see how much the material nets me for me it is just a cost figured into the final product. I charge an hourly rate of at least $100 an hour + material to cover my costs of labor electric etc. Some products do better than $100 an hour but if a product does not get me my hourly rate I either raise the price or stop making that part. The market dictates what someone is willing to pay for an item. I sell mostly wholesale with some retail. My dealers have a dealer price list with their price and the MSRP they can charge whatever they like I will not undercut my MSRP by selling direct. So far this has worked pretty good for the last 10 years.

Mike

[Ajcoholic]

This is why i sold my retail stores back in the 90's and got mostly into real estate. It seemed as though many people are simply "chasing their tail" ......trying to make sure the rent, insurance, taxes, employees, utilities and all other expenses were paid and whatever was left over was yours. It was either feast or famine. I have been self employed my entire life from 18 years old and would do it over again gladly but there were tough times for sure.

I have to laugh at some of these people especially government employees and younger people who want all these various holidays, ect off and recollect that i worked an average of 10 hours a day, 7 days a week, for YEARS with no vacations because i had to to keep my businesses going and growing.

I worked for several years without a holiday. Actually, before I met my wife in 2006, I worked 9 full years without more than an occasional long weekend - and it was standard for me to work at least a Saturday, and often half or more of Sunday as well. Every month or so I'd take off a weekend just to rest and not burn out. Working nights was also common - often I'd be in the shop until 5:30 to 6, go eat supper and go back until 9, 10 or later..

That was fine when younger, and single/no kids. I recall telling my dad, after I made plans to take a week off (with my now wife) when we were dating. Just to go visit some of her friends, etc. I felt very guilty, telling my father I was taking a week off of work. Remember also, this was after I was formally in charge of the company! Yes, when you work for yourself, things are different.

Now, with a wife who works many evenings and weekends (shift work) and two young kids - working nights and/or on the weekend is not too easy. Two weekends ago, she took the kids to visit her family. I stayed home, and worked a full day on both Saturday and Sunday they were gone. It felt GREAT! Just like old times... lol. I really wish I could work more weekends. I get more done than during the week. No phone calls, no one stopping in, etc.

Running your own business sure takes a "different" kind of person. Today I had a stressful day - I was worried all weekend about how things were going to go (just had a full day of meeting customers, trying to schedule several jobs, etc that are time sensitive and important). Some times I really do wonder if the stress and worry is worth it. Then I realize it is! At least for me. Wouldnt have it any other way... :cool:

[bill.young]

I've got a buddy that says that the best thing about Fridays is that there are only two more workdays in the week!

[jerry_stanek]

I was told that that you only need to work half a day. It doesn't matter what 12 hours