The LAST pricing formula you'll EVER need! | Maker's Money 

My dad had a successful machine and welding shop. He said that if there isn’t 10 to 15 percent of the customers complaining about high prices, you aren’t charging enough.

The key to remember is, they came to you for a CUSTOM piece! If they want cheap, they can go to the big box store and “settle for”!

I didn’t think this would work, so I flipped to side tables, painted them and replaced the hardware and priced it according to this formula thinking “we’re not going to have any responses. I would NEVER pay this much for them” . They sold the same day and had a ton of responses, hahaha … thank you guys!

I LOVE the look on peoples faces when I tell them "You can always buy the one at Wal-Mart" when I won't come down a price I've quoted them!!

Head slap. What an elemental and perfectly applicable formula. I have been building for years and will start using this formula (and maybe even revisiting old invoices!). The biggest problem in my eyes is that custom building projects CAN NOT be cost compared to mass produced products from overseas. Unless you are in a race to the bottom (you will never beat Walmart). That said, makers must produce products that have other advantages (better built, customization, personalization, accessibility, etc.). Thanks guys for another fun/useful video.

This is fantastic! I just sold my Roubo split-top workbench that took me 500 hrs to build for $25,000! A profit of $8,000! That was my first and last customer. I’m out of business now for being overly confident.

You should also take a down payment before you start work on any custom job.

I will never forget the time almost 4 decades ago when I was in my friend's kitchen. He hauled up this huge box and started unwrapping it. I said... 'What's that?" he said "It's a coffeemaker. New advanced technology." So I said, "Wow, that looks cool. Is that a good model"? to which he replied, "It's the best one they had!". I thought about that for a minute and asked him "What made you think that?" I was thinking maybe a magazine review or something like that. I will never forget his answer. "It has to be the best because it was the most expensive one." Some people really believe that, and to people like my friend, the more you charge the more attractive it will be.

What a great video! I have been trying to wrap my head around what I should be charging and not what I'm settling for. The prices just went up! Thank you!

I've been following your advice and I'm selling more than ever! Thank you so much!!!!! ❤

I agree 100% with everything mentioned in this video. After I get paid on Friday I'll be buying a dewalt job table saw and miter saw and looking to get started in woodworking. These videos are great! Thanks for sharing

This is great, it's worth remembering that time for consultation, design development and actually sourcing materials should be factored in as well.

For those who want the formula shearing, jump to 4:45 in the video. Decent content. I understand ads on your channel help fund your channel. However, I'm not a fan of ads over 5 seconds and I'm sure I'm not the only one. If and when the ads are reduced to the 5 seconds, I can see myself returning to watch your content. If not, I'd likely won't return. I'm sure I'm not the only one that feels this way.

Thank you for making this video. I've been struggling with pricing my projects for a while now. I build custom subwoofer enclosures. Depending on the type of finish I can usually get these done in 1 day. Using your formula gets the price close to what others are selling for online. I've been doing charity work as you said. This is much appreciated.

The best advice I was given when going to to business, you can't ask for more but you can always give a discount. Plus customers always prefer you come in under the number you quote not over. So use this formula, see what number it produces, then decide if you can''t charge this much then your business isn't viable, you can't do it for less so either do it faster, use cheaper materials, or sell it better, otherwise don't do it at all.

Nice simple way to do it. Provided you know your costs well, this should yield ~33% gross margins which is pretty spot on for a healthy business.

This is exactly the formula I used for years in my sign business. Great Job on the video! And a very good way to Illustrate your point in the beginning of this video to make your point clear and understandable. We’ll thought out. Keep up the good work.

This is awesome. Tried figuring how to price and there was so many different ways by different people. I’m definitely going to try and use this one for my stuff. THANK YOU!!!

This is the first I have ever seen from you two and I must say, keep it up. Your ability and form of teaching are fresh, to-the-point, and enticing. As others have said, some of your quotes I have never heard anyone say: "Intelligence is not a requirement for wealth", but I vibe with 100% and have even thought similarly before. Keep up the amazing show, you have just gained a subscriber!

This is the most helpful video I’ve ever watched on pricing for my business. Thank you so much for this!

this is pretty much what i use and the nice thing about the multiplier itself is it also accounts for any under estimations, or problems that come up in the process of making the thing

Thank you guys for this great content! I know this takes time and money, so thank you!!

Thank you for this. I was over thinking.

Thanks guys! You really solved my problem on how to price my sofa business. This will be my first business and we will open our store for the next 2 weeks. :)

My parents bought a dining room table and china cabinet custom made out of Cherry from an older gentleman (mid 70's) for about $5,000.00. This was back in the mid 80s and that was a big chunk of change for furniture. Every time I go to my moms for a visit, we sit around those same pieces, 40 some odd years later. You get what you pay for when it comes to hand made custom furniture, why would you expect to pay less and get more? It just makes no sense.

My formula is very similar. Mats + hourly * 1.25 for monthly bills then another * 1.25 for profit, then if I'm selling at a craft fair I might add another 50-100% for fuel and also time away from the shop that I'm not making things to sell. But I like the 1.5 thing. That will save me a step. ;)

Thank you for the inspiration and help!

Thank you for sharing your video and for the information.

Great video!! Tyty. Informative, fun, and energetic....great!!.

That’s was a FANTASTIC video!

Thanks for the insight on this video! Nothing good is easy, and this is good stuff you both create.

Im just starting out and seem to have lost on every job. THen this seems to be very high. Confidence is much needed. Thank you.

Great advice! I watch your videos every week!

Thank you so much for the financial confidence boost, I’m about to start building furniture and didn’t know where to start with costing, this will help heaps Cheers from Aus

This is exacly what I was looking for! Starting my first custom project this week and I wanted to know how much to charge. Left a sub

Thanks!! This helped me out greatly!!

I'm only a student and building for family and friends and I've already WAAAAAYYYYY undercharged for pieces I've built and it sucks, gonna try this and hope I can actually implement it.

“Build it faster, or find a new customer”. I love it!

Very sound advice, thank you for sharing.

very blunt and practical. guess this is the first time a video has ever given me a hard slap and brought me back to reality.

Thank you.... I over think things...this was very helpful... I saw my self on the diving board pearlized to move forward..

Awesome episode, and awesome anecdote also!! Im new and trying to figure all this out also....

Much needed thanks guys great advice 🙏

This is a must, I’m a handyman/furniture maker/kitchen fitter etc. started using this formula a few years ago i now win approx 56% of my work bids but make a ton more money.

100% agree. Great vid. Simple formula but it works.

Great I learned about this 😊😊 thanks 🎉

Lack of confidence and salesmanship is the bane of my capitalistic craftsman existence. Thanks guys. Got my sub.

I often joke with family/friends and say that I went into ministry because I don’t like math and we don’t do math in ministry. This is definitely some math I can understand! Thanks for helping out someone new to woodworking!

Been using this type formula for years. Works quite well.

Thanks for your great insight on this topic. The formula makes perfect sense. My issue is that I take a lot longer to build items because of the inefficiencies in my woodworking. I tend to be a perfectionist and always find myself repeating steps to make the project better. Therefore the project that should take maybe four hours total ends up 8 to 12 hours. Thanks for sharing. Felix

All good comments below. I would add one more especially for those just starting out. If you start your pricing low it is much harder to raise your prices as word gets around about what you can do. By starting higher you don't have the burden of trying to figure out when and how to raise your prices.

Wow, great video!

Great advice! You guys rock!

i am greatly amused right now. i just found this video today but i was thinking about this subject for about a month before now and just yesterday i finished my pricing formula. it is exactly the same. the thing i realized, and in turn allowed me to finish my pricing formula, was that with what i do know how to do and my skill at doing those things i am worth that hourly rate. and believe it or not, so are you. the first few times you sell some things at that price it will be uncomfortable. however, when you get the first sale and then get more sales at that price, you will get more confident and more skilled. then your magic multiplier will increase. and more money is rarely uncomfortable.

Thanks for this video.. this exactly my problem but I will use this formula.

Simple and easy. I had spreadsheets that calculated bf for projects materials and supplies etc. At the end of the day it was close and took a while to build. It was a useful learning experience when shop time was slow. Key learnings, use a day rate, forget the hour rate. How many days will this take you to build, or how many can you build in a day. No one works 8 or 10 hours straight. Boils down to time and materials. In my experience the 1.5 is a close estimate for the extras that you run into, overnight changes in materials, mistakes, wastage etc. Some you under estimate others you over estimate, but you don't waste time thinking about it. For me it is closer to 1.65-1.75, this also allows some flexibility for a "discount" price that people look for ... now you can give without your business losing money. You can always say no to anything and anyone.

What a simple solution to figuring out cost. I think I will try that with the client build.

This was really helpful!…..Thanks!

I wasn't far off but this is definitely more profitable than what I was doing... (materials x3) x hourly = total. Thanks ill write it down moving forward

Nice little vid. There's really no way around any of this and it's as simple as it can reasonably be.

Thank you!

I think this is great advice (and a $250 daily rate is actually pretty low). I think where it's gets tricky is when you're talking about those super custom, labor-of-love type woodworking projects. It is more difficult to apply this formula successfully due to the extensive hours those projects take, and in order to be profitable with them you really need to be selling to a niche customer base... in other words rich people.

Thanks for sharing and advice, that formula is a good start step, and after that someone can improve that with others Multipliers, for example, i´d multiply the (Material Cost x RISK to Mess Up).

I would knock out gainers like it was my job at 14. 25 years later my back felt like it suffered an instant exorcism and reminded me how old I was.

Thank you!!!! This was and has been such a pain for me to figure out! I’ve been in business for a year a haven’t been able to come up with something this comprehensive. I honest to goodness tried to factor in the cost of glue, tape, and sanding belts. Lol

A different/ better angle on what I've been doing for a looong time. I like better. Alot. Thanks

Thanks J&D

Howdy (again 😀) Just found your "Maker's Money" section of videos. Damnit!! I've got stuff to do and y'all just made me binge watch your playlist 😂. I'm one of those "types" that think my skill/product isn't good enough, no one is gonna buy this. My friends and family have always told me my stuff looks great. But I always thought, well they're just saying that not to hurt my feelings. I see the flaws in what I built...there's a check in the wood here, the stain isn't even, it's a 32nd out of square, the 45 doesn't completely seam to the other 45....are you guys blind. But, they never see those flaws, only me. So, I have low self confidence in my own skill cause it's not "perfect". In 30 years of woodworking, I can't think of a single project I've made that was ever "perfect". So, I never thought people would buy anything I made. Watching your videos has given me confidence. I am the reason I never tried. Thanks for opening my mind.

I really hade this problem, which is pricing the items that I made for the customers. It is really annoying me alot. But I think your video for today will help me for that matter.

Great video, very helpful, I made a new table base for a friend a while ago and afterwards I got to figuring that I made all of like $5 an hour on that project. They were moving and the original table base fell out of the back of their truck when they were backing down a steep driveway and it got run over so was asked if I could make a new one for them. A few years ago I was contacted by a woman who asked me to make a couple shelves for her, it was a complete nightmare and she was such a pain o work with. In the end I made no money, if anything I think I lost out on that one just from the labor and the headache that she cost me 🙄. Thanks for sharing this video, it was definitely beneficial for me and I’m sure it was for a lot of others as well.

For all the perfectionist, a quote I heard recently. "Perfection is the enemy of good enough." Perfection of course is a relative term.. I am a recovering perfectionist... As one's skill and efficiency increase "perfection" becomes less of an issue.

Excellent 👍

Thank You and God Bless you.

Thank you SO much for the vid! Do you find this to be an industry standard? Watching your vid I was curious to know whether do Market Basket Testing of your competitors with similar products and take this in account? I know I am one of those overthinkers (analyzers) become before becoming disabled I was in a different industry where a similar formula was of paramount importance.

Great insights!

Thank you guys so much! I've been struggling with trying to figure out pricing on the things I make. Almost to the point I was thinking of not making anything ever again.

I also add the "intake cost" into my labor cost. The time you make taking the order...

This is totally off topic, but I love the intro theme song. I dont know why, it's just fantastic.

I like following you young go getters. Certainly agree too many people are working for free. You can see cutting boards for $35 on- line. My formula is materials x2 + $50 per hr.. Good luck have fun work safe!

I'm a little leery of using this formula tbh given how I am just starting out and feel like my work is too novice as of yet. But I will give it a shot and see what happens since I will be attempting to batch make planter boxes as my first project to sell. I made a few prototypes and I will say my second planter box I made was made *much* faster then my first one. So maybe more practice and speed that will help keep labor costs low. Thanks guys, I took some notes and I'll be visiting your other videos here soon.

You just spent the first 3 minutes describing me... 😆 less think, more do! ✌🏽

I just heard basically the same thing from a successful businessman a few weeks ago. His formula was parts + labor × 5. His company has been out of business for several years but he and his partners are all millionaires now.

4:30 TLDR (Material Cost + Labor Cost) * 1.5 = Sales Price. 1.5 is an arbitrary multiplier to generate profit, account for wear, your experience, etc. Scale the multiplier accordingly.

I have been using this formula for years and it works well. The issue I have is the quality of work that s being generated. A lot of these comments say how much we would be surprised how much people pay for quality work, but of the same formula is used for "less than" quality work, it kinda muddies the waters. Would I like to be charging the same amount as Michael Fortune? SURE! Can I? No way. The difference is going to be in the magic multiplier. Where Michael Fortune can set his at 5 times, I can probably stick with 2/2.5 times. Good video, though.

Good video.

Good advice!

very well explained and well displayed. But too many young or newbees forget the minor materials and things like utilities and advertising and business cards even shop rags etc. Also there is the business principal called alternative use of your money, that is what else could you use that same money for. Maybe you could make two end tables for the same cost( $650) and sell each for $600 therefore realizing more profit : it is very fair to charge $975 for this piece. Labor is the most expensive item in any service or hand made enterprise therefore if it is not factored in properly then losing money is inevitable.

This is good to know because people always ask me to build things for them and refinish furniture. And I'm a very green woodworker but apparently I do a pretty good job and I always have no clue what to charge someone.

You’re right I don’t like the formula AND I’m scared, but I NEED it.

Great video! Too often we price our products at a level, we feel, that potential customers won't turn down. When a customer says, no, to buying your product, it feels like rejection. Of course, this is ONLY in the beginning, because when doing business this way, there is no business after that. If we ask ourselves this question, or something similar...When starting a business, was everything needed, like materials, location/shop space, tools/equipment, etc, purchased at prices that couldnt be turned down? NO! Full price was paid. And that's why the businesses that sold all those start-up products is still in business. Sure, everyone likes a bargain. But not everything is at a bargain price and not all bargains are a better deal.

Great info but what if you do furniture refinishing can you use it for that

I personally do materials cost, plus labor time. Labor time also includs shopping time for materials. I shoot for at least $50/hr. Definitely a BARE minimum of 2.5x materials cost. Sometimes it's more.

This is literally inputs X overheads (tweaked with reinvestment profit) it's actually really smart

What I like about this is that not only you're getting paid for your labor, but your company also gets paid so it can make a profit.

We run a Jewelry business - both our own fabricated product, as well as others (wholesale). The best advice we've followed is to remember we actually are running *three* businesses - Fabrication, Wholesale *and* Retail. As you recognize in the video, Fabrication costs are materials and labor, and "some" amount of overhead to cover utilities, tool wear, rent etc - generally expressed as an hourly addition. We then run a Wholesale business, whether selling to other shops *or* "selling to ourselves" - we still have to account for the time it takes for the accounting, or shipping to/from others, or making sales calls and chasing invoice payments., Finally, we run the Retail business, which is where we spend time with the clients, or maintain and operate the store (or website), process orders, invoices, payments, accounting etc. **EACH** of these needs paying for, and actual profit *beyond* costs - fabrication labor, wholesale overhead, retail overhead. If you are "just" running a fabrication business (hiring people to do the labor, buying the materials) you need to make a profit after costs. If you are "just" running a wholesale business (paying a fabricator), you need to make a profit *in addition* to the fabricator's profit. If you are "just" running a retail business (buying wholesale) you need to make a profit *in addition* to the wholesaler's profit. Just because *you* are all three businesses doesn't mean *each* shouldn't make profit - especially since, in essence, you are *part-time* at each of them. If you are *only* selling direct-to-consumer, you may be tempted to skip the wholesale stage - I don't recommend this, as it will miss costs you still have, and will prevent you from *ever* selling through other outlets *if* your product is available *both* from your "shop" (web) or others - people *will* research pricing, and will be upset if you under-price your retailers. Many, many "pricing strategies" out there skip all this, and just add a margin to costs. As you've noted, this is a disaster-in-waiting since it misses the real efforts. Yeah, it "raises prices" - in reality, it exposes your actual costs. If the result is beyond what your market will bear, then you have to re-think your product - *either* reduce material and/or labor - *OR* (what people most miss) raise the PERCEIVED VALUE of your product - if there is a specific technique, or material, that raises your costs, MAKE SURE the customer can SEE the value in the product and "give you credit" for that feature. Note I say "see" - if you have to explain it to the customer, you've lost the sale. It's not so much the exact multipliers, as it is separating out the different "costs" and labor at the different stages.

I’ve been doing cabinets for over 30 years. I work for a cabinet shop. But I have done many side jobs thru these years. Everything you talked about is to the tee. I underbid myself thinking I wouldn’t pay that much for that pc. Of furniture. Finally I decided to charge for what I think what I am worth. Clients don’t even bat an eye. As long as you can deliver.

What about for online virtual products, any formula for that since the material cost in a way is $0?

Awesome video! Thank you for sharing this. My biggest fear is telling somebody what the price is cause people try and compare handcrafted work to cheap factory produced junk online or in big box stores. And that drives me up the wall y’all.

I always say, don't pretend to know how much money someone has. A price for a product might be high for you, but lunch money for someone else.

I'm in metal working. And we use a 3 multiplier but and go as low as a 2 multiplier. For beginners I like the 1.5. But that would have to increase quickly.