Steel Manzanita Tree

Saturday, May 14, 2011


By Eric & Debra Montgomery 
(an article that was written for the California Blacksmith Assn. Journal)

Many factors come into play when you talk about pricing your work. These factors include reputation of the artist/metalsmith, the public’s perceived value, media bias, what the market will bear, competitors’ prices, etc. In this article, we are only going to touch on some basics and base this on a sole proprietorship scenario. The numbers we are going to use are based on working twelve 4 week months or 1920 hours/year = 160 hours/month.


Using a notebook or record book, you can keep track of materials on any particular job. These notebooks may seem unnecessary to a seasoned metalsmith/business owner, but particularly with a startup business, it will help keep you in line with your costs.

There are different viewpoints as far as how to account for cost of materials and is different for every shop. It could be a 10% mark up all the way up to 100% mark up. This starts to get into what the current market will bear, what your competition is charging and other factors. My advice here would be to be more conservative on your markup than not.


What does it cost to run your shop? Take into account business-related costs, which are the fixed costs to run your business other than material costs. Be meticulous about keeping receipts and records of these costs. For example, keep a notebook in your work truck to keep track of the job-related miles. Did you know with mileage alone, you could get a 50¢ per mile write-off on your taxes?

Miscalculation of your overhead expenses could result in underbidding or overbidding your project. This could result in either not getting the job because your price is too high or getting the job because of your low price, but working at a loss.

Therefore, you need to figure an overhead expense hourly rate component to include in your total quote calculations. For example, let’s say your annual overhead is $36,000. Take $36,000/12 which equals $3,000, your average monthly overhead expenses. Now take your $3,000 monthly overhead expenses/160 monthly hours. This equals $18.75 per hour. This is your overhead expense rate component, which must be added onto each hour of fabrication time.

NOTE: Keep in mind when you are keeping track of your overhead expenses, also keep track of what I would call overhead hours. In running your metalsmithing business, you will also be doing other business-related tasks, such as answering emails, answering /making phone calls, preparing quotes, etc. You need to be able to conduct business knowing that you are not losing money when you answer the phone. I will touch on this further in our final calculations.


It is crucial to keep track of the direct hours spent on actually working on a particular project, including design time specific to that project. We have all had a project where the hours were miscalculated and we basically had to eat that labor cost. You certainly can’t go back and ask a customer for more money because you miscalculated your time. Again, a seasoned metalsmith won’t necessarily have to keep notes, but I think it is very important at the beginning or when you take on a type of project you have never done before. It can be as simple as keeping a notebook handy to log in your hours each time you go to work on a particular job.

The importance of this is to (1) be able to provide professional and accurate quotes for your work and (2) if you find your labor costs are higher than the market will bear, you can use these notes to analyze the areas where you may be spending too much time and figure out a way to increase your productivity. You can also use these notes to determine if you could possibly use a lesser-paid employee or helper to do some of the more routine tasks, freeing you up for the more advanced work.


How do you start figuring out what you need to make per hour? One way to start would be to figure out your personal expenses. What do you need to pay your mortgage/rent, utilities and groceries, etc.? Are you working solely as a self-employed metalsmith or do you have a full time job and do the metal work more as a second job?

Let’s just put some numbers out there: Let’s say you need $55,000 a year to pay for your personal living expenses (not including your shop overhead) and plan to work 48 regular 40 hour weeks. That equates to 1920 hours per year. Dividing $55,000/1920 = $28.64 per hour which is your necessary profit hourly rate component.

If you are employee full time through another company and do the metalsmithing on the side, then you can simply use the same formula above to figure out how much you want to make on top of your salary with your side business.


We are ready to do the final calculations to determine your shop rate. The next step is take your profit hourly rate component of $28.64 determined previously and add in your overhead expense rate component of $18.75. This equals $47.39 per hour.

As mentioned previously, you need to factor in an adjustment to cover the hours spent on non-fabrication type tasks of running your metalsmithing business. For example, you determine you spend 8 hours out of a 40 hour week performing these tasks. This means you only have 32 hours of work hours per week available for actual fabrication. Take 32 (hours) / 40 (hours) which equals 0.80 or 80%.

Take your hourly rate $47.39/0.80 which equals $59.24. This is your final shop rate that you would use in calculating your chargeable labor hours on a job quote.


Figuring the Price of the Job


Pricing is a vast topic and this article covers some very basic information. We hope you find this basic information helpful and useful. For outstanding references on pricing metal crafts and the like, check out any of the links provided below.


References/Links: Harriete Estel Berman - ASK Harriete; Home Jewelry Business and Design Guide; SNAG Professional Development Seminars


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