Value of labor

[jennera]

As we are approaching Christmas, Rebecca has had a few people ask her to make pens and now perfume necklaces. As I have been purchasing her supplies, I have been pricing things for her and she fusses at me that I charge too much. I am trying to make her understand the value of the time and labor she is putting into making things.

One of her teachers asked her how much she would charge to make 10 pens if all the materials were provided. Rebecca told her $5 total for all 10 pens. I'm trying to get her to correct that to at least $5 per pen.

What is a good "formula" for pricing items? I try to price them so she will earn between $5-10 a pen. Should I be charging more?

 

[DavidD]

Someone else will surely have a more thought-out formula than I could provide (I may need some help myself!), but this made me smile!

What a generous offer, and I empathize with the challenge of not discounting a motivated and generous spirit, but trying to carefully balance the element of pragmatism.

 

[leehljp]

She needs to go to a crafts fair and see prices there.

$5.00 for 10 pens, No way. Your electricity, sandpaper and finish cost more than that alone, not counting the investment in chisels and lathe. I love making and giving things to special people.

Minimum wage is what $12 or more depending on the state or city? You can make 2 at hour at the best, usually 1 per hour, on simple pens.

THAT is minimum labor for slimline or Sierra. Now if you are artistic and skilled, double and triple that at minimum. If you are skilled, the price jumps

By the way, you are not the first (by a long ways) on this forum whose family member or friend thinks labor is not worth anything.

EDIT IN:
Oh, Its for your daughter, that changes things for sure. For my grand kids, I would and do it for free, but I would teach them about the UNSEEN cost of making things, including time.

 

[TonyL]

As much as you can moving them as quickly as you need to.

 

[gtriever]

Lee and Tony have given good ideas. Pricing labor is a lot harder than people think. Since Rebecca is a young pen turner, I'm going to give an idea in a different direction, that I would normally use for pricing materials: total up the cost of all the materials, used in the project, then divide that amount by 0.6. That will give her a 40% markup on the finished product, enough to buy more kits and some pocket money.

 

[eharri446]

A rule that I have seen on this site was three times the cost of the materials.

 

[Woodchipper]

We had a well-known wood turner at our local chapter meeting. This question was asked- he charges $1.00 per minute for bowls, platters, etc. Look at the previous posts and go from there.

 

[magpens]

I would find it hard to come up with a satisfactory price for Rebecca to charge, based on the above advice given, with all due respect to those who offered.

Taking into account that this is probably the first time Rebecca has sold pens, I would recommend that she charge the cost of kit + blank, plus $20 for her labor.

I know that is a very cheap pen, but it sounds that Rebecca needs both some encouragement in selling as well as a "barely reasonable" return for her time and skill.

Next year I would recommend that her price should rise to:

2.5 x (cost of pen kit + cost of blank), and even more for "classy" kits and blanks.

I am quite sure that she spends 2 hours at least on each pen and more likely up to 4 hours or even more.

That is my advice FWIW. . And I think Rebecca should read this thread .... well, most of it except for the parts you wrote, Jenn, with the utmost respect for your IT Business Analyst career experience.

 

[dogcatcher]

I have been turning for almost 60 years, back when I was really selling and working at it, I used an hourly computation to come up with my most of prices. To that figure I added cost of materials and other incidental costs. If it took me 30 minutes to make X I charged 1/2 of my hourly rate and added the other cost. Over the years that hourly rate increased along with inflation and my additional experience.

For the OP's situation, you need to determine what you would charge per hour, and know how long it will take you to make that pen. Assuming Rebecca is new at this, I would start at a low rate. Most pens can be made pretty quick, but a new person usually takes a lot longer, you really shouldn't be charging for your "learning time". The time should also be computed based on production time, as in making them in an assembly line style. Drill all 10 blanks at once, glue all at one time, etc..

Personally I wouldn't have turned on my lathe for $5 for anyone except family. As to the other info above, sometimes my rules are thrown out and I charged differently, and that could have been higher or lower. I had one person that was a ROYAL pain, if she showed up the calculator always went in to double time mode.

 

[DavidD]

If I may offer a perspective different than the first couple responses, you probably need to start by asking: is this primarily a business or a learning experience?

This is not trivial; if it is a business, you've clearly portrayed yourself as the boss, and you've asked how to price her labor. If it is a learning experience for her - this can evolve into a "business" - the agency probably needs to rest with her.

If it doesn't matter to you whether she gives her pens away for free or makes a healthy profit, why not empower her with the tools and information to decide? How might her decision process change if she were paying for the supplies that you currently purchase? Of course, allowing her to cultivate a sense of generosity and pride in her work is certainly worth something, even if completely outside of the financial realm, but she must appreciate the "true costs" of the endeavor. Just as it may not be "fair" to you that she sells pens at a price that might not even cover your costs, it's not "fair" to her development as a young entrepreneur to limit her ability to make decisions. That sounds like a recipe for resentment and a total motivational killer.

If she's your employee, I think you can set her labor prices, but if this is a learning experience, maybe she needs to be in the driver's seat? She might make the ten pens and realize "Wow, this is awesome that I can make gifts for people and make them happy, and I'm more than willing to forego any sense of profit", alternatively, she may think "This is a LOT of work, and I won't make enough profit to do this again".

Given that her opportunity cost is probably very low, there's not much risk for her in this approach, again assuming your intentions are for her to learn her own value.

At the end of the day, she will know her value far better than any of us speculating with our own personal and somewhat arbitrary formulas. If she's the boss and empowered to make these decisions, that rate can change over time, echoing part of what was stated earlier with differential rates.

Just my $0.02.

 

[ed4copies]

My son graduated from college with an IT degree. His professors had told the class they should not accept a job paying less than 30 grand a year. (20 years ago) I have owned my own business since I was in my mid 20's, at that time a period of about 20 years.

My advice to him: Son, you may be brilliant, but so far you have not written the first line of code that has been used to solve any problem. Right now you are worth exactly ZERO. If your first line of code blows up your employers' computer, you are worth LESS Than ZERO!!

Rebecca HAS MADE pens. She might want to LOOK AT her pens and evaluate what she thinks they are worth. To help her, you might find some similar models on Etsy. Those were made by other craftspeople--some are much nicer than others and there is a variety of pricing selections. Guide her in deciding where her work fits in, then price the product appropriately.

Hourly value does not apply, in my opinion. I can make a very acceptable Jr. Gent in well under an hour and I can sell that pen easily for $150. Amazing what 15 years of experience does for you. But if Rebecca makes an equal pen (and she CAN, it ain't rocket science), it should also be worth $100+ (the rest can be my sales experience). Now, if it takes her longer that is certainly not a surprise. BUT, the end product has an intrinsic value, regardless of who makes it or how long it takes!! Help her locate the style of pen she will be making and determine what that pen should sell for. If the customer is going to supply all the parts and blanks, who determines what quality those pieces must be?? If the customer buys the cheapest kits they can find, Rebecca will ruin a couple in assembly--whose fault is THAT?? Certainly not Rebecca!! She is used to making quality products from quality components--remind her of that!! She has a mother who assists in her success (love has a compelling way of doing that). Is the person "hiring" her able to judge good materials from bad?

Sorry if this sounds "preachy", you brought out the "grandfather" in me!!!

Admittedly the above ignores the "industry demonstrators" who may command a premium because of name recognition. But I am always amused at their answers when they assume any of us can sell a weedpot for $100!! We could if we could forge their signature, but otherwise stick to the values on Etsy!!

 

[robutacion]

Well, I think that Rebecca should be self-sufficient and self-invested, what I mean is, Rebecca may need to see her passion for something that needs to be self-supported financially, she needs to look at all the investment that was made into all the tools and equipment she is using and ask to herself, where all that money come from and how can she guarantee that she will be in the position to minimise her parents expenses and assist them but charging a reasonable/fair price on her work to put back into the power used, all the consumables including kits/blanks replacements/re-stock, etc.

Most kids do not have a true idea of the value of money, sure they are kids and need to learn that and a lot of other things, supportive parents is a great thing, over supporting may not be as beneficial to the kids as they may think so, a good balance is necessary and in the process, kids need to be "coached" to life realities and one of those realities is, kids good efforts and abilities should be rewarded and they should learn that their time and work worth something, how much...? the criteria here can be complicated but a simple understand that each one has to find their own balance and formula.

In my opinion, she shouldn't be charging anything under $15.00 for labour on each pen, this would give her some pocket money and some money to invest on other stuff she may want for the workshop.:biggrin:

Cheers
George

 

[JPW062]

An hourly wage is not the way to price pens if you want to sell them. You have to look at the pen quality when finished, consider your need as far as volume and return, then come up with a price.

I was told today about a retired guy selling finished pens for about half the cost of the kit and blank. He has plenty of money, wants to turn as many pens as his time will allow, and probably gives a fair number away for free also. I hear his turning is pretty basic.

Sales ability counts for as much as pen quality in my experience. I know a few hacks who are making decent money b/c they are able to make the connections to get sales.

$5 is really cheap, but if the goal is to enjoy turning and get some experience it is probably covering ancillary costs.
I have heard two time inputs for minimum labor from non-pen craft fair people. That really doesn't seem too far off for a really simple pen from an inexperienced turner. One can make more working at McDonalds though.

 

[jennera]

Thanks, everyone! She and I had a chat after school about her labor costs. I did tell her that if she isn't going to charge more than minimum wage then she can go work at McDonald's. I think that put some things into perspective.

She has just a few orders for the holidays and we are definitely looking more toward long term if she wants to use this to earn spending money. She would definitely prefer turning pens and things to asking people "do you want fries with that?".

We are moving toward Rebecca ordering her own supplies and materials. She is pretty shy so I've been her "sales rep" so to speak but her confidence has grown and she is speaking up more for herself now. It's just getting her to understand that her skills and talents are worth more than $2-3 dollars profit per pen that I've struggled with.

The essential oil business is very big in our area and we have found that the perfume holder necklace could be a profitable item for her to sell along with pens. I priced those to give her $10 - 15 profit each and have an order for 12 already. As she has been learning, I have priced things lower and warned people that the prices will go up. If the ladies around here really want these necklaces like I've been told, those will go up another $5. We will see how that goes!

She was able to sell 10 of her earlier pens at church and raise $200 to donate for our mission team to use for hurricane relieve in Orange and Rockport, Texas. That really made her happy that she was able to use her talent to give back and some people that have been asking for pens were able to purchase a few.

She and I both like that this will allow her to earn some money but she can control how much and when she works. School needs to be #1 priority right now. If she sticks with the Robotic team at school, that is going to keep her tied up 4 days a week between January and April while they build the robot and go to competitions. Time in the garage will be very limited but that might be a time for her to build up an inventory.

As always, you have given us a lot to think about and we really appreciate all the "grandfatherly" advice. I will share with her and Ed expect another order from us soon. She has 9 or 10 roller balls to make for a friend of the family. And another friend has to decide on what kit they want for another order of 10 or so. Plus what I've requested she make for her grandparents. She will be very busy over the Thanksgiving holiday!

Thanks again!

 

[tomas]

I have given away quite a few pens, but I have never had someone as me to "gift" multiple pens. The teachers should act like adults and educate her about the value of her work. If they were to take 10 pens for 5.00, they should be ashamed and I would question their motives and value as educators. This would fall under the category of a person in authority taking unfair advantage of someone in a subordinate position.

Just my $.02.

Tomas

 

[magpens]

Without prejudice ....

This has gotten pretty complicated. Remember that we are talking to/about a teenager. . It takes a lifetime to understand "opporunity cost".
She is having a barrel of fun and enjoying it immensely, from what I read on here.
It does not take a university graduate with a degree in business administration to know that time is money, and time expended on any enterprise has value, and I feel confident that this person would know that.

And I think it is proper, educationally, and practically, to guide her thinking so that she understands that this is the reality of life.

I would have done my four sons a disservice if I had not encouraged them to undertake some activities that rewarded them financially, even a little bit.

I think this person makes lovely pens and I think that she will be encouraged in many ways to realize a return on her investment in time.

If she doesn't get that encouragement, the "opportunity loss" may well discourage her from investing HERSELF in greater enterprises.

Having said all that serious stuff, I realize that she can give her pens away, but probably not to a person who has commissioned her to make a significant number of pens which the commissioner plans to give away.

Just my $0.02. . Let's lighten it up and be somewhat realistic, guys.

 

[jennera]

I have given away quite a few pens, but I have never had someone as me to "gift" multiple pens. The teachers should act like adults and educate her about the value of her work. If they were to take 10 pens for 5.00, they should be ashamed and I would question their motives and value as educators. This would fall under the category of a person in authority taking unfair advantage of someone in a subordinate position.

Just my $.02.

Tomas

Yes, as that teacher has not spoken with her again, I am not sure that is going to happen. Rebecca is going to check with her on Monday.

When Rebecca suggested $5, the teacher gave her a funny look so I do not think the teacher is trying to take advantage of her. Rebecca is still learning to "adult" and speak confidently regarding her abilities. Teacher = authority figure and Rebecca was unsure how to respond. It was a lesson too on telling someone, a price range or estimate and that it would depend on different factors (kit, materials, etc) for the final cost.

She is learning a lot for sure! It is a great experience for her and is forcing her to speak up and sell herself and product.

:good:

 

[magpens]

I can understand how difficult it would be for Rebecca under those circumstances.

 

[Woodchipper]

I have done time-and-motion study as a consultant in the past. Has anyone done this on how long it takes to make a pen? If you have to cut the blank from a larger piece of wood, drill, glue the tube, etc. how long does that take? I have found that it takes less time to turn wood than acrylic or a synthetic. Lots to consider in figuring the labor costs, etc.

 

[dogcatcher]

I have done time-and-motion study as a consultant in the past. Has anyone done this on how long it takes to make a pen? If you have to cut the blank from a larger piece of wood, drill, glue the tube, etc. how long does that take? I have found that it takes less time to turn wood than acrylic or a synthetic. Lots to consider in figuring the labor costs, etc.

Most of the items that I was selling I knew about to the minute how long it would take for the standard items. These were mostly game calls, duck, turkey and predator calls but included a few pens, weed pots, pepper mills and bottle stoppers. I retired from an accounting field where I billed time by 1/10 of an hour. I did the same with my woodworking. To that time I added my costs of kits, parts, supplies and misc. Sometimes I also added extras for various and sundry things to come up with a retail price.

I also knew most of my customer base, some of them had been customers for 30 years, I know what they want and what they are willing to spend. On the game calls I have specialized tooling that I have made over the years and could make calls in less than half the time of most callmakers, so I could charge less than the new guy down the block and still make more per hour than he did.

 

[leehljp]

I have done time-and-motion study as a consultant in the past. Has anyone done this on how long it takes to make a pen? If you have to cut the blank from a larger piece of wood, drill, glue the tube, etc. how long does that take? I have found that it takes less time to turn wood than acrylic or a synthetic. Lots to consider in figuring the labor costs, etc.

Agreed. I would think that it depends on what you want to do and how you want to do it. The high end pen makers who charge and get $300 -$500 for ball point/rollerball pens and $500 - $1000 or more for fountain pens, the quality in the making is not something that can be produced with mass production without high priced CNC type of machines.

I learned early on to not trust bushings for sizings, therefore, each pen part is measured and the blank is turned and finished to match that part in size. Now, if one wants to get a pen out there and good enough is close enough, then the resulting pen will be in the $50 - $100 range. I can spend twice as long in making a pen and get 3 times the price simply because it "feels" like precision matched fittings, which makes it far more cost effective.