How to price my pens?

[spilperson]

As much as the market will bear. Look for higher-end shows and snooty little shops.

If you are really trying to make a business out of it, selling a pen for $20 is wasting your time, no offense to those who do that. Using higher end kits and blanks will attract a higher price, almost certainly a higher margin and a $ per hour rate for your labor. which would you rather sell - a pen for $20 with $5 worth of parts, or a $100 pen with $40 worth of parts?

Don't forget to track every little item of expenses as well, if you are claiming this on your taxes, plus the room for your lathe, mileage, phone calls, etc.

Good luck!

 

[Smitty37]

Profit motive

As much as the market will bear. Look for higher-end shows and snooty little shops.

If you are really trying to make a business out of it, selling a pen for $20 is wasting your time, no offense to those who do that. Using higher end kits and blanks will attract a higher price, almost certainly a higher margin and a $ per hour rate for your labor. which would you rather sell - a pen for $20 with $5 worth of parts, or a $100 pen with $40 worth of parts?

Don't forget to track every little item of expenses as well, if you are claiming this on your taxes, plus the room for your lathe, mileage, phone calls, etc.

Good luck!

If you are claiming on your taxes you better show a profit two out of every five years or the IRS will likely tell you it is a hobby not a business.
That's not bad except if it is a business you can write off losses against other income and if it's a hobby you can't.

 

[OKLAHOMAN]

As much as the market will bear. Look for higher-end shows and snooty little shops.

If you are really trying to make a business out of it, selling a pen for $20 is wasting your time, no offense to those who do that. Using higher end kits and blanks will attract a higher price, almost certainly a higher margin and a $ per hour rate for your labor. which would you rather sell - a pen for $20 with $5 worth of parts, or a $100 pen with $40 worth of parts?

Don't forget to track every little item of expenses as well, if you are claiming this on your taxes, plus the room for your lathe, mileage, phone calls, etc.

Good luck!

If you are claiming on your taxes you better show a profit two out of every five years or the IRS will likely tell you it is a hobby not a business.
That's not bad except if it is a business you can write off losses against other income and if it's a hobby you can't.

If I remember right you need to report a gross profit not a net profit, If I'm wrong I'm sure someone will strighten me up on this.

 

[Smitty37]

Maybe once...

As much as the market will bear. Look for higher-end shows and snooty little shops.

If you are really trying to make a business out of it, selling a pen for $20 is wasting your time, no offense to those who do that. Using higher end kits and blanks will attract a higher price, almost certainly a higher margin and a $ per hour rate for your labor. which would you rather sell - a pen for $20 with $5 worth of parts, or a $100 pen with $40 worth of parts?

Don't forget to track every little item of expenses as well, if you are claiming this on your taxes, plus the room for your lathe, mileage, phone calls, etc.

Good luck!

If you are claiming on your taxes you better show a profit two out of every five years or the IRS will likely tell you it is a hobby not a business.
That's not bad except if it is a business you can write off losses against other income and if it's a hobby you can't.

If I remember right you need to report a gross profit not a net profit, If I'm wrong I'm sure someone will strighten me up on this.

I don't think so. I have not looked it up lately because my business is making a profit every year but the last time I checked it was bottom line.

Well like many other tax issues. That requirement is not an absolute. The requirement is that you are operating with the intention of making a profit. If you're running a grocery store the presumption of the IRS will be that you are not doing that as a hobby and you would not have to meet the two out of five years profit.

Since most people engage in pen turning as a hobby, the presumption of the IRS will be that it is a hobby and you have the burden of proof to show that it is a business.

On the other hand, unless you get audited, and the chance of that is small, you will get away with it. But, for most people here I would advise they not try to write off business loses against other income, unless they have real expectations of turning a profit in the near future.

 

[JamesB]

This is a good thread. I dropped a pen off at local business yesterday with hopes of a consignment deal but they called me back asking for a wholesale price on them! I didn't know what to say. I'm pretty stoked about it but a little anxious, wondering if I'll do it right. It's the PSI 50 cal kit (I know many people here don't like them), so it's not that expensive to make, do you suppose $15 is a fair wholesale starting offer?
Thanks

 

[Carl Fisher]

The requirement is that you are operating with the intention of making a profit.

This is the understanding that we have come to with our accountant. If you can prove intent even at a running loss then it should technically satisfy the requirement. Having a dedicated sales outlet such as a website plus spending to travel and setup at a show with intent to sell at a profit, marketing material, ACTUAL BOOKKEEPING, etc... all go towards proving that intent.

Again, this is just our understanding of it. It seems like it should be up to you and your accountant to determine this for your scenario.

 

[firewhatfire]

NO!!!!! $40 maybe and let them sell them for 65

This is a good thread. I dropped a pen off at local business yesterday with hopes of a consignment deal but they called me back asking for a wholesale price on them! I didn't know what to say. I'm pretty stoked about it but a little anxious, wondering if I'll do it right. It's the PSI 50 cal kit (I know many people here don't like them), so it's not that expensive to make, do you suppose $15 is a fair wholesale starting offer?
Thanks

 

[firewhatfire]

I didn't sell a $200 pen until I had a $650 pen in my collection. I sold 2 of those to the same guy.

 

[PenMan1]

You can PRICE pens with any formula, Excel Speadsheet macro, or any other "gizmo" that you want. Heck, you can even roll dice or use a Ouija Board. Any of these methods is just as useless as the other.

If you are actually selling pens, your market will determine the price- Regardless of the price you put on it. As you market changes, so should your pricing. The same pen that sells quickly at $350 at one show, may not even get a second look at another show.

My advice would be to throw away the formulas, then figure out the "bottom dollar" that you would take for a given pen. THEN, do some market research for your venue and set you price accordingly. If you price too low for the show, you are perceived as a low quality product. If you price too high, show attendees will buy that painting to go behind the sofa rather than your pen.

 

[tbird1957]

Pricing:
First thing you need to consider - What's the quality of your pen! I've seen some Cigar pens that should sell around $25.00. I've seen others in the $90. - $100. range. Like said before, the cost of making a pen is more than just the blank and kit. First you have an investment of a Lathe - Chucks - Tools - CA - and all type of sandpaper, micro mesh etc. These are all true cost. Also, have you ever had a ruined a pen? This cost also has to be considered. Do you want to cater to high end pen collectors, are just someone looking for a nice pen to carry with them. My favorite pen is the Cigar pen. Their are so many choices for the Cigar pen, wood, acrylic or something special. Also the Atrax is beautiful pen and very reasonably price. For my pricing I consider all factors above. Kit plus blank x 3.5 is a good start. Add a little if you really get a high quality pen, deduct a little if it is just a pen. If it is a really poor quality pen - give it someone or disassemble it and start over, but never sell a poor quality pen - it will stick to you like a plague. My price for quality (of course my OPINION of a quality pen) pen - $49.95. High end quality of a Cigar or Atrax - $69.95 - $99.00 or somewhere in between. I just sold 3 pens yesterday. One was a Cigar Texas Flag Pen - $69.95. One was an Apollo Infinity - $125.00 (very nice pen made with Bubinga) - The other pen was a Atrax $59.95 (made with Arizona Ironwood). Enjoy making your pens and make your pens - Your Pens.

 

[bubbamorse]

As much as the market will bear. Look for higher-end shows and snooty little shops.

If you are really trying to make a business out of it, selling a pen for $20 is wasting your time, no offense to those who do that. Using higher end kits and blanks will attract a higher price, almost certainly a higher margin and a $ per hour rate for your labor. which would you rather sell - a pen for $20 with $5 worth of parts, or a $100 pen with $40 worth of parts?

Don't forget to track every little item of expenses as well, if you are claiming this on your taxes, plus the room for your lathe, mileage, phone calls, etc.

Good luck!

If you are claiming on your taxes you better show a profit two out of every five years or the IRS will likely tell you it is a hobby not a business.
That's not bad except if it is a business you can write off losses against other income and if it's a hobby you can't.

If I remember right you need to report a gross profit not a net profit, If I'm wrong I'm sure someone will strighten me up on this.

I don't think so. I have not looked it up lately because my business is making a profit every year but the last time I checked it was bottom line.

Well like many other tax issues. That requirement is not an absolute. The requirement is that you are operating with the intention of making a profit. If you're running a grocery store the presumption of the IRS will be that you are not doing that as a hobby and you would not have to meet the two out of five years profit.

Since most people engage in pen turning as a hobby, the presumption of the IRS will be that it is a hobby and you have the burden of proof to show that it is a business.

On the other hand, unless you get audited, and the chance of that is small, you will get away with it. But, for most people here I would advise they not try to write off business loses against other income, unless they have real expectations of turning a profit in the near future.

In the infamous of Anthony Hopkins in the movie [Legends of the Fall] "Screw the Government!". I stand by the premise that you claim everything that is a lose as one to offset any profits. If you get audited you get audited, accept the fact that the IRS is NOT on your side and you have every right to pay a little in taxes as possible.

 

[Smitty37]

As much as the market will bear. Look for higher-end shows and snooty little shops.

If you are really trying to make a business out of it, selling a pen for $20 is wasting your time, no offense to those who do that. Using higher end kits and blanks will attract a higher price, almost certainly a higher margin and a $ per hour rate for your labor. which would you rather sell - a pen for $20 with $5 worth of parts, or a $100 pen with $40 worth of parts?

Don't forget to track every little item of expenses as well, if you are claiming this on your taxes, plus the room for your lathe, mileage, phone calls, etc.

Good luck!

If you are claiming on your taxes you better show a profit two out of every five years or the IRS will likely tell you it is a hobby not a business.
That's not bad except if it is a business you can write off losses against other income and if it's a hobby you can't.

If I remember right you need to report a gross profit not a net profit, If I'm wrong I'm sure someone will strighten me up on this.

I don't think so. I have not looked it up lately because my business is making a profit every year but the last time I checked it was bottom line.

Well like many other tax issues. That requirement is not an absolute. The requirement is that you are operating with the intention of making a profit. If you're running a grocery store the presumption of the IRS will be that you are not doing that as a hobby and you would not have to meet the two out of five years profit.

Since most people engage in pen turning as a hobby, the presumption of the IRS will be that it is a hobby and you have the burden of proof to show that it is a business.

On the other hand, unless you get audited, and the chance of that is small, you will get away with it. But, for most people here I would advise they not try to write off business loses against other income, unless they have real expectations of turning a profit in the near future.

In the infamous of Anthony Hopkins in the movie [Legends of the Fall] "Screw the Government!". I stand by the premise that you claim everything that is a lose as one to offset any profits. If you get audited you get audited, accept the fact that the IRS is NOT on your side and you have every right to pay a little in taxes as possible.

That is perfectly legal...but if it is a hobby you can't use excess losses as an ofset against other income (W2 income, dividends, interest, etc.)

 

[Smitty37]

Cost vs Price

When I go to the store to buy a shirt - I look at a tag that gives me a price. I compare that to other prices for similar shirts and buy what appears to be the best value, which may or may not be the lowest price.
The shirts' cost to the store is of no interest at all to me. Only the price and if I can't find the item I want at a price I'm willing to pay, I do without it.

Whether we like it or not that scenerio applies also to the pen making and pen component business. If CSUSA has a big sale, small vendors' sales go down because members see that sale as a better value. That's life.

Your prices will be determined mostly by the venue. You won't sell $500 pens in a $20 market or visa-versa. You have to decide where you are going to sell and the price is "Whatever the market will bear" your costs will determine if you can sell profitably in that market and that's all. You can decide the minimum price you can sell at based on cost, but if you are selling in a $50.00 market and need to get $100 to make a profit - you'd better find a new market.

In regard to business, hobbies and taxes. The easiest way to prove you intend to make a profit is to have a profit motive and operate like you want to make a profit. Here are a few hints that will help you satisfy the IRS in a tax audit in the unlikely event that you are called for an audit.

1. Have a business plan, decide the market you're going to be in, the price range you're going to sell at, who your competition is (don't automatically assume it is only other hand turners either - Mont Blanc are made in a factory), where you are going to source your raw materials, etc.
2. Keep your business money separate from your non-business money. Get a separate business account.
3. Keep accurate records - you can but probably don't have to keep every receipt if you use a computer program like quickbooks to track
sales and purchases.
4. Get a separate business credit card and use it ONLY for business purchases. If you don't use it, so much the better, but get it anyway.
5. Learn enough about the tax code to work it to your advantage
6. Show smaller losses year by year - make changes to increase profits. Drop unprofitable lines, add new lives.
7. Show all transfers of money from your other funds to the business as either additional paid in capital or as a loan. Show all transfers out of the business to your other funds as either a owner's withdrawal, loan repayment or something made for a special reason - record the reason.
8. If you buy inventory and use a lot of it for personal reasons (pens made for personal gifts, etc.) keep a record of your withdrawals for personal use.
9. For most people - set up your accounts to fit 1040 Schedule C unless you incorporate - if you incorporate see a tax accountant who specializes in small corporations.
10. Report all of your business income including cash sales that the IRS would probably never uncover. If you don't lie about your income you don't have to remember what lie you told. Expenses are fuzzy at times - income is not.

 

[mikespenturningz]

Well there is certainly a formula for figuring out the wholesale price for a pen. I use the cost of kit +$5 for incedentals +5 for blank then I add $35 for labor. Now this is as a hobby. If I were a business I would have to add more for labor because this doesn't include any benefits at all. That comes close to giving me the wholesale price. This doesn't work on slimlines or comforts!! Then if you are going to sell these you need to mark them up. Labor is an overhead not your profit that is how I look at it. So to get the retail you can double or triple this wholesale price. Now you have overhead to allow for consignment and still make a good profit. Just my .02 worth.

 

[Smitty37]

Well there is certainly a formula for figuring out the wholesale price for a pen. I use the cost of kit +$5 for incedentals +5 for blank then I add $35 for labor. Now this is as a hobby. If I were a business I would have to add more for labor because this doesn't include any benefits at all. That comes close to giving me the wholesale price. This doesn't work on slimlines or comforts!! Then if you are going to sell these you need to mark them up. Labor is an overhead not your profit that is how I look at it. So to get the retail you can double or triple this wholesale price. Now you have overhead to allow for consignment and still make a good profit. Just my .02 worth.

Never-the-less, you have to price to fit the venue regardless of what you think the value is. Buyer's don't really care how much or how little profit you make, they care only that the price is what they believe is fair market value.