Pen pricing

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Andrew_K99

Andrew_K99

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Feb 17, 2011
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Waterdown, ON, Canada
I've just started turning (4 pens and 1 razor so far). I brought the razor I just made into work and a someone fell in love with it and would like one made. So the question is, how do you price your pens/kits? My thoughts are as follows:

(Kit Price x Mark up) + (Blank Price x Mark up) + (Time x Rate) = Ideal Price

The 'Mark Up' would be a multiplier that takes into account complexity and the tooling required.

So for example, the razor kit ($10.50) and acrylic blank ($4) would be as folows:
($10.50 x 1.2) + ($4 x 1.2) + (1 x $10) = $26.80, round up and call it $30.

I used 1.2 for multiplers as they are a simple kit which use one drill, and acrylic is easy to finish.

A basic wood slim-line would be:
($3 x 1.2) + ($2 x 1.5) + (1 x $10) = $16.60, round down and call it $15.

Again I used 1.2 for a multipler for the kit but used 1.5 for the wood blank assuming a CA finish.

And I used $10/hr for a rate, cause it is just a hobby and can't expect to make anything more, if that even. I'll have to think about the multipliers for other kits and materials.

I am not out to make a living, just wanting to cover my costs and materials. so not to lose money.

Does my logic make sense? Am I over complicating it? What do you use?

Thanks,
Andrew
 
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Just my opinion, but I put a much higher value on my time. Hobby or not, my time is worth a lot more than $10/hr. Right now, I use $25 and hour. That will increase with my skill and hopefully as I have more requests for pens and my time becomes more limited.

Whether you do it as a hobby or with highter aspirations, should not matter. Time is time. We only have a limited amout of it. In a way, as a hobbyist, my time is more valuable because I have less of it to spend making pens.
 
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Personally, I feel your multipliers are too low.

Have you considered the maintenance of your equipment, the deprecaition of the tools, your utilities, etc?

You can charge this small amount if you're just wanting to cover the very basic of costs, but if you get into this and do shows, etc, you'll have a lot more to cover.

Setting your prices low now will establish a trend that will be tough to break with these same customers later.
 
I showed my pens to my CPA ... he asked how much have I been asking .... told me I was selling myself short!

"Its a one-of-a-kind pen, unique in every way and nobody else will EVER have a duplicate ... how much are you willing to pay for something like that?"

........ and that was a Slim-Line!!!! (I was asking $35 btw)
 
Andrew_K99 said:
Thanks for the insight Gary and Rick. What do you guys use? A formulated method or just what feels right?
Click to expand...

I calculate the cost of the pen kit plus the blank add $25 for my time and then a few bucks for incidental then adjust from there. I am not very scientific about it. Some pens don't take an hour, so I may deduct $5, some take longer, so I add accordingly.

As Rick mentioned there is a lot more to consider than just the pen kit and the blank in your costs.
 
I take the kit cost and the blank cost and begin at 3x. I will often go to 4x depending on what the item is and the wow factor. \

Setting prices is not an exact science. I often do shows with $300-400 entry fees. I need to cover those costs and my selling prices need to help me do that. I also have travel costs to cover for a 3 day show.

While you haven't entered into this aspect of pen selling, don't set your prices too low where customers will question your actions on raising prices should you want to do the more expensive shows.
 
As an example, pricing on the $10.50 and $4 costs you mentioned would put my pricing in the $55-59 range for the same combination. I can always come down if needed, and go up a little if the market appears to bear a higher cost.
 
also remember you need to come to your wholesale price, then double it for retail (or triple, etc. depending on your market).

This way if a store wants to buy pens for resale, you can sell them at wholesale without hurting yourself and they have room to make a profit too,
 
I usually price mine at 2.5x material cost.

For Example TruStone Cigar Pen with leather case
Platinum/B. Titanium kit - $15
TruStone blank - $10
Leather case - $7
Total $32
Sell price = $80

Now, I don't think I would ever get $80 for this pen because there are people out there selling wood ones for $20 so I have to adjust my pricing accordingly (probably $40 and that would be a tough sale). Now, take that same formula and apply it to a Statesman Fountain pen made from TruStone, and I would probably get 2.5x the cost of materials without too much difficulty because there is a lot less competition in that market and the competition there is priced about the same (however cost of entry into this class costs a lot more!). For the most part if I can cover the cost of materials alone and make a little above and beyond that, then I am happy. As for electricity, tools, etc. I consider this part of the joy of my hobby (hobby being the operative word here). I'm not running an actual business like some others may be doing. The kits and materials are the expensive part, so if I can make enough to cover that, then I'm a happy camper.
 
I've been having this discussion with my wife for a number of weeks now. Her main argument with this style of pricing (I know because I had the same basic idea) would be with your time/hour pricing. Here is her logic-

People often justify charging a high per hour rate by comparing themself to another highly skilled professional like an auto mechanic or plumber. This comparison is valid if you can really compare yourself to a highly skilled professional. As a new pen turner, I cannot, therefore, I can't justify charging that much per hour. Especially since a simple pen will take me longer than it would for another, more experienced pen turner. For example, someone who has been turning for a number of years might be able to turn out 3 completed slimlines in an hour. For the sake of argument, we'll say that I finish one slimline per hour. If both of us decide on a $30/hour rate, and we both use the same kit and blank, should my pen really cost $20 more than his? The obvious answer is no. Due to his skill level and the lenghth of time that he has been making his pens, his 3 pens are probably higher quality than my one pen, so he should be able to charge more than me. Another example, compare a slimline and a cigar. Assuming that you start each pen with a blank that measure 3/4 by 3/4, you will have to take more material off of the slimline than off of the cigar. That translates into more time spent on the lathe, so should a slimline's price reflect that greater amount of time spent? A two barrel cigar will take more time to turn, finish and assemble than a one barrel Zen. How is that discrepancy resolved?

At the end of the day, I think that you have to look at the initial cost of materials, recognize your own level of skill, and just pick a value for what you think your pen is worth. If you can't sell it at that level, perhaps you need to reevaluate the pen's value. If it sells quickly and the purchaser has the look of someone who just got away with something, maybe it's time to increase your prices a bit.
 
I think in the end, pricing is a very personal issue and you have to do what you are comfortable with. If your pricing makes you happy, then go with it. Also it doesn't matter what I think I am worth an hour or what factors I multiply my costs by if there is not a market for that pen at that price. Find a starting place and then adjust from there. Just don't undersell yourself or your product.

Cheap prices convey cheap quality in most cases. Some people want the cheapest they can get. Other are willing to pay for quality. I prefer to target the people looking for quality at a fair price.
 
Here are my beliefs. Any method of formula pricing is wrong. The only real mistake you can make in pricing is to use a formula.

The right price is what you can convince the customer is the right price. There will be pens you my only be able to recover your out of pocket expenses from, and others that you will make $200 per hour. If you are getting the price that the customer perceives as "worth the cost" then you have it properly priced. The buyer doesn't care what it cost you to make the pen, buyer cares about how much he/she is willing to pay.
 
Hobbyist often feel they don't need to account fir their tools or equipment in their costs. I will account for those costs as I'll need to do repairs or replace the item eventually. :smile:
 
I agree with David for the most part. This is a hobby. I made a vow that when it be comes work I don't want to have anything to do with it. A lot a folks look down their nose when you mention slimline. I sell 10-15 of them a week. I also sell a lot of the 30 and 50 cal both kit and kit-less.
How do you figure the ware and tare of a gouge? Get my drift? I won't travel across the street to set up at a show.
 
Interesting ideas presented. I agree that pricing is very subjective, and ultimately depends on what the customer thinks is a good value for their money. Since I'm new to this and have little current customer experience, I presently use my own judgment for what I perceive to be a reasonable value for my money if I were buying the pen.

I do calculate what my minimum price must be for me to recoup my cost for the materials (kit, blank, case, refill, supplies, etc.) plus my time to make the pen (currently going for $25 per hour). Right now, I charge for the time I think I should be able to make the pen in. In reality, it usually takes me much longer because I'm in this to learn and have fun, not mass produce. The added non-paid time is for my enjoyment.

Some pens I price near my minimum, and some I price above my minimum. It all depends on how they turn out and how much value I perceive in them. As I improve and am able to generate more "wow" factor, the prices will go up.

Dave
 
Your last ? was, what do I use.
I searched others sites to see their prices and found a happy medium.
If you don't think your product is good enougth to sell at going prices give them away or offer at a discount. This will not hurt penturning overall and will help you in the long run with word of mouth and will not hurt when you go up on your prices. One of the main things to consider in this (hobby/business/trade of penturning/woodturning) is not to cheapen it or put it in a $dollar store category. That would hurt us all and is something a few (on this site,other sites and out in the world of woodturning)don't see or are just (def and dum).
 
Dave Turner said:
Right now, I charge for the time I think I should be able to make the pen in. In reality, it usually takes me much longer because I'm in this to learn and have fun, not mass produce. The added non-paid time is for my enjoyment.
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This is a good point. It works fairly well as a counter argument to some of the issues that I (read: my wife) brought up earlier. I'll have to think about that. When I was new here I started a thread asking how long it took to make a pen. I had been under the impression that a lot of pen makers were cranking out 3-4 pens an hour, but was surprised by the responses in that thread. Point being, that if it takes most people about an hour to an hour and a half to complete one pen, are they really including that $25 to $40 dollars in the price, or do most subconsiously do what you are suggesting and figure that it really only takes them "about an hour" to make a pen?
 
Ben,

I'd like to offer you some of the conversation I had with my CPA...he's sorta been a 'mentor' to me on occasion and makes me think from a different perspective.

To address the 'plumber' philosophy .. you really need to consider that being able to turn something, create a round, beautiful, functional pen from a 'tree' takes a special talent. A talent that alot of people dont have, it also takes skill (like plumbing) that you hone over the years. Those experiences are what makes YOU valuable.

If you price whatever your selling, and someone buys it right away, you probably aren't asking enough. When 50% of the people that look at something don't buy it ... you are hitting your sweet spot

I just sold a pen today, and she said "this is too special for me to use here at work ... I want it at home".

Its good to be thinking about formulas, I did it ... I set up multipliers, marketing budgets, office supplies, equipment, shop rental (basement), utilities/insurance pro-rated .... after it was all said and done, my cutting boards were selling for more than that 'minimum' rate.

Just don't sell YOURSELF short, you have a talent, and its worth more than you think it is.
 
Chasper said:
Here are my beliefs. Any method of formula pricing is wrong. The only real mistake you can make in pricing is to use a formula.

The right price is what you can convince the customer is the right price. There will be pens you my only be able to recover your out of pocket expenses from, and others that you will make $200 per hour. If you are getting the price that the customer perceives as "worth the cost" then you have it properly priced. The buyer doesn't care what it cost you to make the pen, buyer cares about how much he/she is willing to pay.
Click to expand...

I try to never get into pricing here but I could not of said it better. Thanks Gerry.

BTW Dudley if your selling 10 to 15 slims a week and also the large caliber pens both component and non component it's a business nmy friend. I've never said it wasn't a hobby also but at those numbers it is a business when you SELL between 500 and 1000 pens a year..
 
Gerry, I can appreciate what you say about getting a customer to understand the price and value. My feeling is that a customer has a feeling of perceived value. Customers will be willing to pay whatever they think the value should be. We have folks walk by that would not pay more than a Bic price. Others will pay for the artistic or other value they see in the item.

As to the length of time to make a pen.....
I would be dead if I took an hour just to turn a pen. I have a limited amount of time to turn and need to maximize my efficiency. I run a production line for cutting, gluing, trimming. I then turn each one and assemble in groups.

Now, some will say I'm missing the true enjoyment of the turning. I enjoy turning, but I enjoy being at a show more and trying to convince folks they should turn loose of their hard earned money for something I've made. I get the most satisfaction when someone feels they need to take one of my creations home. For that reason, I need a deep inventory which takes time to keep stocked.
 
Thanks everyone that has answered so far! This is a great thread and is making me rethink the 'formula' I had in the first post. I only want this to be a hobby, I don't for see ever wanting to make 10+ a week, that IMO would suck the enjoyment right out of it. At the same time I don't want to loose money selling the pens I make.

Thanks again!
 
Lets say your doing slimlines and your selling them for $15 which is about 3 to 4 times cost. Now a close friend tells you he needs 50 of these at the $15 price. when your done with this order you never want to see or make another one of these pens again. Did you make any money? NOT REALLY think about the hidden cost. I have a $400 lathe,+ a drill press,+Band saw,+ table saw,Chop saw, lathe tools . ext.ext,ext.
I wholesaled gereral mechindize for 47 years. Our rule of thumb was 2.5 times cost if we just bought and sold. 5 times cost if we had to repackage, "blister pack or put things together. We then sold to the stores at a discount of 33%, 40% or 50% on larger orders. You need enough of a margen. to cover all your cost. You need room to be able to discount on the single sales if you have to. If you had charged $25 for that 50 pen order you would feel better about doing that many of the same and you could have still discounted them a couple hundred $ and you would both walk away happy. A hobby should at least pay for itself. Even though most are no- profit. Thomas Kinkade started out painting as a hobby. Now his origanals sell for $750,000 each
 
Is it a hobby

If it's a hobby, you need to look at it like a hobby. My son-in-law has a hobby, he plays golf. Now does he ever get a "return" to help him reduce his costs, well yes sometimes he and his friends play for a few bucks a hole and he wins a little - on the other hand, sometimes he loses.

The point is that hobbies are for rest, relaxation and peace of mind - not for making money. If you are doing it to make money it is not a hobby it's a business, so the first thing you need to do is decide which it is for you.
If it's a business you need to calculate ALL of your costs to get a baseline of what the minimum you can sell for. Then you need to understand that the price of hand turned pens is "what the traffic will bear" and that varies from venue to venue. If you can't sell high enough to cover your costs and make a profit you're in the wrong business and need to change.

To me it is a hobby and personally I give away a lot more than I sell because (being 73 years old) I hang around with older people, mostly on fixed incomes, who just can't afford to spend a lot of money on pens - if one of them admires a pen I'm carrying I tend to give it to them.
 
As it appears with this kind of topics, there are three kinds of pricings among IAP members. The first one is the "cheap" one (please only descriptive not pejorative), the second one is the "formula" one (again descriptive) and finally, the "one of a kind" pricing.
As far as I'm concerned, I'm not a professional penmaker. But I'm pricing my pens between x2 + hourly rate (15€ or +/- $US20) and x 3. For example, I sell my cheaper pen (slimline) @ €25 (+/-$US35) while I ask €110 (+/-$US150) for the more expensive (a Majestic Rhodium/Black Titanium Fountain pen with a burl blank).
IMHO this kind of pricing, while rewarding and at the same time reasonable, also helps supporting the business of our professional colleagues.
 
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