Updated: May 2
If you struggle to figure out how to price your custom woodworking projects, you aren't alone. It can be overwhelming to know what to charge so that you attract customers without losing money or sales. We have all been there. In this post, we will cover three strategies to help you price your projects fairly - starting with the best method for those starting out.
Custom Woodworking Project Quote Calculator
This calculator allows you to quickly calculate the price for a woodworking project to provide your clients with a quote that accounts for your labor, overhead and material costs as discussed in this article. You can even add a material upcharge or leave it blank.
Best Method to Price Custom Woodworking Projects
When you are just starting out as a woodworker, it is difficult to find a price to market your project at. Will I cover all of my expenses? Does my price ensure some profit? The Time, Overhead and Material approach answers these questions. Here's how it is done:
Set Labor Rate
Start by setting the rate you want to earn per hour working on a project. This will vary depending on your skill level, cost of living and demand for custom woodworking where you live.
If you are just starting out, chances are, it will take you longer to complete a project compared to someone with more tools and experience. For argument's sake, let's suggest you want to earn $30/hour. This is what you want to be paid for doing the work - your labor.
Add Overhead Costs
The next, and most difficult, step is accounting for indirect expenses that you incur while building. This is your overhead. Individually these expenses are small, but there are many, and they add up. Think about things like:
Shop building expenses e.g. rent & utilities- those power tools eat up electricity
Wear and tear - power tools don't last forever neither do drill bits and sawblades
Consumables - sandpaper, pencils, paintbrushes, rags, wood filler, glue, mineral spirits, tape, dust filters, machine lubricants, trash bags, etc.
Joinery - screws, nails, biscuits, dominoes
Design software - Apps to design custom builds e.g. Sketchup or AutoCAD
Advertising - Google or social media ads to find customers
Cost of sale - credit card processing fees, website fees, shipping
It is too cumbersome to account for how much and what cost all of these items add to one specific project. Imagine counting each screw or measuring how many ounces of glue you've used. It is more efficient to set an overhead percentage and add that to your labor rate. Think about it this way: The longer you work on a project, the more overhead costs you incur. e.g. the more electricity, screws, sandpaper, glue, etc. you use.
The industry standard is around 15-20%, but you can adjust this up or down to fit your situation. You may not have a website or place ads - your overhead is lower, so your overhead rate should reflect this.
Calculate Labor Time
Total up the number of hours it took you from start to finish, if you are selling ready-made projects. Only include time attributed to that specific project. If you batch out items in quantities, total your hours and divide by the number of items made.
If you are quoting a project that hasn't been completed yet, you'll need to estimate your hours. This is where experience comes in handy, so you'll get better at this over time.
To begin, divide your project into manageable tasks. It is far easier to estimate small tasks compared to estimating time for the entire build at once. Consider how much time it will take you to complete each part of the build, including:
Designing the project/mock-up drafting
Cutting and shaping stock
Three S's (sanding, sanding again and more sanding)
Finishing (paint, stain, top coat)
Once you have a good breakout of what steps you'll take to build a project and have assigned time estimates to each, it is a good idea to add some overage. If you are like me, you always underestimate your time, so adding 5-10% to your time estimates will ensure you aren't selling yourself short. As you get better at estimating, you can reduce or remove this.
Calculate Material Costs
This is your raw material - the main components of the piece you are building. Be sure you do not include items you're accounting for in your overhead such as screws, glue or brushes. Your material costs are typically things you don't have on hand that you are purchasing specifically for this project such as:
Wood boards or sheet goods
Hardware such as brackets, adjustable feet, door hinges and knobs
Metal components like table legs or inlays
Paint, stain, polyurethane, epoxy
Sales tax can also be tricky. Ideally, you are purchasing these items tax exempt. Then you can charge sales tax on the total material cost and pay that to the state. To do that, you need to have a registered business in your state, which many hobbyists don't. Every state differs, so it is best to check with your local tax authority to determine the best way to account for sales taxes.
Formula to Calculate Price for Woodworking Project
Labor rate x overhead rate x labor hours + material cost = project price
For the example, lets assume the following:
Labor Rate = $30/hour
Overhead Rate = 20%
Labor Time = 15 hours
Material Cost = $130
Step 1: Calculate hourly rate
To determine your hourly rate, multiply your overhead rate by your labor rate and add that number back to the labor rate. Or Labor rate x (1+ overhead rate).
Hourly Rate = $30 x (1 + .20) = $36
Step 2: Calculate labor charge
Labor charge is your hourly rate multiplied by the labor time, or number of hours you worked on the project.
Labor Charge = $36 x 15 hours = $540
Step 3: Calculate Total
Your total is the labor charge plus material cost.
Total = $540 + 130 = $670
The Time and Material (T&M) method is a pricing strategy used for custom builds, which involves calculating labor rate, overhead rate, material cost, and hours to complete the job. You may also need to consider taxes. Taxes are applied to the material cost, but not the labor.
All expenses are covered
Does not account for demand
Fair price for maker and buyer
Requires good labor time estimate
Price Woodworking Projects with Materials x 3
One of the simplest methods and one that is commonly recommended to new woodworkers is to add your material expenses and multiply by 3.
You cover your expenses with the first third, your overhead in the next third and your profit in the last third. It's is quick. It's simple.
However, it has its faults. Imagine a project using inexpensive materials but takes you 40 hours to make. What about a project with expensive materials but only takes 1 hour? In the former, you don’t make any profit. In the latter, you’ve overpriced your product.
Quick & Simple
Not always accurate
Material expenses are covered
Can lose profit or clients
Calculation: If your material cost is $130, calculate your price as follows:
$130 x 3 = $390
This method works well when there is relatively close alignment with the cost of your materials and the amount of labor that goes into it. High cost and a lot of labor or low cost and minimal labor.
How to Price Woodworking Projects Competitively
You can also adjust the prices up or down based on differences in features and quality of materials and craftsmanship.
Similar Product 1: $679
Similar Product 2: $800
Similar Product 3: $755
Similar Product 4: $790
Similar Product 5: $820
Calculation: (Product 1 + Product 2 + Product 3 + Product 4 + Product 5) / Total # of products = Your price
($679 + 800 + 755 + 790 + 820) / 5 = $768.80
I like to use this method as a “reality check” to make sure that I am pricing my projects in the appropriate range. You can also use it to help acquire new customers by setting your pricing on the low end of the range.
Conversely, if you have a large backlog of projects that you can never seem to get caught up on, this is an indication that you aren’t charging enough. Use the competitive pricing method as a benchmark and adjust your price up accordingly.
The downside is that it can be difficult to find items for sale that are close enough to what you are building – especially if your projects are unique. You also may not know if the retail prices you are looking up are allowing those products to sell consistently, so finding a range is important.
This method also does not account for your actual material and labor costs.
Accounts for market demand
Hard to find comparables for unique pieces
Adjust price up/down to manage backlog
Your costs aren't accurately reflected
3 Methods for Calculating Woodworking Projects to Sell
The materials x 3 method can work well with small, cheap projects to give you a baseline while more complicated projects are better served with the Time and Materials method. Comparing that price to the Competitive Pricing method is a good benchmark to make sure you are pricing competitively.
The general rule of thumb is if you have a long list of clients waiting for you to build, your prices are too low. If you are struggling to make sales, adjust your prices lower.
Comparing 3 Methods to Price Woodworking Projects
Materials x 3
Ensures market alignment
Won't work for unique projects
Time and Material (T&M)
Slightly more complicated
Finding someone that loves your custom work enough to pay for it is exciting, but finding the right price isn't without its challenges when you are starting out. These three methods can be used together to ensure your prices keep you busy but not overwhelmed with a long backlog. There are plenty of other methods used my makers. Do you have a different approach to pricing? We'd love to hear it in the comments!