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Old 05-15-2008, 12:28 PM
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chiger chiger is offline
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Join Date: Sep 2006
Location: Western Kentucky
Posts: 459
Les,

Carl is kind of right. You may be stunned to see what the actual dollars per hour works out to. But that is where the 'I love to make knives' part comes in. If you can afford to take what you can get and not what you need, your probably better off not knowing. Just go at it like a hobby and maybe it will work out.

I'm not suggesting you log every light bulb and keep up with how much your water bill has gone up since you started running your shop on a running bases. Although that stuff is overhead, you just need to do a cost analysis once to establish a baseline. I had to know I was in the ball park.

To run a business concern in a field as competitive as knife making requires you understand and control every little detail to the best of your ability. The big companies have multi-million dollar computer programs and systems to help them control and model their businesses. We do not. So we have to be creative and do it the old fashioned way.

You already understand that X amount divided by Y hours equals Z profits per hour. What I do is turn that equation around to get a price. I multiply Y hours times Z profits per hour I require to get X amount I need to charge. The question is how much profit and how many hours.

If all you make is one knife a week and it cost you a $100 in fuel, electricity, steel, sandpaper, grinding disk, quench oil, quench clay, handle materials, broken drill bits...well you get the point, how much do you have to sell the knife for to make a living?

Oh, and the hours spent heating up the forge, sweeping the shop and lubricating the power hammer go into the averaged overhead figure with light bulbs and fuel cost not the knife production hours since that stuff has to happen whether you make 1 knife or 10. That's how business models work.

And I guess I should explain averaged overhead. That's the cost of everything it takes to maintain your shop for a given period divided by the total number of hours you're in the shop. NOT just the hours you are beating steel or sanding handles. You can do it for a week or a month or a year. A month is probably best to get a good average because fuel and electric bills usually occur monthly, but if you know how how much per day you can do it by adding all expenses for a day and divide that by the number of hours you were in the shop. Averaged overhead is a semi-fixed amount that goes on to the per hour expense of producing every knife you build right up front.

If you establish the price of a certain knife based on a baseline of man hours at your current level, when you get faster the profit margin goes up, minus cost of living of course. Man, it's a vicious circle. So that's why I said the LEAST $/Hr you can accept at this moment in you career. This stuff is tedious as H**l. It's not the real hard part with starting a business.

Let's face it. Everybody and their bird dog makes knives. Some are way better than you and some are not nearly as good as you. You have to find your niche and fill it. There is even a whole industry out there of production facilities who make a living selling knife blades and kits to hobbyist who want to be knife makers. They've filled a demand.

Whether it's your butterfly knives or tactical style for your Marines to carry overseas. Identify a demand and fill it as cheaply as you can. Provide a superior product at reasonable prices and the world will beat a path to your door. I think that's what the old saying is. It's that or something about a mouse trap.

By the way, it doesn't matter how well the blade is made...fit and finish sells and resales a knife! So always make sure that fit and finish are at least GOOD for the whole knife and not just on the blade. Even on your low end stuff. I can't tell you the number of times I've had someone buy 2 or 3 of my low end 'stock designs' as gifts and end up calling me back to replace the ones they decided to keep in their collections. Fit and finish are all important.

Anyway, find a niche and start selling as many knives as you can. The more you sell the more you will sell. If all goes well, sooner or later you'll be selling more of the kinds of knives you want to make than the kind you have to sale to make a living. Don't be afraid to step off in a direction you didn't see coming. The point is to make a living at something you love. And keep in mind that you are not trying to compete with Buck for pricing or those 5 or 10 super makers with super prices. Find what you know and build that. That's where your power is.


chiger,
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