Official Luthiers Forum!

double post. Must have been some internet lag...Mario38770.9086342593

"your shop needs heat" is not a fixed cost. It goes up if you are there every day (vs. you aren't heating in the summer or if you are on a two week vacation)or if it's a particularly cold winter you may spend more in fuel. Not everyone salvages fuel from their backyard if you do you still have to run some sort of tool to get the tree into a usable form. that takes gasoline in most cases and gas goes up and down - variable.

Dave, you are the one who seems to like to argue with me, not the other way around. Here, you're turning around what I tried to make clear.

The cost is fixed, as I said, wether I make one a year, or 30. I didn't say it was going to cost the same to heat it year after year. Of course it will go up.

My shop is heated via natural gas. It is not a variable heat. The shop is 7o degrees, every day, whether I'm in it or not. With all my wood, instruments in progress, and tools, the temp MUST remain constant. And since I make my living in it, I AM there every day.



2)"Your shop needs Electric". Electricity is supplied by utility companies who burn fuel and need to make a profit. Their costs usually go up steadily over time. Also if you run a power tool to do ONE MORE whatever you have consummed more electricity than if you made one less - It's NOT A FIXED COST.

Again, like the above, I stated that the cost is fixed regardless of building one guitar over the course of the year, or 30. Since I'm there every day, the lights are on. If I build one a month or 4, this cost won't vary much. Yes, a tad more for extra machinery being run, but not a lot. Cost is fixed.

3)"my shop gets taxed...all 1200sq ft." O.k. Now add 20,000 more sq. ft. and tell me the tax bill will be the same. Like wise cut it down to 600 sq ft and your bill would drop. Sorry Not Fixed is it?

Again, you're turning things around. My shop is large enough to comfortably produce likely 50 guitars/year, or one. So, for my example of building one or 30, it is fixed.

If I have a bad year next year, struggling, whatever, and I only build 3 guitars, my heat bill, electricity and tax bill and insurance won't change. I can't cut down the shop's size if I'm having a bad year!

4) "My business needs INS." double your capacity and therefore your risk of loss and see if your insurance will remain the same...NO IT WILL INCREASE. NOT FIXED.

What part of "my rates aren't based on output" did you not understand? I know my policy, and I've asked this directly with my agent. It won't change.

5) Double the size of your shop and you will need twice/more the humidifier's twice/more de-humidifiers. Double or increase your production and your machines won't last as long and you'll probably need more of them, better, bigger, more expensive ones as well.

As i said, I don;t need to double it, and we were not talking of variable shop sizes. Mine is fixed. For life. I can double output in this space, or half it. Won't matter. I wasn't being theoretical, I was being realistic.

6)"the more I make the less it costs" ONLY True to a limited extent. You have extra capacity at your current level. Once you go over that all of the above begins to happen and those costs are no where near fixed.

We've already agreed on this one. I never strayed from my availabvle capacity in my examples.

7)"wood always appreciates". Wrong ask anyone who has had to discard wood because of a mysterious fungus/mold. Or how about termites...perhaps this one doesn't apply to you but Florida is just one Big termite nest. I have to worry constantly about pest infiltration and control. Added Cost. and the more I buy the more at risk I am to loose it. What about a hurricane, Flood, Earth quake etc?

Those are seperate issues. You're assuming loss from damages. Geeze, and you're the tax guy? Of course we assume risk, and more stock means more risk, but you weigh the risks and weigh the benefits. I don't have termites, fungus/mold issues at all. No costs there. No hurricanes, floods, tornados or earth quakes have ever hit this area. Methinks my wood stash is safe. In any case, damage control or losses wasn't what I made the statement about. My statement was that wood appreciates, and it does. No ands ifs or buts.

Your argument was like saying prceious metals don't always appreciate because someone can rob your home and break into your safe. C'mon now, think about what you said. Geeze....

Finally you stated that if you needed to do more work you "drank more coffee". I don't know where you buy your coffee but every cup I drink just means sooner or later I have to go to the store and BUY MORE.

Dude, a $5 can of coffee lasts me over a month at 4 cups a day. that's less than $.05/cup(5 cents!). The extra cup after supper to help get me back into the shop for another 4 hours isn't going to factor into anybody's costs....

Tax time got you down, Bud? Ease up <g> We know it's your busy season starting up, but be easy on us.

Got my taxes taken care of last Wednesday. No more worries and paperwork for another year.

Life is wonderful goote...

[QUOTE=laurent] Personally the religious fundamentalist credentials would be enough to
permanently turn me off[/QUOTE]

So if he went to a different church or went to church less or something you'd buy from him? That's as incomprehensible to me as the idea out there that christians should only buy from christians.


At any rate, this has been an interesting thread. I missed a lot of it, but a couple more random thoughts.

Marketing and branding ARE a big deal in the handmade guitar market. Everyone loves to say "fine guitars aren't a commodity". It's true, but I think it misses an essential point. Of course there are many differences between the thousands of guitar builders in this world (small shop, big shop, chinese factory, whatever) but the differences between guitars of a certain level are almost entirely subjective. A handmade guitar built by an experienced luthier with top grade materials and fine workmanship is probably not like any other instrument in the world. But how can you quantify the differences between that instrument and another experienced luthier's instrument with top grade materials and fine workmanship?

So why do some people get $15,000 a guitar and others get $5,000 a guitar? Marketing and branding. Whether it was intentional/contrived/planned or not, the chain of events that vaulted Jim Olson to the top of the mountain didn't carry Charles Hoffman, his good friend and an experienced and capable builder, along. Do Jim's guitars sound "better" than Charles? Sure they do. Or they don't. One of the two.

But who cares...because the market's there for Jim's guitars at $15,000 a pop and it wouldn't be there for Charles' guitars at the same price.

Dave's point about not pricing your work too low reminded me of the old New York hot dog vendor story. The new guy in town pushed his cart around all day with a sign that said "Hot Dogs $.50" and didn't sell one. Some kindly soul came up to him and said, "You're not from here, are you?". The man then changed the vendors sign to read "Hot Dogs $5.00"...and he was sold out within an hour.


Andrew Wright
Managua, Nicaragua

Hey,

All this is very interesting, especially the fact that some of you are questioning Mario's prices and backlog, but not one of you has realized that Mario is in Canada, and charges US dollars, so Mario is actually getting a third more in Canadian dollars. (More power to you, Mario!)

So, some of you need to do more homework about marketing and cost of living, and where you live. Unfortunately, I live in California. :D

Lance

...Yep, Sergei De Jonge's guitars start at 7500$ U.S... That's like 25K CAD (Canadian dollars)... Seriously, the exchange isn't what it used to be. It's now about 17% ... FYI

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I'd like to be able to prove, just for once, that money wouldn't make me happy...

is actually getting a third more in Canadian dollars.

While that was true in the good old days, the US greenback has lost much of its value today, and is only worth a premium of 13-14 cents to the Canuck dollar these days.

You are still correct, though, that the exchange gives me a little advantage in pricing. But not much; then factor in that the basics cost much more up here, and it balances out. I ain't getting fat on account of the exchange rate.

Edit:

Alain, that $7500 becomes $8475 today, not 25,000.... The exchange hasn't been near even as high as 17% in 6 months. Looka again, bud. Today's rate was a hair over 13%. Then the banks will want on percent for a service fee, bring it down to 12...
Mario38771.0200462963

Mario, I know... I was making an attempt at levity... My first idea was to say.. 'that's like one hundred million canadian.... I wasn't really trying to stipulate the exact currency exchange either... guess I should of googled it first.... Not so funny I guess...Alain Desforges38771.0365046296

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I'd like to be able to prove, just for once, that money wouldn't make me happy...

Mario, then factor in free health care ? For my family it would be about $ 800.00 a month
Lance

I really apreciatte this discussion as someone who is trying to establish thmselves in the Market.

It has been very interesting for me to try and grow my business with a very small amount of money to spend on marketing, what has astounded me is just how many this business are prepared to help you.

For me I don't want to be anything more than a one man shop, as that is what I enjoy, and I think to be any larger, you would have to be careful not to destroy what it is your customers like about dealing with you, thats not to say it can't be done as many makers have managed to expand and exercise control over there business.

Like Mario if I was in it purely for money then I would work in a different industry :), the fact is I love what I do, and being my own boss.

Mario, you have my upmost respect for making your business so sucessful, if I can follow the same path and be one half as successful I would be a very happy man.

[QUOTE=harmonist34] [QUOTE=laurent] Personally the religious fundamentalist credentials would be enough to
permanently turn me off[/QUOTE]

So if he went to a different church or went to church less or something you'd buy from him? That's as incomprehensible to me as the idea out there that christians should only buy from christians.
[/QUOTE]

To a point, yeah, but I can see that someone with strong feelings about the politics and social controls the religious right/evangelicals are pushing for might not want to contribute a dime that would potentially further said causes. Of course, given the fact a lot of these folks (like most big players) have shares in major multinationals anyway, it seems like little more than an empty gesture...if the product's good, its good, no matter whether I agree with the maker's personal beliefs or not. As long as it's not being made off the backs of child labour or similar abuse, there's no good reason not to buy it.

This said, I can't say the evangelical background does him any favours in the branding department, as far as I'm concerned. It's all about perception, see

Mattia

Hey Mario,

Dave was speaking in Accounting terms. What he said was correct and by the book, but I see why you view it the way you do. Sometimes it's a matter of perspective.

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"I want to know what kind of pickups Vince Gill uses in his Tele, because if I had those, as good of a player as I am, I'm sure I could make it sound like that.
Only badly."

then factor in free health care ?

Oh, for sure.

There are plenty of reasons I live where I live. My wife is American, and she moved here in 2002. Fact is, we could live anywhere in North America that we chose. We chose to live here. We saw an advantage to being here, and chose thusly. There are disadvantages to being here also, but we adjust.

You're not forced to live in California. You choose to. So you adjust.

Businesses have to make decisions as to where they locate, and relocate, all the time. Manufacturing plants are closed in union states and moved to non-union states. Sometimes, the plants are moved to Canada or Mexico. When the Yen climbed too high, the Japanese auto makers built plants in the US and moved production there. It is sometimes a hard pill to swallow, but it's good economic sense. If Nevada offered universal health care and lower housing costs, you'd all be hard pressed not to relocate there, correct? Unfortunately, it's not always that easy...

Don, I understand, but the book assumes that any business already operates at maximum capacity. In that case, Dave's correct, that any increase in output will require an increase in -all- expenses. But we're not in the book, we're basically artists, craftsmen, in mainly one-person shops, and the rules here are different. I believe my examples clearly show this.

Truth be told, there isn't an economic model that makes sense when it comes to making and selling instruments in our small shops. I've gave it a lot of study, the supply/demand curves, read up on business models, etc..., and the way we do things just isn't in any book. By the books, we should all have failed by now <bg>

We're writing our own business model, I believe. I don't think it is unique, but it is what it is.

I think one of the things that needs to be factored in is exactly WHAT you are selling. Certainly it is much MORE than a guitar.

I think customers buy an element of the romance of it, they buy a chance to meet the person building their guitar (and if they are fortunate strike up a friendship with them), they buy bragging rights (or at least a good dinner conversation) about how they had a guitar built for them, they buy the feeling of individuality ("I'm not going along with the herd"), ... and about a million other things that may factor into the decisions.

I suspect the "models" you are speaking of are those that refer to turn the crank, make a widget, then sell the widget. Supply, demand and all of that stuff.

I sort of see where you are coming from and understand how you have arrived at that conclusion.

But I think in the custom instrument market simply offering the product creates the demand. Until consumers know that there are easy alternatives to production guitars there is little demand. Once they do know the demand skyrockets.

From that perspective it is much like a creative product. In fact, even though the products have a very practical purpose (because when you strip away everything else.... they are **JUST** guitars) they probably are most closely branded like art / artists. And certainly that is a hard product to quantify value.

This has been a good thread.   

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Brock Poling
Columbus, Ohio
http://www.polingguitars.com

[QUOTE=Brock Poling]From that perspective it is much like a creative product. In fact, even though the products have a very practical purpose (because when you strip away everything else.... they are **JUST** guitars) they probably are most closely branded like art / artists. And certainly that is a hard product to quantify value.

This has been a good thread.   [/QUOTE]

Well said. I've been saying for awhile that when it comes down to it, it's "just a guitar", but certainly those that buy custom made instrumetns are buying a lot more than just a guitar. Perhaps that's the key to marketing these things.

It HAS been a good thread. Lots of great insight from folks from many angles.

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"I want to know what kind of pickups Vince Gill uses in his Tele, because if I had those, as good of a player as I am, I'm sure I could make it sound like that.
Only badly."

Wow good post. I have not been following it for a couple days as I have been very busy at the house.

Now for my 3cents. Yes I have had a price increase

When I started building for sale, like many of us small shoppers, I started with a friendship type commission, later to be followed by active seeking work. It became very apparent early on that in my local market, I would be very limited in the price I could charge and yet make sales. Yes I could have spent money and gotten on the internet and if luck pulled in enough to pay for the site. But I had a simpler goal. I chose to figure out a way to build part time. Having the guitars pay for my building was really my main concern. The first two years I had a grand total of 3 paid commissions. The next couple years were better, but I also saw that if I charged a price on pace with the national average I would not be sell in my local market long.

So I asked my self if making money was the main goal or if building was the goal. My conclusion was building and selling in my local market was my immediate goal and to do that I had to price to the market.

That said I am no philanthropist I needed to make enough to replace materials consumables and pay utilities. To make a long story shorter I came up with a plan that has worked for me. I build three different model, as in price range guitars.

Student Model; 2A and 3A wood, IRW or Mahogany, Simple bindings and rosettes, no custom features and appointment 3ply case. I sell these for well under 1k

Custom Model; 3A and 4A wood, limited customer choice of woods, limited customer choice of bindings and purfling, Limited custom appointments and 5 ply case. I sell these at under 1.5K

Custom Deluxe models; 3A through master grade wood no limitations. These I sell on a quoted basis typically 2k to 3k

After marketing to my local market this way for three years now I have built 6 Student models, 4 Custom models and 5 Custom Deluxe. Four of the high end orders were repeat orders from clients that originally bought either a Student or Custom. The other was a referal frome a previous custom order.

I end up making an estimated hourly rate of about $3.50/hr on the Student models. Yes I give a lot away on these models but it allows me to build for my local market, advance my skill level, pays for my personal builds and has proven to bring me return clients with out any real investment in a website or advertising.

I make no hard conclusions; this is just how it has worked for me. I am in the same mind as Don has stated earlier. I am hardly known. I am in the early stages of making my way and a name for my self. I do not expect it to happen over-nite, but in five years I have increased 100% in the number of builds per year. And I am in the black. I feel I am still way into the early stage of my learning process and think it is only fair to my clients that I charge a rate consummate to my reputation.

Hesh

I speak with a lot of my customers via email, this works well as I can handle that outside of the times when I am in the workshop, I find people like to Phone as a first contact, but after that it is usually email.

With most customers I send them photographs of the build in progress, this does two things, involves them and lets them see the internal elements.

[QUOTE=Brock Poling] I think one of the things that needs to be factored
in is exactly WHAT you are selling. Certainly it is much MORE than a
guitar.
[/QUOTE]

Absolutely!!! Regardless of quality (sound/playability/appearance) a
hand-made guitar carries with it all the magical baggage that is absent
from factory-made goods. Look at how Martin tries to stress the family-
owned business image and tradition in their PR, however true or not, or to
a certain degree.
I think most people are craving a form of authenticity that is lacking from
the make-believe culture we're surrounded by. I was traveling through
Vermont last w-e and I don't know how many times I read "good old-
fashioned way" on advertising signs. True or not (most likely not very true
for most…) it addresses a real issue: most objects we use are 100%
anonymous, without any value other than purely utilitarian. 99.99% of the
time we do not know where they come from, who made them and so on…
The relationship between the luthier and the buyer is as important as the
instrument itself, and the fact that it was made "by hand" and not on an
assembly line. This is why all the talk about "mojo", "soul", different
woods and finishes, "sound is round or square" etc. tends to become
mystical (and mystifying).
This is also why it doesn't make sense to want to expand the "business"
so much. What is attractive about the craft is precisely that it is much
more than a "business". The measure of success for a luthier is not
necessarily to become a plant manager a la Bob Taylor… I bet that most
of you would be totally fulfilled with just making a living out of the craft
and having, like Mario, work for years to come. Work at the bench, one
guitar at a time…

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Laurent Brondel
West Paris, Maine - USA
http://www.laurentbrondel.com/

[QUOTE=harmonist34] So if he went to a different church or went to church
less or something you'd buy from him? That's as incomprehensible to me as
the idea out there that christians should only buy from christians.[/QUOTE]

Well Mattia nailed it and responded probably better than I could. I would add
that, living where I live and being a foreigner, in rural USA, I see the
mushrooming of fundamentalist churches as a real threat. Not the most
tolerant ideologies, nor ones fostering tolerance, culture and free exchange
of ideas. Therefore I would tend to not want to support any venture coming
from this background and encouraging its economic growth -which in turn
means political power-… I'll leave it at that.

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Laurent Brondel
West Paris, Maine - USA
http://www.laurentbrondel.com/

Let's end the anti-religious/religious & political talk NOW before anyone is further offended by these comments. We need to keep this place neutral...thanks.
Don Williams38771.5141319444

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"I want to know what kind of pickups Vince Gill uses in his Tele, because if I had those, as good of a player as I am, I'm sure I could make it sound like that.
Only badly."

Everyone is reading more into what I said than what I said. I will re state it for those who didn't get it the first time..."Know what yor real cost is (to make a guitar) so you can use the information". I didn't say don't be an artist, don't make beautiful guitars regardless, don't put your craft first. I simply said that knowing your true cost would help you. How much simpler can I state this. Why does everyone have to read into this further? If you want to give away your guitars ( that's fine...)that's your perrogative. I think you should charge what you are worth. There are ways to do that. Otherwise, work harder, longer, make less and enjoy life...you couldn't do that if you worked smarter right?

If you want to be ignorant about it all and close your eyes and be an "artist" that's fine by me... I AM NOT JUDGING ANYONE. I was giving some free advice. I am not a "taxman". I am a C.P.A., I know a little more about this topic than I care to speak of. I am not going to list here my schooling, business training, the companies I have worked for, the companies I own and have sold. I know what I am talking about. For those of you that got my point...good...for those of you who need to insult and lift yourselves up by doing so...good. Have at it. I remember an old French woman once told me " vette faire en coole'" my spelling is off probably...but it doesn't matter I have no idea what that means.

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Dave Bland

remember...

"If it doesn't play in tune...it's just pretty wood"

[QUOTE=Don Williams] Let's end the anti-religious/religious & political talk
NOW before anyone is further offended by these comments. We need to
keep this place neutral...thanks.[/QUOTE]

100% agreed, but you have to admit that Mr.McPherson is far from hiding his
religious credentials, he's actually pushing them forward. And any
discussion on "business" is bound to have political resonance somewhere…
It's all good.

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Laurent Brondel
West Paris, Maine - USA
http://www.laurentbrondel.com/

What is Mr. Mcpherson's religious beliefs?

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Dave Bland

remember...

"If it doesn't play in tune...it's just pretty wood"

Dave,
I personally think that far too many builders fail to make money for the reasons you have stated...they don't really know their true costs.
I for one would invite you to start a thread and give us some clearer understanding of what goes into the costs beyond materials, where we can sit under you as an instructor, in a non-debate atmosphere for the thread. You have valuable information, and I for one would be consider it an honor to be taught more.

Not going to comment on McPherson's religious flavor so we can squash that here and keep things neutral. I'll PM you on it.

Laurent, drop it...final word.

Don Williams38771.5439351852

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"I want to know what kind of pickups Vince Gill uses in his Tele, because if I had those, as good of a player as I am, I'm sure I could make it sound like that.
Only badly."