In the last of his series of articles on modern woodworking, Anselm Fraser, principal of the Chippendale International School of Furniture, looks at the thorny issue of how to price bespoke furniture.
Oscar Fingal O’Flahertie Wills Wilde, the 19th century playwright, would have understood the problem completely.
In his play, Lady Windermere’s Fan, he writes that a cynic is “a man who knows the price of everything and the value of nothing.”
Like much of Oscar Wilde’s work, his comedy hides a biting truth – that we often consider moral or ethical values as being less important than financial worth. We allow greed to overrule good sense.
It’s an issue that is particularly pertinent for today’s woodworkers, because the value that we place on a beautifully-crafted piece of furniture may be rather more than a prospective customer is prepared to pay for it.
Yes, it may have taken many, many hours to make, using the finest woods, veneers and delicate inlays. But if that prospective customer is looking for a simple table or chest of drawers, then he or she may be more interested in utility value than financial value.
In other words, spending days and weeks crafting the finest chest of drawers in the whole history of chests of drawers, and placing a huge price tag on it, is no guarantee of a sale.
In a world dominated by IKEA, furniture makers have to look imaginatively at the market, design and build accordingly, and – most importantly – always have a sensible price in mind. We may be craftsmen and women, but our valuations have to be pragmatic.
The key concept is value. The painting hanging on our wall may only have aesthetic value, until we discover it’s a Picasso – at which point it acquires huge utility value as a way of paying off the mortgage.
In the same way, good furniture has both utility and aesthetic value. Our wonderful chest of drawers may be aesthetically beautiful but, if the drawers don’t open properly, it lacks utility value.
That balance between form and function is at the heart of all good design, including architecture and fine woodworking. Finding that balance is the first thing that furniture designers should always do: who am I selling to, and what are the values my customer is looking for?
The fact is, good design must be about both the aesthetic and the utilitarian and, if necessary, woodworkers shouldn’t be afraid to compromise, if compromise brings down the cost to an acceptable level.
That budget will be influenced by two things – the cost of materials and the labour costs of designing and making the piece of furniture. It’s a deceptively simple bit of arithmetic: costs + your time = price.
Of course, it’s a little bit more complicated. Costs aren’t just wood and screws. They also include everything from heating to water, local taxes to equipment. For the mathematically dyslexic (and I’m one), it’s a three-step process:
Step One: Deduct the total cost of your piece of furniture from the income you will receive from it. If your total cost of production (including an allocation for materials, marketing, rent of workshop etc etc) is £10,000 and you sell for £11,800, your gross profit is £1,800. Easy-peasy.
Step Two: It then becomes a little harder, because the next step is to divide gross profit by total income, giving you a gross profit margin of 0.15.
Step Three: Multiply that figure of 0.15 by 100 to calculate the gross profit margin percentage. In this case, 0.15 x 100 = 15%.
The British Woodworking Federation (okay, not representing fine furniture makers) says: “When looking at profit margins it is important to make sure that you cover the depreciation of your fixed assets in your profit and loss account so that you can provide the essential cash to replace these with new investments. As a rule if you are in manufacturing gross margins after direct costs should be in the region of 40 to 50%.”
I wouldn’t disagree with that figure, and improving gross profit margin should always be a clear and unambiguous business objective. Equally, you have to have realistic expectations about what customers may be prepared to pay.
Being realistic about pricing is key, but you also have to have some clear ideas of what you want from life. How much income do you want? In terms of profit, do you also want to generate savings to fund growth? Do you need to invest in more equipment?
It’s a question of balancing the present with the future – building a business and a reputation, so that, in future years, you can build gross profit margin. The problem is that many woodworkers think too highly of themselves, and charge a Rolls-Royce rate, when their customer is looking for a Fiat Uno. (All too infrequently, alas, the opposite can be true!)
Remember that Picasso hanging on your wall? Also remember that Pablo Diego José Francisco de Paula Juan Nepomuceno María de los Remedios Cipriano de la Santísima Trinidad Ruiz y Picasso (to give him his Sunday name) survived during his early career in Paris by burning most of his paintings – just to keep warm.
I always advise our students to be pragmatic, certainly until they have built a reputation. There’s no point in graduating from a furniture school and thinking you are immediately a master of the woodworking universe.
That takes time and, in the meantime, it’s better to under-sell than not to sell. Remember also another line from Lady Windermere’s Fan: “We are all in the gutter, but some of us are looking at the stars.”
Start low, be sensible and pragmatic, but always aim higher and higher.