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The Business of Knife Making A forum dedicated to all aspects of running, managing and legal operational issues relating to the custom knife making and custom knife selling industry.

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  #16  
Old 05-15-2008, 07:41 AM
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NJStricker NJStricker is offline
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A couple thoughts here regarding pricing/shop rates.

First, from Wayne Goddard. (Not that I think that he is THE authority on any of this, but he's one of the few makers that has been in a position to actually put some of his comments regarding business in print.) Anyway, he suggested that the price of a knife should be based on YOUR SHOP RATE x 4 X HOURS TO MAKE THE KNIFE. So, at $20/hr., a knife that takes 8 hours to make should bring you $640. That's a bit much, in my opinion, unless you are one of the current hot makers or have established yourself as one of the top knifemakers.

Then, a suggestion from the late Bob Engnath: the price of a knife should be enough to enable you to make 3 more like it. I think Bob's opinion was if you started breaking things down to an hourly rate, you'd realize how little you were making, especially when you start considering all the other business-related tasks that need to be done (which means the knives aren't being made).

Finally, something remembered from an economics class in college: The market determines what price it will bear for a particular product. Whether or not the production costs are above or below that price determines whether the business will thrive or fail. So, if you follow Wayne Goddard's advice and make a $640 knife, but potential customers aren't going to pay more than $150, then you are going to realize real fast that your business isn't so hot.

I'm enjoying this discussion, guys, and learning a lot. I think this is the most traffic this sub-forum has seen in a while. . .
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  #17  
Old 05-15-2008, 09:23 AM
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One other thought, and I say this from the perspective of having been full-time for two years: It's great to get a market niche and to be in demand for a product, but beware of burnout!

I got good at pipe hawks, and got quite a waiting list built up for 'em, selling them at a decent price for the quality. After turning out 3 or 4 of 'em a month for two years, I couldn't stand the sight of them. And I still had 36 left to go...

I did get them done, but after that was over I didn't make another one for two more years. Of course, in that time I moved, got a full-time job, and went shopless for a year. Now my making is back in the realm of a serious hobby rather than a business venture, and I am happy with that. You should never get to the point where you feel like you HAVE to do it. The work will suffer for it.

It may be that I'm just not cut out to be a full-time maker yet, and I know my business sense is very poor. The point of all this is, you need to make sure you're physically and psychologically up for it for the long haul before you make a go at full-timing it. I'm not there yet.
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  #18  
Old 05-15-2008, 12:28 PM
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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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  #19  
Old 05-19-2008, 06:51 AM
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Crex Crex is offline
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Good stuff there Chiger. Very practical approach to the business end of the game.
It's always good to be able to make what you want and be able to sell it for what you can be satisfied with as "profit". We have a tendancy to undersell because we don't look at all the hidden cost/expense. My wife is pushing me to fully retire from my consulting job and make a go with the knives solo. She's been studying up on all the small business details and is moving forward with establishing an LLC, website, etc. Think she's kind of excited about running a small business per say and that will take a lot of the "paper work" load off my plate. If this Blade Show goes as well as the last two, it's pretty much a done deal (I'm still finishing up requests from last year).

I'm sure you didn't intend the statement "By the way, it doesn't matter how well the blade is made...fit and finish sells and resales a knife!", to read quite the way it does (I have seen some of your work). While I do agree with the statement for the most part, I strongly believe that if a knife is not well made (the best one can do), business will suffer later. A "bad" knife comment has a much longer life than a "good" knife comment. No one goes shopping for a bad knife.
To qualify that further, I have had to accept the fact that most people that buy my knives will never use them although each one is constructed for function first. I do hope my fighters, warclubs and big bowies never get used as intended, but I do want them to handle the job if necessary. I do lean toward "nicing" them up for the same reason you stated - they sell better.
Please know I am not challenging you, just clarifying for the general forum browser. As my Granddaddy always said "Don't waste good paint on bad wood! The chickens will never know, but you will."


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  #20  
Old 05-19-2008, 08:02 AM
brucegodlesky brucegodlesky is offline
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Above all, be flexible.
I never liked being identified as being a ....(fill in the blank) If you want to be independent, be open to all sorts of related work. Neighbor needsa 12 tentpegs, pound 'em out. Another neighbor needs a sycle bar sharpened, go to it. Good day at the flea market? sell what ya find.
I keep a pile of blacksmith related equipment here, someone nees a vise, blower, anvil, etc, that extra $50-100 can pay abill. The results of helping new guys get eqippped is big time returns in a lot of cases.


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  #21  
Old 05-19-2008, 08:16 AM
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Les, now that you've moved to Corpus, you promised to come down to Brownsville for a visit.

Also, look up a fellow maker there in Corpus named Jeff Vesley.

I have a complete machine shop that has been paid for by making knives, but if I tried to charge an hourly rate no one could afford to buy my knives. The knife is only worth what a willing buyer is willing to pay. His willingness to pay depends on his perception of the knife itself and his judgement of your skills and personal values.

Like most makers over the long haul, I've grown tired of taking orders for knives. I've always done this for my personal enjoyment and satisfaction only. The price I get isn't a factor at all.

I have always asked for a 10% deposit from buyers I don't know, just to keep us both honest. If it's somebody I know and/or trust, I don't want a deposit. Now if the knife is so unique it wouldn't be sellable to anyone else in case the buyer might default, I refuse the order.

I have never been late on a delivery, mostly because I give myself enough time to get the order done, and maybe do something for myself during that time frame. You need a few knives on hand for shows and walk-ins.

I guess it would be accurate to say that for me knifemaking isn't a business. It's just what I do. And I like what I do. I also like my boss.
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  #22  
Old 05-19-2008, 05:27 PM
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Some great thoughts in here, thank you all! I am glad to see a little action down here in this forum, I always thought that it would bee great to see more discussions about this sorta thing.

Don, I am in Anniston, Al right now for work. That is a bit more than a day trip, even for Texas standards, but I aint forgot ya or or offer. I will see you later this year!

The biggest pain I see is all the things you have to do for the business that dont involve shop time. That is a lot of hats to have and still only get 24 hours in a day....


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  #23  
Old 05-19-2008, 11:17 PM
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chiger chiger is offline
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Quote:
Originally Posted by Crex
Please know I am not challenging you, just clarifying for the general forum browser. As my Granddaddy always said "Don't waste good paint on bad wood! The chickens will never know, but you will."
LOL! Carl, not feeling challenged at all.

It's a valid point. If someone were to put the two different post together...about seeing his knives on page 1 and fit and finish on page 2...well just didn't dawn on me. I guess I should have stoked Les a little about those d**n cool butterfly knives just to head that thought off.

The point I was making about fit and finish was pointed at the ideal of coming up with a design that was quick and easy and knocking out a bunch to sell to the masses. It certianly wasn't pointed at Les's knives. Just at a business model that might include inexpensive knives.

I think too many makers make the mistake of thinking that just because they make a great blade to sell it for $150 it doesn't have to look as finished as a $1500 knife. The average buyer, non collector, doesn't know 5150 from 1016. All they care is does it rust, is it sharp and does it look good. That was my point, which is kind of the same as your good paint on bad wood point I think.

I don't know if you've seen the pics of Les's butterfly knifes, but I and a heck of a lot of other makers would be hard pressed to produce anything close those things. And I am certain I couldn't do it efficiently enough to make a living. If Les can...he is the man.

Les is a comer, up and coming for all those city folk out there. ;~) I HOPE Les nor anyone else interpreted my post the way Carl pointed out. They are strictly aimed at hypothetical business models.

Oh, and Les. I'm sure your wife is burning up the internet for info on LLC. You might have her compare the liability clauses in LLC against a Sole Proprietorship if you guys are doing it without a lawyer. Depending on your situation, it may fit better and you can still protect your personal assets if your careful.

chiger,
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  #24  
Old 05-20-2008, 03:40 PM
Frank Niro Frank Niro is offline
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I'm running along with Don. I just don't know how it's possible to make a reasonable living without a great deal of background and proven success that can be so very slow in coming.Many of those that are trying to be full time makers have there wives out there with full time jobs. Nothing wrong with this at all, and even a great thing that the wives are so supportive, but they aren't making it on their own . When will they? Probably never for all except a very, very, few. Here again great for those who get there if they are really there. It's so important to get the dollars coming in, in the amount necessary to provide a reasonable living or the pressure to have to make will only provide another reason for not being there. Failure is not easily handled by most. The life stresses it creates can destroy great companion and marrage associations pretty darn quickly.
Like Don, I do this because I want to, not because I have to. I still have a most strong sense of competition. I've found that possibly the biggest error makers fail to recognize is that in the real world their knives are not worth the values in dollars that they place on them. Excuses are made and there isn't any adjustment downward made. Back somewhere someone bought one of these and was pleased the price was so low. Didn't that fellow at the table say it was a bargain but just wasn't what he wanted? But, when you aren't making sales what is the problem? Are you are not reaching those who would buy, and you can't afford the cost of going to the show; you are not able to complete sales though you have the knives out there or you can't make them fast enough but raising the prices will slow the sales? Hey you are not getting enough money for a hobby maker let alone to concider full time employment, no matter how many hours you are willing to work a day. Let someone else take over the financial side of the knifemaking including the paying for all supplies, shipping expensives, and shop costs. You will soon know what's left over to live on. A friend maker once told me, "makers are romantics and dreamers, reality is not something they want to deal with" Frank


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  #25  
Old 05-20-2008, 09:05 PM
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Les George Les George is offline
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Chiger - You would have to try a lot harder than that to hurt my feelings than that. I din't even think of it like that so all is well. As a matter of fact, you keep going on like that and it will be hard to get my head outta the door in the morning.... Don't sell yourself short on the Balisongs, they are not as bad as people make them out to be, just a little extra work....

Frank - I have seen reality a plenty, and it sucks! I'm pickin up what you are puttin down though...


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  #26  
Old 05-21-2008, 06:40 AM
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Man Frank! You're one heck of a buzz kill!
Just kidding of course, very practical observations that are important to this thread. You targeted issues a lot of us don't want to acknowledge or accept because they make us uncomfortable and go against the "dream".
Question of the day - "What is real?"
>Definitely not folks in the political arena, but still they have a most definite impact on how reality plays out!<
Now there's a negative thought!


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  #27  
Old 05-21-2008, 09:52 AM
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chiger chiger is offline
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Quote:
Originally Posted by Crex
Question of the day - "What is real?"
>Definitely not folks in the political arena, but still they have a most definite impact on how reality plays out!<
Now there's a negative thought!
Dang, Carl. Now who's the buzz kill? I was trying to forget! ;~)

Nah, you're absolutely right. The economy, mostly driven by the political season right now has had a great effect on luxury purchases like knives.

Most all makers, that will admit it, say they have suffered a drop in sales over the past several months. That's another factor a new business owner has to take into account. Political climates in this country effect the economy world wide.

It may not be based in reality, but the politics of destruction have a greater effect on luxury purchases than any other sector of business.

chiger,
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  #28  
Old 05-22-2008, 05:59 AM
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Amen, Brother Chiger!
The most scary thing going on right now is all three of the vying Presidential candidates at some time in their political past have voted in favor of making us knifemakers outlaws!

Another case 'n point - Here in GA, I can carry my concealed handgun into a public resturant legally but will go to jail if I pull out my custom 5" damascus steakknife to cut my steak!


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  #29  
Old 05-22-2008, 01:13 PM
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chiger chiger is offline
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Quote:
Originally Posted by Crex
Another case 'n point - Here in GA, I can carry my concealed handgun into a public resturant legally but will go to jail if I pull out my custom 5" damascus steakknife to cut my steak!

LMAOff! Your killin' me. Wait a minute. When I quit laughing I'll finish...

Ok. Carl, you sir are man after my own heart. I want a man sized steak and a man sized knife! That is why we need to be involved in the political process. If we don't protect the constitution, the special interest will pay or bully politicians into usurping it.

I don't think a lot of knife makers understand the effect politics has on their hobby/business. Think about it. I'll bet there are knives in every home on the planet. Knives are the most primal, basic and useful tool on the planet. And yet knives and the people who produce them are taken for grated. If knife makers around this country ever banded together they would become one of the most powerful lobbying groups in the world.

I know I'm kind of sounding a little "Dr. Evil-ish," but your point about GA laws is important to knife owners and makers. The squeaky wheel gets the grease and right now I don't think we're squeaking enough.

Ok, soap box away. But your point is very valid. The most insincere people in this world can have the most profound effect on our business.

chiger,
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