Making money.

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Simon Magennis
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Making money.

Post by Simon Magennis »

This topic over on the anzlf is probably worth looking at if you are trying to make a living from instrument making but are not bringing in as much money as you would like or need. In particular start reading it from where Ormsby Guitars mention his experience. I believe he is current part-time although full-time at one point. Could be wrong about that.

http://www.anzlf.com/viewtopic.php?f=1&t=5490

Warren May
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Re: Making money.

Post by Warren May »

Thanks, Simon. Good conversation that. I'm a Statistics Professor, 60 years old, facing semi-retirement with a modest pension and was thinking about turning a hobby into a part-time job. I don't feel my work is at the level of charging enough to make a profit, so it probably would end up in the red, at least for a couple of years, to better learn the craft.

If you consider the arithmetic they mention and build, say, 2 guitars a month, then you could do pretty well if you could keep a steady market going for a very high end product....

$1500 for materials for 2 gutars
$4000 for 200 hours @ $20 per hour for labor (that would be 50 hours per week for each month)
$ 100 per month for miscellaneous like website, etc.
$ 200 per month for insurance

Total cost for 2 guitars per month would be about $6,000. If you sold them for cost, that would yield your labor costs and you could make a pretty decent income of $48,000 per year. If you added an additional profit, you might ask $4,000 per guitar and make an additional $24,000 per year. That would be a pretty handsome salary but lots of shop time. If you only sell 1 guitar per month, that cuts everything in half so you are at $36,000 per year. Still okay but that's if everything goes well and you could keep sales or commissions. If you have a month or two with no sales but keep building, you could go into the red.

But, out of that you will certainly have tool costs and setbacks. Say, that's $8,000 per year figured in for unexpected costs and tool replacemnt. Still okay and after taxes you could make a profit IF you could sell 24 guitars a year. That probably wouldn't be consistent, so you could take on repair jobs but charge considerably more since those would require some time in consultation and pickup.

All of that is based on already having a well equipped shop. You could take out a loan and outfit a shop. You might have to rent space and would need to figure that in. Say the cost of rental and loan are $1,000 per month. You could still do fine if you could sell 2 per month. So, that has to be your target and you would need to treat it as a full time job with 50 or more hours shop time per week.

Simon Magennis
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Re: Making money.

Post by Simon Magennis »

What prompted me to post was actually Bryan Jeppson's post and even more precisely a look at his website. I find it very sad when anyone has to close up shop for whatever reason. Not for the money but for the dream.

The key points in the thread for me are the fact of seeking outside advice and realising that there are people will to pay more that the minimum if you produce something that matches their desires. So Ormsby offered some special editions just like Martin and Gibson and the rest do. The margin is much better. I wonder how many of the great professional makers who are generous with their advice could actually make a better living if they embraced some of the same ideas? Food for thought.

As an aside - in one of the recent posts here it is mentioned in passing that the Santa Cruz operation produces about 2/3rds custom guitars. i.e. higher margin product. Nice work if you can get it.

I have nothing to do with stats but have always had an affinity with numbers. I went through the maths back in the 80's and decided against it. The chances of putting bread on the table regularly were slim and the time scale to long. I have recently done the same little thought experiment you have done. My results are little different although the big picture is about the same.

You need to factor the cost of sales into the labour costs. i.e. how much time does selling and marketing use up? If you assume one third of the time then the instruments need to be done in 66 hours not 100. Definitely possible but it assumes a very good work flow, good skills and plenty of tooling. Maybe 50% is more realistic which reduces the build time to achieve the 2 month.

On the other hand, if I was in the business as a pro I would not be spending anything like 750 for materials on my standard instruments (unless that includes a very fancy case and fancy tuners ). I would be thinking more like 250 (I make classical guitars so some costs may be lower). For instruments where the materials really cost 750 I would definitely have and up price on that. However that is really just me nitpicking.

The key to the venture whether with your numbers, or mine, is getting 10-20 instruments out the door and into paying hands, year in, year out. That is the big challenge.

On a completely different note, turning a hobby into a business is sometimes the death of interest in the hobby. It becomes a dull boring chore because you need to do it for the money. Not always, it may remain a passion, but it is something to consider.


** For a price example, Madinter will put everything you need in a box for a classical guitar for just over $200 ex shipping and taxes. http://www.madinter.com/for-classical-g ... pruce.html The tuners are useable but not great (low end Gotohs if memory serves) but the timber is pretty good. That's including a pre-routed neck. Less if you make you own neck. I bought one of these kits a few years ago and I buy various items from them regularly enough and am happy with the quality.

Warren May
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Re: Making money.

Post by Warren May »

I see your point, Simon. It is sad to see such a fine luthier struggle.

The kit price for MadInter is a good one. The change in material and overhead would be pretty variable but the time to build probably is not so that labor and extras would be where you make money, as with any business.

I built cabinets for years and, in that market, the price is driven somewhat by the competition. But, we offered a high end product that took longer to build and there was still a niche for "custom" cabinetry. In that venture, word of mouth sold the products and contractor loyalty was important. Probably not the same as custom luthiery. We did, when sales of top end stuff were low, take on some commercial jobs. But it was impossible to compete with the factory built cabinets when MDF became acceptable.

You could definitely lower costs on materials but charging for high end labor also means top grade material, in my opinion. The $750 price was based on using high end tuners, top, inlay, etc. and I'm sure you could cut deals to lower somewhat but that wouldn't lower the price all that much on the guitar where most of the cost is in tooling up, labor and advertising costs, I think.

Mario Proulx
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Re: Making money.

Post by Mario Proulx »

Q: how to become a millionaire by building guitars?

A: start with two million dollars......

Or build a better guitar than all others(in your chosen market).

It's that simple. Marketing won't do it because everyone does marketing. Endorsements alone won't do it because too many performers sold their soul to the highest bidder, thereby killing the endorsement thing. Fancy woods won't do it because everyone has access to fancy woods today(as opposed to the pre-internet days). Ad infinitum....

In an evil twist of fate, it all comes back down to "can you build a better box than the other guy/gal")?

Michael Lewis
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Re: Making money.

Post by Michael Lewis »

Frank Ford related the beginning of Gryphon Stringed Instruments with his partner, Richard Johnston. In the beginning they were going to make guitars and mandolins but very soon found out it was much easier to make income by buying and selling, so that is where they put their efforts, and still do to this day. Richard is more in charge of the sales counter and Frank is in charge of the repair department.

I have made more income from repair work than instrument sales for several years now, though I still sell an instrument every so often.

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G.S. Monroe
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Re: Making money.

Post by G.S. Monroe »

I'm very much right in the midst of this topic. I'm desperately struggling to get a luthier business off the ground, without much success. I don't really feel that I have many options at the moment though. I'm having extreme difficulty selling anything in the current market. If I do make a sale, it is at or below cost because I don't have the luxury of being able to have on hand inventory. What I build I need to turn quickly so that I can finance my next build. I'm literally starting with nothing.
My Situation;
1) I've been unemployed for over 2 years, with a decade of work experience in manufacturing & production. My last job ended with the plant closing and 1,200 people being "downsized".
2) Because of financial difficulty I recently went through the 1-2 punch of divorce & bankruptcy, Currently I'm worth about $75 plus a monthly EBT entitlement for basic food.
3) I've moved back in with my elderly parents, who are on fixed income ( at least there is a roof over my head).
4) My father's work shop is available for me to use, It is a fully equipped cabinet shop.
5) I have had a fascination with Blues music for many years, and in the past have built a handful of Cigar Box Guitars. Unfortunately though my primary musical talent is playing saxophone, not guitar.

I have done some serious research into what I am capable of doing with what I have available to me, and in my belief and desire to be productive and self reliant, I have self studied, and experimented for the last year in building wood & string instruments. I know that I'm able to do top quality wood work, my father has over a half century of experience and is a master craftsman, and he has supervised and taught me what he can. The market in Florida will not support cabinet or furniture building, so there is very few options other than luthiery.

So far this year I have built over 50 CBG's, Stick Dulcimers, and assorted folk instruments. All but about 5 of them have sold on eBay, most on average between $45 - $80 each. My average wage after expenses works out to $ 0.53 an hour. I've tried building full scale 6 string guitars, but as yet have sold none of them, even at the asking price of $250. I have no brand recognition, my reputation is only for "cheap" instruments at yard sale prices, and if this doesn't turn around for me, my next step literally is holding a "will work for food" sign on a street corner somewhere. So I'm having a hard time believing that there is any money to be made in this industry. Yea, I'm probably doing something wrong, but at least I'm willing to do something... I can't give up, and failure is not an option for me. I just can't compete with the likes of Walmart, Guitar Center, or Music-go-round...

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Barry Daniels
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Re: Making money.

Post by Barry Daniels »

Competition at the low end is fruitless. Competition at the high end is not easy either, but a single sale can be significant.
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Chris Reed
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Re: Making money.

Post by Chris Reed »

G.S. Monroe wrote:So far this year I have built over 50 CBG's, Stick Dulcimers, and assorted folk instruments. All but about 5 of them have sold on eBay, most on average between $45 - $80 each. My average wage after expenses works out to $ 0.53 an hour.
Your first step has to be market research. If you look at the eBay "sold" listings there's a whole bunch of CBGs which sold for $200-500. Compare them with those which sell for £80 (including yours). What's the difference? From only 5 mins research I can see that the low-price ones have a pine neck with a cigar box attached, whereas the high-price ones have a hardwood neck and some decent finishing on the box. An hour's comparison would tell you a lot about why you're achieving low prices.

Then, if you want to break into the higher-priced market, you need to dissociate those more expensive instruments from your current cheaper ones. This is easy on eBay - set up a new seller identity.

Then you need to think about pricing - the price you set tells the market what you think your instrument is worth, and no-one will rate it higher than you! My strategy, if I were trying to sell a CBG for $200, would be to list it as Buy It Now for $250 but give the option of making offers. Accept any offer over $200. If you sell easily at these prices. the next one lists at a higher price until you find where the market value is. Of course, this only works if your CBG is actually worth $200.

I wouldn't buy a six-string hand-made guitar for $250 because that's the same price as a cheap Chinese factory-made one, so you're telling me it's no better.

Michael Lewis
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Re: Making money.

Post by Michael Lewis »

Some good perspective above. You will find it more than difficult to compete with the low end of the market unless you are set up for big production and can get the costs down so you can have a profit.

Look int the Small Business Development Center near you, often they are available through a community college. Take advantage of what they have to offer, it's our tax dollars at work.

Perry Ormsby
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Re: Making money.

Post by Perry Ormsby »

Simon Magennis wrote:This topic over on the anzlf is probably worth looking at if you are trying to make a living from instrument making but are not bringing in as much money as you would like or need. In particular start reading it from where Ormsby Guitars mention his experience. I believe he is current part-time although full-time at one point. Could be wrong about that.

http://www.anzlf.com/viewtopic.php?f=1&t=5490
Ah, thanks for linking :)

Full time actually, and have been since 10 months after making my first ever instrument (I quit my job to start the business) in 2003. For a little history, within three years of starting I had to take on a paid part time (three days) assistant, which lead to full time. I decided to go back to working on my own just over two years ago for no other reason than I didn't want to be a 'boss' any longer. I build guitars (I take orders for customs for only two months a year, on a 2 year minimum waiting list) as the primary source of income, but do some repair work purely for the social aspect (having a visitor each day breaks up the day... three years ago, with two of us, we were doing 25-35 repairs a week, now its 5-8 maximum small jobs).

I have a CNC that has never been turned on, and I do no outsourcing other than tuners and hardware. Everything else is hand made, including pickups. At any one time Im working on between 8-16 instruments, all custom orders, and the order books close when there are 65 guitars. I do not sell via any stores, nor do I use eBay. My marketing budget is $30 a week, and honestly think that is overkill when I only take orders for eight weeks a year. Every now and again I do a special run, and these are usually for ten instruments and sell out within days. But, I can only achieve these results because of my efforts and reputation Ive gained over the years via my work, who Ive worked for (and as importantly... who Ive NOT worked with), who Ive selected to market to, and WHEN Ive done that marketing.

That thread was started to gauge where people are at with their businesses, as I was looking to maybe do a mentoring program next year. It kind of got side tracked. It amazes me how many people simply have the opinion that there is no money in this industry. There is. I started with a float of $1800, no wage, and no specialist tools or machinery. Ive built my business into a six figure income. I think the whole problem comes down to attitude for most luthiers. There are some fantastic builders, but they dont do well at everything else (marketing, pricing, branding, etc). They talk themselves into failing from the get go it seems. There are numerous perfect examples in this thread alone.

It takes a lot of time to find your niche too... or rather, an outside set of eyes looking at your work, to help you find it. I look at Bryan Jeppson's website because it was mentioned earlier, and I can see he simply didnt have one. It's not the be all and end all, but if everything you do is just like everything you've seen elsewhere, how do you stand out?

Anyway, I just wanted to give a different perspective to the same old dreary 'start with a pile of money and watch it disappear' rubbish Ive been reading here and other forums for ten years.

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