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I'm trying to wrap my head around upcharges for "non-standard" woods on commissioned builds.

Please understand the purpose of this thread is NOT to be negative or offensive - I'm just trying to wrap my head around the "why" as I figure I must be missing something. I'm here to learn, not to criticize. I want to know if I need to adjust what I'm charging for these "premium" woods (above and beyond my standard wood at base price). And why.

Here are just some examples of upcharges I have seen (prices are approximate):

• Cocobolo Rosewood that can be purchased for $275 - Upcharge of $600
• Claro Walnut that can be purchased for $200 - Upcharge of $300 or more
• Koa that can be purchased for $250-$275 - Upcharge north of $450-$500
• Reclaimed Master Grade Redwood that can be purchased for $90 - Upcharge of $200
• African Blackwood purchased at $600 - Upcharge of $1500-$2000

I suppose I can understand covering any potential breakage issues - but think there is something more to this than the obvious.

Please help me!

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P A U L B U R N E R
Burner Guitars

The time it takes to acquire the sets. The harder it is to replace the more it costs.

Also demand, if people really want it they will pay more for it.

When it comes to some woods you have to include the sorting and nonsense that goes into it. Such as buying 10 spruce tips that only one fits your standards and you have to sell the others.

You also have to up charge for workability. The harder to work te wood the more time and money you have into it.

Those are a few I can think of off the top of my head. I'm sure there are others.

Woods like Cocobolo can be a big pain to work with. Because of the resins I find I go through way more sandpaper on a Coco guitar. If a certain type of wood requires special treatment (like Coco) I think that needs to be factored into the price. I try to set my prices so at the very least I'm covering my costs if I need to purchase a second set due to breakage or other damage. After that I take into consideration availibility, workability and what the average up-charge rate is for factories and other luthiers offering the same wood.

Josh

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Josh House

Canadian Luthier Supply
http://www.canadianluthiersupply.com
https://www.facebook.com/canadianluthiersupply?ref=hl
House Guitars - Custom Built Acoustic Instruments.
http://www.houseguitars.com

Hi Paul,
Why don't you give me a call -- I can give you a much more detailed rundown on why we charge what we do.

But first a few considerations - I pay close to $300 or more for the perfect straight gained Cocobolo. Also, I have a hard time finding it anymore. I literally buy it whenever I see it. That's $300 I put into inventory often. As a professional builder, many of us have tens of thousands of dollars in tonewood. You HAVE to think of that is an investment. In addition, many of these sets will not be used for a long time. I would absolutely love to only build with 3 different species but that just isn't possible as a custom builder. Customers expect to have a lot of options.

I'm not sure why you find this unusual. Marking up prices is standard practice in almost any business. For example, if you were to buy a racing bicycle but wanted fancier tires/wheels/whatever than what it came with, the shop is not going to upgrade them at their cost. They'll typically charge their cost + 100%, in other words a normal retail markup.

3x?!?!! Really? Is that the norm? Seems like possibly a little on the high side but I don't know. I havent studied others pricing policies and I've not sold a guitar yet so I don't have a clue what percentage markup there is.

I understand the reasons for the up charge. I've just never noticed it to be that much! I guess I'm losing out on some good money on my first commission for a friend and only charging him my cost! Hahaah. And of course he picked my best set of wood too.

Here is the formula I use for determining my cost:

( (Upcharge wood cost - cost of mahogany) x2) + (extra hours labor to work with upcharge wood x hourly rate) = total upcharge

African Blackwood for example:

( ($600 - $50) x2) + (15 extra hours x $25)=

$1100 + $375=

$1475

The labor hours are an estimate and everybody's "hourly" ( ) rate is different, but this helped me set my prices and I feel it is fair. Also, as others have said, you need to at least cover the cost of replacing the set.

This also opens up a whole new conversation: base price! Base price should be a factor of a couple of things (assuming you want to make a living at it). General overhead needs to be covered- i.e. light bulbs, generic building supplies like glue and sandpaper, tool maintenance, taxes, business license, insurances, etc. You also need to determine how many guitars you can realistically build in a year. If you make $60K in sales in my market, after taxes, overhead, supply costs, etc, you will be left with about $35K. So now take that $60K and divide it by how many you can build. 12? 10? You get the idea. And if you want to make more than $35K, lower your overhead or charge more.

Aren't numbers and business fun?!

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ELEVATE || Next Level Lutherie
http://elevatelutherie.com
&
http://ensorguitars.com

My twopenneth worth... One thing that makes building guitars such a tough business, especially when starting out, is that your retail price to customer rarely reflects a true 'retail' price including a retail markup to make a real Profit for your business. What do I mean by that? Well, it takes years or high build and service quality, experience, good marketing and some luck no doubt to build a sufficient reputation where your 'price' to customer is not limited by competive pressures - a oint at which there is still sufficient demand, at a $7000-$10,000 price point.

The competition and demand means most 'unknown' builders will probably be limited to selling at $2000-$3000, if lucky. Which means that if you are including a real profit or mark up mean your total costs should not really be more than about 60% of your selling price... so say $1200-$1600. Now this cost needs to include:

Materials
All the consumables, glue, sand paper, finishes, polishing compounds etc
Heating, electricity humidty control costs
An allowance for replacement tool costs
An allowance for initial too outlay
An allowance for your shop space or if at home an element towards your mortgage
....and finally what you pay yourself in labour.... and this should be BEFORE you add your 40% markup to make a profit for the business

Add all that up and you will find you would be paying yourself about $5 an hour!!!

But until you have a reputation stroing enough to demand more, the only other way is to to charge a premium for more expensive to buy, more difficult to work, materials...

So would expect a decent mark up for premium materials..... however again there comes a point at which it becomes a bit OTT... when you start upcharging $3000-$4000 for stumpwood BRW, I must admit it seems impossible to justify, especially on top of base prices at over $8k...but if demand is there why not? Afterall, if the demand is there at that price point, you must be building some amazing instruments and will ahve earned it.

I guess for what is better, rather than listing base and upcharges etc, simply talk specification and material choices and privide a price. Then the customer can decide whether it represents value to them, taking all factors into consideration, the rep of the builder, materials and the usual extras etc.

Chris, that was excellent, thanks...

I am really appreciating this discussion.

One of my "issues" is that we have become a global communication world. People can get online and look up almost anything. I've had people come to me and say - I found a set of wood I like on the RC Tonewoods site.

So.... if they see a set of wood for $400 from Uncle Bob - how can I tell them, using some formula, that the upgrade cost for using that set of wood will be $1000???

I have worked music retail and totally understand markup - but having the wood costs totally accessible to anyone makes the markup a bit tougher.

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P A U L B U R N E R
Burner Guitars

When you are just starting to sell professionally, you will not be able to upcharge as much as those of us that have been building for years and have developed a reputation -- this reflects nothing upon the quality of the work being done. Customers simply expect a better deal all the way around when working with new builders.

I also have found that all my customers have been extremely understanding about the income of a builder. They know that I'm not making much money building guitars. The easiest thing to explain to a customer who doesn't "get it" is that there is a lot to running a business and that the upcharges are necessary to survive as a business. You can also refer them to the upcharges of most other professional builders so that they can see that the price structure is similar.

Other folks have covered the primary point but I'll add a few of my own:
- The wood you are getting is usually older and has been on the shelf and stabilized. So there is some cost to me to pre-purchase and hold.
- I don't shop for the cheapest wood, I usually go to vendors that I know and get the best I think is reasonable and pay what they charge.
- When I sell, I charge the price of what it costs me to replace the wood plus ~10% to cover my shelf space, shop time, shipping, etc.
- already covered is that some woods are hard to work with so there are losses that you may not see. For example, I broke three sides building with jarrah, it splits along the grain like fury! That cost was absorbed by me.

Just FWIW,
Alan D.

Normally someone like Bob or Allied or...etc... that sells mostly to manufacturers would either not post their prices online or have different prices for people reselling the materials in finished form.
It makes it tricky and puts the builders in a tricky spot sometimes, as you mention.

I think it is easier to upcharge for perfect wood simply because of the difficulty of replacement. I would have a hard (not impossible) time upcharging for riftsawn wood because it is just not hard to get. The longer I have had it and the better quality it is it becomes pretty obvious why it costs more.

If you are just buying sets from Bob or another dealer when you get the commission then the educated customer SHOULD be asking why you are charging so much. In Chris's equation, there is NO work involved for you. Bob would probably even give you a deal on a second set of sides if you broke them and a customer familiar with Bob would probably know that. They would also know that you have no time invested in that set in terms of storage or shop monitoring.

Building up a quality wood locker takes time and money, no doubt. If it is done right the customer will likely recognize and appreciate that.

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Burton
http://www.legeytinstruments.com
Brookline, MA.

Zeke, me good buddy... dis is N.A. and a free market enterprise system which means percentage markup is as good as your marketing B.S. oh and ummm...there ain't no such thing as "norm" or normal...Like just take a look at Wudwerkr or Alex Kleon or even me for that mater.

Non the less the dudes have been laying it down like it is.

For example...me just broke out 14 arch top billets of red ceder and hemlock...Cost Padma all of 3 days labour, a few six packs, some smokes, a $20 bill and two years air drying time.

Wanna buy one from Padma ~ $100 each. Why, cuz thats what they are worth...to me. And Zeek...thats cheap compared to whats on the market. But they ain't for sale, why? Cuz me can't afford the $150 market price plus shipping to replace them.

Ya me could pull a cut permit, take down a few sticks, buckem, split em, rack em, dry them for two years and flog billets on ebay for $75 each. ~ but you know what...ain't worth it.

Is just another one of lifes.."oh wells"


blessings
Padma

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Audiences and dispensations on Thursdays ~ by appointment only.


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Makes a lot of sense padma! I wish you was close to me. I know where they just did some logging and there are 5-10 full trees that were just left behind. Not counting all the large stump cutoffs that were left in a 15' tall pile. Of I knew how to properly split it up I'm sure there must be some nice stuff there.

I had a customer who was doing just that- but claiming it was another luthier. He wanted everything I offered to be essentially cost. It was obvious the person had never run a business. He actually asked me if I mark up my materials. Of course. I eventually had to explain to him how a business works. He continued trying to bully me into practically giving him a guitar. I told him to go ahead and use his "other" luthier. He was speechless.

At the end of the day, you have to make enough money to be able to keep the lights on and food in your belly. If a customer doesn't agree with that, they aren't worth your time.

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ELEVATE || Next Level Lutherie
http://elevatelutherie.com
&
http://ensorguitars.com

Oh you must mean the senseless~ness of it all eh.

"Close to me"...Now you pullin me leg....see Zeke...me moved to where me is cuz its a 10 hour drive in any direction to the closest city, no matter were you look you see a gazillion trees, the water is still safe and clean drinkin and the sky she be blue. Well maybe you not me pulling me leg. But the Fishin all gone, logging done dit over, mines are filled in, got no industry what so ever at all but we do has the biggest grow op store in the whole province, well so they tell me, cuz me really don't know much about growing stuff other than tomatoes and weeds (plural)

Tell me, is that Tennessee moonshine all is cracked up to be?


Regarding them trees...alls you need is a chainsaw...a heavy sledge , some splitin wedges and a pickup....then while its air drying for a couple of years, you could be saving your money for that $2,000 band saw to process it all. Now what was Paul Burners question about wood markup?

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Audiences and dispensations on Thursdays ~ by appointment only.


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Hey I got a pretty big bandsaw that would prolly handle it. I just don't know about the splitting and such.

I live as far from people as you can get in these parts. I live up in a small farming town we got a BBQ restaurant and an old drug store and that about it. But it's still way to close to the city for my liken. Now for moonshine if you like it then it pretty good. I know some people who may have a little tax free liquor. You ever get to Tennessee I'll hook ya up with a mason jar or two.

+1 to Frank and Burton. I fall into the unknown luthier category, so my pricing is generally just under $3k. But for that price, I simply will not use my better woods. My customer can have EIR, walnut, or any of the cheaper woods I can readily get. Some of my nicer sets just can't be readily replaced, so they won't be used until the price justifies it. No way I will build a curly bastogne walnut guitar for $3k. If that means the wood sits around for a few years until I am more established, then so be it!

Ken

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http://www.casperguitar.com

Paul, seems the best bet is to let the customer buy that set from Uncle Bob.
Tell him there will be no discount on your selling price for furnishing the wood (but no upcharge either) and that HE will take the risks associated with using that set. e.g. breakage, etc.
Just might make the guy happy, and he will have the satisfaction of getting further involved in the process.

Steve

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From Nacogdoches...the oldest town in Texas.

http://www.stephenkinnaird.com

My 2 cents , from a biz pt. Allowing a customer to grind you is false economy. As in my humble experience , they will nickel and dime and grind you throughout the whole buidling process. State your price make no excuses.Profit is not a dirty word. Been there done that.

One of the best "upcharges" I ever heard of was a major, major guitar manufacturer charged a buyer for the omission of the MOP fingerboard inlays. IIRC, it was something on the order of $150. Required "Special handling". I don't see any problem doing that and I sure don't see a problem with setting the price of your special wood wherever you want. It gives the buyer a special appreciation a.k.a. "braggin rights".

I agree with ernie! I had a guy try to get me to build him a short scale nylon with no rosette and just a square headstock to cut down on cost. I gave him a couple of names to call.

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Waddy

Photobucket Build Album Library

Sound Clips of most of my guitars

Yeah, and thanks for the referral, Waddy! His guitar will be ready in a few weeks...

Steve

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From Nacogdoches...the oldest town in Texas.

http://www.stephenkinnaird.com