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 Post subject: business question...
PostPosted: Wed May 16, 2018 4:31 pm 
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Cocobolo
Cocobolo

Joined: Fri Feb 10, 2017 11:09 pm
Posts: 280
Location: Cowichan Valley, BC, Canada
First name: Conor
Last Name: Searl
City: Duncan
State: British Columbia
Zip/Postal Code: V9L 2E5
Country: Canada
Status: Semi-pro
Feel free to answer or not, but I'm curious as to what a person should expect as the markup above cost a person should reasonably expect when putting together a guitar? I realize that much of this depends on the reputation of the builder. When I worked in music stores years ago there was about a 25 - 30% mark up on guitars we would sell.

I've put together a handful of kit electric guitars, and flipped them for my cost plus a little bit for my time. But I've started having people (friends and acquaintances) ask me how much I would charge them to build (read finish and assemble) them guitars with higher end components etc. So I'm trying to figure out what to charge.

I've quickly realized that in the bolt on world a typical tele/strat style guitar made by smaller renowned luthiers (Nash, Kirn, Hahn etc.) is probably selling in the $2500 - $3500 range, while a typical offset is maybe an extra $500 - $1000. So I've used this figure as a bit of a ceiling for the time being. Then I figure out how much the components will cost me, and estimate how long it will take me to build the particular guitar, and hopefully come in about $500 - $1000 less than what some of the more small renowned builders are doing while making more than minimum wage hopefully.

Is this reasonable? Is there actually not that much money in building guitars? ;)


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 Post subject: Re: business question...
PostPosted: Wed May 16, 2018 7:51 pm 
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Contributing Member
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Joined: Sat Jan 31, 2009 8:50 pm
Posts: 1517
Location: Seattle WA
Focus: Build
Status: Semi-pro
I had no idea people were paying 3K for a Strat style guitar. I'm in the wrong business!

Sent from my SM-N910T using Tapatalk


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 Post subject: Re: business question...
PostPosted: Wed May 16, 2018 9:28 pm 
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Koa
Koa

Joined: Thu Nov 04, 2010 1:46 pm
Posts: 1396
First name: Freeman
Last Name: Keller
Focus: Build
Status: Amateur
If I won the lottery I would keep building guitars until the money ran out.

When someone flatters me by asking me to build them a guitar I know that they can buy a better Pacific rim guitar (of any genre) for less than I will pay for materials. I know my fabrication skills are not nearly as good as someone in an Asian sweat shop, nor are my finishing skill anywhere close to a 300 Epiphone or Eastman. I never keep track of the hours in a guitar, but if you are going into business you should do so and I promise, you'll weep.

A business involves all the fixed costs of plant and tooling, you need to take care of your old age and pay some taxes. If someone has figured out how to get 2 or 3 or 5 or 10 thousand dollars for any guitar, more power to them, I haven't and frankly I wouldn't want that responsibility.

I have a very basic pricing structure that works for a hobbyist and buys me a beer once in a while. I estimate the cost of a guitar at my cost for the materials, doubled for my time. I loose money of course, but I get to build guitars and my customers get the best product I can make at this point in my building career.

I will do everything I can to keep it from becoming a business



These users thanked the author Freeman for the post: Conor_Searl (Thu May 17, 2018 11:12 am)
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 Post subject: Re: business question...
PostPosted: Thu May 17, 2018 6:23 am 
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Brazilian Rosewood
Brazilian Rosewood
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Joined: Mon Dec 27, 2010 9:06 pm
Posts: 2193
Location: Magnolia DE
First name: Brian
Last Name: Howard
City: Magnolia
State: Delaware
Zip/Postal Code: 19962
Country: United States
Focus: Repair
Status: Professional
For the parts I buy at wholesale and sell for suggested retail. After shipping I net about 30% on that.

Wood is a case by case study, is it from my stock or do I need to bring it in? I always mark up my tone woods because I generally have a bit of time into selecting them and traveling a days journey to purchase in person..... but for the budget conscious I also by blanks from regular suppliers like allparts. So this is a wild card and subject to my opinion of the value of the wood.

The actual work is always quoted based on time. I write down how long each operation should take me, add the hours and multiply by my shop rate. Shop rate is more than what you pay yourself, it also has to cover electric, wear on tooling, consumables, new tooling and every other small expense you incur plus money for your pocket. Larger shops have larger overhead and their rates reflect this. Reputation also can mean a higher (or lower) rate may be warranted. Area Market also comes into play on this.

It's not a fair comparison to put your parts casters up against a Nash Or Knaggs. Not because of quality necessarily because even if that is equal or even superior the market doesn't see it that way...... Custom instruments are tougher to resell than a brand name so their value on the used market is not good unless you are a rockstar builder.

As an overview though my prices are very much inline with the list price of a similar guitar from the major maker. ie, my classic 50 prices out about the same or a tad less than an USA made Fender Tele.

_________________
Brian

You never know what you are capable of until you actually try.



http://www.brianhowardguitars.com
https://www.facebook.com/pages/Howard-G ... 3702413493
http://howardguitars.blogspot.com/



These users thanked the author B. Howard for the post (total 3): Pmaj7 (Fri May 18, 2018 8:48 am) • Conor_Searl (Thu May 17, 2018 11:12 am) • dpetrzelka (Thu May 17, 2018 10:45 am)
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 Post subject: Re: business question...
PostPosted: Fri May 18, 2018 11:01 am 
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Joined: Sat Jan 31, 2009 8:50 pm
Posts: 1517
Location: Seattle WA
Focus: Build
Status: Semi-pro
I think it's fair to charge whatever you think you can get on the open market. However, if it's friends and family, they are liking the fact that you're making it for them and they want to support you and they are probably leaving it up to you to give them a fair price. (Unless of course they think a "homemade" guitar should cost less than one from Guitar Center )They might even want to give you top dollar to encourage you in your Pursuit.

So, no right answers here. I wouldn't consider too much about how much to mark up parts, but just about how much you want to be compensated for your time.

Sent from my SM-N910T using Tapatalk


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 Post subject: Re: business question...
PostPosted: Fri May 18, 2018 8:44 pm 
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Joined: Fri May 18, 2012 8:35 pm
Posts: 2366
Location: Austin, Texas
First name: Dan
Last Name: Smith
City: Round Rock
State: TX
Zip/Postal Code: 78681
Country: USA
Focus: Build
Status: Amateur
I gave up trying to sell and just give them away.
I’ve gifted 18 to dedicated players. It’s very satisfying.

My builds were priced at $950. I think this may have been too low and perceived as not a top of the line custom based on the price. I think this may be key.

I have 4 in stock and have another 4 nearly finished. After I finish the last 4, I’m done.
I can only afford to give so much away.

If I really wanted to make money, I’d probably spit out a bunch of boring Tele’s made from Texas hardwoods with rusted metal stuff on them.

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 Post subject: Re: business question...
PostPosted: Sat May 19, 2018 6:11 am 
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Brazilian Rosewood
Brazilian Rosewood
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Joined: Mon Dec 27, 2010 9:06 pm
Posts: 2193
Location: Magnolia DE
First name: Brian
Last Name: Howard
City: Magnolia
State: Delaware
Zip/Postal Code: 19962
Country: United States
Focus: Repair
Status: Professional
I see people mention "what the market will bare" a lot in these discussions. How many of you actually know what that means? What do you actually know about your market? In the case of guitars themselves you need the following.....

What is the average sale price of a new guitar in other music stores in your area, large and small (that is often a different number in a larger market)?
How many guitars over $1000 do they sell a month? over $1500? $2000???
What are those expensive guitars they are moving?
What do the sales numbers look like for instruments closest in style to yours? and closest in quality? And what is the sales price of these guitars? These may be different in the public's eye....
Of course you need to get the other shop owners to honestly disclose their sales to use this strategy. And you will find honesty in business in short supply. And if you do get the numbers you will learn what i did, that the vast majority of guitars sold are $500 or less and sales of anything $1000 or up is less than 1 in 10 sales and $1500 or more maybe one a month for NEW instruments (used sales are a different market!!) for a fairly good sized and established private shop in most US markets.

Without that data your WTMWB pricing is just a wild guess, your own opinion of your worth and not actually based on anything else.

Market driven pricing is a viable approach but usually works counter to what most of you seem to be thinking. For example a town with 3 mom & pops has a stable market with avg. sales of $750 per guitar. Now a larger chain from a nearby city opens a store directly in the market and through buying leverage starts selling the exact same units for $600...... The other 3 shops either drop their prices 20% (most of their margin) or lose their customers. And then there is Amazon...... That is typically the way it works. I tried the whole comparative pricing scheme and find I sell more guitars with my hourly approach to pricing my builds.

Remember that the customer needs a reason to seek you out..... He typically visits an actual music store on a regular basis for necessities and is exposed to their barrage of factory guitars for sale at discount prices. Why should he go out of his way to your shop? Especially to get the same guitar for the same price, except have to wait 6 months to pick it up? And then there is the almost zero trade in or resale value of your instrument. I know that last one hurts don't it? And it applies to me and virtually any other small one or two man lutheries instruments......

_________________
Brian

You never know what you are capable of until you actually try.



http://www.brianhowardguitars.com
https://www.facebook.com/pages/Howard-G ... 3702413493
http://howardguitars.blogspot.com/


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 Post subject: Re: business question...
PostPosted: Sat May 19, 2018 10:40 am 
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Koa
Koa
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Joined: Mon Nov 24, 2008 12:17 pm
Posts: 834
City: Escondido
State: CA
Zip/Postal Code: 92029
Country: USA
Focus: Build
Status: Semi-pro
Brian makes good points, but I think we are looking at two different things. Are you talking about trying to start a profitable self sustaining business buying inexpensive kits, swapping out the electronics, and selling the completed guitars to strangers? If so you need a business plan. A REAL business plan, not those formulaic works of fiction you learn in B school.

Brian touches on elements required to do a real plan. I could rant for pages on what a plan for a small new luthier business would look like.

But I didn’t get an impression that was what you were talking about. It seemed to me that what you were facing was a couple of acquaintances who saw a kit guitar you put together and asked you to do one for them. You aren’t prepared to give them the guitars, but want to know what is socially acceptable to charge a friend for the work.

If that is your question, then it really is hard to come up with generally accepted rules. It is very subjective and dependent on your specific community.

I would suggest you start by asking them what they think is fair. What are they prepared to pay? I think that is what some are referring to as “what the market will bear”. If they say $500, and there is no way you are willing to do that for them for that price then you know you are not on the same page and there is no point moving forward. If they say $1,500, and you can live with that then take it on.

There is virtually no way you can offer a guitar of comparable quality to a Pac Rim made guitar at a comparable price and make any profit. Either your friends are going to be willing to pay extra to get something custom from you or you will be making a gift of you time, effort, and money. Most likely the latter.


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 Post subject: Re: business question...
PostPosted: Sat May 19, 2018 4:59 pm 
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Koa
Koa

Joined: Thu Nov 04, 2010 1:46 pm
Posts: 1396
First name: Freeman
Last Name: Keller
Focus: Build
Status: Amateur
You specifically mentioned strat style electric guitars - I'll assume thats what you are making. Lets consider a few things about strats from your customer's buying position

- Fender makes a pretty darn good strat. In fact its pretty hard to beat the American Standard for a domestic generic stratocaster. Street price 800 to 1100, warranty, resale, variety of colors, you get to play before you buy.

- The budget Fenders area also pretty reasonable and can be pretty affordable. May not be domestically made if that matters

- There are some pretty good clones - the G&L Tribute comes to mind. Haven't looked lately but I think they run around 800.

- Then there are the super strats - production guitars with some "features" - different body shapes, often a Floyd, maybe some different pickups. Once again, you get to play them, they have some sort of warranty and maybe some resale. 800 to 1500?

- Probably a third of strat owners have assembled a parts caster at some time. Buy a neck and body, some pickups or a loaded pick guard, put some sort of finish on it (often furniture finish or maybe rattle cans of automotive paint) and bingo, "look at the guitar that I made"

- I remember hearing someone say "anyone with a band saw and a router can make a fender guitar". True, especially if you buy a neck from one of the neck mills. I've made some templates for our high school shop class - each year a couple of students route out a body, paint is, screw a premade neck into it and bring it to me for help making it play. They have fun, learn shop skills and safety and end up with a guitar (and an A). For them the guitar is priceless.

- I've built a few fender clones, either commission or donations. I take pride in making them different from a fender - the head shapes are different, I use different woods, the person buying it gets to specify the pickups and hardware and if they want, I will copy the shape of a neck that they really like. They get their choice of finish as long as its lacquer - I'll color or tint or shade to their liking. They don't get to play it but the can play others that I've built that might be similar, my warranty runs until I die (which might not be too far in the future), the name on the headstock means nothing. My pricing follows what I described above (I was really surprised when one of my donated guitars went up for auction - I had hoped it would sell for 7 or 800 or maybe even a grand - when a couple of wealthy doctors bid it to 2K I couldn't believe it. Of course they were both buying a guitar and making a donation to a very good cause).

- Last is a true commissioned one of a kind custom guitar. I have built a few of these - a Weissenborn, an acoustic in the shape of a ES175 , two ES335's (one left handed) and the day a friend walked into my shop with an arm load of Brazilian rosewood and said "I want you to make a parlor guitar out of this". In my opinion a custom guitar should be exactly that - the buyer gets to specify (or at least negotiate) everything. Neck shape (bring me a guitar you like and I'll copy it), inlay and binding and details. Color (and I would say finish but again, all I know how to do is lacquer so thats all you get). Imagine building a left handed semi solid body that was going to be shipped to Europe, You do neck profile tracings back and forth by e-mail, he wants it "red but not bubble gum", his bands logo inlayed in the p/g you can't even play it before you ship it. Or hand delivering a barn wood telecaster clone to a customer in New Zealand - unfinished rosewood neck, compound radius f/b, no fret markers, some boutique pickups (and weird switching). At his insistence I put a TruOil finish on it, frankly I didn't like it.

How do you price any of those things? How do you create a business around building and selling them? I really don't know, but I'm having fun trying.


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 Post subject: Re: business question...
PostPosted: Mon May 21, 2018 12:05 pm 
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Cocobolo
Cocobolo

Joined: Fri Feb 10, 2017 11:09 pm
Posts: 280
Location: Cowichan Valley, BC, Canada
First name: Conor
Last Name: Searl
City: Duncan
State: British Columbia
Zip/Postal Code: V9L 2E5
Country: Canada
Status: Semi-pro
Thanks everyone. I think I understand most of what has been put forward, especially in regards to realistically comparing what I'm capable of and what is available at your nearest big box store, or desk top computer.

At this point my main gig is teaching guitar lessons, that's what pays the bills, and so I'm fortunate in that I don't require the luthiery stuff to be a business at this point, just a hobby that pays for itself. But I also don't see myself sustaining a 50+ student workload into my 50's (I'm 38 now). Becoming a luthier has been my plan to begin transitioning my business, so that by the time I'm in my 50's there will be some flexibility around how I can generate income. :)

So my question was kind of two-fold, first I wasn't sure how founded my business assumptions were in reality, so thought I should check in, and see if there was anything obvious I was missing. Secondly I wanted to avoid establishing any practices that would bite me later as my "self-funding hobby" becomes a more serious part of my business.


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 Post subject: Re: business question...
PostPosted: Fri May 25, 2018 1:23 pm 
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Walnut
Walnut
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Joined: Wed Dec 02, 2015 4:43 pm
Posts: 12
Location: Staten Island, NY
First name: David
Last Name: Schwab
City: Staten Island
State: NY
Zip/Postal Code: 10201
Country: USA
Focus: Build
Status: Professional
You have to buy parts at wholesale/OEM prices.
I don’t do many kit builds, but I’ve had customers bring me all the parts to assemble. Assuming everything fits together, I charge around $300 to assemble and set up the guitar.


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