Cabinet Pricing: Why Does It Vary So Much?
Cabinet Pricing... it seems like a topic that just will never go away!
I had dinner with a good friend of mine, Kevin Lerma, last night. Kevin is a custom furnituremaker (and sometimes a reluctant cabinetmaker). Ha Ha, Kevin if you're reading this!
He brought a copy of Wood Digest with him to dinner. If you're not familiar with Wood Digest it's a trade-only magazine for professional woodworkers.
I noticed that there was a headline on the cover about Pricing Strategies and so began our conversation... Every year there is a special "Pricing Issue" in Cabinetmaker magazine. Cabinetmaker is another trade-only magazine which specializes in providing information to
small, custom cabinetmakers like me.
Now, before I say what I'm about to say let me mention that I love Cabinetmaker magazine. The publication is well written and provides useful information. It's just that, I don't happen
to agree with their philosophies in regards to pricing.
You see, each and every year they run this special "Pricing Issue" where cabinetmakers from
across the country submit bids for a job detailed in the issue. After all the submissions are received they publish another issue with the results.
Each and every year the result is the same... There will be a large cavern between the low and high bids even though the cabinetmakers are bidding on the same job. The editors at Cabinetmaker always try to make the readers think that this should not be and that the variance of pricing should be quite minimal... I for one, disagree and I'll tell you why.
Pricing is a complex issue and is based on many things... You have to consider hard costs, i.e. shop space rental, labor costs, workers compensation costs, business liability insurance, material costs, etc. etc.
Our shop is in Southern California and while we probably don't have the highest "hard costs" we're definitely towards the top. How is a Southern California Cabinetmaker supposed to be able to turn in the same bid amount as a cabinetmaker in say, a small town in Kansas when the
Southern California Cabinetmaker is paying 3-4 times the "hard costs" of the one in Kansas?
It's just not reality, that all! Pricing is also based on profitablity and we certainly don't all agree as to what we want to make. In fact, I know professional woodworkers who don't even track their profitability! It's no wonder they make so little, they merely work for the pleasure of keeping their staff employed.
One last thought before I get off my soapbox... Pricing (and subsequently value) is alway based on what the market will bear. "Something" is only worth what someone is willing to pay for it.
In Southern California the median new home is valued at over $600,000 and homes valued at over a Million Dollars are a "dime a dozen!" If my custom cabinet bid comes in at $100,000 for a home valued at $1,000,000 then my bid is 1/10th the homes value.
Try getting $100,000 for a kitchen in some city where the median home price is $200,000...
Good luck!
Anyway, I guess my point is this... Pricing is unique to the costs of doing business, the profitability which you demand, and at the end of the day, what your clients are willing to pay.
We typically get more for our jobs than shops located around us but our clients are happy to
pay what we ask because they know they're going to get solid design, quality construction, installation and finish and that if they have a problem, they know we'll be there for them in the future.
So, to all the Pro's (or aspiring Pro's) reading this... remember to calculate all your hard costs and add to that a nice profit margain because quality craftsmanship is hard-to-find and you shouldn't have to apologize to anyone for doing well!
I had dinner with a good friend of mine, Kevin Lerma, last night. Kevin is a custom furnituremaker (and sometimes a reluctant cabinetmaker). Ha Ha, Kevin if you're reading this!
He brought a copy of Wood Digest with him to dinner. If you're not familiar with Wood Digest it's a trade-only magazine for professional woodworkers.
I noticed that there was a headline on the cover about Pricing Strategies and so began our conversation... Every year there is a special "Pricing Issue" in Cabinetmaker magazine. Cabinetmaker is another trade-only magazine which specializes in providing information to
small, custom cabinetmakers like me.
Now, before I say what I'm about to say let me mention that I love Cabinetmaker magazine. The publication is well written and provides useful information. It's just that, I don't happen
to agree with their philosophies in regards to pricing.
You see, each and every year they run this special "Pricing Issue" where cabinetmakers from
across the country submit bids for a job detailed in the issue. After all the submissions are received they publish another issue with the results.
Each and every year the result is the same... There will be a large cavern between the low and high bids even though the cabinetmakers are bidding on the same job. The editors at Cabinetmaker always try to make the readers think that this should not be and that the variance of pricing should be quite minimal... I for one, disagree and I'll tell you why.
Pricing is a complex issue and is based on many things... You have to consider hard costs, i.e. shop space rental, labor costs, workers compensation costs, business liability insurance, material costs, etc. etc.
Our shop is in Southern California and while we probably don't have the highest "hard costs" we're definitely towards the top. How is a Southern California Cabinetmaker supposed to be able to turn in the same bid amount as a cabinetmaker in say, a small town in Kansas when the
Southern California Cabinetmaker is paying 3-4 times the "hard costs" of the one in Kansas?
It's just not reality, that all! Pricing is also based on profitablity and we certainly don't all agree as to what we want to make. In fact, I know professional woodworkers who don't even track their profitability! It's no wonder they make so little, they merely work for the pleasure of keeping their staff employed.
One last thought before I get off my soapbox... Pricing (and subsequently value) is alway based on what the market will bear. "Something" is only worth what someone is willing to pay for it.
In Southern California the median new home is valued at over $600,000 and homes valued at over a Million Dollars are a "dime a dozen!" If my custom cabinet bid comes in at $100,000 for a home valued at $1,000,000 then my bid is 1/10th the homes value.
Try getting $100,000 for a kitchen in some city where the median home price is $200,000...
Good luck!
Anyway, I guess my point is this... Pricing is unique to the costs of doing business, the profitability which you demand, and at the end of the day, what your clients are willing to pay.
We typically get more for our jobs than shops located around us but our clients are happy to
pay what we ask because they know they're going to get solid design, quality construction, installation and finish and that if they have a problem, they know we'll be there for them in the future.
So, to all the Pro's (or aspiring Pro's) reading this... remember to calculate all your hard costs and add to that a nice profit margain because quality craftsmanship is hard-to-find and you shouldn't have to apologize to anyone for doing well!
posted by thecabinetguyonline | 6:51 PM
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