Profitability check


Some of you are professional fulltime makers, some of you are professional part-time makers, some of you are hobbyists extraordinaire.

How many of you analyze costs to see if you are making money or even breaking even?

The hobbyist has the easiest time of it in that he does not have to put bread on the table....just merely keep the costs of his passion from getting out of control.(good luck with that:biggrin:)

At the other end of the spectrum is the fulltime guy. He has to account for materials, expendables, etc. to truly discover how much he is making.

What is the per hour goal of a top craftsman? busy does not equal profit right? I found that there were times when I thought my income was good but then when I analyzed all my cost and hours my per hour earning was disappointing. I find at times I have a denial thing going on when I like the work...I don't want to always know what I am making because I may have to do something a business owner the closer I can get to the truth the sooner I can adjust.

How honest are you with the profit analysis in your shop? how has that changed the way you run your shop?

unless you treat this as a labor of love, like a race car, you'll need to know your real costs, including all the shipping you pay.

Where this becomes really important is when a maker asks that golden question: "How much should I charge for a knife?" The real answer is "as much as you can get" but even that is useless without knowing where the floor is so that at the very least you aren't losing money.

Losing money on one knife is one thing- taking ten orders at agreed-to prices that doesn't cover all of your costs is a real problem.

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Thanks John.

With any manufacturing gig you can reasonably say costs+labor=price of whatever you are making. After shopping out materials and developing efficient methodology you are left with one flexible component to the equation.

Labor rate.

If you value your time at $60/hr and a competitor values his time at $30/hr and you are equal in skill/speed, quality, design. Someone is gonna be making/selling more knives.

This is a problem in contract machining also. There are always companies that are slowly going out of business (and don't usually know it) that set a low bar for everyone. If a person says they are in business and they consistently only make $4/hr after materials/shipping they are putting a strain on others who are actually pricing their products/services wisely. This was one of the reasons for guilds in the olden days....share knowledge and regulate prices.

I go to different knife makers web pages and see such a disparity of quality/pricing that I can't but think that many are not making the $$/hr they should be?
After many years in this game, there are a couple of things that have become obvious to me that make this business vastly different from most others...

1. Nobody "needs" a custom knife. It is a luxury item, and as such is subject to the economy. Basically if people do not have disposable income, or even perceive they don't have disposable income, knife sales suffer. This necessitates that in order to remain relevant, a typical business model is impossible to follow. You must be able, and willing to go with the "ebb and flow", both up and down of the custom knife market.

2. Name recognition and perceived popularity plays a larger role in knifemaking, then in any other occupation that I have ever seen. Hence, the reason you have seen disparity.... pricing is often based more on reputation and popularity then any other factors. Longevity also plays a huge role.... often times the longevity is required in order to gain any level of "good" reputation.

I can't but think that many are not making the $$/hr they should be?

I'm going to say something here that might ruffle some feathers, and I certainly mean no disrespect to anyone.....
One of the biggest influences that I have seen in the last decade that affects full time or sole source of income knifemakers, is in the influx of "part-time" or "hobby" level makers. I have seen many of these individuals who make a decent knife, then turn around an sell it for LESS then the cost of the materials in the knife. Or worse, they post it for sale on one of the knife forums, then if it does not sell within a day, they reduce the price, often several times, until it sells. In most cases the selling price is far less then even material costs for the given knife.
This has happened so much, that knife buyers have become savvy to it. I've personally fielded phone calls from individuals who called to ask... "When are you going to lower the price on that knife? It's been available for 3 days now and hasn't sold!" Those same individuals are aghast when I tell them the price will not be lowered. :)
Those, and many more, are the reasons that a "custom" knife business simply cannot be operated on a standard business model. There are times when you can make whatever given "shop rate" you have set for yourself, and there are times, in order to survive, you have to accept less...... it's all about dealing with those ups and downs of the market.

For a long time, during my early years of knifemaking, I had a false impression that those who were at the "top of the heap" within the custom knife world were riding on a "gravy train with biscuit wheels"..... and while there are a select few who make a great income/living via custom knives, the vast majority live a life of "hand to mouth".

A few years ago at a major knife show, I was involved in a group conversation with several makers whom most would consider "top of the heap"... when the conversation turned to how expensive shows are for a knifemaker. I was blown away when most of the makers in the group stated that they had taken out a loan, or a line of credit, just to do that particular show! It kind of shattered my perception of reality, and also made me realize how well off my methodology of doing business as a knifemaker actually was/is.
The key to being a "successful" custom knifemaker has as much to do with a love of the craft, as it does the amount of money you make. If its a "good" living you seek, most full time/sole proprietor/sole source of income custom knifemakers would tell you to look elsewhere.

As for me, if it were not for a full military retirement, a Wife with a really good job, and a profound love for the craft, I most certainly would be doing something else, because there is simply no way I could sustain even a moderate lifestyle if it fully depended on building and selling custom knives. In my case, the money is secondary to the love of the craft.
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fantastic post, Ed.

There is a lot to take to heart there. As new makers, we feel the pressure to cost less than everyone because we don't have a name. The result of this is that inexpensive knives whore up the market, if you'll pardon the expression. The second problem is that new makers get sucked into being the $150 Knife Man and of course business booms. Let me take that back- SALES boom. Business goes nowhere. Simple math will tell you that materials alone are half of that price, meaning you are slaving away nights and weekends for the remainder which comes out to slave wages. Let me take that back, too. There are no wages because in this end of the market you have to sell three or four knives to afford your next abrasives purchase or that drill press you really need, etc.

Walmart is down the street. If somebody needs an inexpensive knife there is no shortage.
Ed...Thank you! You too John.

My first post I actually wrote about the hobbyist puttin' the hurt on the pro. But since I am neither yet...I erased it. It was up to someone with more experience to discuss that....which Ed graciously did...whether folks get riled or no.

I have seen that "race to the bottom" when machining has a down-turn. Competing for negative $3/hr is scary...and buyers do not care how many carcasses have flys on 'em....they just move to the next one barely kickin'...cause that's where the lowest price will be. In my arena there are no hobbyists upsetting the apple cart....but there is also no one collecting anything.

Still it would behoove the guys benefitting from the pros on here to ask recommended selling prices and hold to them. If you are getting the benefit of years of experience and then undersell a guy using his methods...where is the fairness in that? Especially if you are not relying on those blades to pay a mortgage, etc.

I knew this was a dicey topic....but I had to ask. I think there is a niche for my company in this field (not custom but semi-custom) but do not want to dive in without some intel. I'm grateful to Ed and John for their insights. From the very first time I came here (two years ago) and asked questions I have gotten very thoughtful courteous replies from Ed. I can see that his success is also from personality traits/character that instill trust. A courteous helpful attitude goes a long way these days.... There are other folks on here who fit that bill also...In fact of any forum I have gone on to learn this KnifeDog forum seems to be peopled with the kind of folks I like to be around.(I guess this is a long thank you to the

The only advise I could give any pro makers or hobbyists which applies to almost any trade is....GET OUT OF DEBT....STAY OUT OF DEBT! You can handle much more "weight" when you are not treading water.

I learned this the hard way 10 yrs ago. I had some health issues and had to make $6k/month to break even....good ol' So Cal and keeping up with the Jonses. had to make a move. Nine years later, living in Montana in a hundred yr old store building has it's charms. decent room and the building is paid off.
I am now debt free because of very focused paying off of every thing I owed and changing my "entertainment" levels, and do hard analysis of the true difference between "needs" and wants. Turns out a need is often just a want that I want real

I still have health issues but eliminating stress by being debt free has helped there also....who'da thunk? Lol.

Anyways...thanks y'all in general and I would sure appreciate more weigh in on the finance end of making beautiful sharp works of art....

that's a fact, and a hard life lesson. It is amazing how much money you DON'T need if you have no debt.

I am not remotely on Ed's level in knifemaking. I am a hobbyist, but thankfully, a profitable hobbyist. The first year in this hobby was extremely lean. I was doing okay most of the time, but there were a lot of times when I dipped into the family money when I ran out of money before I ran out of expenses. I finally turned the corner through two things: getting my prices where they needed to be and improved efficiency, but getting my prices where they needed to be was 80% of the solution. Believe me when I say that people out there have money. If you are a hobby maker doing about 40 or 50 knives a year there is zero reason to be part of that race to the bottom. You can find 50 people to pay top dollar without even trying hard. If you can't, you are fishing in too small of a pond. With the advent of the web and social media, reaching out to people from all walks of life has never been so easy.

For a full time maker, the numbers I do are laughable. But for a hobbiest / part time guy I could not be happier. I am very proud that knives paid for Christmas this year. Knives sent my son on his four day school trip to Washington DC. May not sound like a lot, but coming from a place where I was robbing money out of the family bank account to actually contributing was a huge thing for me. Watching this hobby earn the money to build a shop full of tools is huge.
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What a great topic and a great discussion. I'm sure there are many points of view that could be shared on this matter. Maybe I can respectfully offer some perspective from the other end of the spectrum, hopefully without ruffling too many feathers. As a hobbyist I probably only make 12 to 20 knives a year (sometimes fewer). Obviously this isn't a drop in the ocean when compared to the number of knives the pros produce each year. There may be other hobbyists out there who make more than I do, but I really don't see the point in the full-time makers worrying too much about the little guys with their garage-based shops. I may be completely wrong, but here's my thoughts on the subject.

First of all, I think the pros and the hobbyists have different target markets that should be considered in this discussion. Hobbyists in my view tend to cater to the single knife buyers or the new collectors. These are the folks with a few bills in their pockets who just want a good quality but low cost knife, or just want to begin a collection of custom knives. They have to start down the road of custom knives somehow don't they? The more seasoned collectors or dedicated knife users are looking for the more long-term makers with track records of quality and customer service and don't mind paying a nominal price for both. As beginning collectors turn into seasoned collectors over time, maybe buying the hobbyist's knife in the beginning is actually going to benefit the professional makers in the long run. Just an idea to consider.

The next point I would make is that the quality of the professionals' knives should be above reproach, and in essence the knives should really sell themselves. Isn't the established name of the professional maker one of the main reasons that prompt a collector to purchase one of his knives, and not the price? When someone purchases a knife from a well-known maker, he knows what he is getting. He also knows that his investment will appreciate in value over time. I'm fairly new in the game and I can clearly see that the fit and finish of my knives pale in comparison to the true artisans of our craft who have established names and reputations for themselves over hard-fought years. While some seasoned collectors may take a chance on purchasing a new maker's pieces with hopes that they will become more valuable, the discerning collectors will likely still stick with the known names in the industry.

Lastly, I agree that the asking prices of our knives should be what the knives are worth, but I would add a couple asterisks to that statement. Maybe the completed knives from some hobbyists are worth less than the materials that went into their making. Did I just say that out loud? Ouch! I know that may sting some people a little, but I've seen some pretty awful knives for sale at a low cost which was probably twice their value, if you catch my meaning. On the other side of the scale, I've seen many more knives for sale for much less than what I would think they were worth. Now, here's the part that I hope will not offend some of our full-time maker friends. I believe that it's up to the maker to set his prices based on his own wants, needs and desired outcome of the sale. We do not all make knives for the same reason. Some make them for profit, some make them for fun, while others fall somewhere in between. As for me, I want my hobby to be able to pay for itself. If it will bring in enough income to pay for materials, tools, consumables, keep the lights on, keep the shop stocked with sunflower seeds and soda, and maybe leave enough left over to take my sweet wife out on a date or two now and then, I would consider it a success. As for the value of our knives, ultimately it's up to the consumer to decide. The price that someone is willing to pay is what establishes the true value of any commodity. Personally I set the prices of my knives at a middle-of-the-road value where I think they belong. I've sold a few of my knives, and I've sat on a few for a while. If I choose to drop the price now and then to "force" a sale and recover some funds for a specific purpose in mind, I see nothing wrong with that idea. After all, I made it. I can give the knife away, sell it cheap, or sell it for an exorbitant amount of money. That's up to me to decide. That's the beauty of a free market. Now, after that said, I do believe that we should all be responsible with our sales. We should be honest with ourselves and not "cheat" our bank accounts by underselling our wares, and we could also be honest with our clients by offering fair prices for the best knives we can make.
Brandant, I agree with everything you said. However, I keep getting this feeling from reading your posts that you greatly undervalue the quality of your work because you see yourself as a part time hobby maker. Well, you're wrong about that. Your knives are beautiful! They speak for themselves and I sincerely hope you are getting paid for them because they are great.

I think this is a trap many of us fall into to: we're quick to see the flaws in our work but we're afraid to admit what we do well. We have to learn to be honest with ourselves both ways. It's good to see how we can improve but it's *also important* to appreciate the things we do well. As I walk around knife and gun shows I pay particular attention to the knife makers, as I'm sure we all do. There are the makers there turning out museum-quality pieces, art knives, and working knives (user knives) that are meant as tools. I fall into that last group. People buy my knives to use. Those are the makers/knives that I compare my work to. I look at the prices comparable knives are selling for. I can't be sure of what people actually sell their knives for versus the sticker price, but it gives me a good idea where the ballpark is.

At the end of the day, you don't know what your knives are worth until you start hearing "no" more than "yes." And if you're never hearing "no" you are way too cheap. Would you rather make 20 knives for $150 or 10 knives for $300 each? Assuming we're talking about the same exact knives, that answer is simple.
Great thread guys. I hope some more full time makers step in and give their thoughts. The few full time makers that I have talked to have the same advice. Be honest with yourself about the quality of your work, and don't be afraid to sit on a $400 knife. Giving it away only hurts you in the long run. Being new it has been difficult to tell people what I want for a knife. My prices are to low! When someone asks how much for a knife I get the order. Now I have more work then I want. And afraid if I raise my prices that it will offend them. I have decided to stop taking orders until time allows for the other things in life. A well known maker that is a member on this forum told me to price my knives off of time invested not quality of materials. I should have listened. As a new maker sometimes we hear what we want to hear.
Brandant your knives are amazing sell them for what ever you want to.
Thanks for the response to my post, gentlemen. I really wasn't intending to put the spotlight on myself, just using my work as an example for other hobbyists and new makers to consider. I do value my work and charge for it accordingly. I just sold my last knife for $500 last month and couldn't stop smiling for a week! In fact I'm still smirking a little LOL.

The point of my post was to show that everyone who makes knives takes ownership in his product and should get out of his craft what he wants to. If he makes a couple of quick knives in a week, he will be rewarded accordingly with a few bucks to by more raw materials. Those who put a lot of time and effort into making the very best knives that they are capable of will be rewarded with a sense of pride as well as an eventual sale if he so desires, building up his name and brand in the process. We all get out of this craft what we put into it. I just suggest that profit for some is not just monetary.
I'll tell you what irks the snot out of me with "new" makers prices. Just the opposite of what Ed's talking about. I'm not talking about the guys on here that are really trying their best to learn the skills and put out nice stuff. It's the Instagram guys with 50,000 followers that make scrap metal art. One of those tattoo covered gym rat guys can make a mystery steel knife that looks like its from a Mad Max movie and people step over each other to pay $1000 for it. I've can spend 20 or 30 hours making a knife that might sell for $300 if I'm lucky, and those guys make one in a couple hours and triple my price. Granted, they're probably not in it for the long haul, but still really gets me.
One set of formulas I've run into quite often related to various handmade goods...

Labor + Materials + Expenses = Cost

Cost x 2 = Wholesale Price

Wholesale Price x 2 = Retail Price

This is just a rough formula as it will depend on other variables such as competition, market, etc.
I'll tell you what irks the snot out of me with "new" makers prices. Just the opposite of what Ed's talking about. I'm not talking about the guys on here that are really trying their best to learn the skills and put out nice stuff. It's the Instagram guys with 50,000 followers that make scrap metal art. One of those tattoo covered gym rat guys can make a mystery steel knife that looks like its from a Mad Max movie and people step over each other to pay $1000 for it. I've can spend 20 or 30 hours making a knife that might sell for $300 if I'm lucky, and those guys make one in a couple hours and triple my price. Granted, they're probably not in it for the long haul, but still really gets me.

If you want to feel a little better...
Go to ETSY and punch in "custom cutlery". There's people doing 2 and 3 knife kitchen sets in the $100-$200 range. I'm going to assume the materials and quality are reasonable but at those prices...why go to work or even try ? Personally , I've always gone with the old adage that "there's a bum for every seat"...the better your work is, the more seats you'll fill. Just be honest with yourself about your abilities.

One of the biggest influences that I have seen in the last decade that affects full time or sole source of income knifemakers, is in the influx of "part-time" or "hobby" level makers. I have seen many of these individuals who make a decent knife, then turn around an sell it for LESS then the cost of the materials in the knife.

This has been a question I have had for a few months now.
I'm one of those guys who has a full time job that pays enough for me to have gotten into both Blacksmithing and now knife making. I'm currently infatuated with making Damascus and seeing the patterns develop, but I and my family/relatives can only use so many kitchen knives. I plan on continuing to make them (for the love of the craft), but will be starting to sell my excess this year.
Here's my dilemma: I recognize that if I price too low, I will be competing unfairly with the professionals. On the flip side, I am relatively new to knife making and have only a basic set up for heat treating (propane forge, 5 gal bucket of Parks 50 and my kitchen oven for tempering). I can't guarantee the performance characteristics of my final blade (edge retention, mainly) so how much less should I charge than the professionals?
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Billy....You can do real world testing with your blades. Sell the good ones and keep the bad ones for display/samples/photos. Get a high temp thermometer for your kitchen oven. Your oven will be off a bit from that little dial.

For the about selling a blade for the same price of a pro based upon quality. The pro is going to make more per hour because he has developed efficient methods but at least he isn't being undercut by a talented hobbyist who he most likely helped further their skills on forums like these and you-tube videos. Perhaps there is a respect issue that needs to be self addressed?

If you LOVE making knives but cannot bring yourself to charging for them you would be better off giving them away for charity raffles, etc. At least then you are not skewing the market for the maker that lives by his craft. After a person has bought his equipment the cost of steel and heat treating and scales is not exorbitant unless you have to do the latest steel du jour, and exotic ivory, and scrimshaw, and Point is can make a lovely knife with good steel, simple scales, simple sheath and not break the bank. Fit and finish is EVERYTHING. What do I look at first on a knife after the overall design....the GRIND. It's all by hand and it says the most about a blade. So if materials are the issue...scale back on the fancy stuff and gift those babies until your skill matches the high end supplies and then charge according to how the pros charge.

Anyways, if the hobbyist wants to honor the pros...don't put prices on stuff they have to chase. If you do that you are the equivalent of a Chinese company underselling American companies in the same arena. I have had friends lose their machine shops because we are forced to compete with a nation that doesn't honor human rights or environmental laws and gets huge govt subsidies to get US manufacturing there so they can steal our hard earned METHODOLOGIES. As a shop owner I have had to slowly reinvent myself to only do the kind of work that does not outsource well....prototype and military. As a hobbyist when you flood a market with unrealistic prices because you are being subsidized by the day job, don't do it for the money (which is not a moral high ground btw) and are just trying to recoup materials for something you love to most likely are damaging your fellow countrymen who are trying to live on their craftsmanship. A junkie also undersells things to cover his next (I know that's harsh....but thirty years of competing with Chinese machine shops because of American companies that want to save every penny they can and have power to influence trade laws....awww...that's for another time. But I do come by this opinion if the truth hurts....change! The similarities are real there....) It would be better to make a few less knives per year and pay for your materials out of pocket than put the hurt on the pros....who also love what they do...btw.

I've seen hobbyist work on here so fine(a GOOD thing!) that I know you are probably putting the squeeze on a full time guy if your pricing is off.

When I was fresh out of trade schools a good production machinist could make $18-$20 per hour. The future looked pretty bright for this young machinist! Today a good production machinist makes $18-$20 per hour....Thanks CHINA!!(and the other guilty parties involved)

Only you know if you are being "China" to some struggling craftsman......

I know this thread has shifted a bit. I am not a knife maker by trade. I have been in manufacturing for many years and have seen my trade suffer for the same reasons Ed brought up in his earlier response. I once trained a guy that was very talented. He opened a shop about the same time I did. He was swamped because he was fast as greased lightening(cheap $$). He started asking me to quote his "more difficult" work because he was "too busy". I spent many hours over the next few months quoting work for him....but never got any work? He would always say, Ahh man you missed it by 2%..." or some such answer. I finally realized that the work he was having me quote he was doing. He didn't have the ability to quote it but wanted the work. I probably would have helped him anyway but did not like being played that a big package of prints arrived and I drop my quotes through the floor. about 30% of what they should be. I email him the prices on Friday so he can submit and on Monday morning email him to say that if we get the job I am too busy....never heard from him again.

So the moral to the story? I train the guy....give him numerous him quote work. And he's basically stealing my time. Maybe he just didn't think things through? Or thought I was getting fat at my higher skill level because of my willingness to help him anytime? Must have plenty of $$ to spend so much time assisting the new guy on the block.....

Just something to think about....
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I recognize that if I price too low, I will be competing unfairly with the professionals
It's not so much the fact of "competing", but more so as has already been mentioned..... that first knife sale will "feel good", and if the price is too low, you will find yourself in the position of having a bunch of orders on the books, with everybody expecting to pay that "low ball" price that you sold the first one for. (news of overly low knife prices travels at the speed of sound). That in turn will be like a slap in the face when you're sitting there with all those orders, and realize you're not making enough to pay for the materials, let alone your time.

Keep this in mind when it comes to producing and selling custom knives..... You can always reduce the price on an individual sale....but you CANNOT ever raise it. What that means is that when you price a knife, you can always price it higher then you think it will sell for, and if someone shows interest, you have the opportunity to offer a discount. In the end, you can usually get what you have to have out of the specific knife, and the customer feels they got a bargain because you gave them some type of discount. That's an age old sales tactic that is used in every sector or retail. On the reverse side of that coin, if you set prices that are too low, and then try to bump them up, most potential clients will view you as "greedy" and avoid you.
Just think of it this way..... you can always negotiate "down" with a client, but good luck every trying to negotiate "up".

Where the main problem lies is that in general, beginning/hobby knifemakers are passionate craftsmen, but most are terrible "businessmen"(along with a lot of "professional" knifemakers). In many cases it's just a lack of experience, but learning those business lessons cannot only be brutal for the individual, it also affects others within the industry.

As for a knife being of a certain quality level, versus how it should be priced.... that is a solid recipe for disaster! From the VERY FIRST knife you sell....not give away, not give as a gift, but SELL. YOU are creating and building YOUR reputation as a craftsman/professional.
If you're in doubt about the quality level of what you sell, it doesn't matter if you sell it for $1, it has to be the very best you can turn out at the time. Nobody will ever care if they "only paid $XXX for it", if it's substandard or fails in any manner, you have to be prepared to repair/replace, or refund. If you're not, don't ever sell that first one, or if you do anyway, be prepared for the grief you create for yourself.

I've been at this a LONG time, and I have seen even long time "professional" knifemakers destroyed because they took shortcuts and did less then the best they were capable of. The moment you step across the line from giving away knives, to selling knives, everything about your responsibilities changes.... and if you're not ready for it/have thought it through, it can cause you a LOT of grief.

Maybe this will help someone when it comes to pricing their work...... Look at it this way. Take a good look at everything it took you to build a specific knife, at the highest quality level YOU can produce.....then quantify that into a dollar figure and ask yourself..... How much money would I charge to make that particular knife again? Then you have a STARTING point of where YOU should be pricing YOUR knives.

For someone such as myself, it's a bit easier to decide prices. As one of less then 120 ABS Mastersmiths in the world, because I chose that path, spent the time and effort to "go through the ranks", and submitted myself to the testing standards set by the organization, and successfully navigated the course, it not only forced me to gain a lot of knowledge and experience, but also, in the eyes of many, it gives me a certain level of credibility. Now, that doesn't mean that I know everything there is to know about knives, nor does it mean that my way of doing things is the "right" or the only way. It only means that I've likely stumbled my way through many things that others might not least yet. :) All of that took a lot of years, and a lot of time/dedication..... but even with all of that, I often cannot demand the same prices as some of my peers..... simply because I am not as popular as they..... but if I offer similar knives that are not priced "in the ballpark" of what their work sells for, I am viewed as trying to "undercut" them. So, unless you are the #1 knifemaker in the world, pricing and sales will always be something you struggle with. I think in the end, as long as you are HONEST, with both yourself, and your clients, then your on the right track.
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