How to price and get paid for your work.
Blacksmithing, like any trade, requires a lot of thought when determining the price of your work. We all struggle with what we think a fair price should be. We often enjoy work so much that it seems difficult to price work at the price it should be to earn a proper living.
Let’s look at the reality of putting a price on your labor when you work in a skilled, labor-intensive trade. The numbers I will use may be a little different for your country or location, but I am sure you will be able to adjust the numbers to suit your situation.
In my area the minimum wage is $8.00 per hour. This gives a mere subsistence in quality of life. So what is a reasonable salary for the type of work we do?
Let’s first look at the nature of our business. We use specialized equipment to create precision metalworking parts. We assemble our creations into complex shapes and functional elements.
There is a high degree of skill and planning involved in many of our projects. We also have to deal with customers and suppliers on a daily basis. Solve problems and quote projects, as well as do your own accounting and bookkeeping. There are many hats we have to wear as one person business operators.
The manual skills required in the blacksmith business, as well as technical knowledge, are closely related to the skills of a welder, auto mechanic, or machinist. There are some differences in each of these trades, but the skill level is almost the same.
In my area auto shops and auto shops charge between $75.00 and $100.00 per hour. Individual mechanics and welders are paid between $25.00 and $35.00 per hour.
So let’s take an average of $30.00 per hour over a 40 hour week. That equals $1200.00 a week multiplied by 50 weeks (remember you should be able to take two weeks vacation and this is paid for). So, 50 weeks gives a total income of $60,000.00. This is considered a good solid income in my country.
You only get paid for the work you sell. You don’t get paid for the time you spend consulting with your clients. Time spent designing the gate or gate is not paid time. You are not paid for the time spent obtaining materials and supplies. If you do your own bookkeeping, you don’t get paid. If someone else does your bookkeeping, then you have to pay them.
There are many areas that you have to spend time on that you don’t get paid directly for. Everything is paid for with what you sell, so you have to factor in all the time spent smithing.
To calculate the value of your time when you’re working in the royal smithy, you’ll first need to keep strict records of how long it takes you to make your items. You must include the time to paint and finish your work. If you ship to your customers, you must include the time it takes to package it.
You should also keep a record of all time spent that is job-related but you can’t get paid. You will need to keep your logbook very detailed so that you can isolate what proportion of the time you actually earn income and what proportion you support your income but don’t get paid.
You should also calculate all your costs for consumables, electricity, rent, business insurance, vehicle costs, etc. and add them to your salary costs. This will give you the total you need to bring in for a year.
The next step is to calculate the number of hours spent in unpaid work. This includes raids and consultations, or participation in the craft fair selling their products. This should also be part of your log book!
If you track all the time spent in your business and the actual manufacturing time of the products, you’ll probably find a 60/40 ratio. That’s 40% of your time actually working on salable products. 60% of the time is dedicated to related but unpaid work. You will have to determine this ratio from your own log book.
Let’s take a look at some sample numbers in the equation. These are approximate yearly totals.
Salary $60,000
Electricity Store $1200
Store Rent $3600
Commercial insurance $1200
The vehicle cost $6000
Show fee $2000
Advertising $2000
Equipment repair $1000
Total $77,000
You may have other expenses that you only incur since you are in business. These will need to be added to this list. Everyone is a little different, and check with your accountant.
Our actual equation looks like this:
Hourly store rate = (target annual salary + business expenses) / (ratio of hours paid per week x 40 hours x 50 weeks in a year)
Now let’s connect our time relationship.
0.40 x our available paid hours (40 hours per week x 50 weeks in a year)
0.40 x 2000 = 800 paid blacksmith hours in a year
So $77,000 / 800 = $96.25 per hour plus material costs. This should be your store’s rate. As you can see, your actual salary is much less than what you have to earn.
Going back to the beginning of this article, you can see why my local auto mechanic and auto shop is charging $75-$100 an hour. Your blacksmith work has the same value!
Let’s add another twist to this scenario.
Suppose you hire an employee. The obvious expense is wages and deductions. When I was hiring employees, it would take a month before they were well-trained enough to make me a lot of money. It took a week before they broke even and I could use the components they were making. If you pay $10.00 an hour, the first week they can break even. The second week they can earn up to $20 per hour in production for you.
After a month I found that they could make about $40.00 an hour if you kept them busy. If you’ve got the job rolling, this is when you start making money. Remember that you are still paying them $10.00 per hour. If your job dries up, paying employees is a quick way to go broke.
In short, you need to start keeping track of how much time you spend on each facet of your business. Time for everything. Then divide that into the time spent directly manufacturing your products and the time spent on non-billable support hours. Do the simple math to find what you should be charging in your circumstances. It will probably be more than you imagine.
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