The Actual Cost of Things

I would like to share with you today a lesson that was shared with me years ago when I first started my business.

A customer asked me how much it cost to make a table.

I answered him: $1,500.

He said: That’s expensive for this small job!

I asked: How much do you think it should cost you?

He answered me: $800 maximum. It’s a pretty simple job right?

My response: For $800, I invite you to do it yourself.

But.... I don't know how to.

Ok, for $800 I'll teach you how to. So besides saving you $700, you'll get the knowledge for the next time you want to make something,

It seemed right to him and he agreed.

But to get started: you need tools: a table saw, a planer, a top, etc.

I don't have all this equipment and I can't buy all of these for one job.

Well then for another $250 more I'll rent my stuff to you so you can do it.

Okay, he says.

Tuesday I'm waiting for you to start doing this work.

But I can't on Tuesday I only have time today.

I'm sorry, but I'm only available Tuesday to teach you and lend you my stuff. Other days are busy with other customers.

That means I'm going to have to sacrifice my Tuesday, give up a day at work.

I forgot. To do your job yourself, you also have to pay for the nonproductive factors.

What are nonproductive factors?

Insurance, fuel, nails, wood glue, etc.

Oh no! To accomplish these tasks, I'm going to spend more money and waste a lot of time! Do you have them? Could you get it to me before Tuesday?

I'll get you all the material you need. Truck loading is done Monday evening or Tuesday morning. You'll have to come by 6 am to load the truck. Don't forget to avoid traffic jams and be on time.

At 6 am??? Nope! Too early for me! I’m used to getting up later. (After a long pause) You know, I've been thinking. You’d better just get the job done. I'd rather pay you the $1,500. If I had to do it, it wouldn't be perfect and it would cost me a lot more.

Lesson Shared

When you pay for a job, especially handcrafted or personalized services, you pay not only for the material used, but also:

• Knowledge
• Experience
• Study
• Tools
• Punctuality
• Accountability
• Professionalism
• Accuracy
• Guaranteed Work
• Sacrifices
• Safety and security
• Insurance
• Payment of tax obligations

No one should attack other people's work by judging prices. Only by knowing all the elements necessary for the production of a certain work can you estimate the actual cost.

While this story is written as a lesson learned by the customer, flip the script as a business owner. Are your prices adequate to compensate you for your knowledge, skills, time, etc. while also giving you a profit to reward you for taking a risk to being a business owner?

If not, now is the time to re-think your pricing strategy and implement changes today so you can reap the rewards starting tomorrow.