In Your Home Woodworking Business, How to Control Your Woodworking Business Costs

TedsWoodworking Plans and Projects

If you’re in business, whether it be a home woodworking business or any other form of business, you need to know how to calculate all your operating costs. Many home businesses overlook some important “costs of doing business”, and you want to ensure that you achieve an in-the-black profit status. That’s why you should have use an accounting system to adequately calculate all your costs of doing a home woodworking business.
In this article, we’re going to point out some important considerations for you. Have you ever seen an entrepreneur (think neighborhood lemonade stand) who may have priced the product too low and did not really make any profit at the end of the accounting period? The fifty cent glass of lemonade probably did not include the cost of the vendor’s time.
We will guide you so that you will have a definite way of calculating your home woodworking business costs so as to get the most profit out of your business. Besides discussing finances with you local accountant, you should take into consideration these 6 business costs.
1. Cost of materials
The cost will be inclusive of all the materials that you use on each one of your woodworking projects. Do you wonder if it’s really necessary to record all the costs of all the materials? Well, not to the point where you’re spending all your time listing items like an accountant would detail every expense. Don’t forget to write down your time spent doing accounting duties.
Consider placing all your business receipts in a folder and then near the end of your woodworking project, place the dollar numbers on a computer spreadsheet. If you don’t own spreadsheet software or don’t know how to use it, paper and pencil still work. Include all costs incurred when you purchase materials for a project.
Also, it’s suggested that you start with the obvious costs like cost of lumber, hardware, finishing materials, glues. Use your receipts for a reminder so that you take in account for all the costs of the materials that you may otherwise consider as miscellaneous. Such costs can be the cost of varnish, sandpaper, cleaning up supplies and more. Don’t forget to ask for volume discounts from wherever you buy your supplies.
2. Labor Costs
Remember the lemonade stand analogy? Remember to incorporate the cost of your own personal labor. Yes, you’re worth a certain amount per hour – it’s just up to you to figure out what that amount is.
To obtain a fairly accurate cost of your labor, ask yourself what you would pay an employee with similar skill if you would hire someone else to do the wood work. Estimate how much time it would take to finish the job. Write down how long and how much. Also, take into account the quality of job when completed, because that has a reflection on the labor costs. What if the job has to be done over? Quality counts for the end consumer.
3. Overhead Costs
Have you ever wondered what exactly are overhead expenses? Think ‘what is over your head’. Do you pay rent or mortgage on the facility where you will be conducting your home woodworking business? Don’t overlook that overhead costs still must be accounted for even if you are not working on your projects.
Overhead costs are expenses like rent, office supplies, heat, water, air-conditioning, advertising, insurance, magazines, classes, etc. Remember to include the incidental costs of shop supplies that are often quite minor. Did you think about including your office phone, fax, internet and even part of your cell phone bill?
4. Profit Margin
If you don’t make a profit, you don’t have a profession, you have a hobby. What sort of profit margin do you think you should end up with? It’s important to make a profit, but look around and see what the competition is charging. You definitely don’t want to overcharge. In the end, you need to come up with a number that you can live with, yet be enough to reward you for the entrepreneurial risk you are taking.
5. Shipping and Handling
Whether your end customer lives thousands of miles away or across town, you will incur shipping costs. What about the time that it takes for you to get it ready to be shipped that distance? Figure it in. What about packaging materials? Consider buying insurance against damages that might occur. Even more, what about the gas you burn taking it to the UPS or FedEx pick up place?
Running a home woodworking business can have a lot of costs, but has many rewards too. You envision achieving a profit so you can continue enjoying the rewards for a long time. This article was to help you realize all the costs you encounter in the course of doing your home woodworking business and guide you to the profitable success you deserve.
6. Professional fees
You may need to talk to an attorney on occasion, and this is an especially a good idea when you are starting up. Having a good accountant will pay you back many times over. LET THE PROFESSIONALS DO WHAT THEY DO BEST, WHILE YOU DO WHAT YOU LOVE TO DO. If your business grows, and if you choose to let it grow, you may need to hire others to help, especially with sales.

There are still some important info related to articles about In Your Home Woodworking Business, How to Control Your Woodworking Business Costs. As well as some examples of pictures related to the above article you can access here MORE INFO

Thank you for reading the article above. Many important points you need to know.
Have you ever:
– Wanted to build something, because you cannot find it “retail”?
– Thought of making something custom for a specific need?
– Struggled to find detailed plans to build your dream project?

TedsWoodworking Plans and Projects