How much should a custom luthier make per hour?

[KJung]

50K or 100K, both are substantial investments. Otherwise you are just arguing with his examples and not addressing the point.

Capital investment rarely makes a non profitable company 'profitable'. It is more about a company streamlining its production so that it can keep up with tons of orders and get more efficient. Makes more sense to higher a schmo to do the crap work. Much easier to lay that person off if it doesn't work out, and the hourly rate would be a variable cost if the position is structured correctly.

Again, a small builder with high costs and relatively minimal demand would not benefit (at the top or bottom line) from a large capital investment like that. IMO.

 

[aborgman]

Capital investment rarely makes a non profitable company 'profitable'. It is more about a company streamlining its production so that it can keep up with tons of orders and get more efficient. Makes more sense to higher a schmo to do the crap work. Much easier to lay that person off if it doesn't work out, and the hourly rate would be a variable cost if the position is structured correctly.

Again, a small builder with high costs and relatively minimal demand would not benefit (at the top or bottom line) from a large capital investment like that. IMO.

I agree.

In general - there is almost NOTHING that is going to benefit a business in that situation, and the odds of them ever making more than a subsistence living are minimal.

That is just the reality of the market.

 

[fuzzychaos]

As much as his market will bear. If people are willing to pay big money, so be it.

 

[Musicman20]

How much a doctor, dentist or lawyer paid for school is their problem- if they couldn't get some kind of scholarship or grant, it's just not a good justification for how much they charge, IMO. Their skills, OTOH, are what I want them to be known for and what I want them to charge for. If every Dr, DDS or lawyer charged, based on how much school cost and there was no other way to find out who was best, it would be a bad situation for everyone because, just like any other field, someone was bad enough to be at the bottom of their class in school. If they were able to command the same rate as the top of the class, it's because A) those at the top choose to charge less or B) the government sets the rates.

Scholarships are much MUCH rarer in the UK. Virtually all of the LPC law students I know had to pay for:

A) University Law Degree - Now around £20,000 +
B) Law School (LPC or BVC) - £12,000-£20,000.

There is NO way around it, and despite who got the best 'results', results don't show how good someone is in their career, it just gets them into it. They are already very intelligent for becoming a teacher/laywer/doctor/dentist. VERY intense examinations for law/medicine!

I know the recession has hit everywhere, but there are many many very well qualified trainee doctors/lawyers in the UK who are having to work in shops for £6.50 an hour, when they have devoted their educational life to a career.

 

[steve_rolfeca]

I don't know enough (any) bass builders well enough to know if this applies, but in the acoustic guitar world, a surprising proportion of "big-name" luthiers are only in it part-time.

The current situation with a soft economy and environmental restrictions on transporting endangered species has only made things more difficult.

There also seems to be little relationship between pricing and normal business models. If nobody knows you, your instruments are worth about $1,500 a pop. Nobody cares about your materials costs, how good your instruments are, or how long they took to build. At least until you start getting some decent endorsements, anyway- then the sky's the limit.

It's a weird business to be in.

 

[One Drop]

Capital investment rarely makes a non profitable company 'profitable'. It is more about a company streamlining its production so that it can keep up with tons of orders and get more efficient. Makes more sense to higher a schmo to do the crap work. Much easier to lay that person off if it doesn't work out, and the hourly rate would be a variable cost if the position is structured correctly.

Again, a small builder with high costs and relatively minimal demand would not benefit (at the top or bottom line) from a large capital investment like that. IMO.

Exactly.

 

[TRichardsbass]

I apologize for my previous rant. Gets my goat when people argue the minutiae instead of the point.

Many import basses have ZERO computer controlled machining in them. Yet they can be imported and sold to you, like SX for example, for $149.99. Means that the labor in them is costing pennies per hour.

No builder in the US can compete with that. Carvin is the most advanced builder I have seen, and you can't touch anything of theirs for less then $850.

Over time the Japanese have become better craftsman. That is why MIJ basses today sell for as much or more then US basses. It is about the craftsmanship and quality.

I will finish with this. Custom luthiers SHOULD make $250-$400 per hour. And i, as their able assistant, should be paid $200 per hour. You can just mail me the check now.

 

[basspraiser]

I happend to be talking to Carl Pedigo (Master Luthier) today about somehting he is working on and mentioned this thread...when I told him that (many here seem to feel) that $60 to $100 per hour would be a good income for a Luthier...he chuckled and said "yeah! wish I made anywhere near that!"

for repairs he charges so much for the first half hour and then a discounted rate fro each half hour after that...for builds, he quotes one price and does not track his hours...

 

[aborgman]

I apologize for my previous rant. Gets my goat when people argue the minutiae instead of the point.

When it comes to business plans - minutiae matter.

Can you afford that used vertical milling center? What are you going to charge? Can you afford employees? What are you spending on advertising? Insurance? How are you going to grow over time?

These are all things that should have been planned before anyone ever showed up at the bank looking for capital to start a business and to make sure to avoid being under capitalized.

...but I have a feeling that most luthiers, just like most other small businesses, are designed to fail.

Many import basses have ZERO computer controlled machining in them. Yet they can be imported and sold to you, like SX for example, for $149.99. Means that the labor in them is costing pennies per hour.

A business has to choose whether to compete in the mass market or the specialized market - in the case of basses the mass market will require MASSIVE volumes to be competitive... so that leaves customs.

That is an easier market to compete in - but a niche market that is much tinier and can support many less folks than want to sell in the space.

Massive oversupply by folks who often aren't sufficiently capitalized and don't know how to run a business (see: musicians for another example) means lots of folks running "businesses" that can never amount to anything.

I will finish with this. Custom luthiers SHOULD make $250-$400 per hour. And i, as their able assistant, should be paid $200 per hour. You can just mail me the check now.

Custom luthiers, like everyone else, should make exactly the equilibrium between what customers want to pay and the luthier is willing to work for. There is no inherent value.

 

[TRichardsbass]

Aborgman, you give a perfect MBA dissertation on running a business. However, no matter how great a plan is, there are always factors the formulas don't take into account.

Unfortunately today the mass market drives everything, and Moores Law seems to drive things other then chips and computers. Since the price of a computer drops every year, consumers have begun to believe everything should drop every year. Not fair, but true. While you may want to be the guy who lives in the niche, the mass market has an effect on even what the wealthy consumer will pay. And since musical instruments gain value only over centuries (Stradivarius was not a billionaire, but his violins are worth that now) even the best of the best are price bound, and it is driven by the prevailing market.

As for business plans, most companies, even Leo Fender, did not wake up one day and say "I am going to start a guitar and amp business. Let me ake a business plan and go find a line of credit and investors." It is a gradual process. Ned Steinberger made chairs. Then he met Stu, in the same co-op. they made a bass. People liked it. They made more. Stu continued, Ned decided to dabble in carbon fiber.

The shame today is that credit is hard to come by for everyone, even with a good business plan. For a small builder, his planned roi may not be acceptable to his bank, but it might be good in his industry and acceptable to him. Private capital is available, but there are fewer today then even two years ago.

Should builders be good business people? Of course. Are they all? Probably not. But even the best of them today grapple with the cost of scaling up or even just getting slightly more efficient.

I used to have an engineering consulting business. It was in a niche that for many years was decent. As I added employees at each stage my profit point moved right. My plan was good, but there is always an additional overhead and administrative cost associated with adding direct labor. And then you have a learning curve for that labor to be maximized, yada yada. I closed the business in 2007 after a decade because off shore engineers where though not as effective as me, they were sufficient given the price, and there was no way I could compete with their labor, even though I did not start in a mass market and still delivered a superior product.

The threads here that often compare SX with US customs should show you exactly how the mass market can drive the custom price.

Your points are good, but one size does not fit all. One funny thing I have noticed in my life is that successful business owners rarely have an education nor did they start with a true business plan and most MBAs work for these guys and rarely start successful businesses.

 

[godofthunder59]

As much as their skill and reputation will allow.

 

[MarthaSamira]

"I figure I can make $15 an hour if I don't screw up too much. If I add in wood shopping, travel, time messing with computers, time cleaning the shop and rebuilding machinery. Time harassing, threatening and cajoling suppliers and talking to earnest customers, I can count on $5 an hour."

David King

Source: http://www.kingbass.com/build-a-bass.html

 

[ChuckTrucks]

You guys are overthinking this.

Does anyone play your gear? If yes, proceed to pricing, if no then prepare to lose your ass.

 

[TRichardsbass]

You guys are overthinking this.

Does anyone play your gear? If yes, proceed to pricing, if no then prepare to lose your ass.

Correct Chuck. I think honestly, the post got to some builders, Like Bruce, because what is charged and what we "make" is not the same. And I think that confuses a lot of people.

If a company charges $4000 for a custom bass, and it takes 10 hours of direct labor, often people think the luthier is making $400 per hour. Now, I know that the peeps here on TB are smarter then that, but there are some who I don't think have ever been in business for themselves and don't understand all that goes into it.

In reality that $4000 bass may have $1000 worth of materials, and there was probably some overhead associated with costs of machines and maintenance, electric, gas, then of course the administrative parts of making a sale, like phone time, setting up delivery, cost of the bank account, the cost of accepting the payment by CC or pay pal (often around 2-3% depending on the company) and when you look at the then $300 per hour of labor charge it really starts to get closer to $80 per hour in the end. Which I know many of you may say is good, but the volume most smaller builders have even in a good market that isn't a lot.

For comparison, I have a friend who does massage. The business she contracts with for space and admin charges $95 per hour. She gets 46%, so about $45 per hour. However, she has to provide her own creams, rubs and aromatherapy, plus she has to drive to and from. Also, like luthiery, the business is not steady, as one day may have 6 clients, the next day one. In the end her $45 per hour is really about $40. Then, of course, that doesn't include the cost of the annual state license, paying taxes on the services, etc. When its all said and done she nets after all expenses about $20 for that one hour massage. Sounds good on the surface, but in reality its not the standard of living people immediately think they live.

My two pennies and I'm out of this thread now. I think the discussion was worthy, but I hope it actually spurs more people to truly consider buying a custom instrument, or at least a small scale production US instrument.

tom,

 

[SolarMan]

This discussion was worthy.

I am looking at a custom small scale US built instrument. The guy even makes his own pickups. The woods used are amazing (80 y.o. Reclaimed douglas fir, Padauk, Ambrosia Maple) - the wood working is STUNNING.

Graphite neck rods and the whole shebang.

The price? $2000.00

My guess is $500 in materials plus at least 80 hours of labor. Add in his overhead and I think that I have found a bargain.

I'm buying it.

NBD post coming soon!

And Thanks to all you custom luthiers out there - what you do is challenging, labor intensive, and time devouring. And then you have to deal with customers! UGH!

I could never do it but I wanted to thank those that do -

 

[aborgman]

Aborgman, you give a perfect MBA dissertation on running a business. However, no matter how great a plan is, there are always factors the formulas don't take into account.

I agree... but in general small business fail due to failure to sufficiently plan, not failure of the plan. Well, that and most business owners have NO idea how to actually run a business.

Most businesses fail within 5 years (no matter the industry) for a reason.

Unfortunately today the mass market drives everything, and Moores Law seems to drive things other then chips and computers. Since the price of a computer drops every year, consumers have begun to believe everything should drop every year. Not fair, but true.

Sure it's fair.

If your competition can do it legally - you'd better be able to do it, or you will fail.

While you may want to be the guy who lives in the niche, the mass market has an effect on even what the wealthy consumer will pay.

Of course. So does the weather. It's an effect that can be overcome through sufficient differentiation though... unless you think the price of a Ford Escape has a strong effect on the price of a McLaren F1.

And since musical instruments gain value only over centuries (Stradivarius was not a billionaire, but his violins are worth that now) even the best of the best are price bound, and it is driven by the prevailing market.

Yet somehow the Ritter Royal Flora exists... so it isn't price bound, it's demand bound.

As for business plans, most companies, even Leo Fender, did not wake up one day and say "I am going to start a guitar and amp business. Let me ake a business plan and go find a line of credit and investors." It is a gradual process. Ned Steinberger made chairs. Then he met Stu, in the same co-op. they made a bass. People liked it. They made more. Stu continued, Ned decided to dabble in carbon fiber.

...and that lack of planning is exactly why more than 50% of businesses don't even make it 5 years.

The shame today is that credit is hard to come by for everyone, even with a good business plan. For a small builder, his planned roi may not be acceptable to his bank, but it might be good in his industry and acceptable to him. Private capital is available, but there are fewer today then even two years ago.

If it ain't acceptable to the folks actually fronting the money - it isn't acceptable.

The threads here that often compare SX with US customs should show you exactly how the mass market can drive the custom price.

No, it just shows me a failure on the part of their competition to differentiate their worth. If you cannot convince customers that your product is worth more than your competitors - it ISN'T worth more than your competitors.

Doesn't matter how hard you worked, how much your inputs cost... it's worth whatever the customer deems it to be worth.

Your points are good, but one size does not fit all. One funny thing I have noticed in my life is that successful business owners rarely have an education nor did they start with a true business plan and most MBAs work for these guys and rarely start successful businesses.

I think this is only true if we want to limit it to small business owners. Owners of large businesses start other businesses, with strong business plans, proper capitalization, etc., etc., etc.

...and they fail a lot less.

 

[aborgman]

Correct Chuck. I think honestly, the post got to some builders, Like Bruce, because what is charged and what we "make" is not the same. And I think that confuses a lot of people.

If a company charges $4000 for a custom bass, and it takes 10 hours of direct labor, often people think the luthier is making $400 per hour. Now, I know that the peeps here on TB are smarter then that, but there are some who I don't think have ever been in business for themselves and don't understand all that goes into it.

In reality that $4000 bass may have $1000 worth of materials, and there was probably some overhead associated with costs of machines and maintenance, electric, gas, then of course the administrative parts of making a sale, like phone time, setting up delivery, cost of the bank account, the cost of accepting the payment by CC or pay pal (often around 2-3% depending on the company) and when you look at the then $300 per hour of labor charge it really starts to get closer to $80 per hour in the end. Which I know many of you may say is good, but the volume most smaller builders have even in a good market that isn't a lot.

For comparison, I have a friend who does massage. The business she contracts with for space and admin charges $95 per hour. She gets 46%, so about $45 per hour. However, she has to provide her own creams, rubs and aromatherapy, plus she has to drive to and from. Also, like luthiery, the business is not steady, as one day may have 6 clients, the next day one. In the end her $45 per hour is really about $40. Then, of course, that doesn't include the cost of the annual state license, paying taxes on the services, etc. When its all said and done she nets after all expenses about $20 for that one hour massage. Sounds good on the surface, but in reality its not the standard of living people immediately think they live.

My two pennies and I'm out of this thread now. I think the discussion was worthy, but I hope it actually spurs more people to truly consider buying a custom instrument, or at least a small scale production US instrument.

tom,

In some ways this strangely reminds me of the last time I considered buying a new car.

I went in (knowing what the dealership had paid) and made an offer.

The dealer made some comment about not being able to "feed his family" if he sold the car at that price.

My response? That is your problem.

I don't care what the luthier spent on materials. I don't care how much time the luthier spent building it. I don't care if the luthier makes money or loses money on the sale.

I care about maximizing MY economic benefit and getting the instrument I want for the least cost possible. If a luthier is stupid enough to put himself out of business selling things cheaply to me - good deal for me, stupid decision for him.

I don't have some sort of moral imperative to make sure the luthier is making a living wage or to protect him from his competition or his own decisions.

 

[SolarMan]

In some ways this strangely reminds me of the last time I considered buying a new car.

I went in (knowing what the dealership had paid) and made an offer.

The dealer made some comment about not being able to "feed his family" if he sold the car at that price.

My response? That is your problem.

I don't care what the luthier spent on materials. I don't care how much time the luthier spent building it. I don't care if the luthier makes money or loses money on the sale.

I care about maximizing MY economic benefit and getting the instrument I want for the least cost possible. If a luthier is stupid enough to put himself out of business selling things cheaply to me - good deal for me, stupid decision for him.

I don't have some sort of moral imperative to make sure the luthier is making a living wage or to protect him from his competition or his own decisions.

Yeah, I hear you - and your points are valid. We all want to "get along" and "feel good" but life is very competitive and cut-throat.

We pretend to be "friendly"and "giving" - on the surface. But to survive in this world you must be selfish. Sad but true.

"Have a nice day" (after I get mine!) - "Good luck getting that job" (unless I'm going for the same job, you *&!@$)

You are brave to say it so bluntly. I can see many criticizing you for being so honest.

 

[TRichardsbass]

In some ways this strangely reminds me of the last time I considered buying a new car.

I went in (knowing what the dealership had paid) and made an offer.

The dealer made some comment about not being able to "feed his family" if he sold the car at that price.

My response? That is your problem.

I don't care what the luthier spent on materials. I don't care how much time the luthier spent building it. I don't care if the luthier makes money or loses money on the sale.

I care about maximizing MY economic benefit and getting the instrument I want for the least cost possible. If a luthier is stupid enough to put himself out of business selling things cheaply to me - good deal for me, stupid decision for him.

I don't have some sort of moral imperative to make sure the luthier is making a living wage or to protect him from his competition or his own decisions.

You said it. My competition. Which is El Cheapo. Even though theoretically it would appear it isn't, it is.

No you have no obligation to anyone but yourself. True enough. However you also reinforce my point. The mass market does drive even the niche.

Here is how. You said if I can't differentiate sufficiently the value of the Tom Richards Amazing Custom Bassanova, my bass vs. el cheapo then essentially it's my problem. The thing you miss is that for the most part most of us actually have. However the mindset is exactly like yours. You want yours, all of it, at YOUR price. If I am charging a fair price, but you don't like it, the quick response is that something less expensive is as good. And your barometer is the lowest common denominator. I don't know any TBer who ever started a thread titled, "compared to custom builder 1 custom builder 2 is a good deal." But there are tons comparing price point basses to top of the line customs.

Then you go on the Internet and tell everyone how much I suck and then start threads like "Mr. Cheapo bass IS AS GOOD AS A Tom Richards Bassanova?" I could care less if you buy something different, but I have to care if you do something that tarnishes my ability to make that living. So I have two responses. Either work my price lower to meet your desire, or lose a sale. Lose enough sales, and of course I am looking for a 9-5. Lower my price and I eat but still take the bus.

Which is exactly the point of the OP. It wasn't about if Tom Richards is a good businessman, it's what should a good builder make per hour. And the rest of us chimed in to point out that what is made per hour is not what we charge per hour nor what is charged per hour doesn't come close to even some of the suggested rates.

McDonalds sells a double cheeseburger for a buck. A local pub makes a double cheese that is light years better. Because his beef costs more then McDonalds, he had to raise his price from $4 to $5. $5 is still a great price for a local pub burger. Within a month his price was back to $4. Not because his costs went back to lower, but because he has to compete with the mass market even though he is NOT a fast food chain. Its not his niche at all. I actually listened to two customers tell them that they could buy 5 burgers at McDonalds for that price, and that $4 was okay, but $5 was just too much.

Why do you think Mercedes came out with the Smart Car and dropped the Maibach? The Maibach was absolutely worth it's price. But the mass market effects the high end market.

Same for bass. Everyone keeps one eye on the cheapo and when you don't like even a fair price, you will pull it out and clobber us with it. So it DOES effect even the Ritters, Brubakers, Backlunds, Spectors and all of the US custom builders.

I am not saying that you should pay for me to live a great lifestyle. What I am saying is that if you really look at what you get from a custom builder, it really is a good value, if not inexpensive.

Next time I reboot my company I will hire you to write my plan and get me my lines of credit. You do at least understand the financials.

 

[KJung]

You said it. My competition. Which is El Cheapo. Even though theoretically it would appear it isn't, it is.

No you have no obligation to anyone but yourself. True enough. However you also reinforce my point. The mass market does drive even the niche.

Here is how. You said if I can't differentiate sufficiently the value of the Tom Richards Amazing Custom Bassanova, my bass vs. el cheapo then essentially it's my problem. The thing you miss is that for the most part most of us actually have. However the mindset is exactly like yours. You want yours, all of it, at YOUR price. If I am charging a fair price, but you don't like it, the quick response is that something less expensive is as good. And your barometer is the lowest common denominator. I don't know any TBer who ever started a thread titled, "compared to custom builder 1 custom builder 2 is a good deal." But there are tons comparing price point basses to top of the line customs.

Then you go on the Internet and tell everyone how much I suck and then start threads like "Mr. Cheapo bass IS AS GOOD AS A Tom Richards Bassanova?" I could care less if you buy something different, but I have to care if you do something that tarnishes my ability to make that living. So I have two responses. Either work my price lower to meet your desire, or lose a sale. Lose enough sales, and of course I am looking for a 9-5. Lower my price and I eat but still take the bus.

Which is exactly the point of the OP. It wasn't about if Tom Richards is a good businessman, it's what should a good builder make per hour. And the rest of us chimed in to point out that what is made per hour is not what we charge per hour nor what is charged per hour doesn't come close to even some of the suggested rates.

McDonalds sells a double cheeseburger for a buck. A local pub makes a double cheese that is light years better. Because his beef costs more then McDonalds, he had to raise his price from $4 to $5. $5 is still a great price for a local pub burger. Within a month his price was back to $4. Not because his costs went back to lower, but because he has to compete with the mass market even though he is NOT a fast food chain. Its not his niche at all. I actually listened to two customers tell them that they could buy 5 burgers at McDonalds for that price, and that $4 was okay, but $5 was just too much.

Why do you think Mercedes came out with the Smart Car and dropped the Maibach? The Maibach was absolutely worth it's price. But the mass market effects the high end market.

Same for bass. Everyone keeps one eye on the cheapo and when you don't like even a fair price, you will pull it out and clobber us with it. So it DOES effect even the Ritters, Brubakers, Backlunds, Spectors and all of the US custom builders.

I am not saying that you should pay for me to live a great lifestyle. What I am saying is that if you really look at what you get from a custom builder, it really is a good value, if not inexpensive.

Next time I reboot my company I will hire you to write my plan and get me my lines of credit. You do at least understand the financials.

Sorry, but this is another example of a REALLY dangerous way to think about this. The mass market IN NO WAY 'sets the price' for high end goods. Zero validity to this.

Again, the only issue is 'does the consumer see the worth of your product' and are those consumers willing to pay a price high enough, and in volumes high enough, to make your business profitable.

There are many 'luthiers' who make hi end basses, and are completely sold out at all times (Sadowsky, Fodera, MTD). These basses are in the upper stratosphere of the market, and just like cars and fine jewelry, they are pretty much 'luxury items' that really aren't impacted by 'mass market pricing and trends'.

I will agree that if you have a relatively 'me too' product, priced in-between the 'true top of the line' (as perceived by the market) and the more mass market products that have become VERY good over the past 10 years or so), you are most likely in deep trouble from the start.

Once a small business person starts to go into 'McDonald's' mode (i.e., mass market has ruined my business, and the consumer just doesn't understand), you are dead in the water right out of the gate (how's that for a mixed metaphor).

I just got a copy of 'Bass Builder' magazine, and Rick Turner does a reasonably good job of discussing these sorts of issues in a 'business' segment of that publication.