Official Luthiers Forum!

So I did some math today as I clicked SUBMIT ORDER at StewMac and Woodcraft.com... I took note of the money I've spent so far on tooling up and building and I subtracted the money I've made so far ($0) and it really put into perspective what people are saying about this hobby/craft driving you to the poor house. Sometimes it feels like there's a never-ending supply of tools and jigs that you want because even if you may not absolutely need them, they'll either make your life way easier or make your work that much more accurate. When will it end?

On a more serious note, however, I am actually curious to know how many people this is a profitable venture for and if so, about how many builds did it take for you to pay off all the equipment and materials purchased along the way and start actually MAKING money?

Of course I'm half-joking about it driving me to the poor house because I'm lucky enough to have an alternate source of funding at the moment to sink into this as I'm sure many hobby builders are, but from an actual business standpoint it seems like it would take a very long time to start getting a return on the investment.

Depends on how good you are, what kind of people you know, your network, etc...There are lots of variables.

You have to 'get a name' like anyone else in any type of Art/craft business. It also depends on your local economy. The market is also 'flooded' so to speak, with good builders. Etc...

There are alot of variables, and basicly, YOU are most of them.

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Here is what a Parlor Guitar is for!
http://www.youtube.com/watch?v=oEa8PkjO6_I

I make money on my amps, but won't profit on a guitar yet. Amps are easier to make great, but the guitars aren't there yet.

That said, while I was troubleshooting a friend's Fender Blues Deluxe yesterday, he asked how much I'd want for one of my strats. I told him it would be my cost. My policy for now is friends and family only, and not a bit of profit until they're what I consider great. My standards need to come before any others.

I tried to make money but the feds did not like it so I guess I am stuck making guitars

I know some truly great builders who are hanging it up and looking for a day job. I've heard of some pretty big names that are giving up too but that information is second hand so I won't spread rumors.

I did the math a few years ago and came to the conclusion this I'd never make money at this. I'd have to sell 15 instruments a year at $4k to make it worth my while.

I may be pulling numbers out of my rear here, but I would venture to say that 99% of the people here will never make money at this. Of the people who actually intend or at least hope to make money, I'd guess maybe a fourth of them at most, actually will. By the time you add up all your tools, materials, books, education, shop space, and your time, it can be quite a shock what you actually have invested toward the trade/hobby. Yes, if you're looking at the numbers to classify this as a profitable venture, you need to be honest about all the real investments. Sum it all up some time, and I think the goal of realistically getting yourself in to the black can be pretty daunting.

Aren't I just adding a little optimism and cheer to everyone's day?

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Eschew obfuscation, espouse elucidation.

It also depends on what you mean by making money. I make money when I do antique restoration, but couldn't possibly live on it and couldn't possibly make a business out of it if I was trying to amortize my tools in less than the 30 some years I've collected them. I also own all my dad's precision tools he used in his job.

If one is trying to build a business from a craft type of work, you really have a lot of factors to consider. Labor, how much do you really expect to make per hour for your time. Expect it to be a lot lower when you start out than once you've gained experience. How much can you build in a production line type of environment. You can make more guitars in a month if you have multiple orders you can work on as things dry, etc. Can you work like that. In other words, do you have the space and the mental makeup to be able to work on more than one instrument at a time? At any given time I might have had 15 projects going. Things in glue up, things having carving done to match shaped wood, things in color match, things being leafed, things being finished, things being buffed and banged (matching the patination of age), etc. If I took one project from start to finish, I'd do maybe 10-15 jobs a year, I'd make no money. When you start having multiple projects going, then there is the issue of having the tools to do the work on a project when they are being used on another. Clamps come to mind. You can never have enough clamps.

If one is doing work as an actual business, the balance is made between a tool you'd like to have and one you need to have to do a job. If it takes 10 minutes longer to do a task and you do it once a month, then the $300 tool might not be a consideration. But if it'll save you 5 minutes every day, and it's $300, that's equal to a pay of only $14 an hour. It's probably worth buying that tool.

I started my first business on $4,000 (in 1980) and that money was considered my personal investment. That was enough to get credit started so I could get the tools and supplies I had to have. After my first year in business I had lost about $2,500. My second year I made $15K. My little business has made money ever since. It is no longer my business, but run by my ex-wife. But has been profitable for 27 years. It was because of being really conservative with spending on things and building up supplies and tools as it made sense.

I'd be happy to help anyone considering a business with the planning. While I'm not an expert on building guitars, I know what it takes to do that and I am an expert on running a small business.

Seriously ...... you wont make much, so hopefully you can survive. You have to somehow support yourself in the meantime while your 3-5 (or more) years of hard luthing work start to pay off. Without the fact that I had many of my tools and some stock before I truly started trying to sell (I was a telecom engineer for 16+ years), and that my loving wife is a telecom exec .... I am not sure that I would have ever got off the ground. I also got a decent start by doing repairs in a local shop, and selling most of my early guitars thru that shop. Then other stuff started to happen for me ....

I had a student a few years back ask me about the money .. I said look at it this way - lets say you build ten guitars, and sell them for 3K each (at the time, a decent store guitar was about 2K) - thats only 30 K, and you havent paid for ANYTHING yet from that money .... food rent power wood tools .... was the look on his face.

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Tony Karol
www.karol-guitars.com
"let my passion .. fulfill yours"

Definitely... a lot of people tend to only think of the immediate things when we talk about the cost of a build such as the cost of the tonewood or tuners and if you looked only at these things, it definitely seems like it could be very profitable. But I think many fail to realize that tools, rent, and time are real costs as well and without covering these costs, you can't really consider your business as profitable since you're constantly breaking even or bleeding money. I've often wondered about this very point and I've come to the conclusion that very few people probably build on a level where they're actually profitable outside of a factory setting.

It's pretty daunting...

Again, it depends on what you mean by making money. It might well be very hard to make a guitar business make $50,000 a year (make after costs). However, not so hard for you to make $15,000. So if you take your hobby and turn it profitable by selling some guitars, you can make money. (I'm assuming you are good at making guitars) People will pay for a handmade guitar made especially for them. Let's say you have the tools as a high end hobbiest, now you just need to pay for the materials. If you still love it, you can be making guitars enjoying yourself and making some money by selling them. Again, needing to make and sell 8-12 guitars a year is much easier than running a production shop with a helper. Employees, another headache.

I don't think that it's about money and as others have correctly IMHO indicated if you crunch the numbers, add up all the associated costs and opportunity costs you will find that it looks pretty bleak......

But..... I can tell you why I do what we do and hope to expand my loses doing more of what we do in the future. I build guitars because I LOVE building guitars more than anything else that I have ever had the opportunity to do. I live, dream, and breath guitar building 24/7 and there is nothing, absolutely nothing that I would rather be doing.

Give a nice guitar that you built to a friend, or a kid studying music in school and watch the facial expressions that result. Watch them as they slowly come to the realization that what they are holding is now theirs to do with as they please. Understand that what you have the privilege of observing doesn't happen often in our world and when you hear the recipient of your gift guitar play their first song know that you are the luckiest person alive.

I am one of those that counts every penny. my work starts at $2k and goes up depending on options. Materials typically run 1/4 to 1/3 of a builds cost. Consumables including utilities and insurance is another 1/4. Now you have to figure your labor cost or you are just fooling your self. Depending on what you think your labor is worth that eats up another 3/8 of the cost that leaves very little profit left.

I see so many that don't add their labor into the equation and figure that that is part of the profit. This is not true. If you count the money that pays your labor as profits then you work for free. Profit is not the amount after materials and consumables. Profit is the amount after all expenditures. This includes labor.

If you are a small shop, you to do this for love

The labor $ is the profit. I would be more than happy to make 30K at this. It all depends on expensise. As I have very few, that looks doable. But in this economy, maybe not.

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Here is what a Parlor Guitar is for!
http://www.youtube.com/watch?v=oEa8PkjO6_I

As others have said, its not really about making money, but rather recouping some of the cost of the hobby. My goal is to get to the point that I can make a product worthy of selling with my name on it. Hopefully i can start selling to friends at material cost plus a little extra for the intangibles once I'm decent, and then build up to the point making a little money to cover tools etc... It still would probably always be a sizable loss when you look at the cost from when you started learning. I don't think I ever want it to be a job. That would ruin it. I want to build what I want to build. Not what someone else wants me to build. Thats what my day job is for. Hopefully there will be some people out there that like what I've made and will want to buy it. If not, more guitars for me!

Wrong!!!!
Profit is not the amount you get paid above the material and consumable cost. Your labor is part of the cost. Profit is what you get paid above what it cost to produce the product. You can not produce the product without labor

Lets say you are doing this for a living and that consumables and materials combined is 1/2 of the cost for a 3K sell price, that is $1500. So if you consider your labor as profit then you made a 100% profit margin. But I can prove that wrong.

Now lets say that for some reason due to health or schedule demand you have to have someone else do the labor and that expense is another 1/3 of the cost per unit. That is another 1k that comes out of the sell price before figuring profit. That means that your profit margin went from 100% to 20% just for accounting for the labor you had to pay. If you don't account for a standard labor rate then you have not paid your self for your time prior to determining your profitability. This is a huge mistake made in all sorts of small business. You must consider all that it takes to produce the goods as cost or you account for more profitability than you are truly getting. This is a big issue when doing profit and loss statements.

I agree with Michael here... From a small business standpoint, it's easy forget that you really need to consider yourself as an employee of the company. Unless you do so, you're essentially working for free even if you do take home all the money in the end. Michael's example clearly shows how this type of thinking is flawed. You really need to think about the cost of your labor before you can determine what your actual profit margin is. The reason for this is simply the fact that time and energy are real resources and they carry their own respective value.

First of all, I'm not in this to make money. I just like being able to say, "Wow! I built that." That's really cool. Plus I like guitars and music and I'm just not very good. I'm make much better guitars than I do music.

But, if you're looking to get rich, you've got a couple choices. Either, you charge an obscene amount for your labor on an hourly basis. Or, you hire people to work for you and pay them less than you charge for their labor. If you've got a crew working for you at $15/hr, but you charge $25 an hour for their services, then you make $10 and hour for each of them (assuming you've got the work to keep them busy). A crew of 10 makes you $100 hourly. Of course there's all sorts of overhead costs with running a business and making payroll but why complicate it.

Charging $100 an hour for your services, while perhaps appropriate for your skills, is a tough sell to a client. What is that $10,000+ for a guitar? But you've got to consider your workers too. Can you train people to do the work you to your standards?

The people I grew up with who are doing "best" (if money is your measure) all started businesses where they employ low paid workers to do low skill jobs and skim their cut from many many people. The people who developed a special skill that they can market get by, but are by no means rolling in money. However, they are much happier than the rich ones.

Mike

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Mike Lindstrom

What it really boils down to is that it takes material, overhead (consumables and utilities) and labor to produce a product. all the things required to produce the product is "cost". You can not produce the product without the labor therefore labor is "cost" not "profit".

You can produce the product, not sell it or sell it for below "cost" and you have a net loss. sell it for over the "cost" of all that it takes to produce the product then you have a profit.

Most manufacturing a 60%-80% profit margin is the norm. In small business a 30% is considered by a bank a minimal acceptable to get a good rate on a small business line of credit.

Now here is a test question; Let say material and overhead amounted to 1k and it took 100 hours to produce the product and you consider your time worth $20 per hour and you sell the product for 3k. With this scenario, what is your profit margin percentage. Well it is Zero%. Scary isn't it!!!

To reach the 30% desired profit margin either the labor rate must come down to $9.99 per hour or the sell price must increase to $3.9k

Like most people raising a family building guitars, i take on more repair work than i would like. But hey, it's quick cash and it keeps you well informed about what makes sense to you in an instrument and what can be improved.

There are not many "big guys" in this buisiness, the rest of us need several cash sources, like repairs and taking gigs if you play, to make the lifestyle work.

T.A.S. can also be our paychecks biggest enemy, and i find that making or adapting as many tools as i can slows the money leak. Also, it's just fun.

As long as i have food in the fridge, i consider living a life of my own choosing to be a huge reward, and it makes all the little sacrifices like taking on finish touchup work or lame gigs seem totally worth it. Plus i make a terrible employee, and i would probably be fired from any job i could get.

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Jordan Aceto
Ithaca, NY

I sort of get more perspective and less perspective on certain parts of the industry from where I am. I get to hear a lot of things that most people don't. At the same time, I can't claim personal experience actually selling guitars or doing the trade show thing, etc, as my business is similar but different enough.

There are some patterns I've seen. One is that, with the exception of just a few, everyone I know working in the guitar industry could be making more money elsewhere. Kevin Ryan worked in aerospace, Mario Proulx is an engineer, the guys who fix the machines at Taylor could make twice as much per hour as techs in industry, etc. One of the builders who inspired me most, maybe THE builder who inspired me most, recently took a 'carrot job', as he calls it, teaching the cabinetmaking program at a college and stopped building. The reason: 8-4 working hours and the possibility of retirement. This is a guy that was selling some of his guitars over the 10K mark.

Fast helps. The guys I know who are doing best for themselves keep -very- accurate track of the hours they put in, what's slowing them down, etc. If you can make them faster then you can either break into selling through dealers, etc, by pricing a bit lower (at least to the dealers) or you can just bring in more cash every year if you can sell them all! Being fast isn't the same as being careless, it's figuring out how to be more efficient without sacrificing quality. Kevin Ryan is really fast, and it's got at least as much to do with the great jigs and processes he designs with that big brain of his as the Fadal! Mario doesn't use CNC, but he has designed some great jigs to make stuff quicker.

Marketing is huge. There are occasionally guys who go grassroots, but the majority of the guys doing well have made sure to market their stuff hard and are very conscious of their brand (ie: the combination of their personal image as well as the image of their instruments).

15K a year is very conservative for overhead, 30K is what a trade apprentice makes (on strictly 40 hour weeks!)
$3K per guitar, -$500 for parts, $2500 net
That's 22 guitars per year
About 80 hours to sell it, build it, and ship it, per. You might have 60 hrs of building in there, maybe.
The 'factory standard' for man-hours into a guitar is about 40, and that's at efficient factories (ie: Taylor, etc)
A one-man or two-man shop will not be as efficient as that unless you have some -really- nice gear
60 still sounds pretty short, in hours
And if you're successfully selling 22 3K guitars after three years, you're still making $10K less per year than any trade and probably working more. And you aren't making enough to ever retire.

This is a rough business!

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Bob Garrish
Former Canonized Purveyor of Fine CNC Luthier Services

I will just make maybe one or two or perhaps three guitars a year... if that. This is just a hobby I do have a real job. Maybe in the far future when I get enough tools and experience I might consider selling but now as it stands I just give them away... no point keeping 8 guitars in my cramped apartment so might as well bless others with my skills. Besides with the economy doing badly people will not spend 3K on a guitar. It's better to sell food or other essential items because people will always need them.

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Cat-gut strings are made from kitten guts, stretched out to near breaking point and then hardened with grue saliva. As a result these give a feeling of Pain and anguish whenever played, and often end up playing themselves backwards as part of satanic rituals.

Typhoon Guitars
http://www.typhoon-guitars.com

I was packing up to leave a particularly pathetic guitar show, where i think one guy sold one guitar, and as i looked at the pile of full guitar cases headed for the van and chatted with the builder in the next booth who was doing the same thing i said "i never wanted to have a guitar collection" to which he replied "especially not of my own guitars!"

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Jordan Aceto
Ithaca, NY

If you think you want to do this as a business and make money doing it you need to be aware of a few things.
First off ,it takes money to make money . Second , it you are in business , you have to accept that you will have more hidden expenses.
Then , you need insurance , you need to treat the business as a business. So you will pay rent or have to buy a space. If you own the space , you need to pay yourself rent. You are fooling yourself if you don't.
An accountant ,and lawyer will save you money , or cost you money. There are state and fed taxes. You need to incorporate so you can separate you from the business , just in case. Then you get into supplies , and packing cost , shipping , Taxes , and the list goes on and on.
Make money and the government will want some , so costs must be controlled. It gets to be a long list but , if you want to do it you have to do your homework and have a business plan. Information will cost you , either pay the teacher or learn from the mistake. Don't expect to be an overnight success. It took me 8 years till I made enough to think about making a living at this.
Marketing yourself and getting your name out there can be difficult. Customer service is paramount. So as you can see , business is business , you just have a product that happens to be a guitar.
if it were that easy every one would do it,

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John Hall
blues creek guitars
Authorized CF Martin Repair
Co President of ASIA
You Don't know what you don't know until you know it

"how long will you build guitars?"
"until the money runs out"

Bob, that's a great perspective. I made a lot more money building houses than buidling guitars.

The only things I'd argue with are your figures on overhead and the hours in a factory guitar.

In spite of the fortunes one could spend on jigs and tools, this is a great business for people who hate to commit themselves to large monthly bills. My shop is 600 sq/ft and looks conspicuously like my garage. It could be 500 sq/ft if I was willing to give up being able to cut full sheets of plywood on my table saw (which I won't!). My only truly fixed costs are my insurance, my web host, and utilities.

Also, according to the summer 1995 issue of Guitarmaker, Taylor had between 8 and 20 hours in each guitar. An average of 13 hours. Plus.... 2.23 hours for the case, 1.02 for tooling, 1.08 for purchasing/scheduling/etc, and 0.6 hours in "manufacturing management", whatever that is.

I'd bet it's less now. But talk about overhead! Actually, per guitar, it's probably not bad.

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http://www.chassonguitars.com