Official Luthiers Forum!

Sweet, I learned something!

I got the 40 hr figure from another builder, but it was apparently a different factory!

So far as the overhead of having a garage goes, though, John Hall covered it: what's your mortgage?

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Bob Garrish
Former Canonized Purveyor of Fine CNC Luthier Services

I want to correct one misperception. Profit in a sole proprietorship is the amount of money the proprietor gets out of the business. There is no such thing as cost of labor for the person owning the business. It's all income for that person. Doing something as a small business is a labor of love. As I have run a few small businesses I know that there is no greater joy than being able to go to work and do what I love. I hope to be able to build musical instruments as my retirement "project" and make some money doing that. I have a ways to go before I can sell what I make, but I might reach that goal.

If you want to look at profit as a purely business sense, then please do that. However I think someone doing work like this may look at it differently. Walk down to the shop and check on the latest glued up bodies, run their hand across the latest freshly buffed finish. Smile, feel that warm feeling rush over the whole of them and sigh. Shut down the lights and sleep soundly that night. If you get $$ to live into your bank account and you get that sense, life is pretty good. I've been there and I've watched the faces of the pleased recipients of my labors. Trust me, it's profit and it's a great life too when it all works like that.

I wouldn't be surprised if Taylor is an outlier.

As for my mortgage, it would be no different. In fact, it's an honest write-off now. We live where we live. Even if I figured the cost of building it as a percentage of the mortagage, it would be very small. And I know a couple of pro builders doing good work out of much smaller spaces...basements and such. It would be nice to have a garage for my cars (and kayaks) for the 30 or so frosty or snowy days we get a year but I'll probably live through it

I was just trying to point out that, as far as businesses go, this one has the potential for having extremely low overhead, depending on how you go about it. Of course, I hire out my cnc work to a reliable guy with higher overhead

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http://www.chassonguitars.com

Bravo John that is as good as truth gets.

Now we have all had this discussion several times each time some one states "I can't look at this as a business because it will take the love of the craft out of it for me."

Well from the point I started to sell my work I knew I wanted it to grow to the point some day I can do this full time. I also knew for that to happen I had to look at it as a business from that point forward. While seven years later I still do this part time I am rapidly reaching my goals. I feel that the business out look has helped me avoid many of the financial pitfalls many fall into. and I have to tell you it has not take a bit of the love or dedication out of it. I guess you can a tribute the fact that I had nor currently harbor any false expectation. I know I will get out of it only what I put into it. From the beginning there would come a time when my focus would need to change from the excitement of the realization that I was building instruments to the point that I faced the fact I was building a business and this business I was building was doing what I dearly love.

I did so with the up front realization that I could not make the living my family required from the start and maybe never be able to with out having a nest egg to lean on so I still work as an engineer but as my retirement comes closer and knowing that my nest egg is somewhat insured I see the day that my job becomes my vocation. Looking at the growth of your business needs not take any of the passion away. In someway it allows to focus even closer.

Now I also knew I had and still have dues to pay, things to learn and techniques to improve from the get-go and still today. While looking at the production and retailing my work as a business, this does not mean to looking at it on in terms of profitability only. In fact I intentionally started buy selling at bottom basement pricing for several reasons such as to give clients a value product but still not cost myself personally to build. I still to this day make just a small percentage over cost but as I get more competent I bring my profitability up a bit at a time. That said I have always known to the dollar or nearly anyway exactly where I stood cost wise. To not do so would be negligent.

I know some will always view their participation in this craft as a hobby or past time and they will be happy selling their work on occasions so that they can continue participating in this craft with little or no concern or actual profitability and there is absolutely nothing wrong with that in any shape or form as long as one faces the fact that this is the the path they chose.

Joe you are most certinly free to think what you wish but the statement you just made is true only if you are not concered if your DBA, LLC or corperation is finacially profitable and that was the point of this topic. I don't mean this in any rude way at all but with out a cost value you can not honestly judge profitability, you can only judge variance in income and profit and income are differnt things.

The profit of proprietorship is what would be left to the proprietor if he or she hired others to do all the labor, including management.

As I have said before, building guitars does not fit any model of a profitable business. Those who are most successful, and they are few, may manage to earn what they could doing similar work as salaried non-proprietors.

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Howard Klepper
http://www.klepperguitars.com

When all else fails, clean the shop.

I love your post Hesh. I would love to be in a position to be able to build guitars full time, with or without a profit, but I guess like most we have bills that guitar building and repairs would simply not cover even if we were good enough and well known enough to sell 15 guitars a year at over 4K each.

I think part of the problem is that unless you have a name and you are building to a standard where the supply/demand situation means you can sell at $8000+, there is simply no business model that can sustain single builders in a very competitive market. In a way its quite sad as the amount of craft and work that goes into building a superb handcrafted guitar actually justifies the $8000+ price point, but that is simply unrealistic a price for the average guy/gal looking for a high end instrument. The fact is that there are so many incredibly talented builders out there making superb instruments, I only hope to one day be able to get close to that standard.

I am and will always be a hobbyist, because I love it... I know its going to cost me money and how many I end up building will depend on so many factors, time and money, ...once you start you just get hooked and I am only on number 2, yet have bought wood for 3+4 already!

The first aim, will be to satisfy my own lust for extending my own collection, but with guitars built as gifts for family thrown in too. Above all to enjoy the experience of each build and learn something new every time. Or to paraphase Jonathan Kinkead in his book 'to make sure I enjoy the journey'

i've been doing fish taxidermy for 10 years. After finally living my dream and having my own business for 2 years. It seems like a joke after paying high taxes and having the DNR looking over your shoulder. Getting into guitars seems like the same deal. We all get interested and hooked. The next thing we are buying all the tools and crap. I guess it's a man thing. We all have the same dream... we can make money doing the things we love..good luck...

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Jason Moe
LaCrosse WI 54601

I blew my whole taxidermy account on my 1st guitar build.. Woods, tools, inspiration.

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Jason Moe
LaCrosse WI 54601

The only value is for how much and how often people (or the market for the capital-oriented) are willing to buy your instruments. In the real world, whatever time and energy has been spent on the project (or the product for the capital-oriented) is irrelevant to its value.


I heartily agree with this statement.
An expensive and extensive tool collection does not build a better guitar, nor does an accumulation of expensive and gaudy tonewood, nor does jigging up to the ninth degree, nor a huge shop that needs to be kept at 65º/45%RH. I suspect those who succeed are able to work fast, accurately, consistently and have talent and stamina way above the average. Being frugal and modest in social ambition certainly helps as well. Let's tend to the garden, or cut some cordwood while the glue dries… There is no business model for a small artisan like this.

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Laurent Brondel
West Paris, Maine - USA
http://www.laurentbrondel.com/

I like to trick people into giving me money for things i enjoy doing, and would do even if i was not paid to. I like to play guitar, and i always think of it as "free money" when i leave a gig with a pile of cash. I like to build guitars also, and when i sell an instrument, i dont think "hmmm, i have X amount in materials, time and overhead, am i profitable or not?" I think "cool, this money will allow me to continue spending my time doing what i find to be worthwhile."

It may not seem like much of a buisiness model, because it isnt, but i think there is room in the world for us artists and dreamers who are just incapable of working a normal job.

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Jordan Aceto
Ithaca, NY

True that a single proprietorship business all funds above deductable expenses is taxable income to the proprietor but in a real sense taxable income is not the profit in my opinion. The way I see it is I must get paid by my business before I metaphorically determine the profitability of my venture. My material and over head + what I set as an expected rate is the break even point. Any thing over that is my profit. It is important for me to know that figure because in my plan for now and years to come it is these funds that I invest back into the assets of my business such as new tools and shop improvements. I know it is semantics in points of view and my previous post may have sounded like I was speaking from a legal accounting point of view but I was actually try to speak form a realistic business point of view. Yes I pay taxes on all the funds received and deduct the eligible operating expenses like all of us that do this a DBA. I do consider it income. But not all as profit.

Let’s admit it, most of us are in this because we are hooked on the rush we get from building, the accolades from those that interact with our offspring, and being part of a subculture perceived as quite romantic by the great unwashed public. It’s enormous fun but unless you live a monastic existence it probably won’t support you.
Terry

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It's not what you don't know that hurts you, it's what you do know that's wrong.

I could not agree more Jordan my friend! This is not to say that those who want to approach the business of building guitars in accordance with SOP's (standard operating procedures) for traditional businesses i.e. the business plan, the books, balance sheets, etc. won't have every opportunity to succeed, or not.... too.

We are all individuals and in my mind it comes down to the idea that there can be no correct answer that everyone can be pigeon holed into. Some builders are more right brain thinkers and some are more left brain thinkers. Heck I know one person that uses their entire head.....

I spent a couple decades in corporate American including a long stint with what was at that time the largest company in history with over 375,000 employees and no it was not Wal-Mart..... I understand how to run a business and I understand profit and loss. I still have scars to prove it.......

But with guitar building I am much more laid-back and honestly believe that if you build a great guitar, offer real value they will come. And if they don't I'll keep building anyway because I love it.

So I don't think about making money and instead think about building the best guitars that I can build and what I could do to improve my chops and subsequently the value that my guitars represent.

Don't forget to stop along the way and smell the rosewood.

I'll never give up the day job in favour of lutherie.

I come out in the black at the end of the year, but then I blow the lot on making instruments for myself.

right now I'm making nos 40-43

I have 13 self made instruments in the stable.

I reckon that when I finish these 3 (two are commissions on a cost plus a few pennies basis) then I'll be in the black with a stash of wood, truss rods, tuners etc to work with and of course a bunch of tools

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My soundclick xx luthier blog xx luthier soundclick

I never intend to make a living out of this...my life's experience has proved that trying to make a living out of the arts is a hard, hard path to tread, personally.

I much prefer to have a regular dull-sorry, day job with a regular income that may provide a little extra for hobbies I love. Plus the fact I don't want Mr Taxman making money out of the stuff I make. However much I long for music, art and guitar building providing a full time career, it ain't gonna happen- and therefore I am resigning myself to strive to be a lifelong amateur working in the proper definition;

noun 1. a person who engages in a study, sport, or other activity for pleasure rather than for financial benefit or professional reasons

I think you bring up an excellent point about the bookkeeping: the 'profit' part is the part that you can choose to reinvest in your business without sacrificing your lifestyle. Personal taxes are less in the US, so there might be more inclination to pay yourself all the remaining profit (if you're one of the lucky few who makes one!) but up here where personal tax rates are high we try to reinvest as much pre-tax money as we can! With a personal income tax rate approaching 50% up here, anything you buy for the business is effectively half the price (so it gets really tempting to buy a new truck / computer / 'testing amp' / etc etc for the business!)

There are a few other thoughts I've had:
1 - Lutherie is one of those linchpin businesses where the owner -cannot- leave. It has happened or could happen in some rare cases (ie: Bob Taylor -could- sell Taylor guitars and retire to the Bahamas), but for the most part the original luthier has to work at the business forever. Because of this, you have a choice of looking at your profit after costs as what you're worth, aka your wages (since, in a very real sense, it is exactly that!). This is partly because, due to the nature of the business, there is an endpoint to what tooling you'll actually need (and after that it's maintenance), which Laurent and Kent expressed pretty cleanly.

2 - That said, it still fits in the accounting system Michael has been talking about whether you decide to use that knowledge or not. The numbers don't disappear when you don't look at them (I wish they did: I'd never have to pay taxes again!). You just end up setting your 'pay' at the end of the year as whatever the total profit was. The problem with ignoring the numbers, and why a lot of lutherie businesses fail, is that if you don't look at the numbers you might not notice that they're too low.

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Bob Garrish
Former Canonized Purveyor of Fine CNC Luthier Services

bingo someone did understand my point

I think both extremes of the business model vs. artist model of making a living have problems. The problem with the artist model is that it can be a very successful road for a few and a road to losing money for most. The problem with the business model is that it can be a slippery slope to a soul-less world where art turns into a commodity and value is only measured by money. But there's plenty of middle ground where people can meet (or choose to change) their financial needs while working with integrity about something they are passionate about.

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http://www.chassonguitars.com

Back to what I said once before. If running a business takes the love of the craft out of it for you then you should not be doing it as a business. I can understand that some can not separate the two and this may happen. I don have that problem. I easily in my mind put away the accountant when I am working with the wood and have no problem putting on the visor when time look at the books. If I was at a point that I thought I could not do this and eventually make the desired margin I require to consider this a viable business then I close the business. That in no way indicates I would stop building for a moment.

Not for one moment have I ever thought of my work as a disposable commodity. It is the books that I see as the business not the guitars. When I have the leather apron on I am the craftsman when I set at the kitchen table with my wife and go over the books or when I am spending money on wood, consumables or tooling that when I am the accountant.

Profit = Beer money.

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

yea that or Beam and orange slices

Michael & Bob nailed it IMO. Like many others, I am looking at this as an eventual supplemental income when I retire - except that I'm looking 20 years ahead, and just hoping that's enough lead time - and I can say for certain that the family I support would NOT look at my hourly wage as profit!
(it helps that the wife is a CPA...)

What does "DBA" stand for?

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The member formerly known as erikbojerik....

“Doing Business As” This is the simplest singular proprietor or partnership business entity. Where the propiator or partners are the entity and assume all liability.

I build guitars because I love to. For me it is a passion. I didn't start this business , it more of less started me. As I started to get successful and I found that I could take this hobby to the next level I learned early the value of my labor. I also discovered how to get my business diversified so I can work one side of the business when the other side is slow.
Should you believe you want to make it a business, you have to love what you do. I often cannot wait to get in the shop. Take it as far as you want but you have to realize to make a living at this , you can forget an 8 hour day.
Those that know me and visited my shop can see that time is not to be wasted . I can tell you that learning how to use your capital and utilize cash flow. It isn't easy but it can be very rewarding. Invest back into your business
Good luck in your venture
john hall

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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