RestorationAD Posted January 28, 2011 Report Share Posted January 28, 2011 That is the one thing I love about the situation that I am in right now. I have a real life still so I limit the amount of work I'll take on. Plus I can turn down customers, because this is a hobby and not a career. This is important. I do things about the same way... it is the only way to not end up like the countless amateurs that crash and burn. I also only recently moved my pricing up into a slightly higher range. I still try to keep them under 2K because no one knows me (outside of the locals) and I don't expect them to pay 2Gs for a guitar from a no name luthier (even though I have been at it for 25 years). Warning rant ensuing <rant> Secondly "Have integrity". Be honest and up front with your abilities and your business. If you haven't built 10 guitars (not that there is a magic numbers -- some dudes suck forever) are you really qualified? Stay Humble. Too many times we see guys come and go... and they leave with dudes money and some poor customer is left filling up threads about how "deal went bad". It is ugly. If you are going to take someones money to build a guitar make sure you can deliver a guitar worthy of the money (or better) and always put yourself in their shoes. I personally think the market is saturated with boutique builders and there are way too many dudes that think they can build guitars trying to sell to people. </rant> BTW where is Perry in this discussion? I love his points on all this. Quote Link to comment Share on other sites More sharing options...
RestorationAD Posted January 28, 2011 Report Share Posted January 28, 2011 Take Schecter for example; they are not a lot of dough. If they came out with a $2000 guitar, I doubt anyone would buy it since in everybody's mind, they make "lesser" instruments due to their prices. or they might think - wow, a higher end schecter, gotta check that out Really Wes? Really? I would send you my cash before I gave it to Schecter.... I am over my rant now... Quote Link to comment Share on other sites More sharing options...
WezV Posted January 28, 2011 Report Share Posted January 28, 2011 tbh i wasn't thinking brand specific... but look at fender and gibson - they often triple the price to make something seem more desirable, usually with only a slight change in spec! once you have a name people will pay attention to you can charge what the hell you like for a specific example - how much does a les paul junior cost now from gibson? (real guitar money upwards!!) is anybody not buying them because they used to be sold as cheaper student models? The actual parts value & labour value means nothing here. they price them based on desirability Quote Link to comment Share on other sites More sharing options...
NotYou Posted January 28, 2011 Report Share Posted January 28, 2011 (edited) tbh i wasn't thinking brand specific... but look at fender and gibson - they often triple the price to make something seem more desirable, usually with only a slight change in spec! once you have a name people will pay attention to you can charge what the hell you like for a specific example - how much does a les paul junior cost now from gibson? (real guitar money upwards!!) is anybody not buying them because they used to be sold as cheaper student models? The actual parts value & labour value means nothing here. they price them based on desirability Exactly. Just like I said earlier, your name is everything. You could be making the modern equivalent to a Strad, but if you're looked at as being a beginner or hobbyist, you won't really have any buyers. If I wasn't on Destroy All Guitars I'd have to get a real job. Without some real recognition, it's about impossible to sell anything for a half-decent price. It's not impossible, but almost. If you want to do it full time, you need to hang on until your reputation catches up with you and that will always take longer than you think. That was probably the hardest thing I've ever done (and I'm still not quite there yet!). Edited January 28, 2011 by NotYou Quote Link to comment Share on other sites More sharing options...
RestorationAD Posted January 28, 2011 Report Share Posted January 28, 2011 tbh i wasn't thinking brand specific... but look at fender and gibson - they often triple the price to make something seem more desirable, usually with only a slight change in spec! once you have a name people will pay attention to you can charge what the hell you like for a specific example - how much does a les paul junior cost now from gibson? (real guitar money upwards!!) is anybody not buying them because they used to be sold as cheaper student models? The actual parts value & labour value means nothing here. they price them based on desirability Ahhh! I gotcha now Wes. Still would rather give you or "Not You" my money. But that is because I know who you guys are... (not that you are getting it you bunch of hacks ). Exactly. Just like I said earlier, your name is everything. You could be making the modern equivalent to a Strad, but if you're looked at as being a beginner or hobbyist, you won't really have any buyers. If I wasn't on Destroy All Guitars I'd have to get a real job. Without some real recognition, it's about impossible to sell anything for a half-decent price. It's not impossible, but almost. If you want to do it full time, you need to hang on until your reputation catches up with you and that will always take longer than you think. That was probably the hardest thing I've ever done (and I'm still not quite there yet!). Agreed. I think it is awesome that you are on "DAG". I wish I had time for "Destroy All Guitars" or some other guild but I just can't make that serious commitment to building at this point in my life. At least my pickup business is picking up! Quote Link to comment Share on other sites More sharing options...
WezV Posted January 29, 2011 Report Share Posted January 29, 2011 tbh i expected someone to mention the melody maker and how Gibson still produce them at silly prices. But they still wont do a LP jnr that actually looks vintage for less than £1800 RAD - i am hurt, call me a hack again and my soldering iron comes out tomorrow. i have more of your work than you have of mine :D ... i have known a few UK builder who have been hailed as the next big thing and within 5 years an internet search gives nothing but negative feedback! now i nearly got to the stage of pushing it to being the next big thing (within the uk) but i took those others guys as a cautionary note, and i realised i dont want to be in a workshop by myself all the time previous to this year i was in a low paid job in a school and also building guitars to make an almost decent wage ( full time job + full time hobby!!). Now i am on a teaching course so i can earn more for my hours in school, and still make a few guitars here and there. It means i have a much better wage before even thinking about the guitar thing. personally, i am happier with that, because the other option was to make guitars my livelihood, and it would only take a couple of bad reviews online to make me need to look for another line of work! Quote Link to comment Share on other sites More sharing options...
Helldunkel Posted January 29, 2011 Report Share Posted January 29, 2011 This thread is interesting because it really does reflect the difference between guys who are doing this as a hobby and professionals who are making their livelihood from this profession. I know of very few 'luthiers' who actually make a living strictly building guitars. Most of them have 'bread-earning' work to keep on track and make a living. In fact, most of them have another job. I am very fortunate myself in being able to say that I only build. I make a living building guitars BUT this also represents a huge investment. Initially, I went to study overseas in the US and that didn't come cheap. I have also clocked up over 15 years of work and sacrifice, which I would never advocate to anyone. It's that tough. How can you possibly make a living selling a guitar for less then $3000 - 3,500? Its just not realistic. In order to make a livelihood (and a modest one at that) and pay monthly bills, I must find enough orders to be able to build at least 12 guitars per year. Should orders dip beneath this, I need to live on my meagre savings. There is this blindness about people who compare prices of guitar makers without thinking about the difference in the cost of living in the countries where they live and work. I've read somewhere on this thread that a Gibson is $4,000? Over here, they sell for $5,700 for a normal Les Paul custom... A Petrucci Sig 7 string signature does not sell for $2'800 here, but $8'900. I'm not joking, these are the prices in Switzerland. There are actually similar problems in France too and people are starting to get very frustrated. Another point about forums and the internet. There will always be the haters, jealous people, trolls etc. that's just how horrible humans can be - as negative as they can be positive. You will also encouter romance scammers who will try and ripp you off. Believe me, the majority tries to do just that whenever possible. BUT, I am the living proof that the negative can actually bring you customers. Just recently one such person, who is a forum moderator, started to put me down yet again. He's been doing that for the past 2 years and won't even let me talk to him to try and clarify a few points of which he is unaware. The whole fuss generated 3 orders. It's impossible to find a better endorser really... If you start a business as a full time guitar maker, I would suggest that you take a marketing communication training course. This will give you the tools you'll need to get started. I have a background in luxury industry marketing, so I know how important communication is. Many luthiers whom I know never bother to reply to emails. I reply as quickly as I can and invariably customers thank me, adding that luthiers never bother to reply ***? It's obvious it's much better to be aware. Horror stories happen, even to guys who have a good reputation. Take the time to deal with them in the best way possible to make your customer happy. In the end this shows how professional you are. There are guitar builders out there who run away and don't reply to the customer, hiding behind the 'spam' excuse.... If you don't want to make a business strictly building guitars and have a guitar which you built and want to sell, make sure that you cover your costs. Don't loose out on the sale. If the instrument has some imperfections BE SURE to point them out to the customer and have him sign a paper acknowledging his awareness. Keep the history of the email exchange in an archive (something which I always do). That way he can't start to badmouth you for not having been up front with him should there be any imperfection. Most important, whatever you do, don't fall for hype. It's only there for a while but never lasts. I avoid it as much as I can. Just my 2cents, of course. -------------------------------------------------------------------------------------------- Just a comment on, 'luthiers never communicate'. Here are some statistics from last year to give you an idea whether or not this argument is founded: In 2010 I received: -987 contact forms from my website requesting prices and info... -250 endorsement requests -300 messages such as 'Hey, Hufschmid, how do you do this - how do you do that?" Of these, only 25 people bothered to reply to the detailed and informative emails I sent them in good faith and there were 13 serious new customers from them all. Yeah, luthiers are really bad at communication! Quote Link to comment Share on other sites More sharing options...
ihocky2 Posted January 29, 2011 Report Share Posted January 29, 2011 The one very important thing that Huf mentions that I think should be expressed to all new builders who dream of building full time is the cost you MUST sell your work for to sustain yourself. At least in America I would guess $30,000 - $35,000 a year is the minimum you need to make to live comfortably. That means you must take home at least $3000 a month after you subtract parts, materials, tools, and overhead. All of those push your price up at least $500, usually more. That is figuring if you can work out of your garage or basement. If you have to rent a space to work, that's at least a few hundred more a month you need to bring in. After figuring in all of the costs I would say $3500 is minimum you need to sell for to live off of, if not $4000. That means either 1 $4000 guitar a month or 2 $2000 guitars a month. You are very unlikely to become rich off of this business which is why I think a lot of people revert to working it as a part time job/hobby. I remember Perry saying at one time that it took him several years until he started to turn a decent profit. Quote Link to comment Share on other sites More sharing options...
Helldunkel Posted January 29, 2011 Report Share Posted January 29, 2011 This is exactly what I am talking about... Its not realistic to build two $2,000 guitars a month and I will explain why. I take you as an example, as you are from the United States so its easier for me to explain. The basic costs to actually build your instrument if, like me, you live in Switzerland, will come up to about $800. You don't have to pay import tax and international shipping charges within the USA. I do, to get some of my components. If you sell a custom guitar for $1'200, this would imply that my working hours would be worth $400. Just so you know, one of the good ways of measuring the cost of living is to compare what a Big Mac costs. In the USA, it's $---. Here, it's ---Swiss francs. Over here it would be impossible for you to make a living unless you actually sold 4 of your guitars per month. You would also probably need to offer repair jobs - to keep going at all. Which part of this money will you be using when a tool breaks and needs replacing? Which part of this money will you be using to market yourself and pay for promotion of your work? Talking about working hours... I once calculated that in order to make zero profit from a guitar, I'd need to sell it for exactly $2'700. Anything less, and I'd loose money. So, knowing that I must eat and need a roof, you can just see how much personal benefit I make when I selling a guitar at $3'500. If you are a luthier who is living in an inexpensive country, such as Poland, Belarus, Romania etc., then you would be living like a king on the same amount. In Belarus, the average salary is €750. In Switzerland it's close to $3,500. You can live close to 4 months in Belarus for the same price as you can for one in Switzerland. When people compare the prices of various luthiers on the net, - 'Hey, this guy offers more options for the same price! wow! OMG!' - they are not taking the cost of living into account. The same people also expect a lifetime warranty from you! In fact, in Switzerland, you wont find any luthier who would build a simple superstrat oil-finished instrument under $5'500. I'm an exception because I try and make my instruments 'affordable' for customers who don't understand this and live overseas. Many of my collegues over here tell me to raise my prices. Sounds crazy eh? Over here, my instruments are actually $2,000 cheaper then a Gibson Les Paul custom.... The price of an instrument will also reflect your name, experience, investment in design, your craft, the players who play on your instruments and so on... If you can afford an Ervin Somogyi guitar, you know that you will need to pay a minimum of $35,000 for it. It's also unfounded when people say that my prices or the prices of a Blackmachine are expensive, what a joke!!!! Quote Link to comment Share on other sites More sharing options...
Helldunkel Posted January 29, 2011 Report Share Posted January 29, 2011 Here is a very well written and very informative article which was written by mister Darren Wilson. The link to the article where you can also find part 2 http://decibelguitars.com/why-guitars-cost-what-they-do-part-i/ A while back, i posted a couple of brief pieces on sevenstring.org that looked at the high-level economics of running a small guitar business. I still get occasional requests for a link back to the original posts, so i thought i’d extract it, update it and post it here, so there’s a more permanent (and easily-found) record of it. This is the first of two parts. Why guitars cost what they do. I’ve noticed in the last few years that there has been increasing demand for “custom shop” instruments. It’s one of those things that ebbs and flows over time, and the current economic situation notwithstanding, we seem to be on one of those upward swings where guitarists reach a certain level in their playing, and they’re no longer satisfied with “off-the-shelf” instruments, and start looking for something unique, something different, or something that just suits them better. Along with this trend, i’ve also noticed (in general terms) that the average age and pocketbook depth of people seeking boutique or custom-shop instruments seems to be inversely proportional to the demand. I can’t count the number of threads on guitar discussion forums i’ve seen where a young player thinks he or she can get a guitar built to their spec for $1000 or less. A worrying trend is that there have actually been a few luthiers who will take them up on it. Yet when you stop and look at what the true costs of building guitars as a small independent builder, you get a very different picture. No matter how you frame it, penny-pinching, perpetually broke musicians often don’t seem to understand why their dream custom guitar from a small builder should actually cost much, much more than the $1000 they’re willing to shell out. They can’t comprehend why the price list at a big-name custom shop like Jackson starts at around $3500. Click past the break to read more… Lots of luthiers command premium prices… and they should. It’s really hard to make a living at building guitars full-time. Unless a luthier is charging premium prices for their product, (or they’re cranking stuff out in volume) in order to have a profitable business that’s going to grow – and pay themselves a decent wage so they can have a house, a car, a family and a life – they need to charge what the guitars are actually worth, and not be afraid to actually make a profit on every instrument sold. For example, take a look at the range of pricing on David Myka‘s site. He’s a small builder whose work i admire a lot, and he’s been gradually building a stellar reputation for the last few years. His cheapest guitar starts at $2750, and they go up from there. Way up. Just taking a wild guess, but i wouldn’t be surprised (knowing his work and the kind of players he’s likely attracting) if his average selling price – once the guitars are optioned-up with killer woods and top-notch hardware and pickups – is pushing $4k. Simple economics. Say you’re a luthier just getting started. How much do you need to make in a year to have a comfortable life? How much money does your business need for a shop (plus heat and light), tools, raw materials, consumables (blades, drill bits, router bits, paint, glue, etc.) and enough cash flow so you can buy and stockpile wood, hardware and other parts? Add those two numbers together, and that’s your minimum profit you have to make every year. Let’s just say you want to bring home a modest income of $50k per year. Assuming a cost of about $500 per instrument for the raw wood, hardware, electronics (all at wholesale prices – not retail) and a fairly modest final selling price of $2500, let’s assume half of that profit goes to the business and half goes to pay yourself a fair wage… you would have to build 50 instruments a year at that price to pay yourself that $50k. That leaves only $50k for the business, for rent, utilities, tools, materials, etc. And that doesn’t even take into account things like a marketing plan to help grow the business, or potentially having to pay a bookkeeper to help run the numbers, or eventually maybe having an extra set of hands to answer phones, take orders, help pack and ship instruments, maintain a Web site, etc. This also doesn’t include the cost of building prototypes, getting tooling, templates and jigs made, the time spent doing research and development, legal fees, taxes and so on. That’s actually a pretty slim profit. Drop the selling price by 30% and the volume has to increase considerably to maintain a comfortable profit, because your costs are fixed and dropping the selling price has just eaten up your margin. Drop the selling price too far, and the business isn’t profitable (at best) or you can’t make ends meet, can’t even pay yourself, and the business folds (at worst). Of course, working out of a home workshop will save some of those costs, but it’s still hard to make it a profitable business if you want it to flourish and grow. And some people are actually embarrassed about making a healthy profit. If you’re one of those people, you really need to get over that. Businesses are not sustainable without profit. Period. The seduction of production… doing it in volume (or die trying) I think a lot of luthiers chronically under-charge for their work, especially when they’re starting out. Many of them get seduced by the idea of keeping their prices artificially low to spark demand, and then trying to meet their revenue and profit targets by trying to build stuff in volume. They end up keeping the business afloat for a short while on all the deposit money that comes in with the customer orders – robbing Peter to pay Paul, so to speak – and before they know it, they’re in over their heads and staring down a three-year backlog of orders and they’re STILL just barely squeaking by. These backlogs of work result in lengthy wait times, which inevitably leads to unhappy customers, and real potential for the business to collapse under its own weight. They’re also not likely paying themselves a decent wage while doing this, because they’re working with slim-to-nonexistent profit margins to begin with. And slim profit margins means there’s no money to hire extra hands to try and process the work more quickly. Even if they could build more quickly, if their margins are too slim to begin with, building twice as many instruments won’t make them more profitable… the economies of scale only really start to take effect when you get into larger-scale manufacturing. For the small builder, either you profit or you die. I’ve seen this happen numerous times, when talent, skill and ambition meet terrible business sense. Based on the numbers above, you’re looking at producing about an instrument a week, on average. With no vacation time or sick days. I think it would be quite a challenge for a one-person shop to deliver an instrument a week. Stretch that timeline out to an instrument every two weeks, and you’d have to double your selling price to $5000 to make sure the cashflow stays in positive territory and you pay yourself a living wage. As you can see from this very basic introduction to the economics of building guitars, it really is not unreasonable for boutique or custom-shop instruments from small independent luthiers to cost $3500 to $5000 or more. Now, some people are doing it as a hobby or a part-time pursuit, and aren’t expecting to make a living from it… but guitarists should not make that assumption and pressure prices unrealistically downward. Quote Link to comment Share on other sites More sharing options...
NotYou Posted January 29, 2011 Report Share Posted January 29, 2011 (edited) I agree with that, but it also depends on your business setup. We're about to start a less expensive line that will likely make up most of the business. We're going to start selling them at just over $2000, then go from there. I had to go through a lot of people, but parts and wood will run about $400 and I've come up with a good way to make them quickly. If they start selling, it'll turn a decent profit (decent for me... at least for now). We'll raise the price later, but it'll be cheap for a while as an intro price to get people playing them. While I'm doing that, I'll be making two customs at a time which will take longer, but cost much more. I currently have four either ongoing or about to start, ranging from $3000 to $6000 (my prices have rising steadily. The $3000 one is the oldest and the $6000 is the newest). I have a couple agents who I pay a commission to if they sell one and my shops rent is only $400, soon to be $330 (I split it with some sculptors). Things have been picking up and, if it works out like we think it will, this new line should sell well. My point is, even though they're going to be near $2000, it's enough to make business, if it's planned properly. If you're making them one by one and by hand, then $2000 won't cut it. I know some builders who can do that, but they all make strat copies and things like that. I don't actually know how much business they do, though. Thin Edited January 29, 2011 by NotYou Quote Link to comment Share on other sites More sharing options...
Helldunkel Posted January 29, 2011 Report Share Posted January 29, 2011 I agree with that, but it also depends on your business setup. We're about to start a less expensive line that will likely make up most of the business. We're going to start selling them at just over $2000, then go from there. I had to go through a lot of people, but parts and wood will run about $400 and I've come up with a good way to make them quickly. If they start selling, it'll turn a decent profit (decent for me... at least for now). We'll raise the price later, but it'll be cheap for a while as an intro price to get people playing them. While I'm doing that, I'll be making two customs at a time which will take longer, but cost much more. I currently have four either ongoing or about to start, ranging from $3000 to $6000 (my prices have rising steadily. The $3000 one is the oldest and the $6000 is the newest). I have a couple agents who I pay a commission to if they sell one and my shops rent is only $400, soon to be $330 (I split it with some sculptors). Things have been picking up and, if it works out like we think it will, this new line should sell well. My point is, even though they're going to be near $2000, it's enough to make business, if it's planned properly. If you're making them one by one and by hand, then $2000 won't cut it. I know some builders who can do that, but they all make strat copies and things like that. I don't actually know how much business they do, though. Thin Yes exactly, I agree. See, my basic model starts at 2'700$ I call it the H6E (shipping coast included as for all of my guitars) I dont make any profit out of it and this is the reason why I ask for a full non returnable deposit to get started because it covers the building costs and working hours, that's it..... And like I said it depends a lots in which countries you all live and which cost living expenses you must face. For the small builder, producing cheaper instruments is a double blade situation, if you dont do it well you might get a conotation of cheap builder and people will not see your finer builds as top of the range anymore... And if you cant face up with customer services and start to show weakness then you are screwed. Humans have a tendency to have a symdrom which the scientifics call the opinion's based first impression... Quote Link to comment Share on other sites More sharing options...
Dean Posted January 30, 2011 Report Share Posted January 30, 2011 Something to bring up, is sometimes you have to tell people NO.People want to design their guitar and have no concept as to what will work.You try to work with them ,and tell them as nice as posiable their idea just is not a good one.If they insist let them go to someone else.No matter how good you are, someone will try to cut down your work, or talk you into doing something they want,and you do it knowing it is wrong,tell them it should not be done,and after they get it ,they grip because it does not work like they thought.And it is the builders fault,haha.I have taken jobs for people in other lines of work ,knowing I should have turned them down,and they say please.I fall for it ,and the next thing you know ,they have complained to someone about the job.If your going to build guitars for a living ,you better get some thick skin,charge what the market will bare and a fair price for your product.If you can justify what you do and the price you sell it for,sleep good at night then it is all good. Quote Link to comment Share on other sites More sharing options...
RestorationAD Posted January 30, 2011 Report Share Posted January 30, 2011 @Huf - Excellent input. I had no idea that guitars cost so much in Switz... One thing you forgot to mention (if you did sorry I missed it) is the Insurance, Personal Employment Tax, Taxes and other costs of running a business in the real world. My real job covers those things but if I were to only build guitars I have no way to pay those things without a store front (and doing repairs). I send a lot of emails. And try to answer as many as I can as quickly as I can. Most of them are not real customers just people feeling things out. I wish they all generated business. RAD - i am hurt, call me a hack again and my soldering iron comes out tomorrow. i have more of your work than you have of mine :D @WezV I was J/K (I was probably on the sauce when I wrote that)... I would gladly own one of your guitars but I stopped buying them (I spend all my money on tools). But if you want to unload the Birch when you are done we can talk . @Not You Again J/K. I am always inspired by your work. Something to bring up, is sometimes you have to tell people NO.People want to design their guitar and have no concept as to what will work. Another great point. Say NO. I am always getting emails saying "Can you use this wood and do this and this different?" And it is tough to explain to customers that their ideas are based on "voodoo and myths". Or that I just don't work that way. I have a design... it works, I like it. I know what it costs and I trust it to be successful. If I re-engineer it for a single customer it drives the cost up, removes the experience factor, it removes the trust I have in the instrument because I experimented. It is hard for customers to understand that the price reflects these risks. Quote Link to comment Share on other sites More sharing options...
Helldunkel Posted January 30, 2011 Report Share Posted January 30, 2011 @Huf - Excellent input. I had no idea that guitars cost so much in Switz... One thing you forgot to mention (if you did sorry I missed it) is the Insurance, Personal Employment Tax, Taxes and other costs of running a business in the real world. My real job covers those things but if I were to only build guitars I have no way to pay those things without a store front (and doing repairs). Oh yes but that should be commun knowledge for anybody wanting to start a business really... But your 100% correct, most guys think that building guitars is sooooo coooolllll and then only realise how tough it is when they actually have the guts to really enter the real world... Quote Link to comment Share on other sites More sharing options...
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