Lutherie - The Business

[rhoads56]

Ok, so I guess this post is more aimed at guys out there that are already doing this full time, or are charging for their services...

I've noticed, especially on forums such as mimf.com, there seems to be an attitude that we can only hope to ever earn just above the poverty line, and that we are struggling 'artists' and know that going into this career. You've seen the jokes: "best way to get a million in this business is to start with two!" etc...

It is absolutely, the most common thing mentioned to me by luthiers, whilst I was establishing my business in the beginning.

I'm curious to see how many people believe that going into it? Is it the case that you simply don't care, and the job satisfaction is worth more? Is it a case of 'thought there would be more than this, but Im happy with what Ive got'? Or even 'Im doing everything to succeed, and nothing is working?'?

If the income side of things isnt there (or there yet), what do you think needs to change? I'm talking about us as luthiers, AND our clients/players.

I guess I think about this every time I travel. I make a point of visiting luthiers around the world to try and expand not just my contacts, but my knowledge also. One thing that has really struck me is that guys that seems to be doing ok, really aren't (financially). They have the 'chops', but not the income. Maybe it's bad money management? Maybe it's just the areas Ive visited (mostly USA, but email conversations worldwide)? But it definately seems to be something else...

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[killemall8]

I have always believed its near impossible to make a real living off guitars alone. Obviously, you are one of the few exceptions. But you make a quite a few a year, and charge quite a bit to make it worth while. And have a great reputation at that.

I can only think of a handful of single luthiers that make a living off just guitars, and have no problem maintaining that status.

Me, there are a few factors.

I would NEVER want to attempt to do this only for a living. It is too stressful as it is. And that would mean i would have to take on commissions. Which is my absolute worst nightmare, and will never go back to that again.

You seemed to get out there and get pretty well known extremely fast. Never seen anybody else do that so quickly and maintain that status. That is not so common.

In order to make even the poverty line, 10 guitars a year at 3,000 a piece. not that hard to make that many, but indeed hard to sell that many at that price.

To me, its possible. But the odds seem to be 1 in 15,000 or something. Seems easier to become a pro athlete than to make it big time in luthiery.

[HuntinDoug]

Well... for me, job satisfaction is very high on the list. Truth be told, it's at the top of the list. I love building guitars, and I love working for myself. I think for the artistic type it is much more important to do the thing you love to do even if it means living poor. It far outweighs working in a miserable job and having lots of money. I have witnessed some very talented people waste their talents on careers they despise... It's sad. Henry David Thoreau summed it up perfectly in a quote I have posted in my office:

“Most men lead lives of quiet desperation and go to the grave with their song still in them.”

I started a sign business in 1989 because I love art & design. I started building guitars as a hobby in 2006. Since then I have been focused on moving into full time luthiery. I made it a full time gig in Nov of 2011. I put every spare dollar I have into the business, but I don't mind. At times over the past 20+ years I have worked for "The Man" when times got tough. If there is one thing that makes a self employed person appreciate being self employed, its having to work for someone else.

Since 1989 I have always operated a home based shop. Ironically, tomorrow (July 1st) I take occupancy of my first shop space outside of my home. The change scares me a bit, but I also see it as the necessary next step to get to the level I want to be on. I plan on doing sign & engraving work if thats what it takes to pay the bills.

[Prostheta]

I think you nailed the greater percentage of this with the money management part Perry. A lot of luthiers go into it without the correct business mind and don't ask for what the work demands. Charge low rates on a labour-intensive thing like a boutique instrument and you'll both run out of hours in the day and not keep up with the overheads. It costs what it costs. Aim low and you'll not hit the top end target market because they expect to pay a high price and are willing to pay that to get what they want. A bargain means nothing to that market.

Even though I am not a top shelf luthier by any means, I tell people exactly what something will cost and why and then turn it down before putting them into the hands of the right person. Even a weekend warrior like myself should be charging well into four figures purely because that is what any adult worker's time will cost on something as involved as an instrument. I certainly can't compete quality-for-quality on what another luthier would produce on a comparable product budget, however the same overheads exist.

I still eat the same number of square meals per day as a career luthier. Perhaps more since I have more time and my hands and am a little tubbier than I used to be, but hey.

I'm curious to see how many people believe that going into it? Is it the case that you simply don't care, and the job satisfaction is worth more?

Probably more than should believe it. It might explain the habit luthiers have of shooting themselves in the foot by constantly lowballing their own prices and taking themselves to the wall rather than being driven to it. Whilst having job satisfaction.

Can't raise a family on job satisfaction alone.

[orgmorg]

I've noticed, especially on forums such as mimf.com, there seems to be an attitude that we can only hope to ever earn just above the poverty line, and that we are struggling 'artists' and know that going into this career. You've seen the jokes: "best way to get a million in this business is to start with two!" etc...

I think a lot of builders say this simply to avoid talking about the issue altogether

Obviously is it possible to build guitars for a living, but that does not mean that anyone is going to be able to do it.

The thing is that "building guitars for a living" is going to mean many different things to many different builders, since everyone has a different idea of what constitutes a "living," just as every builder has a different approach to, and relationship with their craft.

But, despite this wide array of circumstances, when the topic of "building for a living" comes up in discussion, most get a pretty homogenised vision of what that looks like, based on a handful of shining examples, so it immediately becomes easier to recite the meme of the starving luthier, and dismiss the goal as unattainable, than to address all the things that are really preventing you from taking that path anyway.

I would NEVER want to attempt to do this only for a living. It is too stressful as it is. And that would mean i would have to take on commissions. Which is my absolute worst nightmare, and will never go back to that again.

This is a totally valid and honest standpoint, and I think a lot of people would rather say it's just not possible, than to admit this to themselves.

It is something I have struggled with a lot, myself. I have had some major anxiety issues around this, and have often questioned whether I really wanted to continue.

There are so many things to get stressed about with an endeavor like this, and that alone is going to keep a lot of people from getting there.

In order to make even the poverty line, 10 guitars a year at 3,000 a piece. not that hard to make that many, but indeed hard to sell that many at that price.

And that's if you are making 3000 profit each one, after all shop expenses, not just the outlay for that instrument.

One thing that has really struck me is that guys that seems to be doing ok, really aren't (financially). They have the 'chops', but not the income. Maybe it's bad money management?

Money management skills are often an issue, but not nearly as devastating as time management problems. There are a lot of different acts to juggle in running a business like this, and usually one person has to do it all, as well as what the rest of their life requires.

Again, everybody's situation is going to be different here.

For me~

My partner works a full time job which basically covers bills, food, bare minimum living

My business provides a nice supplement to that, but probably still doesn't bring us up to official poverty level. We live out in a rural area in the southeast US, so our expenses are pretty low, but our lifestyle is

also pretty simple. We could live pretty well on poverty level income.

My son is grown up and on his own, but we have a daughter who is 11, so my time has to be balanced between my roles as parent, luthier, housewife, and small business owner.

My lack of time management skills messes each of these up in their own turn, and is not much more helpful in keeping them all going simultaneously.

Management skills, whether money, time, business, or whatever, are things that most artistic people tend to fall short on, and there is no one way of fixing that, since everyone does it in their own special way.

The real key is to be honest with yourself.

Evaluate and identify your strength and weaknesses, and own them both.

Fix what you can, adapt to what you can't, reinvent yourself if you have to.

It can be a brutally painful process, but better than getting called out on it later on, when you have been faking it the whole time.

[killemall8]

In order to make even the poverty line, 10 guitars a year at 3,000 a piece. not that hard to make that many, but indeed hard to sell that many at that price.

And that's if you are making 3000 profit each one, after all shop expenses, not just the outlay for that instrument.

Ah, good point. I forgot about that. So that would be more like 4k per guitar, gross income.

Edited July 2, 2013 by killemall8

[demonx]

$148.87

It is currenty end of the financial year here in Australia. I just finished up my tax spreadsheet yesterday and $187.87 is my profit after twelve months as a registered business.

My cash taking is a five digit figure, however I have been putting every cent back into machinery upgrades and various other tool purchases etc.

I consider that having an "in the green" a pretty good result at this stage, being that I'm living off a factory income as well as doing this whilst I get things set up and sorted out. It also tells me that once the workshop is setup then most of those spent dollars on tools and machinery purchases will be profit in the future leaving the potential for a five figure profit rather than the three figure of this year.

At this stage, I don't see it being a "full time" income, however with more planning, change of procedures, reducing labor intensive excercises and more machinery purchases/upgrades that will enable more precise work resulting in less labor in other areas, I can see the potential for a full time income. Building guitars for a living is not in the short term future for me, maybe long term.

I am curious though, how many members on this board are full time builders?

[RestorationAD]

I do not have a lot to add to this discussion but I will jump in regardless.

You guys know I am part time and will probably never make the switch. I have a career, family, and no real desire to devote the endless hours it takes to be self employed. Usually self employed == 24-7 work.

I tried this route in the late 80s early 90s with no internet in a non music town as a young man with no reputation and gave up. Since returning I would say that the internet makes it easier to reach customers and market yourself. I think being an artist and making money do not usually go hand in hand. Smart business decisions and intelligent product choices are hard things to do.

Reputation is everything. Being able to charge 2k-4k a guitar depends on your rep as a builder. I think I am just now starting to turn the corner reputation wise, partly because I work part-time and partly because I am pretty picky about what I build. I am 4 years in as a business and only quit losing money this year (most of it has gone into tools and supplies). Also I think a large pile of profit is sitting on the shelves waiting to be built. If I didn't spend another dime right now I could probably finish 15 guitars with the supplies I have. But I would run out of glue, sand paper, and oil.

Like Perry I also build pickups. Unlike Perry I don't do repair work (I am assuming you still do). The pickups used to generate a little income but now a days the market is flooded and it is hard to compete. I think diversity helps during the early days of Brand Building.

I believe that if I went full time and worked like Perry does (from what I have read he relentless and is currently doing a very large run on similar styled guitars) at it I could make a few dollars but my standard of living would not be what it is now. I wouldn't be poor but I wouldn't be doing a lot other than building guitars. Perry's work ethic is strong and he puts the hours in it takes to succeed. I have a strong work ethic but have already devoted years to my real career so I can work smarter not harder and get paid accordingly.

I wonder if the better safer business model is to own a music store that does repairs, lessons, sells new equipment, and builds custom guitars in the back room.

The other business model I considered is design something that is awesome and get a major manufacturer to build it for you. When I talked to the guys at Reverend they told me "Your work is awesome but you should outsource the builds". This didn't make me happy as I like building guitars myself.

I don't think it is impossible to make a living building guitars. I still like to day dream of running my own guitar shop even though it is probably not going to happen at this point in my life.

[RestorationAD]

In order to make even the poverty line, 10 guitars a year at 3,000 a piece. not that hard to make that many, but indeed hard to sell that many at that price.

And that's if you are making 3000 profit each one, after all shop expenses, not just the outlay for that instrument.

Ah, good point. I forgot about that. So that would be more like 4k per guitar, gross income.

Don't forget self employment tax, income tax and insurance. All of these will eat up a lot of cash.

So try 20 guitars at 4k a piece with a 3k profit margin.

[demonx]

I'd like to expand on Rads Tax and insurance comment above.

Most people dont consider other costs like advertising. I spent over a grand advertising this year.

Credit card fees for part purchases ran up several hundereds of dollars which is a percentage of the several thousands of dollars hardware opurchased.

On going running costs like replacing bandsaw blades, blunt router bits, worn out files, razor blades etc this year added up to several hundreds of dollars. Add on top of that buying sheets of perspex to make templates, a sheet can costs hundreds on its own and if you're doing full customs you'll know you spend a lot of time making templates.

Then theres various bookkeeping and admin related expenses. Lets not even get into safetly gear, breathing protection, hand cleaners, gun cleaners, plastic sheets and the dozens of other things we have around our workshop that are part of the build process. I spent hundreds of dollars on sandpaper alone and that gets thrown out. Masking tapes, double sided tapes, wax/grease remover. All things we're buying and they are used up = ongoing running costs.

A customer and will look at a guitar and see a couple hundreds bucks worth of timber and a few hundred bucks worth of hardware and think that if you're charging two times this price then you're a rip off artist. They don't see the things I'm mentioning above or the time involved.

In realism you need to cover your hours and running costs and material costs. In essence it could be that to run full time you need to charge 6.5 x your actual material costs or more. Minimum cost. This may not be the right number for everyone as it'll vary on your build style and what you pay for things, but its the number floating around in my head at the moment and I can tell you I'm not charging that at the moment. I'm undercharging, but I'm still getting things sorted.

[rhoads56]

Forget about the "x times materials" model. Start thinking of the "I want $ x hour" model.

As you get more efficient, you'll automatically get a 'pay rise'. As you build a reputation, you can increase your 'hourly rate'.

As you start buying in bigger quantities, you'll start getting price breaks, effectively giving yourself a pay increase.

My minimum rate is $70 an hour, and that's for ghost builds where someone else needs to make a decent profit margin on my work. Work on my own instruments is considerably higher than that.

As for advertising, thats a new subject altogether. I spent $800 last year, and that provided well into six figures of signed up work. Of course, that advertising is only strengthening an already established brand though.

[RestorationAD]

Forget about the "x times materials" model. Start thinking of the "I want $ x hour" model.

As you get more efficient, you'll automatically get a 'pay rise'. As you build a reputation, you can increase your 'hourly rate'.

As you start buying in bigger quantities, you'll start getting price breaks, effectively giving yourself a pay increase.

So Perry is dead on here.

As you get bigger/better/reputable/efficient you get a raise. Time is always money.

Better tools cost less to operate. I spend $125.00 on a carbide 1" blade for my bandsaw and it lasts all year and cuts straight saving me a ton of money in wood and sanding time. My old saw needed 5 $35.00 blades a year and I never knew when it was going to wander and destroy an exotic top. Everyone here knows how much that stupid CNC has cost me every time it breaks. When I replace it with the more expensive model I will actually save money.

I always try to buy in large quantities to get the better discounts even if it means sitting on the sunk cost of parts for a year or more. I do not buy parts on demand or use JIT (just in time) theories as they do not apply to the archaic supply demand world of guitar parts.

I designed the S9 to use wood in sizes that are readily available this helps keep the cost down. But now even those sizes are becoming harder to find cheap as more and more suppliers realize there is money to be made on luthiers.

I would say I spend more on glue, paper, finish, tools, safety equipment a year than I spend on raw materials. Parts are still the big part of my expenses. However if I would stop ordering bridges from Italy that would not be completely true. One cost lost is silly expenses like my McMaster-Carr and Klingspore bills. Screws, Sand Paper and raw materials are a killer to the profit margin.

This next year my focus will be on bringing bridges in house. The more in house the more things are about hourly rates and efficiency.

As for advertising. I spend about $100 on business cars, $200 - $400 on T-shirts and other swag like picks with the logo. I spend $50 a year on webhosting and picture hosting.

[RestorationAD]

Oh I forgot the $450 plus expenses (alcohol bill) I spend on going to the local guitar show.

[demonx]

That was just an example of how the price will change once you add labor etc - when working out things in full, I totally agree.

At certain points an hours log needs be kept (and occasionally reviewed as your procedures change and improve) and then a wage caculated to reflect.

I have been through all that AND need to go back and review and start a new build log. The first couple builds I sold were at zero profit and giving away the labor. They were for friends. My first paying customers and I charged them to cover material only.

The first "non friends" builds I sold were build at a wage of approx $14hr. That hourly wage now sits at approx $36hr but it'd vary per build as some are faster and some are slower.

When I get my **** together and decide on some set guitar models with set range of variable specs (I'm getting there but still way off) THEN I'll go back, do another couple time logs and do an accurate calculation of a hourly wage and adjust prices accordingly as they'll need to be much higher than they currently are to sustain an income. However as I'm still in the experimentation and exploration stage and still learning how the hell I plan on doing the builds, all this is just hobby money and not wage. Its all just a model to experiment with until I decide and am comfortable to launch what I consider the real business where I would like to be running CNC and a few other toys, in which case build times and other costs will change dramatically again.

The end model as you call it will be based on materials, associated running costs + tax and other expenses plus wages = price. However I'd like to stay at "hobby" stage until I have a real idea of what the hell I'm doing, I'll then have a scale of associated costs I can relate to builds and get a rough idea from that what I should be charging as "running costs" per build and so forth.

[demonx]

I also agree with RAD that parts are my biggest expense. I spent 3 times the amount on parts that I did on timber.

I own my workspace (mortgage) which is approx 1500sq ft area, plus outside of that has onsite parking etc, so that percentage of the mortgage is also to be considered in the final costing as well.

There are so many things to factor in.

[RestorationAD]

I like the build log idea. The log gives your work a Reality. I keep it in my head and adjust it to help keep the delusion alive during the year until the tax man bangs on the door.

Be careful that CNC thing is way more investment in time, money, and pain than anyone admits. The learning curve is stupid hard. I lost a whole year to that piece of sh*t and I will not get it back until I upgrade to the new unit. I had to pay for the benefits up front and it is not cheap.

The problem with business is realizing the benefits of efficiency moves usually means riding out the lows until you can finally realize the benefits. I am 2 seasons into the CNC and it is finally helping me speed things up. Time is money and efficiency rules the day. However the money I saved buying a hobby machine has been lost in down time and ruined guitars when it took a "left turn" through the exotic woods.

[RestorationAD]

I also agree with RAD that parts are my biggest expense. I spent 3 times the amount on parts that I did on timber.

I think they will remain a big part of expenses. As I move more things in house I lower my external costs but increase my hourly costs. As a part-time builder I am willing to trade cost for my personal time.

If you are an LLC you should be able to get dealer discounts and that significantly reduces the cost of parts.

While I have removed retail pickups from the cost of my guitars I really just shifted the cost into time I spend working on the pickups. And I still have to spend money on the raw materials needed to build pickups. What I really bought was freedom to build what I want verse buying what they want me to buy.

[demonx]

RAD - keeping a real life time log on paper will open your eyes to areas you need improvement or at least change method.

The first time log I kept was rediiculous. I was at around 100hrs (very new to building). The last time log I kept (23 builds ago) I had lowered the build time to 50 hrs and discovered I had spent the same amount of time on paint that I did on woodwork (it ws an airbruished guitar though so more hours were added there). I knew instantly I needed to change my paint process and I'm stil trying to lower the time spent in certain areas. So each log you keep, you'll be able to isolate focus areas to improve on. It's probably about time I kept another one.

Your advice on the CNC is sound. My plan at the moment for that is when it happens, buy something like what Doug has ($$$ I dont have), rather than buy something that I'll regret like you fell into the trap of. The learning curcve as you said I fully understand will melt my brain, so I have it in my head I'll basically shut up shop and not take on any customers (like I have now for my house reno's) and just work with it until I get a grasp on what I'm doing. So I'd essentailly be dedicated to working on/with/learning the CNC 6 days a week.

[demonx]

As far as buying wholesale, yes I have wholesale accounts at several of Australias biggest distributors - the problem there is, most of the wholesales prices are not far off ebay prices and often the ebay prices are cheaper. It really sucks for Australian business.

EG: The Aust wholesaler for Grover sells grover mini's at approx $80 cost (plus freight) and then the retail is something like $130, whereas I buy them from the UK at approx $50 - this is just one example (prices are approx, not exact)

There is no distributor for the bridges I like, so I have to buy them from the USA. Pickups from the UK. Every overseas purchase attracts international fees for using credit card as well as adding international freight costs.

Down the track I'd love to be making my own pickups and get at least one cost inhouse, however at the moment I'd like to learn to make guitars first.

[RestorationAD]

Cheers!

That is a good plan on the CNC. Try not to be discouraged.

As for the AUS getting parts. Sorry. Man I have it lucky getting hipshot for what i pay.

[demonx]

I wonder if it would be beneficial to have a business section on the forum, viewable only to members admin consider approved businesses or professional builders.

I'm sure there are many topics not posted, questions etc and various supplier issues that professional builders would not discuss in public, that might be discussed in a more provate area?

Just a though. This thread is an example of what could be posted in such an area.

[Prostheta]

If you guys want it, let me know what you need. I presume you are all capable of self moderation so it can be both open and private.

[demonx]

Its not my call! I was just throwing out a suggestion. I don't even know how many members on here would fall into that category or if it'd be worth it. Was just a passing thought I threw out there for discussion.

[Prostheta]

It's a good one. It should be "visible enough" that other business owners can jump onboard but private enough so that content is only visible to members. I understand that an area devoted purely for business-to-business discussion would be useful without it being jumped into by non-business owners. I'll get onto this.

[Prostheta]

Ole hyvää.

http://projectguitar.ibforums.com/forum/67-business-chat/