The Slightly Confused Woodworker

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You paid what?!

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I read a pretty interesting post on the Lost Art Press blog today regarding saying “no” to a customer. Well actually, the post referenced the interesting post, which was written some time last week. To summarize, a customer who had placed an order asked for a discount when coming to pick up the order, even though they had already agreed to a price. The owner not only refused to offer a discount, he also refused to sell the piece at the original cost. The moral: If you aren’t going to compromise in your work and its quality, you shouldn’t compromise in the value. Well, maybe that isn’t what the author was getting at, but that is what I think he is getting at. Do I agree with it? That depends.
In my line of work, first as an electrician, and then in the sales of electrical services and goods, I’ve very rarely come across a situation where a “discount” didn’t need to be offered, and often times that “discount” is offered without being asked. When bidding work, the basest rules of sales should be the first consideration: Know your product, Know your customer, Know your competition. What does that mean?

Knowing your product doesn’t only mean that you should know how long it will take to produce and what it does and what makes it tick, it also means knowing the value of it. It means knowing how much it can be sold for profitably.

Knowing your customer means building a business relationship with your client. It means understanding what your customer’s needs are, and how quickly he/she needs it, and it means knowing what your customer is willing to pay.

Knowing your competition, that’s the most important rule. What can your competition do that you can’t? Can your competition deliver comparable material for a better price? Can your competition provide the service more quickly? Is your competition flat-out better than you? These are things you need to know and understand. These are things that many “professionals” still don’t comprehend.

That all being said, the shop owner who refused to sell may have been in a situation where he could afford to pick and choose his cliental; that part of the story is unknown. If he is in that favorable situation, more power to him. Where I live, the competition is far too fierce to refuse work, and more importantly, refuse profit. There are some people that get insulted when asked for a discount, and maybe for good reason. Maybe the piece he was selling already had a very fair price, and a discount would have decreased the profit so much as to make the item not worth selling. Or it could be the other way around, and maybe the customers saw a similar product that was cheaper, and the shop owner was overvaluing his product. Or maybe it was a little bit of both. As I said, not enough of the variables are known to even make a guess.

Here is what I do know, most craftsman overvalue their work, and most buyers undervalue the product. Case in point, my dad happened to stop by my house last week and commented on how nice my cupboard looked. He mentioned that I should sell it when it’s finished. I wouldn’t sell it, but what cost would I ask if I did consider selling? To use round numbers, I would probably be looking for $950-$1000. I came up with that number taking into account the materials cost, time spent, tools/skills needed, and the desire to make a profit. Most importantly, I came up with that number because I’ve seen them sell for twice that price and more. At the same time, I’ve seen similar cabinets sell for $500 or so. My number may be unrealistic, or it may be a great deal; I’ve seen indications that both notions may be correct.

My dad, on the other hand, would tell me to sell the cabinet on the high side, somewhere in the $1500 range, which is what most individual furniture makers are charging from what I can tell. Yet at the same time, my dad wouldn’t pay more than $500 for one in the store. And there lies the dilemma. A professional salesman needs to know what to charge. A professional needs to know that Customer “A” may pay $1500, and customer “B” may only want to pay half that; the good salesman knows how to sell to both. Because that is the only way you stay in business and earn a living. Telling customers “no” doesn’t fly in my world, and neither does giving it away. Figuring out a way to say both “no” and “yes” is how you prosper. At least, that is what I’ve learned.

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25 Comments

  1. Andrew says:

    I didn’t get the story from Lost Art. I read it a couple of times and didn’t get it. I could think of a few things I’d call the owner – none that I’ll put in writing.

    • billlattpa says:

      At first I didnt understand what was going on because I didnt read the first post. I didnt necessarily agree with what the guy did, but thats his company, not mine. Thanks
      Bill

  2. ctregan says:

    The real lesson of the story……If you want to wheel and deal on price, don’t wait until the waiter brings out the check, its too late!!

  3. edhresko says:

    Actually, the real lesson of the story (according to the original poster), was always run your business so you have the power to say “no”.

    • billlattpa says:

      It all depends on the competition. My company has turned down jobs before if a customer was trying to low ball us. But i know of no business anywhere that can tell everybody “no”. The power to say “no”, thats a very subjective line of thinking. What would that business owner have done had his next client asked him for a discount? And the next? As I said, every single job i price ends up being discounted in some way shape or form. Why? The level of competition is far too high. My old boss once said to me “the cheapest guy in town doesnt stay in business for too long” My answer: “neither does the most expensive”
      That is the key to knowing your competition. You’re the only guy in town who sells furniture, you can name your price. A new guy opens up, suddenly youre saying yeah a little more than you used to do. Theres a huge reason why ikea is a multibillion dollar corporation and the local furniture maker is barely surviving. All the ethics, quality vs quantity aside. Its because at Ikea you arent ever going to have to ask.

  4. forbeskm says:

    I would not deal with the vendor in the Lost Art Press story. I found both the customer and the vendors actions unacceptable in front of another customer. It looked quite unprofessional and could have been dealt with better.

    That said, costing is something very important. If you don’t price at the 1500, what are you paid per hour? One has to make money to stay in business and if one is working for pennies instead of dollars they will not be in business very long. I have sent customers elsewhere as I could not compete on what they asked for. If there is not a market then there is not a business.

    One just has to find the right niche as there are plenty of people who can pay the higher prices, the marketing and story just have to be crated right for them. Sure your target/costco/ikea shopper is not the target.

    • billlattpa says:

      Niche is the key word, which falls into knowing your customer, knowing your competition. The problem with niche work is the smaller it is, the quicker it gets filled. The guy in the story, which was countertops, may have been the only game in town. Where i live, which is borderline country, there are 4 high quality countertop makers within 10 minutes of each other, not to mention hundreds of custom kitchen/cabinet makers. The market sets the price here, and if you drive 15 miles east to the outskirts of Philly it gets even more intense. At that, the customer was a putz, but most of them are at one time or another. Thanks
      Bill

  5. Jeff Branch says:

    If a customer and I agree to a price and upon delivery of the product, for no good reason at all, the customer demands a discount, then I am going to say no. This is the customer not living up to their end of the deal. Once you allow a discount to this kind of customer, more will follow.

    • billlattpa says:

      I agree, but i probably wouldnt have refused the sale. People ask me nearly everyday. I take it as an unfortunate part of business. Had the person demanded a discount, id probably tell him to shop elsewhere.
      Thanks
      Bill

  6. This is the hardest part for me when I’m trying to sell a piece. I came up with a formula for everything I sell (TIme+Materials) *50% mark up for profit/haggle. If I have 50 in labor costs, 50 in materials, my list price will be 150. Sadly for what most people are willing to pay in my area I end up paying myself minimum wage. Walmart prices are fine for Walmart, but it seems to me most people are unwilling to pay up for a higher quality piece. (I do a lot of ‘upcycles’ of antique furniture.)

    • Derek says:

      The crazy thing most people don’t realize is that goods from walmart and ikea are overpriced! Cheap particle board goods made in a low-wage country that aren’t even put together (that’s your job!) cost practically nothing to make. That Ikea table may be quite a bit cheaper than your local joiner, but you are still getting hosed on the deal.

      • There is also the fact we probably cant even buy the materials from Lowe’s at the price it is sold for a walmart. Not wanting to Walmart bash, I shop there, and for a college kid trying to furnish his apartment for cheap it is fine. The issue is that people expect that price for something custom made. They dont take into account the $1500 in tools required to make it or the fact that it will last 100 years rather than 10. Communicating that value is hard. The seller has an ethical obligation to charge a fair price, but the buyer also has an ethical obligation to pay a fair price.

      • billlattpa says:

        Most businesses try to operate at a 35-40% profit margin, sometimes higher. The cheaper a product, usually the higher the mark-up. At the same time, places that sell commodities, like home centers, (lumber, wire, conduit ) etc, often are selling their commodity items at profit margin of 6-7% or less. Which to me is a mistake, as it can cheapen wages. At the same time, those commodities are what homes and businesses are made from.
        I’m hardly an economist. I can only speak from my own experience.

        If I were the shop owner, and a client asked me for the discount after the fact, my decision would have been based on how exactly the words were phrased. Somebody just asking for a bit of a price break is a lot different than a person storming in and demanding a big discount. I can’t imagine turning down a customer he asked for a price break and then agreed to still pay the original quote. I can see myself refusing to sell to a customer who “threatened” me with a discount. That part of the story wasn’t made very clear.

    • billlattpa says:

      I learned a formula, which was 15-20% material mark-up + hourly rate + expenses. Now, for hourly rates, I wouldn’t mark my hours down and charge. I would estimate that a project will take 10 hours, and factor that into the cost.
      Some people have a higher material mark-up, and that is subjective to where you live, how difficult materials are to come by, etc. But I’ve found that my formula almost always leaves a livable profit margin.
      Most people don’t want to pay for quality, not when it comes down to it. I think most people can be really foolish. I generally don’t buy cheap things, and that includes furniture. At the same time, around 20 years ago I purchased a “cheap” plywood computer desk, and I still have it, and it still actually looks pretty good. Now, I’m hardly saying that it is high end, or even mid grade furniture, but it did serve its purpose and it was certainly worth the money. These things are relative. I wouldn’t buy a cheap table, but I wouldn’t put out money for ivory and silver lined coasters either.
      Thanks.
      Bill

  7. dzj9 says:

    A 50% deposit is customary where I come from. So is a tip for the craftsman. Be it some extra cash, a bottle of wine or spirit…

    In 25 years, no one has ever haggled when the job was done.

    I would’ve stuck to my guns and if he insisted, he’d be left without his advance and the piece he ordered.
    Let him sue. Maybe he can haggle with lawyers 🙂

    • billlattpa says:

      I wouldn’t have given a discount, and I likely would have tried my best to briefly explain why. Had that not been enough, I would have politely asked the guy to shop elsewhere. According to the story, the guy selling the counter top refused to sell it at the quoted price once the customer asked for a break because he was insulted. Personally, I wouldn’t have done that, but that’s just me. I would have sold the counter and privately felt that the customer was a dick. There are too many variables that are unknown really to comment on it. If the guy asked nicely to knock a little off the price, I see nothing really wrong with that. If the guy demanded, I would have asked him to leave, as Jeff Branch had mentioned earlier.
      Thanks.
      Bill

  8. All of the competition and pricing considerations were pretty much built into the price the customer and the craftsman agreed upon. A piece of furniture or a countertop is different than an on-site job in that it is a piece – X dimensions, Y construction, Z hours – very little chance of unexpected extra costs or an unusually easy job. On-site jobs, or fixing a car or whatever, lots of other variables can come in so the pricing has to have more flex built in. The customer was trying to screw the craftsman because he figured he had the power to do so. More to the point, he was trying to screw him on price on a luxury good where 90% of the point and the price is to demonstrate to yourself and the world that you have the money to spend on something like a custom countertop. The craftsman was in a position to tell him to fuck off, which is a good place to be and the point of the story.

    That said, assuming the story is true, and not an instructive and well meaning fable, you know there was some backstory left out, and the customer had to have been an unusual dick during other contacts.

    Thinking about it in terms of a custom shop, I am also not sure the customer could really spin the story to damage the craftsman’s business for the same reason this has attracted so many posts. Who is going to listen to a wealthy guy bitching about something like that and not understand just based on the simple economics of the situation who was being honest and who was being a dick?

    • billlattpa says:

      I think we don’t know enough of the variables. If the customer asked nicely for a price break, I wouldn’t have been necessarily offended, even though I think it’s pretty tacky. If the customer demanded a cheaper cost, and then only backed off when the owner refused, then I probably would have reacted differently.

      I’ve found, though I hate to say it this way, that the wealthier the client, the more of a discount they often want. I’m just basing that from my own personal experiences, and not trying to make a general statement. People with money, depending on how they made it, usually cheapen the services that they want. It’s a line of thinking that has been perpetuated for 50 years, and the internet does little to help that fact. Most people don’t understand the amount of time and training and equipment it takes to be a successful carpenter, or electrician, or furniture maker etc…Those skills have been devalued greatly over the years, sadly that devaluing sometimes comes from people in the same trades. Low ball pricing is the name of the game anymore. Every trade has experienced it. Sometimes it stems from the heavy competition in the region. If you’re like the guy in the story, and you can afford to say “no” then you are fortunate. In my experience, I don’t know too many people who can.
      Thanks.
      Bill

  9. John Shipman says:

    One of the great things about the Schwarz is that his posts are informative, entertaining, and not too long. Apparently, they can be thought provoking, too. I can’t ask for more than that.

  10. Like many others, I had a heckuva time trying to figure out what the Schwarz was getting at. Having the power to say no, ah, I see. Thats the moral of the story.

    In my “other life” I o/o a small chocolate and pastry business. Yes I use quality ingredients, yes I invested in expensive equipment, yes everything is made by hand on site. It’s also a store front so I pay serious rent and overhead, I also have staff to pay. But many people don’t want to pay for my stuff.

    I was always told by employers never to say “no” to the customer. One employer finally gave me this golden advice: “Get your mind past this “customer is king” crap, you have to make the customer THINK he’s king, but you gotta make a buck. That’s your job”.

    So when customers ask for discount, s.o.p. (standard operating procedure) is to say: “Yes, we can give a 5% discount on purchases over X $ (usually double or triple of what the customer is buying–depending on how much of an a-hole s/he is). Who is manipulating who?

    But very few people have me over a barrel. Had one customer come in, she had bought at least 5 or 6 b-day cakes from me over the past year. However this time she claimed my last cake “wasn’t right” and wanted her money back. Right then and there. It’s just that she couldn’t find a decent excuse of why she wanted her money back, said she only had one slice and something wasn’t right. Told her I could only refund her if she brought the remaining cake back. After all I have my reputation to keep up, and I need to know exactly what the issue was. She shows up at the end of the day with a half a cake, and I refunded her half of the price…..

    Sometimes I think the world would be a better place without people…..

  11. billlattpa says:

    I’ve found that the “customer is always right!” is very rarely accurate. Much of the time, the customer has very little idea of what he or she is talking about, doesn’t understand or want to understand what goods and services are valued at, an in many cases doesn’t even really know what they are looking for. At the same time, it is important to make customers feel comfortable, they are spending their hard-earned money after all.

    When the customer in the story asked for the discount, maybe he or she didn’t understand that asking for a discount on an already agreed upon commission isn’t really considered in good taste. I was saying to other commenters that we really don’t know enough of how it went down to really make a judgment. Was the customer rude when asking? Was the customer very polite and the shop owner rude? Was it somewhere in between? The part of the story where the owner refused the sale even at full price I’m still not really understanding. Who lost out in the end? The owner may have had such a successful business that he can choose his commissions at will. And if he did then God bless him. I can only say that I know quite a few people who run their own businesses, from carpenters to electricians to guys that make cabinets, and I can’t imagine any of them refusing a customer who politely asked for a price break.
    Thanks.
    Bill

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