Darn, that’s too bad.
I went to the Sierra Small Business Development Council, was given lots of great advice on my first visit, some homework, which they helped turned into a business plan on my second visit, and I get a follow-up call every six months or so, asking if I have any new concerns. Can’t say enough good things about them.
Shoot, if your local places aren’t helping you, maybe someone there can help point you to a better local resource.
http://sierrasbdc.com/
I’m still waiting for that geology class to come in handy. Although, in all fairness, I took it because I thought there would be 500% more dinosaurs than there was. But now I know the difference between a rock and mineral. Sort of. A mineral is… A thing… That makes a rock? That can’t be right.
Meanwhile, I only just figured out Roth IRAs and saving for retirement. I find that about as thrilling as shale, but of the two one of them will feed me in my old age. Hooray, liberal arts degree.
Of all the pricing strategies for one-person production-limited products, I like the demand-based one best. Pick a high price. If you’re selling too much, raise it. If you can’t sell enough, raise it anyway (because you might be accidentally signalling poor quality - there’s a story here that explains the theory). If you still can’t sell enough, lower it. Once you’re selling more than you can supply, raise it again. When your demand is just a little less than your production, you’re there.
Thanks @dan ;p I think I’ll have to find that book, “Influence: The Psychology of Persuasion”. Looks to be a thought-provoking read! My problem is finding the buyers, which is the main thing I am trying to figure out.
@erin, I think colleges need to have a “Reality 1010: Living La Vida Loca While Dealing with all the Nitty Gritty Sh*t no one Ever Thought to Teach You”. The first part of the semester: Budgeting: Plan to spend or fail at paying your bills; Investing: 401k or Bust (Care about it or plan to go to Jail when you are old so that you can afford housing and catering); Buying a House: Or how to hire yourself for 4 new Jobs with no pay! (Handyman, Landscaper, Plumber, Lawn service + more!). Second part of the semester: The Hell of Health Insurance (in the US anyway), Learning How to Say “No”; 10 Healthy, Cheap, and Filling meals to take you through your 30’s and beyond, . . .
Okay, I’ve run out of ideas 
What lessons do you need as a functioning adult? ;p
How to do your laundry so you’re not always wearing pink.
AAA Avoidance - don’t get stuck on the side of the road at 2am waiting for Lester the Molester. Simple fix tips including the secret tire changing module.
Electrical 101 - replace a socket, switch and reset a circuit breaker.
You might review your design time rate.
Here’s the problem with single-person businesses, at least in the US. By the time you factor in State and Federal income tax, PLUS Self Employment Tax, your tax rate on service labor is edging near 50%.
You take the taxes out then subtract wages for an employee (or yourself) and there is nothing left for the business. You gotta feed yourself which you can’t do at $25/hr if you’re actually keeping up with the tax obligations, much less giving anything back to the business bank account.
Design time I wouldnt go any less than $60/hr rate and no billing less than 1 hour. Maybe 30 minutes only for the easiest of projects but that would be a rarity for custom design. Now, “customizing” where you are simply changing text in a template design for example is a different story, that I would just buffer into the cost like you have already done.
You’ll find that phone calls, emails, and sketch/design revisions will suck an amazing amount of time and you need to be compensated for that because there will be lots of un-billable time invested elsewhere. If you get to a spot where you have an employee, those sometimes unavoidable non-productive times are a double hit especially if you start off with lower rates because it’s a side gig or hobby.
Machine time/Cost. Amortization over 5 years for technology items is a standard for TAX purposes but if you’re trying to factor out actual costs for machine time that’s a different story. You want to calculate costs so that you are completely recouping machine costs within 6 months, maybe a year, at tops (this is in line with where profitable CNC shops set their ROI numbers) Remember you gotta pay for the investment itself plus maintenance AND if you’re running a business, the machine should also pay into the bank for future expansion too. If you’re buying on credit, you also have compound interest racking up the bill. So if you want actual numbers for an example: GF Basic @ $3k (full price) PLUS $500 for the first replacement laser tube. The 2000 hour life of tube has been mentioned before so we will stay with that. Say you run the laser 8 hours per day every work week (OK maybe you wont but eventually it might happen) that is 1 year of life from the laser tube. So your first year investment is $3500 and split out over 2000 hours is $1.75/hour and that’s not including any electricity use nor profit margin. So in this case the $0.75/minute (aka $45/hr) is actually pretty good margin. 
The trick is to keep that machine busy and if that happens, all is pretty good. However machine time cost goes higher the less and less it’s used. Still, it doesnt make sense to bill out the machine almost 2X more than you bill out yourself, right?
So, the question is, can you make an item to fit an existing market value and still make a profit on it? Or do you make an exceptional item thus creating a market demand and make a reasonable profit?
Comparing against Etsy is hit or miss because so many people are selling virtually identical ho-hum boring stuff for cheap. However there are people on Etsy looking for those “WOW!!” stand-out handmade items that are willing to pay for them, but they really have to be exciting items.
Thank you so much for reminding me about the self-employment tax. I had completely forgotten about that!
It definitely comes down to: finding a profitable niche, making high-quality and highly priced OOAK Art pieces, or mass production of medium quality (like many on Etsy do). Mass production seems easiest, but has the slowest pay off rate, fancy one-offs have the highest pay off but take longer and can totally bomb.
This thread has been extremely helpful in pinning down relevant information. Thanks everyone for your input!
Cialdini’s book will change your life, when you read it. every AD you hear, every salesperson you interact with.
changes everything. I had read a chunk of it before I started car shopping years ago.
an equally life changing book would be the “Millionaire next door”. Or really any of the I believe three books in the series. Where you really learn how the truly wealthy think.
Always loved that story, and that book 
Looks like a good book - just picked up a copy. Thanks. 
I’m a bit lost as to how the price per minute is so high! Initially, I took this as read and went with it but I did a quick stack up of the numbers and came nowhere close to this.
My Basic cost me £1500 inc shipping + (less than) £500 in taxes. If we assume (big assumption) that a tube will be about $500 and shipping might be $300 (to the UK). then that makes a new tube (inc taxes) about $750 to me. I’m keeping VAT in as this is a side business which likely won’t be VAT registered for a while. If we spread that cost over 3 years, the cost of a Basic and a replacement tube would be £917 / year. Since this is a side business and I’m away a lot during the week, let’s say I only get to use the machine for like 5 hours of cutting time / week, that’s £3.52 an hour / 6p per minute.
We pay 12p per kW/hr and as a 40 W machine, with a 40 W fan, that’s like 1p / hour - but let’s call it 1p / min an cover lights and some of the other small tools associated with production too.
I have a home brew filter system which has currently taken about £50’s worth of filters. I’m going to be conservative and say I’ll need to replace them three times a year. So, over 3 years that’s £450 - or £1.73 / hr (3p per min) assuming 5 hours a week usage as above (I think this is a big overestimate of this cost but, I like to be safe).
Altogether, it’s less than 10p per minute as actual cost of running the laser. I’d charge me loading / unloading / setting up / weeding etc. as labour time as it requires my actual hands on attention.
Have I made some massive error in these calcs or am I missing something fundamental? If I can price my laser time at 10-15 p / min I think I can actually turn a profit from some of the products I have in mind. At 75p - £1 as sort of suggested, it’s going to be really tough!
There are plenty of laser businesses in the UK that do small jobs for other makers, you might try calling them up and along what their rates are. One is YEAH Laser, https://www.yeahlaser.com/
The 40W is the rating of the tube’s output. The input, the electricity, is considerably more. The peak rated draw is 800W, but the measured draw is considerably less. Karaelena measured it and posted that info somewhere around here.
The point of the above story is that the glowforge doesn’t cost enough, and doesn’t use enough power, to worry about pricing it. If your figure of 917 GBP/year is correct, and your desired rate of return is 15%, then you need to charge 1,054.55 GBP to make 137.55 for the whole year. If your goal is 140 pounds profit on your investment it’s a labor of love anyway. Price your materials and your time. As a general rule of thumb, take your CGS (Cost of Goods Sold = materials plus direct labor) and multiply by four for retail or by two for wholesale (price charged to shops.) Remember that it takes time to do the accounting and general business stuff as well as the marketing of your products. Retail takes more time, hence the larger markup. If the math is close to making sense, then consider pursuing it. If the math doesn’t make sense, approach it a different way or try something else. That’s my advice.
This math is mistaken, at least as I read it. The assumption seems to be more that the GF costs 917 a year, so you’d need to make at least that back each year to make a profit. To make 15% on cost of goods sold, you’d need more like 1100 GBP of gross annual income. But yeah, any way you slice it, it’s still a labor of love, and the main “real” cost is much more about the laborer’s time.
You To echo PaulW’s point, you need to calculate the opportunity cost of your time (what you could earn by doing something else), or the value of the “time off” you would have if you were doing nothing. Add that to the cost of the 'Forge, electricity, cooling, materials, and the space that is taken up by the 'Forge, and you’ll get closer to what you should be charging.