Pricing a kitchen, how to get the work AND make a profit?

[tim]

Keith,

I use the dowel type (confirmat) screws a lot mainly because I often need to take the furniture apart a couple of times and it doesn't reduce holding power - I make a fair bit of walk in closet stuff and bedroom gear so working on my own sometimes means that the only way things are getting upstairs is in pieces.

I find them quick and easy to use although if I lose concentration when drilling its easy to let the drill wander a little and then when you come to put the big fat screw in it can sometimes be a little to close to the surface and deform - very rarely breaks through but at c 3in long you can see that any slight deviation is critical.

From what John says it looks like once the cabinet is made it stays made so the poscket screws are fine plus in ply there will be ample holding power.

John, great thread and very interesting and helpful. Confused by one thing:

A couple of 50 mm wide cross pieces, one across the back where the top of the back panel will be (not all the way to the top or it will get in the way of the brackets), and one across the top at the front

Are these strips like a sub top ie is the 50 mm width horizontal or are they vertical for fixing through the back and allowing the door to be shorter than the cabinet height to clear any worktop overhang? Not sure if I've made sense but its late so apologies.

Anyway look forward to the next installment

Cheers

Tim

 

[Woodythepecker]

John, i must say that you have done a great job in explaining how you build your kitchens, and to hear that SWMBO helps you along the way is excellent. I won't ask you who is boss of your company because if it is a normal household i think we all know.

Keep up the good work you are doing a grand job.

Regards

Woody

 

[Alf]

I used to use biscuits, but the jointers aren't accurate enough.

Presumably your clamp requirements would increase dramatically too.

Fascinating stuff, John. Thanks for taking the time.

Cheers, Alf

 

[johnelliott]

Why kitchens?

It's the numbers. I have no particular interest in kitchens, if it was up to me I would make hardwood tables and chairs. But it would be very difficult to find enough customers willing to pay the kind of money that would be needed in order for me to make a living.

People's price expectations are baseed on what they see in shops. If it can be sold in a shop then it can be made abroad and if it is, then no English person is going to be able to compete.

Kitchen's, however, need to be designed, made and installed. Even if some of that work could be exported the rest could not. The result is that people expect to pay quite decent prices for kitchens. Even quite small ones can easily cost £5,000.

The one that I am currently doing for £x,000 would have cost £(x+2),000 from MFI(from one of their dearest ranges), and I am quite happy with that much profit, or I would be if I was getting the stuff out faster. Having said that, I am incorporating a number of unusual features which will be quicker to build next time and which will provide me with several USP's (unique selling propositions).
I find that when I visit potential customers it helps if I can offer them features that the big firms cannot.

One problem that I have not yet resolved is the fact that quite early in the selling process I need to show my customers some kind of drawing of what I am intending to provide for them. I can draw freehand but I it's slow and difficult to change. I've had a go with CAD but learning how to do it burns up time that I don't have to spare, plus at my age my brain is shrinking and tying to get more stuff in it is very difficult. I've also tried commercial kitchen design software but it is unsuitable due to it needing to use standard cabinet sizes. Any ideas?

John

 

[tim]

John

I use deltacad for a lot of drawings (www.deltacad.com) just because its reasonably easy to use and there was a pretty long demo time but I agree with you its a job in itself learning to use those things.

When you quote the figures you do are you including appliances/ installation etc or are you just talking about the cabinets? Because £5k for a small kitchen inc appliances is a pretty good price I think.

Also do you not think that people expect that your cabinets would be more expensive than those in MFI if they are being made for them rather than just out of a warehouse? Yet you show that you are undercutting (poor term but you know what i mean) MFI using better materials and bespoke cabinetry in your example. I would have thought that you could have made a premium on this irrespective of the amount of profit you were happy with rather than offer a lower price esp if your adding a whole bunch of other USPs.

Very interesting stuff.

Cheers

T

 

[johnelliott]

Tim
Thanks for your comments, just the kind of stuff I was hoping for.

Firstly, it was not my intention to undercut MFI, I didn't find out what they were quoted until after I had given my price. Admittedly they were offering a more elaborate kitchen, more (and smaller) cabinets, and lots of trim.

That's one of my major selling points, simple, elegant, no unnecessary details, very popular with the ladies, that.

No, I wasn't including appliances.

Quality is a very difficult thing to sell. People that sell quality items, Mercedes, Sony etc aren't able to sell the quality as such, they sell reliability, features, status etc. Difficult to do that with a kitchen.

Also, although my birch ply cabinets are stronger and will last longer that flatpack stuff, they do have one major drawback, they are not covered in melamine. Melamine surfaces are ideal for kitchens as they are very hard and very washable. It's only the edges that let the stuff down. My cabinets are either painted or oiled and varnished, neither of which are as durable as melamine. All in all, I don't really say very much about how the cabinets are made or what they are made of, instead I concentrate on the fact that they can be made in whatever sizes the customer requires, and then I point out that I can make the wall cabinets slimmer than standard in order to maximise the light and feeling of space in the kitchen, stuff like that is what they want to hear.

I'm starting to find that once I get the call, the sales are not too difficult to achieve, subject to them being actually ready to buy ewhich frequently is NOT the case.

I have two main competitors, one is the established kitchen suppliers, and the other is 'all the other things customers can spend their money on'
I prefer the former

John

John

 

[Alf]

John,

I was wondering, do you take along samples of your materials, finishes etc with you? A mini cabinet to give an idea of what it'll look like? Or don't your customers really bother about that so much?

Cheers, Alf

 

[Philly]

John
Have you tried Sketchup? It is a quick and easy program to get to grips with-but very powerful at the same time. You can knock up views really quickly, and they look very professional.
I have a couple of pics here of my workshop that I layed out with Sketchup-http://www.philsville.co.uk/layout.htm
Have a try, it is superb.
Hope this helps
Philly

 

[tim]

Philly,

Those pics look great - how long did it take you to master the program and how long d'you think it took to draw those pics.

One of the probs I face regularly (which John alluded to) is that customers expect to see drawings very early on in the process - well before any money has been committed and if a program takes an age to learn or lots of time to draw up pics then its pretty annoying to waste hours on a lost sale - yet at the same time it has to look great often to make the sale (esp where client imagination is low).

Also not sure that the dimension on the diagram is accurate enough! :wink:

T

 

[Philly]

Tim,
I reckon a couple of hours and your in. It has some great instruction videos with it that really get you going and there are extra ones on their web site. As to dimensions-you can make it as tight as you need. My workshop pics are close enough to get an idea of layout. The program also has some interesting render options to allow you to make "sketch" type drawings-they look great and will impress the clients better than anything I can draw by hand! :wink:
Cheers
Philly

 

[tim]

Philly

I was joking about the dims - 4 decimal places!!!

I've just looked at the price $475 :shock: I know not much compared to Autocad etc but still a lot. Do you think I'll be able to learn enough in the 8 hour trial time to get a real sense of its capabilities?

Cheers

Tim

 

[johnelliott]

More thoughts on pricing

My wife (who works full time in the business) and I were sorting through the potential jobs I looked at over the weekend. We know roughly what's involved in making each one, the materials and the likely time. What we don't know, of course, is how much is the customer prepared to pay?

So, when we decide how much to ask, we have to choose between two different pricing philosophies-

a) We already know that we must not drop below a certain price. Let's say in the case of kitchen A, that that price is £6,000. When pricing A should we ask for £8,000 to cover unexpected problems and the fact that things always take longer than expected? Well yes, indeed we should. Trouble is, what if the customers had £7,000 as an absolute price ceiling? Then we wouldn't get the job. That would be OK if we had other jobs waiting. At the moment, though, although there is plenty in the pipeline, pipelines have a habit of drying up unexpectedly.

b) the other philosophy is to try to keep the price as low as possible. This way we are more likley to come in under the customers' price ceiling and are therefore more likely to get the work. Also, the customers are more willing to wait longer for us to start the job and to put up with any other inconveniences that might arise. The problem with having no padding in the price is that we absolutely must make sure that nothing goes wrong, or be prepared to burn the midnight oil if it does.

My wife and I discussed this for some time, and in the end decided to go with philosophy b, and keep our prices as low as possible. After all, a low prices is only a potential problem if we GET THE WORK, which is, of course, the name of the game (and the thread). Making the profit is the other part of the problem but I would prefer to cope with the problems of achieving speedy and efficient production than to cope with the problems of not getting enough work (been there and didn't like it)

John

 

[Chris Knight]

John,

You describe a classic descision tree question. If you are able to assign some probabilities to the various possibilities (such as the pipeline drying up, such as the possibility of hiccups etc. Then you can build a very simple model to help deternmine the most profitable course of action.

 

[Mdotflorida]

Very interesting John. Many thanks.

I'd like to know about sourcing potential customers. For every 1 person who wants a bespoke kitchen there must be many many more who just visit their local warehouse. Do you advertise. If most of your work now comes via word of mouth. How did you do it when you were starting out ?

Also, is it just a job for you now. When I was younger I was really into hang gliding. So much so that I became an instructor and taught for a living. Eventually though, because of doing it every day, the last thing I wanted to do was to go hang gliding on my days off. Do'es doing it for a living take away the enjoyment of woodwork in your spare time ?

Jeff

 

[tim]

John,

Do you ever ask what their budget might be in your opening discussion? I know its a gamble but sometimes customers are so unrealistic that their ceiling -or what they say is their ceiling - (in my relatively short experience its usually 20% lower than the actual) can be so way off reality that its not worth pursuing the conversation any further eg dining table plus 6 chairs and 2 carvers for £1000. When I ask the question I normally phrase it very openly and say that I use it to determine the approach and possible materials/ fittings etc.

I do it because I have been caught out at least a couple of times where I've done drawings for things etc etc to find out that the customer was way off the park in terms of realistic price. I've also found out after a job by hearing from a friend of a friend that the customer was delighted because they had a budget of twice what I charged :shock:

I think that you are right about keeping prices as low as poss - I regularly burn the midnight oil when the padding disappears! but I also know that if I've underpriced I end up resenting the job which seems to manifest itself in a variety of ways (ie not wanting to go the extra mile - because I feel I already have etc) all my fault I know.

So now I tend to include a variety of options on fittings, trim etc. Some of these options take the figure below the budget but the difference is purely materials so if they choose the lower priced ones then it doesn't eat into profit and some options take it higher than the budget and these do have some profit attached. I appreciate that I'm not talking about kitchens in all these examples - I make a lot of built in stuff but they often have very similar fittings.

Chris, I'd be really interested in making a model but so far I've not been able to gauge the probabilities since there are so many differences in the jobs and responses. Maybe I'm being dumb but I'm not sure how I'd go about feeding valid numbers into the model and thats surely whats needed to get a useful result.

Cheers

T

 

[beech1948]

John,

Sorry guys....long rant follows...

Do you ever ask what their budget might be in your opening discussion?

I think that you are right about keeping prices as low as poss
So now I tend to include a variety of options on fittings, trim etc. Some of these options take the figure below the budget but the difference is purely materials so if they choose the lower priced ones then it doesn't eat into profit and some options take it higher than the budget and these do have some profit attached. T

Hi,

First I have to say that my sales experience is 23 years of high value ( £1million+) sales in IT. However, selling is selling its just the materials that differ..wood..electronics...not a lot of difference.

I would think that asking the client about their budget is essential. That is the question is not "what will you pay" but:-

What is your budget for the kitchen
What is your budget for installation, electrics, plumbing etc etc
What sought of kitchens have you looked at..what do you like
What price ranges were these in

What is most valuable about finish, service, your needs,to you..what do you want
If the price came out £2500 above your stated budget would you still be interested ...if there is enough benefit to you

I would then move on to find out what they expect as benefits and have a check list of 15 benefits they have not thought of to offer...I believe people buy benefits and not things...even if the benefit is just to show off rather than have a spiffy new kitchen.

Looking at companies such as BMW and Mercedes can be instructive.

Range of cars equates to a range of differient price/quality fittings or finishes

Options on every thing helps with marketing and pushing envelope of budget or expected price and makes it their choice. In fact making it their choice is very important as they need to be able to choose the price level and gadgetry. It might be possible to double your profitability by using this "options marketing" approach

I would not even talk about competitors. Be aware of them for your own uses eg pricing, but just ignore them and project utter confidence that your kitchen is the best available bar non.

This is not arrogance but a way to build your brand as you + your skills + your performance + your references + delivery to choice + professional quality + high quality materials. I have come to think that personal branding is probably the most important element for a small ( 1 or 2 person ) business. I have based this on starting and having a successful 2 person company delivering executive coaching...a very personal purchase if ever there was one.

Its also possible that the myths around what you do are actually your fears. Won't or can't pay enough...be low price etc etc. I think you need to test these assumptions out or find clients who will pay more. Defining your market will help. Who will pay more profit to you...council houses or country houses....salaried or business owners. Are you getting to the best market for your business..if not why not.

Oh God...there I go again....I will try not to get too carried away in future.

Alan

 

[Anonymous]

Thanks Alan, really interesting

And thanks to John - I really have learnt a lot from this thread :wink:

 

[johnelliott]

John,

You describe a classic descision tree question. If you are able to assign some probabilities to the various possibilities (such as the pipeline drying up, such as the possibility of hiccups etc. Then you can build a very simple model to help deternmine the most profitable course of action.

That's an interesting idea, Chris, and I would like to know more about it. As Tim says, though, the problem is to put a numerical value on the probabilities. There just isn't enough data yet. 'Winiging it' is a goood expression for what I am doing at the moment

John

 

[johnelliott]

Very interesting John. Many thanks.

I'd like to know about sourcing potential customers. For every 1 person who wants a bespoke kitchen there must be many many more who just visit their local warehouse. Do you advertise. If most of your work now comes via word of mouth. How did you do it when you were starting out ?

Also, is it just a job for you now. When I was younger I was really into hang gliding. So much so that I became an instructor and taught for a living. Eventually though, because of doing it every day, the last thing I wanted to do was to go hang gliding on my days off. Do'es doing it for a living take away the enjoyment of woodwork in your spare time ?

Jeff

Jeff,

I advertise in a local free paper. It'ds quite a bit classier than the average freebie, and covers an ideal (for me) area, couple of large market towns, plenty of villages, good mix of retired people, yuppies etc

Yes, much of it is quite boring, some of it is downright scary. I still enjoy most of it, though. When I leave a finished kitchen and the customers say they really love it then that makes me very

I don't have spare time as such, but if I did I would probably do something musical

John

 

[johnelliott]

John,

Do you ever ask what their budget might be in your opening discussion?

I could try that, anyone know where I could get some sodium pentathol? I've hinted at it a time or two, but haven't got a useful reply.

One problem is that many people, when they first start looking at a project, don't have a budget at all, they only decide on one after they've heard the price.

John