# Pricing



## Smitty37 (Jan 6, 2014)

This is inserted because of a thread in another forum at this site.

A bunch of us here sell pen kits,blanks & such so here is a little comparison.

First let me say this is not a complaint if it were I'd get out of the business.  It is offering a taste of reality (if reality exists) to pen makers.

I commonly see people say "start at three times what you spend for materials". I can't speak for Ed, Roy and others but I'd love to do that and  can assure you that I don't "start" prices at 3 times what I pay my supplier because you won't pay that much for most of the things that I sell.  Maybe the larger sellers can buy in sufficient volume to do that, but most of us selling here can't.

They then say "add a fair wage for your time".  I also don't get to say "Well my time is worth $20.00 per hour and I won't take less than that" (even though in my career job I was making about twice that 22 years ago).  I think if we said that we'd all be out of business.  

Additionally, your time, if you are a sole proprietor, according to the IRS is worth absolutely zero.  Your pay is your profit, if any, for the year, that's what you pay tax on including the payroll tax.  In fact, you can't pay yourself a wage which is a good thing because if you could you'd need to deduct income and payroll taxes from it and couldn't subtract expenses. It might eliminate profit from your business but you'd be worse off.

The point is:
A) If you are making pens strictly as a business, you will price your pens to make a profit and if you can't sell enough pens make a profit you'll get out of the business. 

B) If you are making pens as a hobby and want to off set your costs you will sell your pens for any price you feel like because any income from pen sales does offset some costs. 

C) If you are an (A) maker you have no reason to expect that the (B) maker really cares one iota whether or not you can charge what you'd like to charge to make the profit you'd like to make.


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## wildbill23c (Jan 6, 2014)

Wow, perfect timing from the other thread.  Thanks for making this pricing thread.  It makes complete sense.  There's a huge difference in pricing I can see from someone that is 100% into making pens for a living.  I am not, its more a hobby to me because I have another job.  Trust me it would be great to be able to work at home in my shop every-day, but unless I start selling a few hundred pens every week it won't work out so well LOL.  

The economics issue more so weighs in on those who are in the business to sell more than it be a hobby.  Yes, I can get a few pen kits here and there, but unless you are buying hundreds at a time, you can't expect much of a profit as the pens are higher if you only buy a few kits at a time.


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## Bruce markwardt (Jan 6, 2014)

I am clearly in category B.  I am retired.  I make pens for fun.  I give away most of them.  When I sell one, I typically price at cost plus a few bucks.  And when someone buys one, I am thrilled.

If I were trying to make pens for a living my approach would be completely different, but I'm not so I am comfortable with what I'm doing.


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## Smitty37 (Jan 6, 2014)

I'm a (B) maker myself. I give away far more than I sell and I charge relatively low prices. That being said I recently sold 20 Le Roi LB's for $25.00 each that probably a lot of folks would have charged double that.

Now, I had fun making them, they came out real nice, the buyer loves them and we're both happy.

And I'm putting the gross into a new lathe.


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## Nikitas (Jan 6, 2014)

I have sold many pens and I am happy with what I charge. That being said I moved away from selling pens and moved more into selling tools and bushings. I still sell pens and make blanks to sell but I have found I make more money with the other..NOT doing it for a living but I dont work for free....My .02 worth. I charge what the customer is will to pay and I do have a bottom line I will not go below....


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## Tieflyer (Jan 6, 2014)

Smitty, I personally love the LeRoi style and would make them all day long...my customers  don't like them and I struggle to get $25. They will, however, pay more for the Caballero and Jr. Gent.  That reminds me, I need to count my inventory and possibly bolster your economy with an order!


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## rossvh (Jan 6, 2014)

Smitty, I totally agree. I'm a B turner and don't want to "move up". It's much more fun making pens that I can decide to give away - or get something to cover my cost so I can make more pens. I've read these "price" threads before and never felt they applied to me. Thanks for putting so succinctly!


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## yorkie (Jan 6, 2014)

I am a total 'B' maker.  Just a hobby for me, so as long as it pays for itself, I'm happy.  Having said that, I generally get 3-5x hard costs per pen, but that doesn't factor in my time to make or sell them though.

Last year I sold about $20,000 in pens and I spent it all on more blanks/kits and tools.  I do love to buy tools!


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## kovalcik (Jan 6, 2014)

I am strictly a B maker and happy to be there.  (BTW, $25 Le Roi's are my best seller).  My worst nightmare would be to get a 100 pen order.  I do this to relax.  I don't want the pressure of having to get 100 pens done by a certain date, not to mention it is really boring to make 100 of the same thing.


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## greggas (Jan 6, 2014)

Are there really that many here that derive 100% of their income from pen making?

I suspect most here started the same way....somehow stumbled onto turning....then learned about turning pens....decided to give it a try ...gave a bunch away ...and eventually some of those gifts evolved into requests for more pens and then the great debate..."what do I charge?"

In my 5 years posting on IAP I have always answered this question from a business standpoint with the ultimate answer being charge as much as you can for the product you are selling in a manner that results in profit and happy, returning customers.

Many folks here give their work away or simply want to cover costs.  These are not the folks that ask how much to charge.  When one asks what to charge then they are entering the business world and should endeavor to come up with pricing that results in sales and profit regardless of what percentage of their income is derived from pen turning. 

Giving your work away is fine and certainly our right.  The only issue I see is that more and more pen turners are showing up at shows selling their work at barely the cost of the material. This has really started to drive down selling costs in some regions that I have visited.   When China does this we berate them as under cutters.    Here we seem to say " this is America and you have the right to charge what you want..." True, but why not make a little money at the same time?  

Smitty, BTW my 3x cost starting point in the thread earlier today was to give the young man a reference point for starting a profitable enterprise.


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## Smitty37 (Jan 6, 2014)

greggas said:


> Are there really that many here that derive 100% of their income from pen making?
> 
> I suspect most here started the same way....somehow stumbled onto turning....then learned about turning pens....decided to give it a try ...gave a bunch away ...and eventually some of those gifts evolved into requests for more pens and then the great debate..."what do I charge?"
> 
> ...


I wasn't singling out your reference it is commonly mentioned as a starting point.

*What you are seeing is in fact just normal competition.  There are far more people both turning and selling pens than 5 years ago...I think IAP membership is up almost 60%.  As more folks enter any business the competition will tend to drive the prices downward.  Countering that to some extent, I think the overall demand for custom pens has also increased greatly in the last 5 years as more and more people learn that they exist.*
** 
*When one independent business man prices lower than another it is competition - call it undercutting if you like.  If seller A prices at $10.00 for what he makes and seller B prices at $8.00 for essentially the same item more people are likely to buy from B.  In the case of custom pens though the customer is simply making a choice he would have to make anyway - "Who shall I buy from?" and, rarely will price be his only consideration.*


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## Smitty37 (Jan 6, 2014)

Posts #6 and #9 are a perfect example of one of life's realities.  One's customers don't like a particular pen style ... another the same style is his best seller.  That's what I mean when I said pricing (or even perceived value) is usually not the only factor considered by people making purchases.


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## yorkie (Jan 6, 2014)

I tend to do only a couple of shows each year and find Etsy is okay, but not great.  Though, I do tend to sell my pens on the high side and I price them based on how they turned out first, and cost of materials second.  I just sold a Princess/Bluebonnet pen for almost $200 and it cost me $35 to make.  It was too pretty to sell for $70 or $100.  

I'm in no rush to sell them and I put a lot of work into finding exceptional pieces of wood and into my finish.  I tried putting some on Ebay once but too many people giving them away for me to get across why mine would be worth double, triple or more.

My advice?  Price it based on the beauty of the pen and it will be the right price.  Sell it with excitement and talk passionately/knowledgeably about the wood.  You might not sell more but you'll enjoy it a hell of a lot more.  Then, those you do sell, you'll feel glad about.

Life's too short!


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## raar25 (Jan 6, 2014)

So Steve I have to ask if you dont sell much at shows or on Ebay or etsy where do you generate $20,000 in pen sales?  That is alot of pen sales.


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## Smitty37 (Jan 6, 2014)

raar25 said:


> So Steve I have to ask if you dont sell much at shows or on Ebay or etsy where do you generate $20,000 in pen sales? That is alot of pen sales.


At $200 a pop it's only 100 sales.


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## yorkie (Jan 6, 2014)

I don't sell a lot at $200.  Most of my pens are sold for around $80-$120.  I have a lot of people who know me for pens and people I have sold to come back for more.  A lady was given one at Christmas this year by someone and has already bought 5 more of my pens from Etsy.  Also, there is a auto manufacturer who has me make pens for their GM's in the Southeast region once a year and this year they bought 42 full sized Statesmans.  Mainly though, it's repeat customers and I post all my pens on my Facebook page, which helps gets the word out.




raar25 said:


> So Steve I have to ask if you dont sell much at shows or on Ebay or etsy where do you generate $20,000 in pen sales?  That is alot of pen sales.


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## greggas (Jan 6, 2014)

Smitty
First off I know you were not directing your comment at me....but I wanted to clarify why I made the comment.

I do not necessarily agree with your comment _" What you are seeing is in fact just normal competition"_  I think what is seen more often is lack of a business plan or strategy.

If someone was selling pens at or below cost as a "loss leader" to attract traffic for other products ( a time tested retail strategy) I would agree.  But when all one sells are pens at cost or below then what strategy is this?

But the following example demonstrates what I am seeing more and more:
This past holiday season I had a booth at a show in my area.  There was a gentleman there selling some of the same kits I do.  He was selling a pen for $30 that I sell all day long for $75.  If you assume a blank cost of $5 and $6 for the wood box he included his total material cost was $29.  This did not include his booth fee ( $ 450) nor travel,finishing, electrically, etc.

He visited my booth and bragged of selling out of the pen in question while I still had 9 in my display.  When I asked him how many he sold he said 10.  I relayed that I had sold 28 and the show was only half over.  I asked him why he was selling so cheap and he said he was not sure what to charge so he started low and could always raise the price if he was selling to many.  I asked him how he plans to raise the price now that he was sold out.  He shrugged.

My point is this...selling at lower prices as part of a business strategy may have merit if you have a sound plan.  

You are correct in that pen turning has become very popular.   I sell at around 30 shows a year and by far met more pen turners this year than all other years ( probably combined).  I suspect that we will have to suffer through 2-3 years of dwindling sales at shows due to this influx.  Eventually folks that are not making money selling pens will stop selling pens and hopefully prices will rise again.




Smitty37 said:


> greggas said:
> 
> 
> > Are there really that many here that derive 100% of their income from pen making?
> ...


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## Janster (Jan 6, 2014)

...sell for what you can get for them! BTW....Smitty's are my top sellers and they're had at a reasonable price and his service is A #1. I just sold a pen and the customer wanted to deal a bit, that is OK. I did deal w/him and while lowering my price a small amount,  I did not lower my standards and the customer is getting a quality pen and both he and I are quite satisfied. Be well.......Jan


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## gawdelpus (Jan 6, 2014)

Always nice to see different takes on this subject, in my case I started making pens when my Wife wanted to take up woodworking some 6-7 years ago  we tried my big old centre lathe but that was hopeless, long and the short we got a cheap wood lathe and I decided pens was a safe enough thing for her to do, no lumps of timber flying out all over the place lol. She lost interest and I am still with it . We go to 3 craft markets a month and do just fine ,most times the takings are nearly double my weekly pension ,maybe not all profit but at least half is hehe. I get what I can in price,but anything over $50 dollars are hard to shift at times. I do offer a discount for a second or subsequent sale to the same buyer,and give a free refill with every pen sold.  That said one market I go to there are several other pen turners ,one only has a case of slims friction finished and priced at around $15 dollars,mine start at $30 . Another seller only has acrylic sierras in a case all at around $25 dollars mine are around $40 
point here is I out sell both them,and  with higher prices ,I have around 120 pens on display at any one time (sometimes just too much choice ) But I do get the sales as I have a complete range of styles and they stand out.
I am not the best salesman in the world by any means but I am passionate about what I do and love educating my clients as to just what goes into these pens ,I get them involved in the process and they can see the value, not always what I would like to get,but at least things keep moving ,no antiques on my stand lol. So as all of us, I looked at what pricing others were suggesting ,then gradually worked out what my pricing had to be to make consistant sales,and return sufficient that I at least feel I am getting and giving good value for the prices charged.
Slimlines and streamlines are probably the most profitable pens ,but take as much work and material as any double barreled pen kit I have found , In the end, where and to who you sell will end up dictating prices .
Cheers ~ John


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## Smitty37 (Jan 6, 2014)

greggas said:


> Smitty
> First off I know you were not directing your comment at me....but I wanted to clarify why I made the comment.
> 
> I do not necessarily agree with your comment _" What you are seeing is in fact just normal competition"_ I think what is seen more often is lack of a business plan or strategy.
> ...


 


Essentially what I'm saying is related to people not doing pen making with the thought of it being a profitable business as well as bandwagon jumpers. 

In the 1970's there was a CB radio craze - everybody wanted a CB in their car, people that had them wanted to talk on the all the time. "Businesses"(the bandwagon jumpers) selling CB's sprang up all over the place and the bottom fell out of the prices...after a couple of years, it died and CB's pretty much became the gab media of truckers again.

In many hobbies, be it pen turning, baseball card, stamp, collecting or pen collecting there will always be some people who like to make it just business enough to lower the cost of their hobby. They really aren't interested in a profit.

At one time I collected coins and I was pretty well aware of every lincoln cent and jefferson nickel that was worth more than face value. When i found one I saved it and when I had a bunch of them I sold them and used the money to buy coins I needed or wanted for my collection. The idea was not to turn my hobby into a profitable business but to reduce the out of pocket costs.

In the custom pen business that becomes competition for the turner who wants to have a profitable business rather than a hobby.

On the occasion when I sell a pen (I buy or barter for many more than I sell) the cost of that pen doesn't even enter my mind. I'm in the business of selling pen components, making pens is a hobby.


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## wildbill23c (Jan 6, 2014)

Very interesting information here so far.  

Since I'm in it more so for the hobby aspect, if I say made and sold the slim-line pen for about $13, it would certainly recoup the cost of supplies, and would give me a little bit of extra money.  But, I can see where more professional turners could take that same pen, and sell it for $30, just because of their professionalism in turning and finishing, and the vast larger knowledge base that they have.  As a hobbyist, it doesn't matter as much to me to make a massive profit, which yes with a slim-line pen there isn't much there in the first place but this thread is helping a lot with my ideas and thoughts for pricing.  Thanks so much.


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## jfoh (Jan 7, 2014)

Over ten plus years I have sold several thousand pens. I did not make as much money as many would think but it has added up to a medium size pile of money. After taxes it was a much smaller pile and if you figured my time I might have made a lot more money just working my regular job. But I have enjoyed every hour spent learning and making pens. These days I just sell via a dozen retail sellers and do a few large orders. In fact most days I just piddle in the shop according to my wife. Call me a pen peddler.


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## greggas (Jan 7, 2014)

Essentially what I'm saying is related to people not doing pen making with the thought of it being a profitable business as well as bandwagon jumpers. 

In the 1970's there was a CB radio craze - everybody wanted a CB in their car, people that had them wanted to talk on the all the time. "Businesses"(the bandwagon jumpers) selling CB's sprang up all over the place and the bottom fell out of the prices...after a couple of years, it died and CB's pretty much became the gab media of truckers again.

In many hobbies, be it pen turning, baseball card, stamp, collecting or pen collecting there will always be some people who like to make it just business enough to lower the cost of their hobby. They really aren't interested in a profit.

At one time I collected coins and I was pretty well aware of every lincoln cent and jefferson nickel that was worth more than face value. When i found one I saved it and when I had a bunch of them I sold them and used the money to buy coins I needed or wanted for my collection. The idea was not to turn my hobby into a profitable business but to reduce the out of pocket costs.

In the custom pen business that becomes competition for the turner who wants to have a profitable business rather than a hobby.

On the occasion when I sell a pen (I buy or barter for many more than I sell) the cost of that pen doesn't even enter my mind. I'm in the business of selling pen components, making pens is a hobby.[/QUOTE]

Given that the title of this thread was "pricing" I based my comments around how to price pens in an attempt to turn a profit.  I harbor no ill will to anyone who wants to give away their efforts or sell at cost to keep the cash flowing to allow the addiction to buying all things pen related ...we have all been there !

I guess I thought the intention of this thread was to have a discussion on how to determine pricing.  I go with the assumption that if one asks how to price they are looking to make money.  If they simply want to cover costs there is no need to ask how to price.

Smitty, you sell pen components...if someone asked you how much to charge for pen components would you advise them that it is ok to sell at or below cost?   

I totally get the hobby thing....I just think it becomes less of a hobby and more of a business when one starts to think how to price their work.  Wether one makes 5 or 500 pens a year, considering how to price is a business , not a hobby, function.


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## Smitty37 (Jan 7, 2014)

greggas said:


> Essentially what I'm saying is related to people not doing pen making with the thought of it being a profitable business as well as bandwagon jumpers.
> 
> In the 1970's there was a CB radio craze - everybody wanted a CB in their car, people that had them wanted to talk on the all the time. "Businesses"(the bandwagon jumpers) selling CB's sprang up all over the place and the bottom fell out of the prices...after a couple of years, it died and CB's pretty much became the gab media of truckers again.
> 
> ...


 
Given that the title of this thread was "pricing" I based my comments around how to price pens in an attempt to turn a profit. I harbor no ill will to anyone who wants to give away their efforts or sell at cost to keep the cash flowing to allow the addiction to buying all things pen related ...we have all been there !

I guess I thought the intention of this thread was to have a discussion on how to determine pricing. I go with the assumption that if one asks how to price they are looking to make money. If they simply want to cover costs there is no need to ask how to price.

Smitty, you sell pen components...if someone asked you how much to charge for pen components would you advise them that it is ok to sell at or below cost? 

I totally get the hobby thing....I just think it becomes less of a hobby and more of a business when one starts to think how to price their work. Wether one makes 5 or 500 pens a year, considering how to price is a business , not a hobby, function.[/quote]I responded as I did because you stated that certain activity was not competition.
 
Given that I don't believe collecting pen components is ever a hobby that's kind of an unusual question.  From time to time I see someone offering my kits for sale in deals and trades below their cost.  At times, I have sales where the selling price is below my cost.  Sometimes I sell below costs for a particular purpose i.e. Pens for Troops.  For a normal business no I wouldn't tell anyone to sell below costs.  But, a hobbiest pen maker isn't a business and is not interested in "making" a profit so his pricing calculations (if he does any calculations) will be different from the person doing it as a business.


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## kovalcik (Jan 7, 2014)

Here is my (a type B pen turner) cost breakdown for a Le Roi (Sierra style) with a basic wood blank and a CA finish:

Selling Price: $25

Kit: $5 (Smitty's Club membership and I take advantage of sales)
Blank: $1 (I usually trade, cut down larger boards, or use my own harvested wood. Sometimes I get a deal here or on EBay.)
CA, Sandpaper, MM, etc.: ~$1/pen (probably high)
Shop overhead: $0 (I am a hobby woodworker, I would own the tools and be using them regardless.)

Profit: $18

It takes me ~30 active minutes to complete a pen (I usually have several pens going at a time). I am paying myself ~$36/hour. Not bad for hobby time. Beats sitting in front of the TV.

Show costs:
The shows I do are local and usually have an entrance fee of ~$50.
Travel and lodging $0.
Pen Boxes: $2/pen (Basic cardboard. I make my wooden boxes for higher end pens)
I bought a table cloth, plastic bins, and some office supplies 4 years ago and am still using them, so at this point this cost is negligible.

My stock consists of 40 to 60 pens so I do not have a lot of money tied up in inventory.

Selling 4 pens with box covers my show costs. Everything else is straight profit. I do sell other styles of pens and also sell bowls and other items which are almost all profit since I harvest my own bowl blanks and turning wood.

After asking the price question here, I started my price at $35 for this style at my first show. I made adjustments and found $25 to be the sweet spot for the shows I do. Would be curious to see how others do their price breakdown on a similar pen.


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## wildbill23c (Jan 7, 2014)

Very interesting.  I'm kind of playing around with prices right now to find a good selling point.  Makes tons of sense what everyone is saying.  Thanks everyone.


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## Mike Powell (Jan 7, 2014)

Ive only made two sales, and I am definately a (B) guy.
First one was to a coworker and sold him a slimline for 20, bloodwood and a black slimline kit.  He is a Ga Bulldog fan and asked specifically for these colors.
The second was a lady that works with my wife, Im not very fond of her.  Price didnt matter, because I didnt really care if I made that sale or not.  I charged her 40 for four Designers and 50 for a Classic FP with Olive wood.  All of the others are kept or given.  When the second sale came into question, between my wife and I we threw down like 7 or 8 pens on the table.  My kids each have one, the neighbor boy has one.  My dad and Mom have 5, my Mom and Grandma each have one.  Heck, even my sons therepist was given one by my wife.  I do it, because i enjoy it.  I like to sale/barter a few, but I dont ever want this to be something I have to do.  I like to be able to take my time and not turn it into a production line type thing.


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## Smitty37 (Jan 7, 2014)

I recently sold a bunch at @25.00 (LeRoi Elegant LB) and it was more profit than cost even though they could easily have sold to the same buyer for at least $5.00 more and maybe $10.00. When I told him the price for several other styles (higher) he was happy with what he paid.

I don't use a formula because in the end the price will depend far more on the venue than the seller's cost.  Buyers don't give a hoot about seller's costs anymore than we care how much the dealer's cost is when we buy a car, at least in my case, I ask how much the car will cost me not how much the dealer paid.  Buyer's care about their cost, not the sellers.  A formula might be useful in determining the minimum you will accept for a pen.

One line I have used with car dealers is "I want the price at which if I offer $1.00 less, you will refuse to make the sale"


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## Smitty37 (Jan 7, 2014)

*Another interesting point*

I also wonder about makers who say they set their price and won't lower it for any reason - even if it costs them a sale.

I personally don't know of many successful large retailers who operate that way - even high end retailers will lower the price at times - can you imagine a jeweler who asked $25,000 for a piece and refused an offer of say $24,999 if it cost a sale?

My personal observation of the shows that I go to is that shows seem to me to be a 'barter' or 'dicker' market where most of the sellers expect to discuss the price.  I've found that to be true regardless of the price of the items on display, I've rarely seen a seller who wouldn't budge on prices, some might have an item or two they won't dicker over the price but I've never hit one where they'd rather take most of their inventory home than cocede a little on price.


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## keithlong (Jan 7, 2014)

Well I have been making pens for almost 5 years now and I do sell some to offset my cost,  however when I first started, I was in it to make pens for my personal collection. Then people started asking me the prices for my pens,  which were mostly slimlines, and so I came up with a price that I was happy wit and pens began to sell. Then as time went on, I began having request for larger pens as well. Then a few years back, I had an opportunity to meet with a group of retired military men and women and make pens for our service men and women, and I love it. We meet one Sunday each month and turn pens. Then the gentleman over thr program came up with the idea , the farmout program, where he supplies the kits and you take as many as you want, turn them, then bring them back to the next meeting. Works out great. I usually give away more than I sell. Most sales now are to repeat customers. My most popular sellers are junior gents, cigars, slimlines and sierra styles.


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## Tieflyer (Jan 7, 2014)

The lowest price I'll go on a sale is cost. Some days, some pens, I'd rather give away than to discount. Every sale carries it's own dynamics and I have 25 years of retail manufacturing experience to guide me now. Some sales are just not worth haggling over, some customers don't need to be dealt with. My pricing starts at MSRP. If I get a good deal or discount, that goes toward my mark down flexibility later or pads my bottom line to offset a possible loss on some future sale. 
As I said before, I currently rely 100% on kits and pen sales are supplemental to other turnings. I'm not a pen artist, I can't compete with pen makers who are. My pricing reflects that reality. Down the road, maybe, watch out. Lol.


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## jfoh (Jan 8, 2014)

Call me an over sized hobby turner. My very first pen sale, of any type, was a large pen sale that ended up being over $12,000 in profit.  To some I did everything right, to others I did it all wrong. I am sure I made as much profit as the seller and both of us were very happy with the outcome.

Like many my first 50 to 100 pens were of poor or at best uneven quality and looked like I was in fact learning. But as time went by the quality, fit, finish, material and overall looks of my pens became better and better. Each night I would turn several pens and finish assembly of  others turned previous nights. Then I had my wife view them and she took any she wanted and made comments about the others. A good critic can teach you a lot if you listen. Those which past muster ended up in a large box. Those found to have flaws were repaired or turned down to tubes. 

After two years my box was full to say the least. I decided to sell a few of them. So I contacted the buyer for a regional bookstore, one who sell coffee for five bucks a cup. I showed her a sample group and asked if they were interested in selling them in their stores. The buyer liked the pens but did not have a good feel for how well they might sell. So a consignment offer was made and a price per pen was agreed to. I sent them all the pens I had on hand after careful final inspection. All was just over 600, with gift boxes for all and trays to display about a third of them at a time.  

They sold every pen out in just two weeks starting on Black Friday. I got a check in the mail for the entire lot just before Christmas. Thinking it was payment in error I called the buyer. It was very gratifying to hear my pens were a great hit. I put the check in my wife stocking at Christmas. To this day, my wife has never asked about any pen, wood, tool, equipment or shop purchase. All my wood working equipment, all the kits on hand and all the wood in my shop, everything has been paid for out of profits from pens. And I have more kits, more blanks and probably as much wood, or more, than the local Woodcraft store. 

Even though I pay taxes on the profits I consider myself a hobby turner. My profit per pen on the first order was just a little over $20.00 per unit. Not a professional markup, for a serious pen turner, and not at cost. You make what you want and deal in volume you want to deal with. I later found out that large orders can be as much a curse as a gift. Turn a hundred or more of any type pen, under a deadline, and it becomes work. Repetitive, boring and underpaid for the burnout which results. Now I make perhaps six to seven hundred pens a year. Mostly for fun, but most find their way into local stores. Keep your goals in mind and price to meet your goals. If you want high profit then make superior product because if yours is not you will not sell many before the market dries up. If you want just a little over cost you can turn forever if you just pay attention to details and give good value for your work. And if you just want to recover a little of your cost then price your pens to pay for materials and stretch your hobby budget as far as you can.


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## wildbill23c (Jan 9, 2014)

Question, how exactly do you figure the amount to pay the IRS in sales?  It may sound stupid but I have absolutely no clue.  I mean right now I'm just selling to cover the cost of materials so I'm not making any money, just a fund to get more pen stuff.  Just want an idea in case I actually start selling enough to make a profit.  Also, does that mean if I sell 1 pen at a 50 cent profit I need to pay taxes on it, or is there a minimum you can make before having to pay taxes?

You mentioned a consignment.  How does that work, and what is involved to actually put a display up in a store to sell pens or well anything for that matter?  Any special documents needed to do this?  I'm going to be picking up a small display box to setup on the counter at the cafe/restaurant where I work, but if I need to setup a display somewhere else, what do I need to know?


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## Tieflyer (Jan 9, 2014)

Federal taxes start at at specific $$ in income. If you're a business you need to file as such.   Check the IRS website and go from there. If you have "income" you probably need to file. That doesn't mean you'll meet the minimum requirements to pay taxes.  And the more public your sales are, etsy etc, the more visible you become in the eyes of the taxman. The more checks and credit cards you take, the more visible you become.  Some craft fairs provide a vendor list to the IRS because sales are being conducted at an event they are hosting. Know this in advance and get the needed forms to report your sales.  If you sell wholesale to a retail location, assume they will claim you as an expense, again increasing your visibility. Will they come after a hobby pen turner?  Probably not. Do you want to take that chance?  Probably not. Lol. The best business advice my mom has ever given me is "don't screw with the Fed". 

As far as consignment, different shops have different terms. Usually a percentage of the sale is kept by the shop for selling the item for you. I've seen 15-30% on average. Find out in advance, treat it as a business deal and have a valid and clear contract signed by both parties. CYA, just like any other business dealing.


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## lyonsacc (Jan 9, 2014)

wildbill23c said:


> Question, how exactly do you figure the amount to pay the IRS in sales?  It may sound stupid but I have absolutely no clue.  I mean right now I'm just selling to cover the cost of materials so I'm not making any money, just a fund to get more pen stuff.  Just want an idea in case I actually start selling enough to make a profit.  Also, does that mean if I sell 1 pen at a 50 cent profit I need to pay taxes on it, or is there a minimum you can make before having to pay taxes?
> 
> You mentioned a consignment.  How does that work, and what is involved to actually put a display up in a store to sell pens or well anything for that matter?  Any special documents needed to do this?  I'm going to be picking up a small display box to setup on the counter at the cafe/restaurant where I work, but if I need to setup a display somewhere else, what do I need to know?


 
Here is a link to a discussion about hobby versus business for US taxes:
http://www.penturners.org/forum/f18/u-s-tax-reporting-pen-hobbies-106530/

As for what the IRS wants (assuming you are a business) - They want anything you generate as a sale reported on your tax return.  Most penturners would use Schedule C.  You report your total sales on the first line.  On the next line you deduct your cost of the pieces used for the pen (kit and blank).  Further down on the form you can deduct your other expenses (a portion of your sandpaper, glues, etc.). That "portion" could be determined by a ratio of how many pens you made to sell versus the total number of pens you made.  That is a very oversimplified  example.

Keep in mind each state and many cities have different rules about business licenses and sales tax (most aren't that obnoxious, but some are).


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## Smitty37 (Jan 9, 2014)

wildbill23c said:


> Question, how exactly do you figure the amount to pay the IRS in sales? It may sound stupid but I have absolutely no clue. I mean right now I'm just selling to cover the cost of materials so I'm not making any money, just a fund to get more pen stuff. Just want an idea in case I actually start selling enough to make a profit. Also, does that mean if I sell 1 pen at a 50 cent profit I need to pay taxes on it, or is there a minimum you can make before having to pay taxes?
> 
> You mentioned a consignment. How does that work, and what is involved to actually put a display up in a store to sell pens or well anything for that matter? Any special documents needed to do this? I'm going to be picking up a small display box to setup on the counter at the cafe/restaurant where I work, but if I need to setup a display somewhere else, what do I need to know?


The tax man has no interest in individual sales.  Taxes are on the profits of your business - you take all of the sales and total them to get your gross sales.  You then take all of the costs for pen kits and or blanks you bought and deduct the cost any that are still in your inventory giving your cost of purchases.  You then deduct that from your gross sales to get your gross profit.  

Then you can deduct expences.  Typical expenses are advertising, shipping costs, etc.  I follow schedule C in tracking expenses.  You do NOT have to prorate use of sandpaper, glue, finishing materials etc. so long as you use them only for business purposes.  You can also claim the cost of your lathe, lathe tools, etc. so long as you use them only in your business.

The criteria to claim a business rather than a hobby business is for it to be a business you must be engaged in it to make a profit.  There are some general rules that apply - profit in 2 out of 5 years is the most common one and that is modified and there are exceptions for start up operations. 

There are a number of things you can do that are in your favor if you are audited by the IRS: Have a written business plan S.C.O.R.E is an organization that can provide you with a world of help (free) with that as well as some other services; Maintain a separate banking account for the business and do not mix business and personal finances; Keep accurate records of your sales and expenses and know which expenses the IRS doesn't like i.e. business use of your home which is tough to justify for most homes; don't lie on your taxes, you can and I always do, interpret the rules in my favor, if audited I might be overruled but won't be accused of fraud.  I also have a rule that says if an expense is quesionable unless it is very large it's probably best to not claim it.

Now if you are a hobbiest all of that goes out the window and you follow a different set of rules that require you to claim the income from sales but what you can deduct as expenses and how you deduct them is entirely different and much more in favor of the government.  So if you can justify it, it is better to have a regular business.

Btw it is perfectly legal to not claim all of your expenses if you want to meet that 2 out of 5 year profit thing....the profit does not have to be large and the IRS can't force you to claim expenses.  It is also perfectly ok to claim an expense one year and not the next.  For instance, most years I don't claim miles on my vehicle as business use because it's so little it isn't worth the bother, but some years I travel more for business and claim it.

If you have a legitimate business you can easily hide a closely related 'hobby' by integrating it.  I do that with pen turning, I use the same kits I sell in turning pens so when I sell a pen I just add the sale to my business income.  When I buy blanks they become business inventory, If I sell some they just become business sales.

Now you should be confused enough to last awhile....:biggrin:


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## wildbill23c (Jan 9, 2014)

Very interesting everyone, sounds like typical government nonsense in how everything is written.  Completely makes having a business or actually trying to help yourself out of the hole completely pointless.  I make less than $14k a year, and pay more out in taxes now than I did when I was working a $40k a year job.  Pretty darn backwards if you ask me.  I got a refund from my 40k a year job, now I owe taxes every year ugg.  LOL.  

So the IRS is going to worry about me making a couple pennies from selling a few pens here and there?  Oh well I'll do the tax forms for them so they can have more paperwork to sort through LOL.


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## Marines1407 (Jan 9, 2014)

It is an elusive question. What should I charge for my pens? How much is artwork worth? It is almost 100% subjective. I have a day job, I also have a business degree. Pen turning for me is a hobby which supports itself financially (I am thankful because most hobbies don't) but I run the hobby like a business. I have a separate account for pen turning, I track expenses, calculate my costs, and set prices based on those factors. 
I charge a price that I am happy with, and the customer is happy with. I have been told I do not charge enough, and others have said they are too expensive. 
I live in an upscale area and I have found my more expensive pens to be most popular. I actually sell more $40 dollar pens than $20 pens. I also meet people who are budget minded and want a low-cost pen. 

If you want to give them away, give them away, If you want to charge the moon, charge the moon. The main point is to have fun doing it. If you are not having fun, find a new hobby.


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## pshib (Jan 9, 2014)

Here's how I decide on what to charge for my pens. I take the total cost of the pen, that includes tax, shipping, a rough estimate of the cost of glue and sandpaper used for the pen, then I add a 30% mark up and $20 an hour for my time. Finally I adjust the price according to how well it looks. I usually charge roughly $35 for a slimline depending on the final look. Custom work is an extra charge.


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## Smitty37 (Jan 9, 2014)

An interesting side to this thread is, "How much is time creating pens worth?".  And, what makes it worth that figure?

Here is my thought.  Time creating a pen is worth exactly what I would be getting for that time doing other things that I do.  For instance:

I walk my dogs -- $0.00 except that now and then I find a coin in the parking lot of the state park where I take them to walk.

I work in the yard -- $0.00 but doing my own mowing does save me money.  On the other hand mowing when the lawn needs mowing takes priority over turning.

I watch TV a little -- $0.00 actually that costs me a little.

I eat dinner -- $0.00

I sit at my computer and play bridge, free cell, etc. -- $0.00

I build other things usually for our own use in my shop -- $0.00

I go to Church -- $0.00

You get the point.  Most of the alternative uses of my time do not give me any income.  Couple that with the fact that I like to turn pens and I consider the value of my time as $0.00.

When I was working full time and making close to $40/hr I would still have considered the time turning pens as being worth $0.00 because if there had been an alternate use of my time that made money I wouldn't have been turning pens, unless I didn't need the money and would rather have the recreation.


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## kovalcik (Jan 10, 2014)

The price of my time is the hardest for me to calculate when decideing what to charge for my work. It is something I do to relax. It is sort of like someone else getting paid to read a book or play video games.

A related aside, at Christmas my family does a Yankee swap, but every gift has to cost a dollar or less Everybody tries to come up with either the most wanted gift or the one nobody wants. (I got stuck with a 3' tall plastic wise man one year. My sister in law is a yard sale queen!). A lot of ingenuity and work go into the gifts and a lot of time is used to make up for the $1 limit. I usually go with something off the lathe. I often wonder at the true value of some of the gifts vs the $1 price tag. It goes a long way to demonstrate the difference between cost and value.


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