Materials - What Are They Worth?!

My wood obsession is well renowned. People from all around the world pay good money to hold my hard wood in their hands...

I'll mainly be focussing on the valuation of timber, but the principles that i'll discuss can easily be applied to other materials, though as you'll see, timber has some unique aspects that must be considered when deciding how to price it into your products...

Example 1

So let's get straight fucking into it...

Consider the two scenarios below:

1. You buy a piece of PSE [planed square edge] timber for £200. You spend 10 hours making a piece of furniture out of it, with an hourly rate of £20.

Allowing for £50 of overhead allocation, you sell the piece for £450

2. You buy a piece of rough cut live edge timber for £100 and process it to the same dimensions as the PSE timber above. You spend 10 hours making a piece of furniture out of it, with an hourly rate of £20.

Allowing for £50 of overhead allocation, you sell the piece for £350

Which of the above examples is wrong!?

Exactly...its number 2!!

There is a reason that PSE timber costs more than rough sawn, because you are paying for the time and effort someone has put into processing it for you. By buying a cheaper piece of timber and doing your own processing, you're actually going to put yourself in a loss position if you don't put a value on your time to do it.

It may only take an hour to get that piece of wood to where you want it to be, but that is still an hour of your time. So at £20 an hour, that piece of wood you bought for £100 should then be instantly valued at £120...no questions...no arguments...if you think otherwise, you are, in fact...

WRONG!!

You have still potentially saved your client £80, but have directly INCREASED your profit and put VALUE on your time!

Let's Talk Drying

Wood is wet and we all know we need to dry it before we use it. Different applications will have different MC [moisture content] requirements, but for sake of good order, lets say we want to have our wood at 10%...

Wood is a prime example of where

"The Wetter The Better"

is absolute fucking horseshit...

So we go and buy ourselves a fresh cut slab of wood for £200 and again, for the sake of good order, lets say it's fresh cut and has a MC of 30%...

We obviously need to dry it, so we have two options:

1. We air dry it for 2 years until it is at 10% (yes...assumptions made..bite me)

2. We pay for someone to come and collect it, kiln dry it for us, and bring it back, but its usable within two weeks

So obviously one of the above has a cost and one is "free". But ask yourself this, if you went and bought that slab as a 2 year air dried piece at 10% MC, would it be cheaper or more expensive than the fresh cut slab you bought?

Exactly...it would be more expensive...why?!?...Because drying wood is a service, it takes time...and therefore you shouldn't be doing it for free!!

We have to take into account something called "The Time Value of Money". Let's stick with our example above. You spend £200 on a piece of wood that can't then be used for two years. That means you have effectively been asked to put £200 aside, and not touch it, look at it, move it, lick it, feel it, for a whole 2 years.

Now if I had £400 in my bank account and I took £200 out in cash and put it in an envelope for two years and left the other £200 in my bank account, at the end of that period, which would be greater?

Now yes...with the way the global economy is, the money in the bank would probably be about the same 😂, but the general consensus would be that it would have earned interest, i.e it has at least been available to create a return.

Now lets come back to the second point above, kiln drying, and lets again, for the sake of easy reading, assume the kiln will dry the wood to 10% also, but there is going to be a charge of £50 to do it. However we are then going to have 10% MC timber within two weeks. That £50 is effectively the value of the TIME we need to apply to the timber we are drying ourselves.

Now clearly the above is MASSIVELY oversimplified, but its designed to get you to start thinking about pricing and costing being an ever evolving process.

Inflation

HAHA...inflation...hard wood...get your minds out of the gutter people...honestly 🙄

I'm just going to warn you all the once...

DO NOT google "inflation penis meme"like EVER

Even in the name of comedy 😰

We can't escape inflation, like Thanos, it is inevitable, yet it only really becomes an issue because wages rarely go up in line with it...but anyway, i digress...

The point is that if we buy a piece of wood and keep it for 2 years, ignoring adjustments for drying, ignoring adjustments for processing, if we went to buy that same piece of wood 2 years later, the likelihood is that it would be more expensive.

So if we are using the materials in a commission, what value do we use?!

We use the higher one...because you have to look at it from the point of view of the client going out and doing the job themselves...what would their cost base be? It would be the higher figure...therefore you utilise the higher figure, because otherwise, you are again, technically putting yourself in a loss position.

N.B - let's not get ourselves confused with the valuation of STOCK which is an accounting exercise predominantly used for tax purposes. Stock is valued using the LOWER of cost or NRV [net realisable value - what you can sell it for] but that's not what we are doing here so don't fret about it for now!!

Also, taking inflation into consideration is something we should do on an annual basis.

Inflation at 4%?!

1st January each year, add 4% to the base cost of your materials.

Your costs are going up and you need to be able to reflect that in your prices.

Material Rarity/Scarcity

So you've managed to source yourself a piece of material for £150 that you've never been able to source before and you're pretty sure you're incredibly unlikely to be able to source again...

So how do you value that when it comes to using it in a commission?!

This ultimately bring us back in a big circle to my main point in my blog post "Know Your Worth" - What can the market bear?!

You could effectively value it at whatever the fuck you like, if you're pretty sure nobody else is going to be able to source it themselves for the same purpose, you almost have a level of exclusivity. You have a unique selling point, so capitalising on that is essential. If you know other people have the same materials, or there are ways and means to source it, then we have competition and we have to price it accordingly...we have to remain fluid and we have to remain adaptable.

Example 2

I bought a piece of 1200 year old Ancient Elm Burl about a year ago, beautiful stuff, truly stunning, but not the sort of thing you can walk into a timber yard and just pick up, its incredibly rare, I may get offered some again, I may not...I prudently assume not.

I cut the piece up into a number of mallet heads and handles, and then priced them accordingly based on the fact I would have to further dry them and stabilise them before I could use them.

Now I know there is nobody else out there using this stuff for tools, but I price it fairly based on my cost and time.

However, every time I accept a commission with a piece in...my stock is reduced...it therefore becomes scarcer and rarer...so as my stock dwindles, I increase the "value" of the remaining pieces to reflect the limited nature of the material.

Waste

What do we do about wastage?

Let me give you another example

Example 3

I buy a piece of wood 75x75x300mm for £90

I would normally cut a mallet head blank to 75x75x100, so logically you would assume that I would then cut into three pieces, and value them at roughly £35 each for the purposes of quoting for a mallet...

WRONG!!

IF this particular timber needs stabilising, yes, I will cut it into three pieces, I will dry them in the oven slowly because as i'll then be stabilising them, i'm not too worried about any checks or cracks that may appear...and then they'll be priced at around £45 for my time in getting them usable for MY purposes!

However, if it is a hard wood that doesn't need stabilising...I will cut out a 75x75x200 section from the MIDDLE of the piece, and then cut that into TWO pieces of timber, as opposed to three...therefore valued at around £50 each for the purposes of quoting for a mallet...

But why i hear you ask...?!

Because when timber dries, it loses moisture from the end grain quicker than it does through the face grain. There can be a MC discrepancy between the middle of a piece of timber, and the extremities.

So if I cut this piece into three, I will have one mostly uniform piece and two with a moisture gradient. When the two with the gradient continue to dry and adapt to changing environments, different parts of the head will move and adapt differently, introducing stress and the potential for excess movement or failure.

So by cutting this piece into two instead of three, I can provide a better product, but at a higher price.

Travel and Bespoke Sourcing

If like me you are very particular about the timber you use, you may go directly to the supplier yourself to ensure you select timber that has the exact characteristics you need.

Yes, we can get all manners of timber delivered to our door nowadays, but we are at the behest of someone else picking it for us. It may be largely irrelevant, but there may be situations where you need a very particular grain pattern, or size, or colour and the only way to achieve that is by selecting it in person.

So let's say the supplier is an hour drive away (call it 40 miles) and we spend an hour whilst we are there to buy a piece of timber for £250

How much are we going to value that piece of timber at the moment we get it home?

- £250 direct cost

- £60 direct cost (assuming 3 hours of our time at £20 an hour)

- £36 travel (80 miles at 45p per mile which is the UK standard rate for mileage reimbursement)

So the moment we put it on our shelves for the first time, we should be VALUING this piece of wood that COST us £250 at:

£346

And that is a fair representation of the time and the effort that has been put into sourcing that particular piece of timber.

I try where possible to select as much of my timber by hand as I can, though I am lucky enough to have a number of suppliers who I trust implicitly to send me the best of the best!

Ultimately, how you value your materials is entirely up to you, but like with general pricing, you need to havre method, you need to have consistency, and you need to remain both comparable and reasonable at all times. Otherwise you risk pricing yourself out of whatever market you are trying to penetrate...

As always, any comments or questions, please drop them below and i'll be sure to come back and answer them in as much detail as I can

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