In a previous topic, it was asked "How much do you charge?" Several of the responders talked about how much profit they expected to make. The answers sounded like the profit was what paid the labor! What I consider profit is that portion the money received that I can use to fund the next fishing trip and take the wife out to dinner and money that can be used to expand the business. I consider the labor as an expense. If you were in a rod building business and had a helper, what would the profit be on the rod the helper built, and what would the profit be on the rod you built?

What are your thoughts and What do you think is a reasonable profit percentage (after all expenses) should be, 30%, 50%, 100% ? Do you make more profit on a highend coustom rod or the plain jane rod?

Bill Bauer

Gross profit is the amount above and beyond the purely physical costs of producing an item. Net profit is the amount left after "overhead" has been taken out of the gross profit. Things like insurance, heat, lights, rent, advertising, labor, etc.

Few custom rod builders operate in a stand-alone business type situation, so they often don't factor in things like this. But they should at least factor in the cost of the thread, finish, razor blades, sandpaper, and all those other little things that one can easily forget to charge for but which must be purchased in order to construct a custom rod.

I can't say what a reasonable profit percentage is because there are too many builders all operating for different reasons and with different expectations. But unless it was for a gift or a close friend, I'd hate to build a rod and end up with less than $100 net profit. But again, it all depends on what you're trying to accomplish with your rod building business.

.............

Thanks Tom, that is exactly what I was hoping to hear. Net profit is the term I am familiar with and your answer is a good explanation of what anyone in business needs to remember. Namely, what is the (net) PROFIT after ALL the expenses (labor is an expense) are paid.

Bill Bauer

I attended a seminar in Visalia California some years back which was basically trying to help small business startups.
The figures were interesting to me and i have never forgotten them. I think they still apply to a degree today.
Most businesses fail within 3 years.
Of the ones that make it their selling price was AT LEAST costs x 3.
The ones that failed were mostly those who could not accurately determine their costs. There are other factors but that was #1.
I build rods for buddies and have a list of guys who have asked me to make them rods.
But its on a cost plus it maybe pays for the shipping of my personal supplies basis. In reality i lose on the deal as my labor is free.
A friend of mine offered to host my rod making on his African Safari business. When i told him what i would have to sell them at to be making a genuine profit he lost interest.

There was an in-depth article in RodMaker concerning how to determine the actual cost, all costs, of producing a custom rod.

This was in the series on custom rod pricing which also included a list of builders in various geographic regions of the U.S. and what they charged for a list of various rods. The physical cost for each rod type was outlined and fixed. The final selling price varied widely by region, however.

There were also comments from a wide range of builders concerning their local markets and why they charged what they did.

..........

Like Lou, I build and sell a fair amount but mostly friends and fishing partners. I charge my cost x3 for a simple rod but more intricate = more expensive.
I try to make enough after shipping to build one for myself, whether I need another rod or not. I'm not trying to make a killing, just enought o keep going and have some shirts or boat stickers or hats made to give out at local tournaments. My day job pays the bills but the rod building deal helps on my fishing habit.

IMO, you can't have a completely fixed formula ... such as keystone pricing.

Take an inexpensive IM6 generic blank, some Hardloy guides, EVA grips and a basic reel seat ... multiple times three and become INSTANTLY disappointed in your "profit".

Take a more costly SC5 blank, Fuji Titanium SiC guides, CG1 turned cork grips and a Fuji Cobra seat ... multiple times three and own it for life as your own personal rod.

Each builder has to determine the correct price for their work AND their marketplace. However, do yourself and your customers a favor ... be sure your craftsmanship is up to par AND don't undercut the value by selling too low.

I have no problem getting orders and my builds aren't inexpensive. A proper business plan will go a LONG way to making your rod business successful ... whether it is a small home-based business or something larger.

the way i see it, there are two different types of profit in the rod building business.

1. you are a custom rod builder and you build every rod yourself. this may put a little cash in your pocket, but there's no way you're going to bring in the motherload. you may charge 300% over costs, but the fact is one person can only build so many rods in a day.

2. you design a rod and hire a major manufacturer to build them for you to spec. you market the heck out of it. now you are not limited to how many rods you can sell, because you're ordering the rod you designed in bulk. distribute them through sportfishing dealers, and all of a sudden you are selling 50+ rods per day. of course you have to be marketing/advertising saavy for this to work.

just my $0.02



Edited 1 time(s). Last edit at 07/17/2009 01:41PM by Tom Kirkman.

In my own business it is the hidden costs that need the closest attention...mobilization time, insurance, drive and delivery time to and from a job...

In my business I try to track it with a General and Administrative Overhead figure spread out over the whole year. Basically, I add up all those 'non-production' costs and divide that number by the number of hours I will work for the year. The number, at my level, usually comes to around $12 for every hour worked. This gives me a general idea so I don't end up taking these costs out of my profit.

Les

A similar way to look at things is this, which is very similar to what others are saying.
Take costsof materials x2 (except the blanks) Lower end blanks x3 is ok, but on the high end ones, x2 may be a bit high, but this is up to you. Remember that the x3 may actually gain you a bit more than x2 after your shipping is taken into consideration. You pay shipping twice. Once on the materials and supplies, once again as you ship the final product to the Customer if you have to ship it. Also the shipping tube is a cost. The true cost may be a 2 1/2 markup. That is up to you.
Also factor in an amount for your thread, color preservative, epoxy and other supplies you use. Maybe the amount is $15 per rod. You will be able to figure that out. Maybe you only mark that up x2 also. Include your shipping costs here.
If a rod takes you 8 hrs to make, you want to make $15 per hour, the labor amount = 15x8= 120.00.
So if the seat, handle set, guides, thread, checks, keeper, = $60.00 (cost) retail =cost x 2=$120
blank = $50.00 (cost) retail =cost x 2 =$100
labor = 8 hrs x $15.00= =$120
misc costs, plus shipping= 15.00 misc costs =$30.00
total cost $125.00(without labor) total = $370.00 (selling price)

This is a pretty good example of a couple we have built. As for any fixed costs, like electric, work space costs, I would include in the labor cost per hr, or add another line.
A person also wonders about your equipment costs, Well, this is handled a bit different. For tax purposes, if you do this for a business, this is a depreciation, or equipment purchase issue.

I own a couple small businesses. We build the rods as a hobby.However we do sell them through our Lure Company. We do not charge as much for the labor factor as I put in the example. However, we do not do the really fancy threadwork. You need to price the labor as you see fit! I am kind of a numbers guy. We do a lot of activity-based-costing, as it relates to direct business costs. The same ideas will apply here. The above example is an example of how this works.
If anyone is interested, I have a simple model of this on excel. I would be happy to email it to anyone who may be interested.
Thanks, I hope I did not confuse anyone too bad, It is the same others said, yet presented a bit differently.
Kyle Robinson

Kyle,

I`ll take a copy please,

beshelman@yahoo.com


Thank-you,

Bill

Ohio Rod Builders

Canton, Ohio

Kyle. I sent you an email to get a copy of that excel program, but i must have the wrong email. Could you please send me a copy of that aswell. thank you
cscarriganflyfishing@yahoo.com

Kyle,

Can I get a copy as well? I am always interested to learn.

Patrick Rutledge

Hello Kyle,
I am new to all this and would like to get a copy of your excel program.

cheneyotye@yahoo.com

thanks

Hello Kyle,
I am new to all this as well and would like to get a copy of your excel program.

2alpha@cox.net

Thanks