The most important, yet ignored, step in the canvas trade.
By Russ Griffin
Log onto any canvas or upholstery forum and you’ll quickly see that pricing and estimating is the most asked question by people in the marine canvas trade. Yet, it is the most debated and unresolved question, leaving the inquirer no more knowledgeable than before he or she asked the question.
If you ask 100 canvas makers how they estimate jobs, you’ll likely get 90 different answers. Some use the old 80/20 formulas of labor/cost from our Business 101 classes of decades past. Some folks price per linear foot. Some owners simply count the number of windows and boat tops. Some use Time Standards for labor and materials costs.
In the first two years of business, we saw that pricing and estimating was crucial. By the end of our second year, we had established a pricing and estimating system to ensure success. So, why does pricing and estimating remain such a mysterious subject among canvas makers today?
The answer often lies in the mind-set of the canvas shop owner. While geographical location, income per capita, cost of operations, competition and other factors play into pricing, canvas shop owners often fail to realize that pricing and estimating is something we do to make our business a success. Instead, shop owners often put themselves in the mind-set of the consumer. This is a dangerous place to be when pricing jobs because the consumer rarely understands the value of the product you are providing.
Originally, our business had three partners who estimated potential jobs. One of us was a 15-year veteran in the canvas trade. My brother and I were new to the trade with only two years’ experience. Yet, our backgrounds had given us experience at pricing and estimating. Coming out of the advertising and marketing field prior to canvas, I had learned the secrets of being a market price-leader and how to capture larger market shares. In other words, “How much of the money being spent in canvas in my market can I capture?” My brother had experience in the construction business, where job bidding could make or break a company overnight. Often, in the construction business, miscalculation of a single item can bankrupt the company on a single job. Between the three of us partners, we quickly saw that our job pricing was inconsistent and based on perceived value, past history, old rules or consumer mind-set.
Necessity is the mother of all invention
Putting this assumption to the test, all three of us estimated the same job individually without collaborating on our estimating methods. When the three estimates were finally presented, the range of the estimates, from the lowest to the highest, was a $2,000 difference! If the job had been worth $20,000, you could understand a 10 percent variance. However, this job was worth $4,500 to $6,500, depending on which estimate you chose. So, who was correct? More importantly, which estimate ensured profit and which estimate did not?
Necessity is the mother of all invention. We immediately knew we had to create a pricing and estimating system, one that was not only based on labor and materials but would also tell us if we were making money or not!
Establish a pricing system
Most people in our trade are hands-on folks who do not have hundreds of hours to collect the seemingly endless amount of data required to establish their shop rate, which is an amount per hour charged to the consumer to cover labor, taxes, fixed expenses, rents and mortgages, etc. This is known as overhead. This shop rate may range from $65 to $485 per hour depending on your clientele and location. For example, a canvas shop on a small inland lake in Tennessee has different overhead than a shop in Long Beach, California.
Establishing your shop’s pricing system may be easier than you think. A simple method is to use the shop rate of successful industry-related businesses in your area, such as a boat dealer or auto dealer. These businesses are often larger and have dozens of number crunchers on staff who have already established the labor rate for your area. Simply visit the service department of your local boat or auto dealer. There will be a sign posted near the counter displaying the company’s labor rate per hour. Since this labor rate reflects the value of skilled and trained mechanics and the overhead costs required to offer the company’s services, you may be able to use this figure as your labor rate. After all, why should the canvas maker’s rate be any less, assuming you are also skilled, trained or certified as well?
Determine your costs
The second step is to determine your cost of goods. In addition to the cost of materials used on the job, we must add a markup to cover shipping surcharges, waste and overages, and fixed materials such as tape, staples, tools, thread, sewing supplies, and any other costs associated with fabrication. This is something most canvas shop owners fail to factor into their pricing. They fall back into the consumer’s mind-set and fail to realize there are additional costs above what they paid for a yard of material or a frame fitting. In an attempt to give customers a deal, they don’t mark up the cost of materials. Little do they know they just took a loss on every inch of fabric or item purchased for the job. In other words, shop owners are paying customers instead of customers paying them.
If you visit national chain stores that serve the marine industry, you quickly see their overhead is built into the price of their products, since they have no repair or installation departments. Often, these big-box stores add 400 to 500 percent to the cost of an item in order to cover overhead and labor costs. Since a canvas shop has both labor rates and product sales, we use a much lower markup—for example, 200 percent—on materials to cover costs and expenses related to them. Even at 200 percent, we are giving the consumer a heck of a good deal!
Decide who you and your customer will be
The final step to pricing is knowing how long it will take you to do the work. The Time Standards guidelines published by the Marine Fabricators Association, canvas training schools and canvas estimating software are all valuable in estimating jobs with a large number of pieces or complexities.
But before you carve your timetable into stone, you must factor in the level of quality your customers are willing to pay for. This will affect the methods of fabrication your shop will use and your fabrication timetable. Decide who you are and who your customer will be. Are you in a market with high-end yachts? Are you on a small lake in Minnesota? Will you compete to get the top two-percenters, or will you be the bargain-price guy? Perhaps you will be somewhere in the middle. Your fabrication times will depend on the quality expectations in your market and the level of quality you are able
The real formula for success
Our shop uses estimating software we designed that calculates stainless steel, fabrics and trimmings to the inch. It calculates fasteners and fittings, grommets and poles, and much more. It provides you labor hours, a materials list and cost of goods. It tells you how many zippers to order and calculates your gross profit on the entire job. It does all of these wonderful things, yet I chuckle when I see the bottom-line results. Magically, the profitable numbers always seem to hover around the ole 80/20 rule we learned back in Business 101.
The real formula for success is to think like a businessperson, not a consumer. Profit is not a dirty word. Old canvas guys like myself have a tendency to remember a job we did 10 years ago. We fire a number from our hip to the consumer, failing to realize that costs have doubled since then. Have a system based in real dollars, real expenses and real profit. You’ll never have to worry about underestimating again.
Russ Griffin is co-owner of Northcoast Marine Specialties LLC. Northcoast operates a canvas-making training school in Port Clinton, Ohio, and is an estimating-software provider.