Over the past 20 years, the question I’m asked most often by canvas makers, upholsters and my students is “How much should I charge for this project?” Daily, someone is asking that question on the Advanced Textiles Association forums and industry Facebook groups.

As business owners, we must consider several factors, such as:

• Markup,
• Hourly Labor Rate and 
• Gross Profit. 

While large businesses have myriad employees that can crunch the numbers for specific demographics and geographic locations, small businesses do not. The simple task of setting our prices can be daunting.

Let’s go back a few decades to see where we came from and where we are going, money-wise.

The 80/20 rule

In the old days, canvas shops simply added up the cost of materials that were to be used on the project to determine the total price. This was called the 80/20 rule.

Let’s say we have $500 in materials. Divide that $500 by .20 and it equals $2,500. The $2,000 difference between material cost and retail price represents 80 percent, which is gross profit. Labor costs are paid out of the gross profit. This was a profitable formula for the canvas industry to ensure a successful business.

However, material costs have steadily increased over the years. Fabrics that were $6 per yard when we got into the business are now $20 per yard—or more. Labor rates that were $50 per hour are now $168 per hour in some areas. Shipping costs are through the roof and need to be accounted for in your estimates as well.

Back in 2005, we saw the 80/20 rule steadily becoming more difficult to follow, if you consider the time invested into each project. We saw canvas making go from a basic level of complexity through the mid-1990s to difficult levels as the boat designs changed. Smile and frown windows, zippered track systems, complex frame systems and more all played a part in increasing the hours per project.

In some cases, the 80/20 rule made a profit; in other cases, we were working for nothing when you consider the time spent on the project. This is a common problem in our industry.

What’s the answer? We decided that we must look at everything and its financial value. We wanted to consider materials markup, labor rate, profitability and hours invested on the job.

The price of materials

We began by establishing the markup on materials. The canvas industry had always used 200 percent as their golden number. Example: a $5 item would retail for $10. However, when stainless steel jumped into the $200 per-stick range and polycarbonate glass surpassed $500 per sheet, the 200 percent normal markup went out the window.

We now have markup levels at 125 percent, 150 percent and 200 percent, depending on the cost of the item itself. The higher the cost, the less markup we apply.

The cost of labor

Next, we looked at labor rates. A simple way to establish an hourly rate is to visit your local boat dealer. Walk back to the service department and look for a sign that is likely hanging somewhere on the wall. It says: “Our Labor Rate Is $___ Per Hour.” Dealership rates may vary slightly, so the blank could be filled on the dealer’s sign with any figure.

This is a good starting point because we, as canvas makers, cannot rebuild a boat motor and they cannot do canvas. Although our skills are completely different, our skills are equally valuable.

Time is money

Next, we tackled the hours needed to complete the project. We track our time to estimate, build frames, put in fasteners, install track valances, fit canvas, lay out the project, sewing time, installation time and dozens of other steps that may be necessary to complete a particular project.

These times are factored against each estimate that we do. Thankfully, we have software that makes this easy to do. Another way is to use the Marine Fabricators Time Standards—available to Marine Fabricators Association (MFA) members only—as a guide. Their standards guide will give you instant project times. Best of all, it won’t take years to track and document times. The MFA has done the work for you!

Make a profit

Each job must make a profit. No, profit is not a dirty word—it is the most essential part of any business. Without profit, you have nothing more than an expensive hobby that is unsustainable.

We now have markup, labor rate and time to use as factors. So how do we use them to ensure profit? Which factors are the most important?

Let’s say you have a small job that will take $300 in materials and 4.6 hours to complete. If you charge $1,005 for the job, this leaves you $705 for gross profit (labor), which when divided by 4.6 hours is $150 per hour.

Sounds good, right? But the profit for the job is only 70 percent. To get the gross profit to 80 percent under the 80/20 rule, you would need to finish the job faster or charge a higher labor rate. Since you likely cannot cut any more steps or speed up the process with robotics, a labor rate of $228 is required to make 80 percent for example.

Be flexible

After decades of establishing the cost of my time, markup on goods, hourly timetables and so on, I’ve found that the most important factor to successfully making a profit as a business is ensuring the gross profit of each individual job is consistent, rather than setting numbers that result in varying gross profits.

Sometimes it calculates as an hourly shop rate of $92, sometimes it’s $150 and sometimes it’s $250. We allow our shop rate to float up and down and we don’t publish it.

We also never disclose the number of hours estimated or an itemized list of material costs—that information is for our internal records only. Some states require disclosure of material costs separate from labor, but everyone can keep their
number of hours and their per-hour rate private.

This means that similar jobs will have equivalent prices, and if the jobs are different and Customer B complains about being overcharged based on what Customer A paid, we can clearly point out to the customer that they are comparing apples to oranges.

If we are maintaining an 80 percent gross margin, we know that we are profitable after all expenses are paid—and that keeps our business running. 

Russ Griffin is co-owner of Northcoast Marine Specialties LLC, which operates a training facility in the art of canvas making in Port Clinton, Ohio.