Secrets to Operating a Successful Gunsmithing Business was written by Gene Kelly, President of the American Gunsmithing Institute and the Gun Club of America. This is the second of a seven part blog series.
Secret #2:
Know your operating costs, decide on and maintain adequate profit margins to meet your goals.
Most Gunsmiths fail simply because they don’t charge what they need to, to cover overhead and still make a significant profit. They seem to be afraid to charge what their knowledge and skill is really worth. They often price a job low, because that is what the starving Gunsmith down the road is charging and he has charged that for 20 years, or “because this gun is only worth X I can only charge Y.” Wrong!!! The market will bear more than you think it will. People WANT to SPEND MONEY on their Guns! This is one of the key areas I work on with our students and now some of them are making six figures a year!
Once you know what your personal objectives are, then next you need to have some idea of what your total business costs will be. Again, to begin with don’t over complicate it. Here’s a simple break down of how to do it:
I am going to over-simplify this, ( I go into a lot more detail in the course), but basically you need to know your overhead and general costs, such as: rent, utilities, advertising, etc. for the month. That is what we are calling your overhead. Let’s just say it was a $1,000 to keep it simple.
Then we divide that by the number of hours you will be doing paid work. So a typical work month (40 hours per week, 4 1/3 week) averages 176 hours per month. Now this is assuming you are going to be 100% productive and we all know that no one ever is. So you need to adjust that number by a performance factor. Say you were only able to bill 50% of your time. That would be 88 hours a month if you are working full-time. So take your total overhead ($1,000 in this example) and divide it by 88. Bingo! You now have your per billing hour overhead cost, (in this example $11.36 an hour).
Now take what you want to make in NET profit each month (let’s say $5,000) and divide that by 88 (50% Billable Hours) and you will end up with your second number $56.81. Add them together and you get the minimum hourly rate that you need to charge. (in this example $68.17 a hour). Does that seem like a little or a lot to you? If it seems like a lot then you REALLY need to take my Business Success Course. But it may surprise you that you can actually charge less than that per hour and make more NET profit if you become more efficient. I will address how to do exactly that in a future blog.
Check back for tomorrow’s blog where we’ll discuss marketing and selling your gunsmithing services.
