Blacksmithing as a Business

© Nol Putnam

published in ANVIL Magazine, January, 1996

Blacksmith Bill Gichner once told me that as a beginning smith, I would spend 80% of my time learning the craft and 20% of my time selling. Once I had mastered the craft, the figures would be reversed. I did not believe him - I was wrong. It became imperative to learn what my work was worth.

In smithing, the progression for me has been learning:

  1. How to smith.
  2. How to price my work.
  3. How to market the ironwork to produce a livelihood.
  4. How to put all of this together to create a life that includes family, friends and being a good citizen in my community.

My process sounds very orderly. That has not been the case. All of the above points have to be worked together; like the tides, intertwined. Some days your hammer will do your wish, and the next, some numbers may fall into place.

Something about my own business first. I did not pick up a hammer until I was 37 years old. Aside from wishing that I had started learning younger, beginning at that age, I knew what I wanted to do. I did not have to try a lot of avenues until I blundered into my love. No blades, no horses, no wholesale; I knew I wanted to do: large, architectural smithing. Of course, I paid years of dues with hooks, hardware, chandeliers, fairs, galleries, and even some wholesale work. And I still do some of these. One can never start full grown like Venus on the shell. Dues must always be paid.

In 1982, I moved to my present shop and for the next ten years worked with one or two others in the shop as partner, helper or apprentice. Today, I have come full cycle, and once again I work alone on architectural commissions.

My basic business rules are:

  1. To respond to any inquiry (mail, telephone or fax) within 24 hours. This includes people who call upon me in an emergency to shoe their horses. I cannot. But I always return the call and refer them to farrier friends. Someday they may want some wrought iron.
  2. To greet everyone who comes into my shop. Customers are the life blood - treat them nicely. And remember, never judge a book by its cover.
  3. To treat every question as though it is the first time I have ever heard it. It is the first time the questioner has been brave enough to ask (because you greeted them so nicely), and all that's wanted is some correct information. Who better to provide it than you?
  4. If I have the time and the inclination and they are receptive, to teach them something about the craft. They are future customers or perhaps their friends will be. It pays to be helpful.

The foundation of a successful business is good record keeping. It is a must. You cannot know the value of your work without records. And too, the IRS will not like you, and your accountant will have strong words with you. So do not buy into what I call the Sarah Bernhardt syndrome: "I amartiste I do not keep records!" Nonsense. The flip end of this is just as harmful: "Well, my work isn't very good, so I shouldn't charge a fair price." It is true that the customer should not be charged for your education. But once learned, you deserve to be paid for all of your work. And too, you will be undercutting your smithing neighbor who knows the value of his work. Not fair to them.

My work is priced by how long it takes me to do it. Thus, I must keep track of the hours and then know what to charge per hour. The latter is called your shop rate and is made up of two parts. The first part is what it costs you to open your doors: rent, mortgage, lights, fuel, telephone, advertising, heat, equipment, shop tools, water and more. This is your overhead. The second part of the figure is your salary.

Overhead is everything you need to run your business. At tax time, some of these expenses will be handled in different ways. Costs of major equipment (your power hammer, a new anvil) may be spread over several years. The building, if you own it, may also be depreciated over 15 or 20 years. And the cost of materials used in the creation of your work may be deducted right off the top.

Breakdown of Expenses or Overhead: Advertising, Business Commissions, Donations, Dues & Publications, Equipment, Freight, Hardware, Insurance, Leasehold Improvements, Mail, Mail UPS, Materials, Materials steel, Office Expenses, Other, Payroll Gross, Propane, Rent Paid, Sales Tax, Shop Tools, Show Fees, Supplies, Tax Preparation, Taxes (Federal), Taxes (FUTA), Taxes (Unemployment), Taxes (State), Taxes (Town), Taxes (Personal Property), Taxes (Real Estate), Telephone, Travel, Truck (mileage), Utilities, Water, Welding Gas.

All these bills are to be paid from your business account. Keep your personal and business accounts separate. It is not that someday you won't get stuck and need one for the other, but don't make a practice of it. It is much simpler for all concerned to have those nice checks printed up with the name of your forge boldly at the top. This can take many forms, from a simple checkbook to the One-Write check system (using the carbon strip), to a computer program like Quicken, which greatly simplifies record keeping.

I also keep a record book in my truck to record all the mileage I drive for the business. This is a must for the IRS. It is a log of date, where, mileage in and out. At 29 cents per mile, this can add up quickly.

Also on the dashboard I keep an envelope to put in all those silly little cash receipts for four screws, one can of black paint, the envelopes for the business, and such items. These are your out-of-pocket expenses. I pay myself back at the start of each month, breaking them down into their categories. I know all of this sounds burdensome. But is really only a matter of training yourself to take a few moments to keep these records as they occur.

The next step is to figure out how many hours a day, week or month you spend actually producing work. It is this activity that produces the income - not answering the phone, not looking at reference books, and not having that cup of coffee. Only when you are at the desk designing it, the anvil creating it or the bench putting it together, are you actually earning money for yourself and your business. You will be amazed, astounded and even shocked at how little of your time actually gets spent productively. I am at my shop seven to eight hours a day. I probably spend five or six hours a week in the evenings at my desk and computer - in theory, that is a 45- to 50-hour work week. In actual fact, my chargeable hours hover between 15 and 25 hours per week. It is from these productive hours that my overhead and salary must be paid.

To find out how many hours you are working or where they go, create a time sheet in half-hour increments and keep track for a month. Do it again in six months, and then again periodically to see that things are still in balance. A time clock is very useful for this (They cost about $300, but are great for keeping track of multiple projects).

The second part of the 'what-to-charge equation' is your salary. How much do you need to earn in a year - $15,000 or $35,000? How do you break this down? Again it must be reduced to the actual productive hours you are working. There are 52 weeks a year. Take out the weekends and you have 260 days. Take holidays (another five), a week of being sick, and finally this year you had better take that week-long vacation with the family. So we are down to 245 actual working days.

Having filled out the time sheets, I know that I average four hours a day of chargeable time. Further, I've decided I need to earn $25,000 a year.

The formula then goes like this:

4 (hours per day) x 245 (actual days) = 980 chargeable hours per year.

$25,000 (my salary) divided by 980 (chargeable hours) = $25.50 per hour.

Now you must add in the cost of overhead.

And having kept GOOD records, I know my monthly overhead averages $2500, or $30,000 per year.

$30,000 (overhead) divided by 980 (chargeable hours) = $30.63 per hour.

$25.50 + $30.63 = $56.13 (basic hourly shop charge).

I would round this up to $60, because I know you will have forgotten to add in something somewhere.

Now, how do you apply this to your finished work? The simplest way is to keep track of your hours on the fireplace poker and multiply by $60. But what about the design fee; cost of materials; replacement of equipment; delivery and installation time; the three hours you spent with the client while they decided on the style? All of these impact upon your final price. (Let me recommend a tape from Walt Scadden, P.O. Box 8116, Buckland Station, Manchester, CT 06040, at $12.95 + 1.95 for shipping, for a detailed and excellent discussion of these charges.)

Properly, these are subjects for articles in themselves.

But in a nutshell, I do the following:

Design time: The first meeting is free, and then the design fee is 20% of the total cost of the item.

Materials: I multiply my cost by 50%, and this will cover the extras, such as rivets, etc.

Delivery: One-half the shop rate per hour, plus mileage, to and from.

Installation: At the hourly shop rate.

Profit: (This might also be called fix-up, replacement of equipment, or darn-I-didn't-charge-enough-again.) 20% of the total price.

So Mr. and Mrs. Jones have called you for a fireplace set of three tools and a hanger. You do a drawing of one of the tools so they can see the size and the elegance of the handle. You estimate that you can do a tool every four hours.

4 hours x $60. shop time = $240 per tool; the hanger is 2 hours x $60. = $120. Design fee 20% of one tool (you only did the one drawing) = $48. Materials = $22. Profit (20% of $840 {3 tools and hanger}) = $168. For a grand total of $1,078 plus state tax where applicable. This estimate will give fire tools a new respect in your eyes. You know the actual costs of doing business. You can hold your head high and enjoy the fruits of your labors.

This all may seem a far cry from doing things that make your soul soar. In fact, it is not. My self-esteem is far better knowing (not guessing) that I am charging a fair and honest price for the things I choose to make. I can document it. More important, by charging a fair price, I have time and money to do the things that make my life richer and better, like buying a recording of Dylan Thomas or Yevtushenko; taking a trip to Mexico to see the copper workers or tile makers; a week down the canyons of southern Utah in the late summer; a trip home to see the grandparents and collect some of the old stories; a chance to go back to school to hone skills or learn new ones. This is all possible because I know with certainty how to charge and what to charge for the work. I love my iron work, and most days I love going to the shop. But I do not enjoy subsidizing people who buy my ironwork. I work too hard for that. I have too many things that I want to do in my life. Don't be ashamed to know the nuts and bolts of your work as well as the joy it brings to your soul.

Nol Putnam maintains the White Oak Forge, Ltd. in The Plains, Virginia. Among his many artistic efforts is the Memorial Gate in the West Columbarium at the National Cathedral in Washington, DC.

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