I'm busy but I'm not making money

Business Hub · Problems Nobody Talks About

The arithmetic nobody does

A full order book feels like success. It is the most common way a workshop goes under.

The trap is that being busy hides the problem. Money keeps arriving, so the bank balance never collapses dramatically enough to force a reckoning. It just never grows, and you work harder each year to stand still.

Here is the calculation almost nobody does before setting a rate.

Add up what the workshop costs you in a year whether or not you do any work: rent, rates, insurance, power, phone, van, accountant, subscriptions, tools and replacement of them. Then add the wage you actually need to live on. That total is what the business must generate before it has made a penny.

Now the part that catches people. Divide that by your billable hours, not your working hours.

Billable hours are not working hours

You cannot charge for all the time you spend. Stripping a chair is billable. Driving to collect it usually is not. Quoting is not. Ordering fabric is not. Chasing a supplier who sent the wrong batch is definitely not. Nor is the hour spent photographing finished work, or doing the books, or standing in the workshop deciding what to do first.

In a one-person workshop, expect to bill 55 to 65 per cent of the hours you work. If you are also doing your own marketing and admin, it will be nearer the bottom of that range.

So a forty-hour week is realistically twenty-two to twenty-six chargeable hours. If you set your rate by dividing your costs across forty, you have under-priced everything by roughly forty per cent, and no amount of extra work will fix it. It makes it worse.

The symptoms

You can usually spot this before the accounts confirm it.

• You are booked months ahead but dread looking at the bank
• You cannot take a week off without it hurting
• You quote a job, win it immediately, and feel uneasy about how quickly they agreed
• Jobs routinely take half as long again as you estimated
• You are buying materials out of the next customer's deposit

That last one is the serious signal. Once deposits are funding the previous job's materials, the workshop is running on borrowed time and one cancellation can bring it down.

Fixing it without losing every customer

Raise the rate. That is the fix. The question is only how.

1. Work out the real number first, using the calculation above. Do not guess at it.
2. Apply the new rate to every quote from a fixed date. Do not renegotiate work already agreed.
3. Do not announce it. Nobody sends a letter about their prices going up; you just quote the new figure.
4. Expect to lose some enquiries. That is the mechanism working, not a sign it has failed.

The customers you lose at a higher rate are, almost without exception, the ones who were costing you money. The ones who stay are the ones who wanted the work done properly.

Underquoting is the apprentice's mistake. Doing it for twenty years is a business model, and a bad one.

The one that is harder to hear

If the real number comes out well above what your local market will pay, the answer is not to work for less. It is that you are selling the wrong thing to the wrong people.

That usually means moving up: better pieces, traditional work, trade and contract clients, designers, or teaching. All of those pay properly for skill. Competing on price against a workshop that staples foam over the old cover is a race you cannot win and should not enter.