"Business of Lutherie" forum?

[Ormsby Guitars]

The fun is driving your Ferrari on the weekend after selling guitars all week because you didn't spend four days worrying about fret jobs

I've had a handful of muscle cars, it's about time I had a Ferrari!

The Ferrari Nationals is being hosted in Perth next year. You've got twelve months

[kiwigeo]

No point me buying a Furryarri...the boss would destroy the clutch and rip the arm rest off the driver's side door on the gate post just like she did with the Mazda

[charangohabsburg]

No point me buying a Furryarri...the boss would destroy the clutch and rip the arm rest off the driver's side door on the gate post just like she did with the Mazda

Just choose the right model, Martin:

[demonx]

The Ferrari Nationals is being hosted in Perth next year. You've got twelve months

I've owned two Corvettes over the years and I never even made it to the Corvette Nationals. Always too darn busy!

[simonm]

No point me buying a Furryarri...the boss would destroy the clutch and rip the arm rest off the driver's side door on the gate post just like she did with the Mazda

Well how about a Lambo then:

timthumb.php.png (284.28 KiB) Viewed 24727 times

http://www.lamborghini-tractors.com/en- ... /1464-mach


MIght end up with a wider driveway but that can't be bad.

[Nick]

With the Lambo, you also have the advantage of being able to drive saws e.t.c off the P.T.O.!

[ozwood]

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[demonx]

Here is some of my advice for budding luthiers who wish to make a business out of it.

However much profit you "think" you'll make, half it, or quarter it. Maybe even less. The work hours you can double or quadruple! Get used to tire kickers and dreamers and write yourself some cut and paste answers for all the people wanting free guitars or asking you to teach them and tell you everything you know at the drop of an email.

There are LOTS of little things that cost WAY more once you're a business as opposed to a hobby builder. Most luthiers who make a dozen guitars a year would probably get by not being a business and it would be more profitable for them.

If you are NOT a business, your insurance will be covered by home and contents. If you are a registered business, you are no longer covered and need business insurance. The cost of business insurance will depend greatly on your area and how much machinery. Not only will you need fire and theft, but most business insurers won't touch you unless you also add professional indemnity insurance and liability as well. It all adds up. Mine is approx $200 a month and believe me I shopped and shopped to get it down that low. So however many guitars I make a month that fee has to be divided by and then added to the end price. Imagine you had your workshop burn down and you had for example five customer guitars in for repair and then ten customer builds in there which are in various stages close to completion. You need insurance for these too. Not only do you need to insure for your tools, but your stock and any any instruments that may be on site.

Workspace rental. This can be anywhere from $300 a week to thousands per week. Most residential councils will not allow you to run a manufacturing business out of your home. Something to look into and then add to the cost of your guitars.

Accounting fees. For a business they generally run a lot more than personal accounting fees. Depending on your needs, if you go as a company for example, you could be spending three grand plus a year on an accountant. Most likely though you'll be a soul trader and can do it yourself and lodge online though.

If you've been buying stuff on ebay and think you'll get it cheaper by being a business and buying wholesale, think again. Australian wholesale is generally more expensive than buying on ebay.

Think of the Aussie dollar fluctuation and how that effects your sale price. For example, it's a great time for us to sell to overseas now, but out costs have gone up 25% from what they were a year ago and it's predicted that the Aussie dollar is going down to 60%. So whatever you are imagining your guitars to sell for, it'll need to be a lot higher to allow for the currency.

Marketing. That is a whole new topic and it alone can make or break you. Many old time luthiers are not up with the IT era and they're filtering away into non existence. It's an IT dependent world now and you'll need to be up with that.

Anyway, that is just a couple of things off the top of my head. I could go on and on but usually when people have something in their head, they're going to do it regardless.

[Ormsby Guitars]

Most likely though you'll be a soul trader

Best tax related typo Ive ever seen

[ozwood]

he is the Demonx

[Mat]

I appreciate what Mr. Searls has said! So much truth that I should personally consider further.

I am in no way a qualified luther, my goal though is to be like a certain swiss guitar builder who makes a handful of guitars every year to his own spec and has people lining up to buy them. While I understand there is more to this picture than meets the eye, this is a dream which I believe can come reality with the right marketing as per Searls comment on IT. However, essentially it would be a hobby until word got out that i make the guitar everyone wants to play I also understand that you actually have to have a high quality instrument that is outstanding before you can just make and sell.

I also recognise the emotional attachment people have to instruments, if you have a good marketing strategy magic can happen.

[demonx]

Another thing that constantly surprises me is the general publics belief that the only tax we pay is 10% GST.

When working out your tax, calculate 30% tax. That is a realistic percentage and allow for that in your pricing.

About the "soul trader", that'd be a funny iPhone spellcheck thing, but quite appropriate when talking about the tax dept!

@ Mat. That's a nice dream. More realistically though that is something to keep as a goal for several years down the track. In between the "start up" and the "in demand" builds, there will be a lot of compromise. In saying that I'm not suggesting you compromise your moral compass and build things against your will, I'm just suggesting that unknown builders who build only stock can end out with a lot of stock they can't sell if you're looking to be a business from the start.

My advice is build for people you know. Local musicians, family, friends, their friends etc. Forget the internet completely at the start. Get your local scene liking your builds and they will rep you. People talk. Then it will grow from there. Then people you don't know will come in with requests. Then as you grow you'll have the need to market, which is where the IT thing comes into play.

I started off this way and it grew faster than I had any preparation for. Then I went the IT route and it grew into a business, however I'm trying to backpedal at the moment. I'm laying right off the social media presence and focussing on the local market again. Since I started building there is a whole new generation of guitarists in town and at the end of the day, it was my home town crowd that got me started, so I'd be a real arse to forget where I came from. When I say local, I'm talking home town, not local as in Australia. In the past my local audience was metal heads only, now I'm trying to expand that to the rockers and the blues guys and I've recently taken my first acoustic commission, which is another direction again. What I'm getting at though, look for local support before you look anywhere else.

[Ormsby Guitars]

^^^^

Whereas my first commission was from Florida, my second from Perth, and my third from Sydney. From there, 30+% were USA up until the GFC, when I then concentrated on the areas less affected. Now its global, with 40% of sales in both Customs and the Korean line being USA/Canada, 15% are 'other world' (which is all GST free sales). My European sales percentages have doubled in the last year, and we are looking to expand there.

The AUD vs the world has meant my parts and materials costs have gone up, but these relate to only 20% of the full value of an instrument on average, but the USD alone buys 20% more value now than not too long ago. So, whilst my costs have gone up a little, my pricing has increased significantly more, to obtain the same value for USA clients now, compared to two years ago.

I no longer allow any factory visits, ie: guys in Perth are no better off than those anywhere else, except they may pick up an instrument in person on completion. Other than existing long term multiple order clients, you cant just visit to discuss an order. That's shaved 3-4 hours minimum a week, allowing 3-4 hours a week being pushed towards marketing and expansion. So, whilst one guy from Perth MIGHT be upset that he cant visit to discuss maybe ordering a guitar, we've got ten guys willing to simply send a credit card number to us online.

The world is a big place, and anyone not viewing that market is limiting their success by a massive amount. Having said that, I still love doing local guitar demo days, shows, and clinics. Its just good fun.

[routout]

Well put that is how to do it negativity will get you no where and you are correct the world still wants our craft.

[kiwigeo]

Workspace rental. This can be anywhere from $300 a week to thousands per week. Most residential councils will not allow you to run a manufacturing business out of your home. Something to look into and then add to the cost of your guitars.

While Perry and yourself might be classed as a "manufacturing business" I think a majority of the acoustic builders in here who are doing it for money would be classed as a home business rather than a manufacturing business. Most Councils around where I live allow small businesses to be operated out of domestic dwellings. The main issues Councils would be concerned with is excessive noise, dust and excessive visitors to the property....all things that are fairly easy to manage....especially if you cultivate a good relationship with your neighbours.

[Mat]

Thanks Allan and Perry for the advice and inside knowledge.
I have a few mates who are great musicians and I'm actually keen to build them some guitars. Seeing someone you know play on an instrument you made must make you feel a little warm and fuzzy inside.
Again, thank you to all those who are running businesses and still contribute to this website, without you I know I'd be making some silly choices.

[Ormsby Guitars]

Workspace rental. This can be anywhere from $300 a week to thousands per week. Most residential councils will not allow you to run a manufacturing business out of your home. Something to look into and then add to the cost of your guitars.

While Perry and yourself might be classed as a "manufacturing business" I think a majority of the acoustic builders in here who are doing it for money would be classed as a home business rather than a manufacturing business. Most Councils around where I live allow small businesses to be operated out of domestic dwellings. The main issues Councils would be concerned with is excessive noise, dust and excessive visitors to the property....all things that are fairly easy to manage....especially if you cultivate a good relationship with your neighbours.

So it should be easier to make money then, right? No rent and all...

I work from home. The council loves us, and we are currently negotiating an expansion of the workshop. Neighbours love us, because we take in their deliveries that would be carded, we have soundproofed the workshop so its not noisy for them (plus machinery is only run between 10-3), and we pay for extra bins which the locals can use if they have a bit of a party on the weekend. Also helps that a bunch of them need "just a bit cut off this bit of wood thanks mate" every now and again

But, you're right, not all councils are equal. In discussions with another council to build our dream home, including a 150m2 sunken workshop/bunker/evil lair. We want so much land we cant even see the neighbours. Call it a workshop for the purpose of running a business? Nope. Call it a garage or gym? Sure! Ask to work in there? SURE NO PROBLEMS!! Wait.... oh never mind...

One council rejected my work at home application for a home we were looking to buy, because she "went to a rock concert two days ago against my will, my ears are still ringing, and i wouldnt dare allow you to terrorise the neighbours with your loud concerts day in day out". Hmm...

[demonx]

Another thing about councils, most won't allow you to spray 2k and baby other things that are associated with guitar building. Most people wouldn't know that.

There are so many things a council can stop you on, it's a lot of work to keep above board on it all. It's best to have s sit down with your local council and talk about it. They'll print off pages of regs that you'll have to meet. In some cases, it'll be insane, for example you may be asked to rebuild your shed with a industrial slab. This is just one example of many.

Back to advice on what to prepare for. Expect to spend a lot more on tool replacements than what you do as a hobbiest. Router bits get replaced more often. Bandsaw blades get replaced more often. Sandpaper becomes bulk purchase @ $88 a roll and several different grits needed. You use a lot more glue and other odds and ends. You'd be surprised how much crap you go through when building every day. Even little things like how much double sided tape you go through and masking tape. It all adds up

[kiwigeo]

All your comments taken on board Allen and Perry but how many acoustic makers in Australia do you know of outputting as many instruments as you electric builders are? I'm not talking about Cole Clark or Maton which to me are guitar factories.

Most high end acoustic makers like Smallman and Redgate would be turning out a fraction of you guy's output in a year and most of the acoustic makers that I know are working from home rather than working in rented space.

[demonx]

The thing you're missing though Martin, a council won't care if you're making one, or one million, bylaws are bylaws and they are usually not in our favor.

I've been down this road witg council before. It's black or white, they don't see grey.

[simso]

We all start at home, its part of the natural growth of a business, but I suspect most councils if they knew we were running a business rather than hobby building a guitar they would shut you down. Some councils are good, some are just sticklers for the small stuff.

If I had to do it all over again, I would buy a large property on the outskirts of perth and put a dedicated building onto it, a lot cheaper.

I went the commercial route where I purchased a work building / unit in a commercial district to operate from.

It certainly adds to ones over heads

Steve

[ozziebluesman]

One expense is Public Risk.
How do you guys who hold guitar building courses and work from home get cover?
I have tried for my very small home business and the insurance companies don't want a part of it.
Cheers
Alan

[demonx]

One expense is Public Risk.
How do you guys who hold guitar building courses and work from home get cover?
I have tried for my very small home business and the insurance companies don't want a part of it.
Cheers
Alan

Is that with home and contents insurance or do you have specific business insurance?

I talked to my insurance provider about this. In a nutshell your typical liability does not cover this, it's a specific and quite costly liability insurance if it's something you do often. If it's a one off, you can get an event style one off insurance, also very costly. Not worth while having people come and train.

On a similar note, if you have someone working for you, they are not covered under your typical business liability insurance either and you need to pay another liability that covers staff. As well as paying workcover and all the other crap that goes along with having staff. Then you need to know how to calculate all the different tax levels and keep up with super and all the other outgoing costs of having staff. Our business (company) at the moment has nine staff members, all casual. It's a fair effort staying on top of it all and the ongoing regulations and changes. Right now we're having to work out a $6000+ back pay to the staff as last year the award changed and we did not know. A couple years ago we were paying all staff above award and thought everything was fine, then we recently put on a new staff member who raised their hand and said "hey, this is the minimum", we looked into it and now we have to find over six grand out of thin air because these things change and you don't get notified. The joys of business.

[ozziebluesman]

Thanks Allan.
Yep it is very expensive to get public risk when training someone to build an instrument in a home workshop.
If you work from a commercial business site no problems.
Cheers
Alan

[Mat]

Hey Perry, (and anyone else)

I have a question I want to ask...How much floor space do you have in your shed? I'm just wondering as a hobby builder vs. a commercial builder would have different space requirements.

Cheers