Verlane DeGrange

Spokane Falls Community College

**
MEASURING AND SELLING PRICE**

For cutting straps

**Many times a saddlemaker must decide how much to charge for a strap
cut from a piece of leather or side of leather. Since a side of leather is an
irregular shape, at first glance it may difficult to decide where to begin. This
method shows how to organize this odd shape and make money from your investment.**

** **

** Follow these
steps and always remember: never cut any leather until you have done
all the computations first and are absolutely certain of your computations.
**

** **

**1.
Lay out side of leather on flat surface. Inspect both flesh and grain
sides for flaws, butcher cuts, and holes. Make note of where the flesh side
flaws and cuts are and mark lightly on grain side with modeling tool or pencil.**

**2.
Have invoice from supplier on workbench and compare the square footage
listed with actual footage received. Leather is always marked with a whole
number and a smaller number following, such as 22
3 indicating the number of square feet are 22 and three-quarter feet.
Usually the invoice matches the item shipped.**

**3.
Be sure to note: the total price including shipping at the bottom of the
invoice is the total amount you’ve paid for the leather. This will be the cost
you will use in # 9 to calculate your selling price.**

**4.
Lay long 9 foot straightedge along the top edge to “square up” the side
of leather. Be sure to leave as little waste on the part you plan to cut off,
while still cutting off any clamp marks, holes, or nicks. **

**5.
Do not mark anything yet. However, measure with a measuring tape the
distance from the line you plan to cut off to the belly portion of the side.
This distance usually is about 20”-22” depending on the depth of the side from
top to bottom. You determine where the last cut for straps on the belly will be
by the softness or how much the leather “breaks over”. On a younger animal, the
break over point may be only 18”. **

**6.
Write on the invoice what this number is.**

**7.
To find out what YOUR cost is per strap that is 1” wide x full length of
side, divide the depth of hide into total cost. This will vary somewhat
depending on the original depth.**

**8.
Let’s assume the cost for the side with the shipping included is $150.00.
Thus $150.00 ÷ 20” = $7.50 per inch width is your actual cost out of pocket for
every 1” width strap you cut from this side in the quality zone of leather. **

**
**

**
Let’s step aside and learn about calculating
prices before proceeding**

** **

**To calculate your selling
price, you need to sell the leather at a 40% profit margin. There is a
difference between margin and mark-up that you need to be aware of.**

** **

**MARGIN IS BASED ON THE
SELLING PRICE**

** **

**MARK-UP IS BASED ON THE
WHOLESALE PRICE**

** **

**Since the wholesale price is
the smaller amount, you must “mark-up” an item more than 40% to get the true
selling price. This can be illustrated by this example: If you are selling an
item for $10 and you are working on a 40% margin, to find your actual cost when
only the selling price is, known, subtract 40% of the selling price from
$10.00. Thus $10.00 – (40% of $10.00) = $6.00. **

** **

**To arrive at the selling
price based on the wholesale cost (your cost), you need to mark-up the item 67%
of the wholesale cost. Again: $6.00 + (67% of $6.00) = $10.00.**

** **

** If you try to arrive at the
selling price by adding only 40% to your cost, you’ll fall short of a profit
that allows you to stay in business. Let’s do the math again this time and
you’ll see why you’re loosing profits: $6.00 + (40% of $6.00) = $8.90. You’re
literally being robbed of $1.10, which is approximately 10%. You wouldn’t pay
a customer 10% to do business with you, but with faulty math reasoning that’s
exactly what you are doing!**

** **

**You need a 40% margin
(translate: 67% mark-up) to stay in business according to the SBA. On some items
you’ll need even more to remain profitable, but this is a general guideline for
a business. **

** **

**Now, back to our original
problem: what should you sell a 1” wide strap for when you’ve paid $7.50 per
inch?**

** **

**9.
Do the math this time using actual numbers:**

**$7.50 +
(67% of $7.50) =$12.52. To make the number a bit more in line with pricing ease,
call your selling price $12.50 for a 1” wide strap that runs the length of the
side of leather.**

** **

**10.
Let’s do another problem based on this concept: what should the selling
price be of a strap that is only 5/8” wide? Now in a more condensed form, let’s
run through the math again:**

** **

·
**Your cost per inch: $7.50 per inch in width**

·
**5/8” = .625” as a decimal (for simplicity on a calculator)**

·
**Your cost for a 5/8” strap = $4.68; stated mathematically it is**

**(.625 x $7.50 = $4.68). For ease of handling, let’s round off your cost to
$4.70**

·
**Mark-up $4.70 by 67% for your profit.**

** Thus $4.70 + (67% of $4.70) = $7.84 is the actual selling price.**

·
**For ease of handling, round off selling price to $7.85**

** **

**Using this method, you’ll
make the right amount of money selling this side of leather if you sell 20-1”
wide straps and still have the belly left over for small items. If you took the
original cost of the leather at $150.00 and marked up the entire side 67%, you’d
arrive at the selling price of $250.00 for the whole thing. By cutting straps,
you get a greater profitability from a given space on the side (the prime area)
and still have a bit left over for small projects. Thus strap work is usually
more profitable and efficient than cutting large irregular pieces.**

** **

**AFTER HAVING DONE ALL THE
CALCULATIONS AND DECIDING HOW TO BEST USE THIS PIECE OF LEATHER, YOU MAY CUT THE
FIRST STRAIGHT LINE ACROSS THE TOP FOR STRAP CUTTING PURPOSES.**