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.