Cost of Goods Sold—Price per piece calculations?

[Polydeuces]

I'm curious about this for a variety of aspects—I recently just made a spreadsheet to know the top-end (no material-in-volume discounts) of what I would spend on any given bucket of glaze.

I was stunned to find that a Temmoku recipe I've been using costs $88 to mix up, mostly because of the lithium. I probably wouldn't have made it if I didn't receive a big bag of lithium when I purchased all my studio equipment from a retiring potter (for a relative pittance).

So I'm just curious if anyone goes about the tedium of estimating how much materials are tied up in any given piece, and how they do it. I'm specifically curious how one might estimate the number of pieces glazed (say 1lb mugs) from a 5gal bucket, or if those with the wisdom of experience can drop some knowledge in this thread on the subject!

Thanks!

[Mark C.]

I have been at this 45 years and you can spend lots of time wondering about just those things or you can make and sell pots and do more fun things.

I mix up 420 grams (almost 1 # of cobalt oxide) in my black glaze every month or every other and I never think about the costs.Life  is short and the tedium you mentioned is just not going to slow me down with a thought about it.

For me it works like this, buy 10 tons of clay a year along with any needed glaze materials-make and sell that. At the end of year figure a cost during taxes of profit /loss and then pay my taxes and do it again-thats about as close I want to think about it. As I mentioned many times buy in large quantities to keep costs low and buy with other potters when you can.Its more about getting the materials at lower costs -buying when prices are low say like cobalt was cheap just a year ago and now its sky high .I bought 20 #s when it was cheap-most materials are like that.

If you want to really get to figuring go to Mea's web site Good Elephant Pottery as she has done the most keeping track of anyone I know.

I can figure it all out or well go fishing lets see let me think about that as I get the boat ready and leave to be on the water.

[Magnolia Mud Research]

Some years ago I embarked on a similar exploration to determine the minimum amount of glaze I needed to conduct a testing series.  To keep the story short ,the method was to take one of my regular glazes as a prototype glaze.  Then I took several of my standard test pieces and weighed each piece dry.  Then I applied glaze in my normal manner and immediately weigh the glazed piece.  The difference between the wet weight and the dry weight was the weight of the glaze slurry used.  Since I always know the weight ratio water to solids in each of my glazes I calculated the amount of glaze solids (aka ingredients) used for that glaze on that piece.  I next estimated the area covered with the glaze and calculated the amount of solids per square meter of glazed surface.   After averaging several test pieces done this way, I had an estimate of the minimum batch size for testing.  You should be able to use this procedure to estimate cost of glazing on for  any item.  
  

One of the side benefits of the exercise was that learned to be able to plan ahead for new projects.  As I became more experienced and I amassed a quantitative knowledge base that allowed me to switch to the "Mark C. approach".  
  
LT
 

[Mark C.]

(One of the side benefits of the exercise was that learned to be able to plan ahead for new projects.  As I became more experienced and I amassed a quantitative knowledge base that allowed me to switch to the "Mark C. approach".  )

Thanks for the kudos

I used to think about such things 3 decades ago but since I'm using things like 3,000#s of Kingman feldspar I bought from the mine in 1981-I soon realized that the calculations are just not worth it for me. If I was staring out clean today then this would all be easy but I'm using things every week I bought many decades ago at unknown costs.for example a ton of greatly borate when they said it was going away or g-200-long gone or Kona F4 or Albany slip(many have never heard of that I'm sure these days)

I'm more concerned if my body will make another 10 tons of pots than what that may cost me money wise.

One thing I should add is a type A workaholic attitude is key to making this pottery gig work so well.Its hard to fit that into the cost equation

  

[Pres]

I really don't do any where near the volume as Mark or LT, but found out while teaching that there were ways to keep costs down, it may mean not using some glaze, substituting some items, or re working materials when it shocks me as to how much the totals may cost. Mostly I buy my materials, hope they will last a season, and then start all over again. If they last longer great, if I run out early I replace them. In the long run everything seems to be going up, but costs don't skyrocket like the price of oil!

 

best,

Pres

[GEP]

I’ve never taken the time to figure out cost-per-bucket of glaze. I only look at it as cost-per-year in glaze materials. I only spend about $300/year on glaze materials, and half of that is spent on tin oxide! $300 to glaze 2000 pots is so cheap, I don’t feel the need to analyze further. 

[Polydeuces]

Lots of good wisdom here & thoughtful responses. And I appreciate the depth of that method, LT!

I must say, I'm experiencing some relief knowing that there isn't yet another thing that I ought to be juggling in the madness of making pottery. I still feel as though I have a long way to go before I'm making a living through pottery and I've practically been a starving artist for the past decade. So at the moment, information empowers the necessities of frugality. Plus, I think I have some personal leanings & inclinations toward analytics.

I'm beginning to wrap my brain around the workaholic thing, Mark. It certainly seems that the best way to earn a living with pottery is to make pots, sell pots, and only sweat enough details to make tax season bearable.

 

[Mark C.]

I was a starving potter for over a decade-so just plan on that and then the tide will turn. traveling to outside shows open the economic door for me-as well as keep my local sales going.

[Gabby]

I don't make a living by pottery or by any business, but  I think it makes sense to keep track of what you are spending in your business until you know instinctively that your production process is sensible given the prices you are charging. If you don't pay attention to what you are spending at the beginning of things, you could find yourself not only leaking cash but leaking cash completely unnecessarily. 

Of course you make a living by making and selling pots rather than by bookkeeping, but two different people could sell the same number and quality of pots and one could be doing well with it and the other going broke if the costs of the inputs to their processes are completely different. Managing your costs, which first requires knowing what they are,  is a completely reasonable part of running any kind of business.

[Mark C.]

For me starting out was I like working in clay (1970s) which morphed into selling pots which morphed into a living (1980s). The business side came along with all that. It was not a plan at all it just happened as I liked working with clay. I made the business side work well along that path. Not at the start but along the way..

Keeping costs down has been in blood from day one not because of a plan but because I had no money to start with.Keeping the money became the plan as I went.

If I started today and bought it all at the start it would never pencil out. Its slow process. 

[JohnnyK]

14 hours ago, GEP said:

I’ve never taken the time to figure out cost-per-bucket of glaze. I only look at it as cost-per-year in glaze materials. I only spend about $300/year on glaze materials, and half of that is spent on tin oxide! $300 to glaze 2000 pots is so cheap, I don’t feel the need to analyze further. 

That comes out to about fifteen cents per pot...not a bad return on investment, Mea!

[Gabby]

Mark, my thought was expressed for the OP rather than for you, the OP who opened with sharing that he was surprised to discover his tenmoku recipe costs $88 a bucket. Mea a few posts later says she spends $300 a year to glaze 2000 pots.

In my life I have known people who have trouble making ends meet who discover upon examining their inflows and outflows finally that they have been spending a lot of money every week or month on something that has been a huge money sink without their realizing it, dieters who don't know why they keep gaining weight because they didn't realize that something they eat all the time is actually highly caloric,  people who realize  after a few years that their water bill has gotten so high not because of their teenagers but because they have a leak in a pipe through which they are continuously losing water...

How we do with our various gambits is definitely affected by our particular gifts, our timing, and our unique circumstances rather than only our mundane systems. I have had math students who do great without studying, but not worrying about studying was not  at all the key to their success and not in fact a path that tends to work out best for people in general.

Bill Gates and Mark Zuckerberg both dropped out of college to start their businesses, but many who have taken that as advice for a flourishing future and tried the same found that strategy not to work out quite so well for them either in the short run or the long run.  Jeff Bezos quit his job to follow his Amazon vision, but abandoning the job with a paycheck while trying to launch a business is a less successful strategy for most other people.  The fact that many businesses, including Amazon, starts out with many years in the red does not suggest that everyone's business that is in the red at first will eventually succeed if people  only stick with it long enough.

It is not just staying power and the willingness to work hard, I think, but a mix of other things that make one person's creative business succeed while another fails.

[Callie Beller Diesel]

I too tend to analyze glaze costs at an over-the-year rate, rather than quite so specifically as weighing a pot. But I don't do the same volume of LT or Mark yet, either. It's not an unreasonable way to analyze in the beginning.   It's also one thing to say that you spent $88 making a bucket of glaze, but that doesn't take into account how far that particular glaze goes, unless you're only using one. Maybe that bucket of glaze gets used for only a few pots, or as an accent with other, less expensive glazes. 

It's still a good idea to keep an eye on that bucket cost. Do you need 12% of that expensive ingredient in there, or does the glaze work the same with 8-10%? And buy whatever bulk is feasible for you. You may not have room for pallets of things, but 50 lb bags of the stuff you go through and finding out the point where your supplier offers volume discounts on clay are worth looking in to. Mark is right about going in with other potters to purchase, and Gabby is right to say that you make your money making pots, not as a bookkeeper. While it's necessary to watch material costs,  in clay  physical materials are usually much less a part of your pricing structure than your time is.  Learning to work efficiently is what will make a bigger impact on your profitability. 

[Polydeuces]

Thanks for all the wise words, y'all.

The dead truth is that I'm essentially self-funding my own education in pottery & the business thereof, and am not really making any money at it—in fact I'm sinking pretty much all of my discretionary income in it. I started about 4 years ago, have slowly invested in putting a studio together, and had some local & online sales this year—I've probably sold about $600 of pots so far this year, and I've seen maybe around $400 of it. I'm really just trying to get my whole process dialed in and earn a sense of confidence behind what I'm making (and how I'm making it). Narrowing down all the errors I've been making has been costly on multiple fronts, but I've learned a lot and it's still a lot less expensive than a ceramics degree! I'm faced with a lot of limiting factors currently (short on space, poor man's gas kiln, some lack of technical knowledge), but I'm eking through it.

Once I get all the making dialed in, I intend to move directly onto craft markets/shows & wherever else I can slide in.

Thanks again,

—Kevin

[DirtRoads]

I target to keep my variable costs to 25%.   (for bowls, platters, etc ... different numbers for ornaments & jewelry)

7% for clay

8% for glaze

5% for electric

5% for elements, kiln repair. 

Of these costs, there is more variance in glaze costs.  8% is the high end cap and only 1 glaze is close to this number (red).    Actually I've raised prices a bit to accommodate labor production so this number is probably around 6% now.   I have one glaze that is considerably cheaper, around 1%.  The key is not to exceed this 8%.  We just tested one glaze and cost was 5% of selling cost.  I've backed my prices into these numbers.    Note:  Glaze costs include the freight cost.

[neilestrick]

6 minutes ago, DirtRoads said:

I target to keep my variable costs to 25%.   (for bowls, platters, etc ... different numbers for ornaments & jewelry)

7% for clay

8% for glaze

5% for electric

5% for elements, kiln repair. 

Of these costs, there is more variance in glaze costs.  8% is the high end cap and only 1 glaze is close to this number (red).    I have one glaze that is considerably cheaper, around 1%.  The key is not to exceed this 8%.  We just tested one glaze and cost was 5% of selling cost.  I've backed my prices into these numbers.  

Am I understanding this correctly in that the glaze used on a pot was 5% of the selling price of that pot? So if it was a $20 mug, there would be $1.00 worth of glaze on it?

[DirtRoads]

Yes.

[Stephen]

I will just toss in that it is also important to put the pottery business in the right context before deciding what's important to track and what is not. I hear Mark on wasting time tracking numbers you don't do anything with but I do think you have to be careful not to go so far that you convince yourself that none of the numbers really mean anything, that's really not true for any business.    

While it may take more time than its worth to figure out if a $35 pot cost $1.50 or cost $2.25 in clay and glaze, variable cost, either exact or simply a division plug from yearly purchases does matter if you are trying to price and forecast actually knowing your gross and net margins. It also matters what the end game some day is, retiring and selling a business or simply closing down  and selling all the equipment.

If you are not going to be a home based potter/road warrior, one person can only make and sell so many pots and if fixed expenses reach a certain point it will likely require other folks making some pots too or at least participating in some of the process and if you always have both labor and profit accounted for then growth won't require some big price hike. Also while you're making all the pots yourself you can take your labor cost as salary and re-invest the profit if you want to grow the business with a clear idea of what's labor and what's profit.

 

[Dick White]

I will not add to the discussion of why you should or should not calculate the unit cost of things you make, but I will note that I have done just that as part of my job managing a community pottery studio. We require that the students/users of the studio to use only clay purchased from us and use only the studio glazes. That required some cost estimating to reach an appropriate selling price of the clay. The basic price of the clay is simple - what we pay the wholesaler per box - but we load the price with a surcharge to cover glaze materials. The glaze calculation software I use (Glazemaster) has a feature that it will calculate the cost per pound of any recipe. So yes, the actual price of the glaze materials in any bucket is readily available, and can be adjusted as the price of raw materials changes. That leaves the question of how much glaze is used per piece. That's a relatively simple mechanical problem. I had a variety of bisque ware typical of the student work, which I carefully weighed on an accurate gram scale. I glazed each piece in the usual manner and let them dry. Then I weighed them all again, and calculated the increased weight of the glaze load now on each piece. I don't remember the numbers that were involved, but from here it is basic arithmetic to average out the cost per piece of glazing.