A few days ago I shared the following equation for calculating the break-even cost for a product. Here it is again:

materials + labor + overhead = “break-even” cost

Yesterday I showed you the cost of my materials. Today, let me break down the cost of labor.

A few days ago, I told you that one of my least favorite things in the world to do is ask for money. Similarly, the worst part of a job interview or application is the question “How much do you think you should be paid?” Even if I know it is coming and spend days thinking about it, I get all flush and my face gets sweaty. And I don’t know what to say. How do I sum up my worth with dollar signs?

This is even worse. This time I am the boss and I am the employee. Let’s be honest, the employee me wants to make as much money for as little work as possible. The boss me wants to keep prices down in order to be fair to the customers…which means I want to pay me as little as I am willing to work for. See the pickle.

So let’s talk hourly wages:

  • The minimum wage in Colorado is $7.24 per hour.
  • I am currently a graduate assistant at Denver Seminary and grade papers for $10 an hour.
  • I also hold a sort of administrative assistant type position for the Bulletin of Biblical Research and make $11 an hour.
  • The last time I babysat, I made $15 an hour.
  • When I worked as a Sonic Carhop when I was 16-years-old I regularly came away from a shift averaging $12 per hour.
  • A bit of google searching tells me that computer repair guys can make $100 an hour.
  • Licensed “master” plumbers charge $140-210 per hour.
  • “Helper” plumbers make $50-60 an hour.
  • Air traffic controllers make about $55 an hour.
  • Engineers of various kinds make $30-$40 an hour.
  • Nutritionists, electricians, and editors make about $25 an hour.
  • Today, a friend of my husband’s who owns a window and door installation company came to install 7 new windows and a sliding door for us. The labor part of the bill was about $750. This blew all our other price quotes out of the water, and we felt like we got a great deal. He was here for about 6 hours. He also came and measured a few weeks ago, spent time handling our order, disposing of our old windows, etc. Even including all that he probably made close to $100 an hour.
  • Online research shows that the hourly rate for seamstresses is all over the board. Some seamstresses are adamant that they would not work for less than $20 an hour, and some consumers say it is offensive to pay less than $30 an hour. An inexperienced seamstress can make as little as $8.50 per hour. Many experienced seamstresses who charge per job rather than per hour average up to $50 an hour.

According to my research, the second biggest mistake people make when starting a business is not planning for growth. With this in mind, I have tried to think of what I think I should pay someone else if I ever grew beyond what I could handle myself. If I really wanted to find someone willing to work to my perfectionistic standards, I am fairly certain I would have to pay at least $20 an hour. I’d really want to pay more. And I’d feel guilty paying less than $15.

And yet, for some reason, I am not willing to cut myself a paycheck that high. If I ask for it myself, it seems greedy. I have decided that I want to make $12 an hour. Even working 40 hours a week, 52 weeks a year (with no sick leave, vacation time, or any other benefits) only grosses me an annual “salary” of $24,960. Not bad (actually, that much a year would make me pretty excited). But I bet you make more. And let’s be realistic. The MAXIMUM amount of time I feel I could actually spend sewing each week is more like 20 hours. Right now, Josiah doesn’t really allow me to do much sewing outside of naptime and after bedtime. (All the buttons on the machine just beckon irresistably to an 18-month-old). If I allow myself a few weeks of unpaid vacation around the holidays…say I work 48 out 52 weeks a year, up to 20 hours a week…we are looking at an annual gross salary of up to  $11,520. At $12 an hour, SnugasaBugBaby is certainly not my way to “Easy Street.”

Maybe you think that it would be ok for me to make $5 an hour since I have the advantage of staying home with my baby while working. I appreciate your opinion…and I disagree. Most of the time I spend sewing is done after bedtime and during naps. If you are not a mother, let me inform you, this is VERY VALUABLE TIME!!!

Maybe you think I should be willing to work for less because sewing is my hobby. Well, yes it is. However, I have a list in my head of projects I wish I could get to that is way too long to write down–and CERTAINLY long enough to satisfy my desire to sew as a hobby. The reason I started SnugasaBugBaby is not because sewing is my hobby, it is because it has become a marketable skill.

OK, I am sure that is more than you ever wanted to hear about hourly wages. Me too.

Calculating my time is whole lot more straightforward. I simply write down the time I start, write down the time I stop to read Josiah a book or two, write down the time I resume working, write down the time I stop to get Josiah some lunch and put him down for a nap, write down the time I resume working, and write down the time I finish. Then I add up the time.

The first time I made a Playmat Purse it took me at least 8 hours or so (I had lots of figuring out to do). Once I had an established pattern and jotted some notes for myself, the next several took me around 3 hours. Now I have the time cut down to 2.5 hours. (For most projects, about the 3rd time I make something I have pretty well worked the kinks out of the process. The time I spend at this point is truly the amount of time it will always take me)

The first few diaper bags I made took me about 14 hours. Now it takes me 11.5 hours.

A Peek-a-Boo Blanket takes about an hour and 15 minutes. A personalized pacifier strap takes about another 15 minutes.

Based on an hourly wage of $12 and the above times, here is the labor portion of my “break-even” cost:

Playmat Purse: $30

Diaper Bag: $138

Peek-a-Boo Blankie: $15

Pacifier Strap: $3

Remember, again, the equation:

materials + labor + overhead = “break-even” cost

The labor cost calculated today should be added in to the materials cost calculated yesterday.

Tomorrow, we’ll add in the overhead costs.

-:-

Follow the Whole Pricing Process:

General Pricing Formula

Calculating Break-Even Cost: Materials

Calculating Break-Even Cost: Labor (You Are Here)

Calculating Break-Even Cost: Overhead

Adding a Profit Margin

Adding Retail Mark-Up ?

Adding in Fees: Establishing the Final Price

  1. Rochel Farfaglia says:

    Hi. I wanted to drop you a quick note to express my thanks. I’ve been following your blog for a month or so and have picked up a ton of good information as well as enjoyed the way you’ve structured your site.

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