The Cost

Pete Howlett

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For the self employed in the UK we pay forward our taxes and rarely get rebates. The next 12 instruments I build will pay my tax bill, settle loans and cover the necessary purchase of materials and consumables. My landlord has had a safety check of the premises done and another instrument will pay for the remedial work I am responsible for in my 3 units. It will be summer before I see any profit in the business. This is the cost of doing something very few people get to do. AT least I have heat in my home and workshop. An actor I follow on instagram has no heating in her house and is miserable and depressed because she is living from hand to mouth pursuing her dream.

Be debt free with $30K in start up money before you consider becoming a bespoke ukulele maker. Even after this and you have made your first few faltering sales and are learning your 'value' in the the shark pool, you will very soon realise that the most important process in the whole cycle of making and selling is banking.
 
Debt free is first and foremost the most important part of the finances. And that includes being mortgage free.

Then at a bare minimum 6 months of ready cash on hand for all your living expenses. This is basic financial well being that was taught to me from a very early age from my parents that were always self employed.

It takes so much pressure off every other aspect of the business, your life, family and mental well being that it changes your outlook on taking on commisions, and "having" to make a sale this week.

No one who is living this life will ever will tell you its easy to get to this point.
 
By far the best avenue to take here in the UK is to set up your business as a Limited Liability Company.
 
My bank manager once told me the the 3 most important things to watch in business is Cash flow, Cash flow, and Cash flow.
And beware of overtrading.

Classic Symptoms of Overtrading
High revenue growth but low gross and operating profit margins.
Persistent use of a bank overdraft facility.
Significant increases in the payables days and receivables days ratios.
Significant increase in the current ratio.
Very low inventory turnover ratio.
Low levels of capacity utilisation.
 
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Tell that tom my son - there are very few benefits now to having a limited company.
 
An understanding girlfriend with a good job that does not have a penchant for new shoes.
 
Credit factoring is one of the worst ideas I've seen - giving away a large chunk of profit while losing contact with (and probably alienating) customers.
 
I would further advise to any budding luthiers that you get orders (income) before going crazy buying tools, wood etc.
For if you have no orders (income), you can't claim the tools on tax.
 
My bank manager once told me the the 3 most important things to watch in business is Cash flow, Cash flow, and Cash flow.
And beware of overtrading.

Classic Symptoms of Overtrading
High revenue growth but low gross and operating profit margins.
Persistent use of a bank overdraft facility.
Significant increases in the payables days and receivables days ratios.
Significant increase in the current ratio.
Very low inventory turnover ratio.
Low levels of capacity utilisation.

Some years back a friend ended up with a dominant customer who kept wanting things and was late paying for them. That customer went bust, my friend never got paid for the goods he had supplied and the whole issue nearly made him bankrupt. Beware how you trade.

Edit. As the economy picked up he became in contact with someone with who he had previously either worked with or for. He gave up his business and went back to employed work where, using un-utilised specialist skills and experience, he earned a lot more and had a more secure income stream. His experience showed me that self employment isn’t always the better option, it all depends on circumstances and what your strengths and weaknesses are.
 
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I'm just a hobbyist builder, but it has been educational reading the comments from those of you that do lutherie for a living. I'm asked from time to time if I plan to sell my instruments. Not deliberately or for a business. If someone offered to buy one, I'd listen to them, but that's as far as I'd go. I gave away 3 ukes this week. Not something I could do if I did this as a business, I think.
 
I have the greatest respect for all of you who start and make a living off a small business. While I had many high flying "business" ideas, I never had the guts to take the risk and actually try to implement any of them.
 
In an earlier business venture that failed .. I was constantly relying on my overdraft to get me by, and in the end my Bank manager took the facility off me and made it into a loan..it took a year to pay it off, it seemed harsh to me at the time but he really did me a favour I went back into working for someone else for a while to pay the loan off. And I didn’t lose my property as many other failed businesses did.
 
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To follow up on Merlin's post, I really am clueless about how to run a business. A few years ago, I started an online fine arts photo venture. Registered with my state tax department and all. It failed big time. I sold very few prints. Not because I am lousy at photography, but because I am lousy at promotion and marketing. I've heard of people that do very well getting business just by word of mouth. I am not one of those people. Fortunately I was still employed FT at the time.
 
I've been building and selling ukuleles for six years now. Over that time I've made $22,750 dollars. That works out to $3,791.66 cents a year. Obviously no one could live on such an income. However, I never intended to make ukuleles for a living but only to provide enough money to buy wood and tools and maybe some decent wine. I make ukuleles because I enjoy making ukuleles and I am retired and have enough TIME and discretionary income to do so.

Bottom line is: Don't quit your day job (or night job).
 
Iv'e been self-employed for about three decades now, always mixing different income streams. Musician at the weekend, bookkeeper and now therapist / pastoral carer in the week and a tiny income as a writer in the background. Has worked out well overall.
 
I've been building and selling ukuleles for six years now. Over that time I've made $22,750 dollars. That works out to $3,791.66 cents a year. Obviously no one could live on such an income. However, I never intended to make ukuleles for a living but only to provide enough money to buy wood and tools and maybe some decent wine. I make ukuleles because I enjoy making ukuleles and I am retired and have enough TIME and discretionary income to do so.
Sequoia, that is amazing to me. I'm recently retired, too, and do this as a hobby. If I was able to sell some of my instruments and flip the money back into the hobby, I'd be delighted. However, I can't seem to stop making stupid mistakes in my building. They don't stop my instruments from being functional, but they are aggravating none the less. If someone asked to buy one of my instruments and they still wanted it after I pointed out the flaws, that's one thing, but I could not in good conscience ask someone to pay me for one, not at my current level of expertise.
 
I've read that some outfits keep their new people in luthier apprenticeship for as much as eight years. That would be for an 18-21 year-old, up to about 30 years old. By that time they should be journeyman "workers" at the lutherie. How many more years to become Master? It varies considerably; some don't make it that far. How many young people have that kind of patience??? Plus, that's just the technical side of the business. Meanwhile, apprentices would need to be educated on the business side. Dedicated much?
 
….However, I can't seem to stop making stupid mistakes in my building. They don't stop my instruments from being functional, but they are aggravating none the less. If someone asked to buy one of my instruments and they still wanted it after I pointed out the flaws, that's one thing, but I could not in good conscience ask someone to pay me for one, not at my current level of expertise.

As instrument builders, we are obligated to produce a product that is fit for purpose. For the ukulele, this means an instrument that will play in tune, is built to a level of sturdiness that ensures it will not be easily damaged, is finished in a manner that will resist the rigours of handling and hopefully, sounds pleasing as well.
The reading of reviews, shows that not all manufacturers get these basics right, but as small specialist builders we should, at least, be striving for this, and perhaps quite a bit more.
A guitar builder of note is reported as saying that “Good lutherie is not so much about building perfectly, but more about being able to hide mistakes perfectly”, and this should be kept in mind by all fledgling builders.
Don't be overly concerned about making mistakes as long as you are willing to address them, so that they don't become repeatable or habitual.
The dedicated player is less concerned about cosmetics and perfection, and more about playability and musicality. There are exceptions to this generality, and as most of us know, some people take much delight in pointing out the most trivial and minute cosmetic flaws.
My advise is to show your instruments to any interested party, let her/him play them, listen to the relevant comments, and re-assess the worth of your builds accordingly ... not everybody is looking for perfection, but nearly everybody is looking for a discount.
 
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