I've been thinking about pricing and terms strategies for independent luthiers some lately. My interest arises from my business, of course, but I think the topic is relevant to everyone and worthwhile.
If there's a standard pricing/terms strategy in the custom guitar world, I'd say it's 10-20% down up front and the rest due when the guitar's finished. That helps cover materials costs, helps keep money coming in all the time, and helps (if a non-refundable deposit condition is set up) ensure that your buyer intends to complete the purchase. Pricing is all over the place, but around $2k seems to be about as low as most established builders are willing to go on an instrument.
There are some drawbacks to this approach, however. If you're getting a steady trickle of deposits but only finishing a small number of guitars each month, a problem with any one of them(guitar is refused, shipping damage, etc.) can really crush your finances for the month. Your income isn't necessarily going to increase the next month, so if you've had to overextend to pay the bills one time it may be a while before you can get that new debt resolved.
Another issue is that many luthiers find themselves in the awkward position of needing to charge more for their guitars but realizing that they're going to cut out a large segment of the "players" crowd and move into the "collectors" crowd...often a sound business move, but not always a personally rewarding one.
This isn't earthshattering, by any means, but here's my proposal.
Why not offer two prices for guitars, one based on the "10%-20% down and the rest at completion" system and a lower one for cash up front? As long as you're responsible with your spending, a bird in the hand is worth two in the bush. Having that $2000 in your pocket on January 1, 2007 for a guitar that will be delivered on January 1, 2008 could mean a nice $150+ in interest through investment, allows for a "bad month" reserve to be built up, etc. Having more cash on hand allows you to stockpile materials when they're available at good prices and allows you to buy in greater bulk, lowering your costs. If you've got a prospective client who's struggling with the price, that $100 (or whatever it is) off might go a long way.
Having all of the $ up front obviously all-but-elminates the chance that somebody's going to back out on the deal. And there's a financial incentive in place for people to go that route, but no "penalty" if they don't - it's just that they pay your regular price.
I'm not building guitars for a living and may either be stating the obvious or missing the obvious, so feel free to contribute your thoughts.
My conclusion at present is that I could make my services as a dealer more worthwhile for luthiers if I were to always pay my discounted price up front, which may or may not prove to be the case.
Andrew
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. So, that down payment has gone to WAS and TAS. One thing is for sure, my next guitar purchase will be from a luthier, not a factory.
As it was my guitar rode in its own seat back on the airplane...but the wife had to take the bus. (heh heh)
