cost of operation/questions

[Sandy Dukeshire]

running a jen ken 1918 elect crucible kiln with a 75# pot for 16 days gave me a bottom line of $673.85. its broken down like this:
144.77 = furnace elect
104.08 = annealer and studio elect
150.00 = propane
100.00 = nuggetts
50.00 = color
125.00 = new annealer element, and a spare and extra relays+ s+h

elect cost me 10.5 cents per kwh

maybe this last expence could be maintence but i added it in because its what i spent. this run gave us 95 hours blow time. the 16 days include 30 hours up and 30 down with one over night crash that brought baby down to 800 degrees, but she recovered and we only lost a day, not the pot! (THANK YOU pete!) working temp started out at 2150, and ended at 2120. i may go a bit lower next run. the vertical gather makes it hard to get one big gather, so i kept lowering the temp to try and get more glass in one shot. any thoughts on this?? my idle temp is 1800. what temp do you all idle at??? i use 1800 because it takes about an hour to come up to working temp, and in the event of a problem (like no power...)a longer time frame to do something about it. the temp will drop like a stone from a bridge with no power. i have heard others who idle at 1300. this seemed very low to me. not only would the glass take forever to get to working temp, but if my controler had (ANOTHER) brain fart the pot would freeze up fast, not to mention devit. which begs the question - will a pot of glass suffer from devit if it hangs out too long at 1100-1300 like in fusing?
also at night i would cover the lid with fiber blankets. got to keep my baby tucked in and warm!
all in all, to run the furnace for a month costs about 300, which is better than i had guessed it would be, but all the other expences do add up. i would like to know how this looks to those of you who are running wire on and off again like weekends (or a few weeks at a time) and such, and anybody who runs a backyard, small, elect studio like mine.
all constructive criticism welcome !!
sandy

[Brian Gingras]

Well, I have questions rather than answers...how many pounds of glass was used? How many charges. We run at roughly $1,100-$1200 per month with color now, but we use use a boat load of batch. Part of figuring acceptable operating costs should also be return on investment...did it break even? Did it make $1000, did it make $10,000?

I'm idling at 1700, I've gone as low as 1400 if we are gone for a few days.

For 90 hours, your propane bill looks good...the electric seems way low for 95 hours, but if you are not gathering much, and not charging much then it makes sense.

But we are a production shop, so our numbers will look different than yours.

[Dave Bross]

I'm guessing about 125 pounds of nuggets? Got that by dividing the $100 by .80 cents for the nuggets. So two or three charges?

17-1800 hold is probably a good idea. it will devit if you go low enough, although that point varies a lot with different glass compositions. 1700 was the traditional "lowest to go" point.

Big gathers? Dip, cool, repeat, dip cool, repeat...ad nauseum. At least it's a given that you get even glass distrubution. I actually blew the sides out of a tall narrow assay pot by trying to push too big a gather in there. Humorous lessons in basic hydraulics...or...if you're going to be dumb you've got to be tough.

I would figure in elements and electrical parts too, although I'm prejudiced because I tend to demolish more elements than most due to bad behavior around batching/operating the furnaces and that the elements are way close to the pots on mine.

The numbers look good and I'm in agreement with Brian's comment on your satisfaction with the resulting financial gains/losses being the real comparison. I'm in the negative numbers these days and I'm still just as happy as if I had my right mind.

Love your shop...hi tech hobbit hole

[Sandy Dukeshire]

i just KNEW i could count on you to cut to the chase!! ;) YES! YES! YES! i made money. but really, so far i have only run my expenses and this month i am already sick of paperwork, but my estimate would be 4k less expenses plus future sales to be made from some inventory i made. which is good for a 16 day run for me. how was your profit margin this month? glassblowing is not all i do, so when i commit to a hot run its really an orchestrated event with at least a week prep and another week recovery, so i figure that time in as well.
as far as glass i used 2, 50 lg bags new nuggetts spread out over maybe 6 charges and every night i recycled the days clear, and about 20 lbs clear scrap saved from last run. most times i worked with the pot half full except twice i filled it up when i had help and we worked larger, and it was a BLAST!! i also estimate my glass cost at a dollar a pound. my last order was for 1000 pounds nuggetts and with shipping my total was about 1000 dollars.
as far as hours, from the 16 days i worked 9, 10 hour days and 1, half day. working time was working temp, the rest of the time at idle temp. my electric bill came yesterday and i was pleased.

[Sandy Dukeshire]

wow dave that was fast and right on the money with the pounds of glass! you may be tough but maybe your not so dumb. glad you like the shack. it is heaven on earth.

[Brian Gingras]

i just KNEW i could count on you to cut to the chase!! ;) YES! YES! YES! i made money.

How was your profit margin this month


Good on the making money part, that is what the bottom line comes down to. We just an SP pickup, and with fuel it came to $935 for 2,000lb. Margin? We are making work that is shipping in July right now, I do know our net profit to be in the neighborhood of 60-70% give or take a few points, but at the same time we are building some stock as well, and paying for 2009 shows, etc.

We look at the actual profit per hour based on 2 owners...that's what counts here now since we will be drawing an income from this. We are also counting the new accounts, and volume of reorders...We are currently spending 20 hours a week in the shop, another 20 or so on marketing, packing, and metal work for our products...so you could say we are running 40+hrs a week, but not all hot.

[Doug Sheridan]

wow Brian, 60-70%...need an investor? I'll just take 50% on my money please...

[Eben Horton]

Those #'s look good to me. I use aprox 1200 gallons a month to run my 300 lb furnace and 1 glory hole, so thats $ aprox 2800 a month in gas a month alone.
Tom farbanish told me once that a good formula for a production studio is to aim to make $1000 a day and to pay for your month's overhead in one week. That was about 10 years ago though when propane wasnt over $2.50 a gallon.



I think the idea of turning on the furnace to 'blow your brains out' then shut it off is the way of the future- I am sort of spoiled by blowing lots of half days and keeping it idling along when I am not busy.

I think i have to go electric.. the #'s really make sense now.

[Brian Gingras]

wow Brian, 60-70%...need an investor? I'll just take 50% on my money please...

Nope, just the 2 of us, sorry :)

Now we have been putting that part of the 60-70% back into development of new designs recently...bare in mind, we run at my house, the mortgage is less than most studio rents and we run electric on a residential rate.

[Doug Sheridan]

darn, I was hoping r and d was part of costs. Guess I'll keep my money, heh.

[Brian Gingras]

Well we are actually putting some of it back into building a new fusing kiln to cut costs and speed production, last month it was more kilns shelves to add annealing volume, so that should help the overall bottom line.

I've seen your BIG operation, I wouldn't expect something that size to be even close to pulling 50%

[Sandy Dukeshire]

i am glad to hear you are doing well brian. so many are not. at this point for me its better to line up the work and "blow my brains out", make some money, shut down and regroup. i could not keep up that pace for long. eben your numbers are big but if your income balances it out your still ok, but why pay more than you have to? keeping a 300 lb at idle seems like super big waste. if its sitting so much maybe down size the pot size as well?

[Brian Gingras]

Thanks Sandy...it's been about the right designs, the right price, and the right marketing. In talking with our galleries, they are having a hard time moving a lot of the glass they have, it's been educational to see what buyers are after in this market.

[Eben Horton]

Sandy, if you downsize the pot in a gas powered furnace, you increase the combustion space. You can actually make your furnace less efficient by doing something that you think will save money. Also, the more glass you have to draw from, the less you have to charge, so the costs per pound in reguards to melting are much lower when you have a larger capacity.

As for paying for all of the costs, your right, I am considering building a smaller furnace to work out of when i am not needing 'Bertha'. 100 lbs would be a good size I think. My problem is space-I have a tiny studio.

[Doug Sheridan]

big enough to hawk costs like a mad man. I find it a challenge that I enjoy oddly enough. Overheads are where businesses get in trouble because they don't consider everything. They would include equipment, tools, taxes, utilities, square footage of the operation and anything you write checks for that is not materials. Keep track for a year and then divide by 12. Overhead + materials + labor = costs. I also add a percentage of materials to save for unexpected increases. Labor includes every minute in the shop by anyone, times their wage, times 1.5 for employment taxes and benefits. blah, blah.

[Brian Gingras]

[QUOTE=Doug Sheridan;73759 Labor includes every minute in the shop by anyone, times their wage, times 1.5 for employment taxes and benefits. blah, blah.[/QUOTE]

no employees, but we do have one independent sales rep though. 2 owners, each making 50/50 of what's left. We track all of our time. As I said only about 1/2 of the time is spent in the shop, the rest is marketing, shipping, metals(different shop, low overhead), etc...The key here is we have VERY low overhead in terms of rent, etc.

[Brian Gingras]

Sandy, if you downsize the pot in a gas powered furnace, you increase the combustion space. You can actually make your furnace less efficient by doing something that you think will save money. Also, the more glass you have to draw from, the less you have to charge, so the costs per pound in reguards to melting are much lower when you have a larger capacity.

As for paying for all of the costs, your right, I am considering building a smaller furnace to work out of when i am not needing 'Bertha'. 100 lbs would be a good size I think. My problem is space-I have a tiny studio.


it looks like the Stadelman mini melter would fit in a brook closet though :)

[Tom Fuhrman]

my biggest expense in doing business is insurance. It's a sad state of affairs when insurance is more than your material and manufacturing costs, but I guess that's the same business model that Starbucks has become accustomed to. I know it has put a lot of others out of business. I know it was a big contributing factor in putting Louie Glass under a couple of years ago.

[Ben David]

Thanks for posting this - I am planning a similar sized setup, and it's always good to get solid numbers.

Doug wrote:

Overheads are where businesses get in trouble because they don't consider everything.

Yes - and this is even more important when working out of a home office or studio. It's very easy to "offload" business expenses ("I'm buying this for the house") and then not put them in the household budget. Lotta expenses can fall through the cracks that way.

- - - - - - - - -
I am also somewhat surprised that the actual cost of glass is on a par with the fuel and electricity costs. It will be even higher for me if I decide to import one of the name-brand art glasses. My shop in Tel-Aviv used to use SP batch, now they have System96 nuggets which I believe they import themselves.

In almost every archived thread on recycling bottle or float glass, the mantra has been "the glass is much less of an expense than energy costs." While that is still true, it seems that for smaller wire setups the cost of glass itself can be significant relative to operating costs.

[Sandy Dukeshire]

eben, when i typed downsize "pot size" i was meaning furnace. but it did get me wondering - will any (gas or elect) furnace run more efficient with the pot full? i'm thinking once a larger mass is hot, it should hold its heat compaired to a half or less full pot that has more empty space?
overhead was a huge factor when considering starting a hot shop 3 -4 years ago. i looked for 2 years for the perfect place. the problem with renting for me was the loss of control. i hated the idea of any lease that could expire and put me on the street after getting set up and comphy. one place i looked at was perfect in every way - except the landlord was a lawyer - and he wanted to look at my books every year and would base my rental increase on my income AND he expected the tenants to "pitch in" to pay for things like a NEW ROOF!!! for 30 years i'v owned rental property and never dreamed of doing business the way this guy wanted! then we looked to buy a place to set up, but then we were talking real money, and with just me, just starting out, i was in fear of getting in over my head real fast, and my family would not be happy with me gone 80 hours a week. so we knocked down the pool and built in the backyard. best desision i ever made. like brian, my overhead is very low, dinner is made at HOME every night, i can walk out to check the kilns at 3am in my pjs, everything is so much easyer. i was able to build MY style of building, the size I wanted, with the elect service to suite ME, i can go to work on a whim, i'm with my family, i just love it. no high rent, landlord, other tenants, rules, travel, ect...
ben - i tend to go in the other direction with expenses - like when i bought all those flowers 3 weeks ago - they ended up being a business expense - i DID plant some around the studio....and i may have by accident put some bbq propane bills in with the studio propane bills but i'm not sure...hmmmmm..

[Doug Sheridan]

Tom, you are so right. Insurance has gone crazy the past two years. Since Katrina, my fire and flood insurance has gone to 11k a year because of its location. My building is all concrete with sprinklers too. Health insurance, well that's crazy high as discussed elsewhere.
And Brian, just to be clear about what "net" is, that would be what's left after the owners get paid, not what they get paid. Accountants would call that a cost. So set a pay level and call it a cost, then figure your net.

[Brian Gingras]

Doug...well then net is near zero b/c we pay ourselves what is left...it's a simple partnership, not a corp. We do not draw salaries, etc. Studio profit is between 60-70% on average per month, then we split it when we do. It's a very different model than the larger operations, and I suspect the way a lot of studios will be in a few years when operating costs go way beyond the demand for the products of the bigger operations.

Anyway, I think we are comparing apples and oranges, studio wise.

[Mark Wilson]

ok i took a stab at these numbers. remember, i use my studio differently than most of you, so it is hard to compare. my crucible kiln pulls around 15 amps at 240 volts, my annealer pulls 25 amps at 240 volts. it takes me around 30 hours from cold start up to get well fined out glass to blow. i start melting on wednesday evening at bed
time, let it melt all day on thrusday, then blow on friday and saturday mornings then ramp down and shut everything off before bedtime on saturday. here is how the numbers work out doing this

crucible kiln
30 hours ramp up and hold before blowing
30 hours holding or blowing on friday and saturday morning
8 hours ramping down
electric rate is $0.0975/KWhr
total cost $25/weekend

annealing kiln
10 hours on friday
10 hours on saturday
total cost $10/weekend

clear glass
35 pounds of cullet per weekend
$0.30/pound + $0.15/pound shipping
total cost/pound $0.45/pound
total cost $15/weekend

glory hole
5 hours of friday
5 hours on saturday
75,000 btu/hour @10 hours/weekend
total of 750,000 btu's = 7.50179 Therms
cost for 7.5 therms including distribution fees and all of the other BS
$8.29

color glass
estimate $15/weekend (more sometimes)

depreciation
assume 30 weekends per season
assume 3 elements, 1 relay, 1 TC season
$5/weekend


total cost
assume 35 pounds of glass/weekend
assume 8 hours of blowtime/weekend
total cost per weekend $78.29
total cost per melted pound of glass $2.23
total cost per hour of blow time $9.79

mark w

[Doug Sheridan]

Sorry to labor (pun) on this Brian, and I understand most artists work that way, but I am only referring to a balance sheet and financial statement that would apply to any size business. I feel it's dangerous to think labor costs are profits, that's all.

[Brian Gingras]

Yes, I understand that. Apples and Oranges yet again. I talked a few months ago with with a foundation guy in town..actually the biggest in town...he said when he started out he was making X, if you factor in inflations he is still making X, which is a good living, but as he put it the only thing that really changed is the umber of zeros...the business income back then was 1/20th of what it is now, but the profits are still the same...his lower overhead business had a huge net profit % wise, than his bigger business does now.

[Dave Bross]

The "backyard factor" Sandy mentioned turned out to be one of my favorite things about being set up at home too. The convenience of meshing other things-to-do in with the glass is huge.

[Doug Sheridan]

Big, small, apples, oranges, it's still all the same whether you sell $100 or $100 million.

[Brian Gingras]

Big, small, apples, oranges, it's still all the same whether you sell $100 or $100 million.


in the way you calculate profit, yes it's all the same. the small studios just have way less expenses lines on the schedule.

[Doug Sheridan]

Many costs are constant like rent, some taxes, insurance etc. no matter what sales are. When sales increase, overhead percentages will decrease. So really, small operations can have higher overhead costs for a finished product, even if it's in the back yard.

I chair an Economic Dev. Committee that works on small business retention in our downtown. We have a tax lawyer, real estate lawyer, a CPA, the asst. City Manager and a few success story owners on the team. Our goal is to keep storefronts in business. A common failure is the owner spending all the extra money at the end of the month and not charging enough for their wares or services to also end up with "profit" after they pay themselves. All sizes of operations make this mistake. I've done it too, so I speak with experience.

[Brian Gingras]

So really, small operations can have higher overhead costs for a finished product, even if it's in the back yard.



I'd like to see how you arrive at that conclusion.

[Eben Horton]

I'd like to see how you arrive at that conclusion.

Volume baby... Volume.

I cringe when I see the overhead #'s of the guys here that have small furnaces, but I know that I can produce a considerable amount more product.

Profit margins improve when you can make more work. In my case, I have set expenses that are the same every month, but expenses in direct relation to produciton costs obviously get larger when I make more and more glass. What changes when you make more and more glass is that the % of expenses of your static costs gets smaller and smaller the more you make work. Its in essence the flywheel effect. I have a big gas bill, but If I can produce 60% more glass than someone with a small furnace, at the end of the month, my profits are higher.

Selling all the glass is the hard part though ;)

[Dave Bross]

The more you produce, the lower the percentage number goes on your fixed costs like rent and insurance. Of course it's just the opposite on utilities, materials and those sort of expenses. Economy of scale will usually work up to the point that you become a dinosaur, where the tail is on fire and the head doesn't know it yet. You've all seen some great businesses big and small that mismanaged growth and went down the tubes. Growth mismanaged is surely the biggest killer of small business. Too much too soon...no controls...no parachute (profits to re-invest).

Kudos to Doug for working with re-localizing business and survival skills.

I don't really mind seeing the fuel prices going to the sky because I think it will finally force us to deal with how we go about transportation, and, more important, I think it's also going to force us to re-invent the local economy we once had.

A good read on the subject is "The Small Mart Revolution" by Michael H. Shuman.

[Doug Sheridan]

As Eben said, overheads that are constant become a smaller percentage per cost per item as sales increase. In every case that is true, even if your overheads are tiny. Common mistake is in pricing your finished work. It must include a profit beyond labor.
I figure profit in the cost of each item by adding labor and material costs and multiplying that number by 40% = profit. Calculate overhead by dividing a months total of overhead costs by the total of work hours per month. If your total hours increases, the overhead is smaller. So, when pricing an item it goes like this: Materials + labor + overhead/hour + 40% for profit = selling price.
This really only applies to volume sales. But even on small quantities it's handy to know how a design measures up and how high or low you can price it. When we were doing big volume it would tell us what to advertise or do specials with.

[Sandy Dukeshire]

Doug - i loved your idea using my end of the year # and divide by 12. so i went back 2 years, tracked my progress, and also discovered certain rhythms that i will attempt to capitalize on over the next year. also your pricing calculations look sound, i will run my numbers with it later to try it on for size. i cant agree more with you all about volume. thats the exact reason i work 10 hour days when the studio is hot, which really translates into about 12 hours, now i can shut down for the summerish with no worries.

so lets all pretend we made 10k last month. do we pay off the loans and bills, or do we stick that cash back into the business. yes we all have different situations, but from a business standpoint, what would you do?

thank you all for you time and imput on this subject. it has been valuable to me and i hope others as well.

[Brian Gingras]

Volume baby... Volume.

I cringe when I see the overhead #'s of the guys here that have small furnaces, but I know that I can produce a considerable amount more product.

Profit margins improve when you can make more work. In my case, I have set expenses that are the same every month, but expenses in direct relation to produciton costs obviously get larger when I make more and more glass. What changes when you make more and more glass is that the % of expenses of your static costs gets smaller and smaller the more you make work. Its in essence the flywheel effect. I have a big gas bill, but If I can produce 60% more glass than someone with a small furnace, at the end of the month, my profits are higher.

Selling all the glass is the hard part though ;)

Can you physically produce 60% more glass than someone with a smaller furnace though? At what point does it become necessary to then hire help to produce the 60%...The only thing that is clear to me, is we are making money...this new company literally has 4x the sales numbers over my old operation(same studio, same equipment) yet we have seen only a 20% increase in operating costs in the same time frame...this has a lot to do with new designs that use less materials and are selling for more per pound of materials, and less loss/experiments as well...anyway, to each his/her own operation.

By the way, an increase in furnace capacity would do nothing to increase our output, we simply don't have enough time in the day to use it up :)

[Pete VanderLaan]

A major key to survival in this biz is the same as anywhere else. Being lean and mean is important. Having no employees means the insurance can vanish, particularly workman's comp. Cutting energy costs is key. Electric is really the future and Moly is the method in my opinion. There is no combustion chamber in an electric and keeping it tight keeps it affordable.

Eben, when I get this little three pot furnace installed, you have to get a bank loan, buy a tank of gas and come up to see it and go trout fishing.It will hold a 150lb pot, a 38 lb pot and a 15 lb pot. In a small shop, the damn things are ideal in that they don't radiate any heat. I cannot conceive in any way having fuel costs near yours using a moly, even at 21 cents per KWH. If you were melting your own color in it as well, the color bill would tank out as well. I will run either a gas, or an oil fired gloryhole.

At this point, John Gilmore has paid for his furnace from Steve in about 16 months just from the fuel savings.

[Eben Horton]

Pete, when do you think you will be done? I would love to come up for a visit and can visit my dad as well.

[Pete VanderLaan]

I am currently in Portland and Steve thinks the furnace will ship at the beginning of August at the latest. The molds are in fabrication now. It's a very neat design that will either take a 24 inch pot, or three smaller pots which is my preference. I have this thing about molten color.

We took the 75 lb furnace downtown to the Hilton yesterday and had it off of the truck and in the booth in about ten minutes. Not bad for a 1400 lb unit. The one running at Elements is cute as a button.

Mary Beth and Coco are building the glue room and the loft in the new shop as I type and when I go home Sunday I will have a wall frame to insulate, electrically wire and sheet rock for the counters in the grinding stations. The electric service is running. The hood will really be pretty small since the moly furnace takes up such a tiny footprint and I don't use a very big gloryhole. I suspect the detail work will be deceptively slow. The big project is finishing the horse barn which is classic post and beam. We milled all that heavy timber last fall and will assault it about Aug 1st. MB also had me mill 650 2x6's last week for a 4000 ft fence going out to the sheep pasture. It is enough junk that we had considered renting a crane but the thing was about 400 dollars a day and we would have needed it for weeks. Then, the man who was helping me mill the wood suggested that I just go out and buy a used excavator, since it would be able to lift the beams to the height we would need and we could still dig with it and keep it for the summer and then sell it. They are fairly cheap right now with the housing crisis keeping construction idle, so MB is out pricing used CATS around 12-14000 lbs. Economically it will work out much better than renting as long as we don't wreck it. The machine will have a "Thumb" so it can pick up beams, or some of the little pebbles we have here in excess. We call the opposable thumb machine a Darwinian excavator while the one that simply has a bucket is a fundamentalist excavator. I love bashing on big stuff so it should be pretty entertaining. If you want to try running an excavator, I would come in early august.

I am introducing an entire new product line of crucibles from High Temp of Portland. They have been in the business for over forty years and are a major player in the Portland area for refractory parts. They were also in the business of supplying crucibles to the steel industry and were very receptive to making pots for glass. We have been doing R&D on them, have a bunch out in the field at this point for about the last year and they have been really nice. The castings are really superior and the formulation is working great. Even better, they will cost less than the current pots I have been selling from E.C. I will continue to have EC products for those who want them but invite anyone to look at these pots and to compare them for themselves. I am also going to be handling softbrick, insulation,mortars and castables, so that will be a major expansion of my biz. Our shipping rates with Fed Ex freight will be attractive as well.

It is great to be up here seeing old friends. I ran into John Croucher last night and will definitely be having dinner with him! Hugh Jenkins is prowling the halls in the technical area and every time I turn around, there is a familiar face.

But going to the US open with my dad on fathers day was the best thing so far. Watching the playoff with Rocco Mediate and Tiger Woods was very cool.

Eben, you are welcome any time.

[Eben Horton]

glad your having a good time in Portland Pete... And it sounds like your going to have a beautiful studio when your done. I will shot for early august, and I will help you do whatever for a day, maybe 2 OK?
the new pots sound great !!

eben

[Pete VanderLaan]

I look forward to it Eben.

[Mark Rosenbaum]

Pete: Are you going to put prices up somewhere for your crucibles?
I need a new one for my Stadlemelter and I am interested in the new ones.

[Sandy Dukeshire]

wow pete. the place sound fantastic! i would love to take a peek sometime over the summer. we try to hit the smoke house (Porkeys?) at 16 and 25 a few times a season and your not far.
and eben when your heading north i'm 2 miles off the 495 and 93 intersection. you are also welcome to make a pit stop at my humble shack.

[Pete VanderLaan]

I have never been in Porkey's. Somehow the idea of a big smiling pig just waiting to be eaten disturbs me. Horsefeathers in North Conway is MB's preferred restaurant. You are however welcome. Late summer is best. We are really moving a lot of materials right now and it distinctly looks like we are opening soon.

This conference is really well attended. I have seen tons of old friends and yesterday the guys from LaClede Christy brought me a really nice coffee mug. Today is the last day and then we have to get in a horrendous line to put Steve's furnace in the one freight elevator here to put it in one of two ( count 'em 2) parking places for packing up. We will be there a long time.