The following was submitted as a letter to the editor:

Great piece on shop rate (“Establish a loaded hourly shop rate,” FDMC January 2025), especially the encouragement to load in a little profit. We would do exactly that on everything from material to labor to hardware. This would also give a little room to discount if needed on larger commercial projects where volume discounts are expected. 

One thing to note: We would use a percentage of actual production hours per employee to calculate our overhead recovery rate. Of the 2,000 working hours per employee, how much was spent actually producing? 

• Shop employees: 80% of the time (-20% for bathroom breaks, machinery set-up, etc.)
• Office staff: 0% 
• Me, personally: 40% (I handled a lot of our outside sales)
• Sales staff: 0% 

So, this would be a common breakdown for a typical shop:

• Production Employee 1: 1,600 billable hours / year
• Production Employee 2: 1,600 billable hours
• Production Employee 3: 1,600 billable hours
• Production Employee 4: 1,600 billable hours
• Office Manager: 0 billable hours
• Owner: 800 billable hours 
• Sales Manager: 0 billable hours

Total billable hours: 7,200 year
Total annual overhead: say $700,000
Overhead recovery rate: $72/hour
+ 20% profit: $116 hourly shop rate

Forgive the long email, but once we got this figured out it changed everything with our pricing and we were able to become actually and predictably profitable, consistently. 

I hope it’s helpful! I appreciate your putting in the work to help others with this stuff. The industry definitely needs it!

Corbin Clay
Founder, finishmatch.com

(Editor’s note: Corbin Clay was a 40 Under 40 honoree and founder of Azure Furniture Co. in Colorado. He currently is part of a startup involving AI technology and finish matching. You can read more about how his experience with Azure Furniture at wdwrk.net/Corbin-Clay-Azure-Furniture.)