As with any business starting a woodworking business from home requires a plan. Part of his plan must include some way of keeping track of costs. Whether this is the cost of materials used or the cost of labour, you must keep track. This will tell you if are making a profit or not.
The amount of you spend on material is simple to keep track of. This involves keeping an itemized list of the materials purchased for each project. The material purchased might also be for several projects. This is a fixed cost after you have made your purchases. At the start you will often be buying more than you need, so you will have extra materials for your next projects. This extra material should be considered stock on hand. It will be part of your inventory.
Another important cost to consider is the cost of labour. If you choose to build the woodworking projects yourself you will be receiving a salary or some form of compensation from your company. You could determine the actual rate of pay based on a percentage of material costs. This would be for a number projects you would normally complete in the course of one or two weeks. Your salary could also be based on what you have to pay someone else to do the job. this would be based on the labour rates in your area for that kind of specialized work.
Do not confuse your salary with any profit the company makes. Salary is fixed, while profit is variable and depends on how well you run your company. The profit your company makes is the reward you reap for the risk you take for being an entrepreneur.
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