A knife making business plan is a plan for selling hours of grinding, heat treating and finishing, with a few dollars of steel inside. A handmade chef knife has about $12 of steel and $18 of handle in it, and eight hours of work; a hunting knife six hours and a sheath. Priced to pay those hours, knives earn a wage and a little more. What lifts the plan is something that earns more for each hour than a knife does, and in this plan that's sharpening. In the example below, a knife maker in Arkansas sells chef, hunting and paring knives and sharpens knives at a weekly market, and ends the first year about $3,700 ahead on $47,900 of sales, after paying every hour at $25. Below is a description example, each part of the plan, the first year month by month, the startup budget, and a free template.
The short version
- Describe the business in a paragraph: the knives, the steel, who buys, the goals.
- Cost a knife from the bar stock up: steel, handle, pins, abrasives, heat treat, hours, fees.
- The hours are most of the cost; price from them.
- Sharpening earns the most for each hour and brings knife buyers to the table.
- Keep steel counted by the inch and handle blocks by the each, by kind.
- Number each heat-treat batch, so a knife that chips can be traced to its batch.
- TaroStack keeps steel by the inch and handle blocks by the each, and gives each batch of blades a lot. More below.
Part 1: the business description
Cossatot Knife Works, a made-up knife maker near Mena, Arkansas, I use in these examples, writes:
Cossatot Knife Works makes chef, paring and hunting knives by stock removal from carbon and stainless steel, heat treats them in its own oven, and sells them online, at knife shows and at a weekly market, where it also sharpens knives while customers shop. In its first year it aims to sell 20 knives a month and keep a month's wait for chef knives.
Part 2: what a knife costs
| Per unit | Chef knife, 8 inch | Hunting knife and sheath | Paring knife | Sharpening, per knife |
|---|---|---|---|---|
| Steel | $12.00 | $6.00 | $3.00 | |
| Handle material, pins and liners | $18.00 | $13.00 | $8.00 | |
| Belts and abrasives | $8.00 | $6.00 | $4.00 | $0.50 |
| Heat treating | $10.00 | $6.00 | $4.00 | |
| Leather sheath | $9.00 | |||
| Making at $25 an hour | $200.00 (8 h) | $150.00 (6 h) | $75.00 (3 h) | $3.33 (8 min) |
| Box or packaging | $6.00 | $4.00 | $4.00 | |
| Fees: 6% on knives, 3% on sharpening | $27.00 | $17.70 | $8.40 | $0.36 |
| Variable cost | $281.00 | $211.70 | $106.40 | $4.19 |
The hours are more than two-thirds of every knife's cost. How to set a price from materials and time is in how to price handmade items.
Part 3: customers and prices
| Product | Price | Variable cost | Contribution | Margin | A month at full speed |
|---|---|---|---|---|---|
| Chef knife, 8 inch, handmade | $450.00 | $281.00 | $169.00 | 37.6% | 6 |
| Hunting knife with leather sheath | $295.00 | $211.70 | $83.30 | 28.2% | 6 |
| Paring knife | $140.00 | $106.40 | $33.60 | 24.0% | 8 |
| Sharpening, per knife, at the market | $12.00 | $4.19 | $7.81 | 65.1% | 120 |
In a month at full speed the chef knives bring $1,014 of the $2,720 of contribution, the sharpening $937, the hunting knives $500 and the paring knives $269. On top of the $25 wage, a chef knife earns about $21 for each hour in it, a hunting knife $14, a paring knife $11, and sharpening about $58. The sharpening table also puts the maker's knives in front of people who cook. What a market stall costs is in cost to sell at a farmers market.
Part 4: the first year, month by month
Fixed costs are $1,235 every month: shop rent ($600), power and propane ($120), insurance ($90), the website ($40), knife show and market fees ($250), ads ($100), and software and card fees ($35). Sales start at 15% of full speed:
| Month | Chef knives | Hunting knives | Paring knives | Knives sharpened | Sales | Profit | Cash, year to date |
|---|---|---|---|---|---|---|---|
| 1 | 1 | 1 | 1 | 18 | $1,101 | −$809 | −$809 |
| 2 | 1 | 1 | 2 | 24 | $1,313 | −$728 | −$1,537 |
| 3 | 2 | 2 | 2 | 30 | $2,130 | −$429 | −$1,965 |
| 4 | 2 | 2 | 2 | 36 | $2,202 | −$382 | −$2,348 |
| 5 | 2 | 2 | 3 | 48 | $2,486 | −$255 | −$2,602 |
| 6 | 3 | 3 | 4 | 60 | $3,515 | $125 | −$2,477 |
| 7 | 4 | 4 | 5 | 72 | $4,544 | $505 | −$1,973 |
| 8 | 4 | 4 | 6 | 84 | $4,828 | $632 | −$1,341 |
| 9 | 5 | 5 | 6 | 96 | $5,717 | $978 | −$363 |
| 10 | 5 | 5 | 7 | 108 | $6,001 | $1,105 | $742 |
| 11 | 6 | 6 | 8 | 120 | $7,030 | $1,485 | $2,227 |
| 12 | 6 | 6 | 8 | 120 | $7,030 | $1,485 | $3,712 |
The year's sales are $47,897 and the profit $3,712, after every hour is paid at $25: a full month is about 124 hours, $3,100 of wages, plus $1,485 of profit. The first five months lose money, $2,602 at the lowest, which the working cash covers. More chef knives, and a waiting list that lets the price rise, is where a better year comes from.
Part 5: the startup budget
| Item | Example |
|---|---|
| Belt grinder, 2 × 72 | $2,500 |
| Heat treat oven | $2,200 |
| Drill press and bandsaw | $1,200 |
| Quench tank and small forge | $600 |
| Steel and handle material, first stock | $900 |
| Safety gear and dust collection | $300 |
| Show table and display | $500 |
| Website and photos | $900 |
| Working cash | $4,000 |
| Total to start | $13,100 |
The $9,100 spent before working cash isn't earned back in the first year; at $1,485 a month it is a few months into the second.
Get the template
Download the knife making business plan workbook. Four sheets: your knives and sharpening with price, variable cost and a month at full speed; the first year, month by month, with sales, profit and cash; your fixed costs; and your startup budget with working cash. It's an ordinary Excel file with no macros, and it works in Google Sheets, LibreOffice and Numbers.
Where this stops working
Four kinds of steel in bars, a dozen kinds of handle wood and micarta, pins in three sizes, blades heat treated in batches, and commissions waiting on a particular block of burl. A notebook can't say whether there's enough of the stainless bar for next month's chef knives, or which heat-treat batch a knife that chipped came from. Keeping materials like these counted is in raw materials inventory example.
How TaroStack does it
TaroStack keeps steel by the inch and handle blocks by the each, and gives each batch of blades a lot.
Materials in their units. Steel bought by the bar is stocked by the inch, and handle blocks, pins and liners by the each, so the stock is in the units the knives are made from.
Each heat-treat batch a lot. A run of blades through the oven is a batch that takes the steel off stock and gets a lot of its own, recorded automatically, and a batch record form carries your own fields, such as the oven temperature and the hardness test, with their limits and a sign-off. How lot numbers work is in what is lot tracking.
Reordering steel. Each steel and handle material comes up on a reorder list in days of cover, worked out from how fast it's used, with the supplier's lead time, and a supplier's price rises show up in the price-creep report.
| The job | Notebook | In TaroStack |
|---|---|---|
| Inches of each steel | Measure the bars | Stock by the inch |
| Which batch a chipped knife came from | Memory | The heat-treat batch's lot |
| A batch's temperature and hardness | A page of notes | On the batch record, with limits |
| When to order steel | When it's short | Reorder list in days of cover |
Lots, batches, batch records and reorder lists are on every plan, from $49 a month. The first 30 days are free, with no credit card. If you'd like a hand setting up, ask, and we'll do it with you.