How do Small Batch Custom Knife Makers and Designers make most of their money?

[Zaydok Allen]

In my perusing I see many knife designs from custom knife makers being produced by major manufacturers. But I also see that many of them have their own small batch custom knife making business. There's lots of examples of where you can get a Les George, or RJ Martin, or Hinderer designed knife from a company like ZT or WE, but you can also get the real McCoy from the designer themselves.

I'm curious if selling or licensing their designs is how these folks make the majority of their money, or if maintaining a small production element on their own is. The genuine articles usually command much higher prices. Obviously each deal made can influence the outcome, and I doubt they'd be making small batches of knives if they weren't making some money doing so.

The reason this question came up in my mind is I've been thinking about buying a few designer made knives rather than buying a production company copy. It seems a better way to support the designers I like. But I also realized if I buy designs produced by production companies, I'm obviously helping create a demand for the designer's work, which leads to supporting them as well.

Just curiosity really.

 

[BreechFace]

One way could be that the designers get a royalty on commercial sales of their used designs.

 

[George P]

Ever price a Randall? Notice they have a multi-year backlog? That's how they make money, high demand keeping prices up very high.

 

[hso]

I doubt they'd be making small batches of knives if they weren't making some money doing so.

You have the cart wayyyyy before the horse. Custom knife makers aren't manufacturers. They are craftspeople. They start off making knives for the love of it. They generally don't even pay for materials starting out and give a lot of knives away before someone convinces them that they should be charging for them. That transition from hobby to part time maker may be quick with some talented folks (and should be much longer for some I've seen charging for knives that others would just give to friends and family). Eventually they get enough people interested that they set up at local shows and then regional shows and then national shows. See how this is going? Years of work honing their craft builds skill and quality and eventually a reputation. THEN a company gets interested.

The company is leveraging that skill, talent, and reputation grown by the knife maker. They make a cheaper version of the maker's knife benefitting from the maker's reputation. They make it available to a broader market than is willing to pay for the hand made. This is leveraging the maker's reputation and public interest in their knives as a way to help market and make profits from a knife they might put out that doesn't have that association and cache'. This may also benefit the maker since it introduces more people to their work, but most folks buying production knives have zero understanding of what goes into anything made by hand and simply aren't equipped to understand the price for a custom. Heck, part of why I became an ABS Apprentice Bladesmith was so I could better understand what went into the knives I was so fascinated by. Not too many people are willing to invest the money and time to do that.

Knifemakers make knives because they want to and they keep making them because they want to. If it pays they can buy more equipment and have more time to make more knives that they want to make. If it pays well enough it makes it easier and more fun and more profitable so they can put more time into making only what they want and still make a living from the dedicated customers paying for anything they make.

Those monthly or quarterly royalty checks are great, but nothing that can be depended upon since last year's "hot knife" may be discontinued in a couple of years. The only thing that a maker can depend upon is their own work and their customer base for it.

There are people like Blackie Collins that designed knives for decades making a very nice living off of those checks coming in, but most knives you see promoted as "designed by" are from good knife makers who still make knives every day they can.

 

[Madcap_Magician]

You know how to make a small fortune making knives?

Well, first you start with a large fortune...

It is very difficult to actually make a living on knifemaking. Most knife makers are hobbyists with full-time jobs or who are retired from full-time jobs. I'd say of all knife makers, probably only 5% (or fewer!) are doing it full time, and most of them are not making huge amounts of money. Even among the knife makers skilled enough to command a following, many lack the business skill to make a sustainable and profitable business. Plus like many craftsmen, it's a very precarious business that solely depends on the health and skill of a single person.

 

[hso]

I'd say of all knife makers, probably only 5% (or fewer!) are doing it full time, and most of them are not making huge amounts of money. Even among the knife makers skilled enough to command a following, many lack the business skill to make a sustainable and profitable business. Plus like many craftsmen, it's a very precarious business that solely depends on the health and skill of a single person.

Well said!

I think we've discussed how most full time makers either have a spouse with a good job and benefits, are retired with pay and benefits, or are terribly lucky, talented, & persistent (or all three).

Shop fire, you're out of the business. Hand injured, you're out. Illness, you're out. Divorce, you're out.

 

[Zaydok Allen]

Ever price a Randall? Notice they have a multi-year backlog? That's how they make money, high demand keeping prices up very high.

Yes of course, but that wasn't really my question. Put simply I was asking if the majority of well known knife designers who sell or license or otherwise authorize a production company to produce their designs, but also produce their own numbers of the same design are making the majority of their knife making profit from one or the other business practices. I don't think Randall does that, do they?

You have the cart wayyyyy before the horse. Custom knife makers aren't manufacturers. They are craftspeople. They start off making knives for the love of it. They generally don't even pay for materials starting out and give a lot of knives away before someone convinces them that they should be charging for them. That transition from hobby to part time maker may be quick with some talented folks (and should be much longer for some I've seen charging for knives that others would just give to friends and family). Eventually they get enough people interested that they set up at local shows and then regional shows and then national shows. See how this is going? Years of work honing their craft builds skill and quality and eventually a reputation. THEN a company gets interested.

Yes I understand that, and didn't really think it necessary to articulate all of it. I'm talking about established names in the industry, well known designers, not someone just getting their feet off the ground.

The company is leveraging that skill, talent, and reputation grown by the knife maker. They make a cheaper version of the maker's knife benefitting from the maker's reputation. They make it available to a broader market than is willing to pay for the hand made. This is leveraging the maker's reputation and public interest in their knives as a way to help market and make profits from a knife they might put out that doesn't have that association and cache'. This may also benefit the maker since it introduces more people to their work, but most folks buying production knives have zero understanding of what goes into anything made by hand and simply aren't equipped to understand the price for a custom. Heck, part of why I became an ABS Apprentice Bladesmith was so I could better understand what went into the knives I was so fascinated by. Not too many people are willing to invest the money and time to do that.

Also understood.

Knifemakers make knives because they want to and they keep making them because they want to. If it pays they can buy more equipment and have more time to make more knives that they want to make. If it pays well enough it makes it easier and more fun and more profitable so they can put more time into making only what they want and still make a living from the dedicated customers paying for anything they make.

Those monthly or quarterly royalty checks are great, but nothing that can be depended upon since last year's "hot knife" may be discontinued in a couple of years. The only thing that a maker can depend upon is their own work and their customer base for it.

There are people like Blackie Collins that designed knives for decades making a very nice living off of those checks coming in, but most knives you see promoted as "designed by" are from good knife makers who still make knives every day they can.

This answers my question It sounds like knife making really is where they are making the majority of their profits, even if it's not a full time way to make ends meet.

Sorry if my original question wasn't clear or inclusive enough.

 

[hso]

Sorry if my original question wasn't clear or inclusive enough.

No need to apologize. I wouldn't expect most people to know what goes into the process because most people don't make a living as an artisan or intimately know anyone that does. There are darn few of them out there making it doing it. And most artisans don't have the opportunity to have a manufacturer want to reproduce their work.

knife making really is where they are making the majority of their profits

The normal contract provides 2-5% for the maker. That's 2-5% from what the manufacturer is making in profit, not retail. What's that come to? Remember the discussion about what a manufacturer is getting for a knife they produce? Dealer pays half of MSRP. The cost to the distributor the dealer buys from is 80% of that half of MSRP. The really large buyers are paying the manufacturer another 20% less than that. So the manufacturer may be making 15-20% profit overall. That is averaged over their whole line. Some items will sell more than others and some barely at all. Now the person who invested all that skill and talent that we're talking about is making 2-5% of maybe 10% of the 30% of the 50% of MSRP. Not enough to make a living off those checks unless you're really prolific and lucky (Onion, Collins lucky). The checks help, but it is making custom knives where the living comes from.

 

[Zaydok Allen]

The normal contract provides 2-5% for the maker. That's 2-5% from what the manufacturer is making in profit, not retail. What's that come to? Remember the discussion about what a manufacturer is getting for a knife they produce? Dealer pays half of MSRP. The cost to the distributor the dealer buys from is 80% of that half of MSRP. The really large buyers are paying the manufacturer another 20% less than that. So the manufacturer may be making 15-20% profit overall. That is averaged over their whole line. Some items will sell more than others and some barely at all. Now the person who invested all that skill and talent that we're talking about is making 2-5% of maybe 10% of the 30% of the 50% of MSRP. Not enough to make a living off those checks unless you're really prolific and lucky (Onion, Collins lucky). The checks help, but it is making custom knives where the living comes from.

Ahhh yep, with margins like that it makes sense. So for a designer to get picked up by a production company, it sounds like the real bonus is getting their name out there.

I wouldn't expect most people to know what goes into the process because most people don't make a living as an artisan or intimately know anyone that does. There are darn few of them out there making it doing it.

I've been doing a little reading on custom knives in any article I can find online. My interest is in the overall scheme, not the nitty gritty details, but what I've discovered is that custom knife makers and designers are totally under charging, but it's what the market will tolerate. I will never again look at a $500-$3000 knife made by a true artist and think "Boy I'm not paying for that!" It's the care and TIME you are paying for more than the materials. I just have to prioritize my money though. Mortgage comes first. But as with all things, do I want two or three nice production knives, or do I want one really nice knife made by a craftsman/artist?

I'd rather start shifting my knife purchases to stuff made directly by the designer for lighter duty so I'm helping support them, and keep my production knives as harder use knives.

 

[hso]

shifting my knife purchases

Yep

Many collectors start with production knives, progress to limited production, go on to bread and butter customs, and then to fully custom pieces. The next step after that is collecting mementos of your knifemaker buddies and helping promising young makers along.

 

[lemaymiami]

What little I know about the knife "business" has been learned mostly right here... Madcap's post (#5) is right on from my own experience in the fishing world, all the way down to the "start with a large fortune" proposition. I get royalties (very small..) from flies I've designed, been a commercial tyer for shops for about 30 years (no longer), have taught and written magazine articles.. and yes, I'm a full time fishing guide starting my 26th year. I make ends meet and pursue the things that interest me but... thank heavens I'm not relying on it as my sole income - particularly this past year when most of my bookings - cancelled out...

There's a long standing joke about my world that goes like this... "What do you call a great fishing guide in the Keys who just broke up with his girlfriend?" Homeless...

I suspect that most of the great craftsmen that make outstanding blades aren't exactly getting rich and are in it for the personal satisfaction as much as anything.. We're all very lucky that there are so many of them these days... For commercial success I'd be looking at companies like Benchmade and others that have the ability to come up with good products with great standards and still staying profitable.

 

[Valkman]

I suspect that most of the great craftsmen that make outstanding blades aren't exactly getting rich and are in it for the personal satisfaction as much as anything..

Yes this is true I believe. For me when we built a house we also built me a shop. By the time you do that and buy a grinder, buffer, chop saw (or a good band saw) and a workbench and maybe a mill you're not going to make money for a while. Then it takes a couple of buckets of crappy knives to start grinding knives good enough to even show anyone (that's my experience, didn't have a mentor except the internet) much less to sell. Of course you're also buying steel and handle material so you are WAY in the hole before you sell your first knife.

I sold my first knife for $80 and was so nervous that buyer wouldn't like it and trash me on the internet that I made a 2nd knife to go with it! He was very happy and so was I.

After about 4 years I was making pretty good knives and made it into Blade magazine as the "Hot Handmade" maker of the month. That always helps your business but I didn't get swamped with orders from that. It just showed me I was advancing at a pretty good rate and was getting recognition.

I wound up tearing up my left hand in a table saw accident at about the 10 year mark of knife making and that pretty much ended things for me. I tried to go back but making orders no longer interested me. If I did it again I wouldn't take orders at all, just make what I want to and sell them as I go. Having a book full of orders is heaven for some guys but I hated it - I'd rather make what I feel like making.

I made knives because I loved making stuff that worked and looked good and it's a huge plus when other people like your knives and you can sell them for enough to do it all over again. But making money is hard and most have no business sense. I know I had no idea how to run a business I just did it for fun. It was not my primary source of income and thank God I had good medical insurance.

 

[Madcap_Magician]

No need to apologize. I wouldn't expect most people to know what goes into the process because most people don't make a living as an artisan or intimately know anyone that does. There are darn few of them out there making it doing it. And most artisans don't have the opportunity to have a manufacturer want to reproduce their work.

The normal contract provides 2-5% for the maker. That's 2-5% from what the manufacturer is making in profit, not retail. What's that come to? Remember the discussion about what a manufacturer is getting for a knife they produce? Dealer pays half of MSRP. The cost to the distributor the dealer buys from is 80% of that half of MSRP. The really large buyers are paying the manufacturer another 20% less than that. So the manufacturer may be making 15-20% profit overall. That is averaged over their whole line. Some items will sell more than others and some barely at all. Now the person who invested all that skill and talent that we're talking about is making 2-5% of maybe 10% of the 30% of the 50% of MSRP. Not enough to make a living off those checks unless you're really prolific and lucky (Onion, Collins lucky). The checks help, but it is making custom knives where the living comes from.

It is hard to say for sure sometimes, because obviously the business deals are confidential, but I shouldn't wonder if some makers who are lucky and smart do manage to make a decent living off of licensing designs. Blackie Collins and Ken Onion, for sure, but I was thinking about Alan Folts, who has licensed about a dozen variants of his Minimalist fixed blade to CRKT. Now, those are $20 knives really. Alan charges under $300 for the custom versions even with the most tricked-out options. But even Wal-Mart sells the CRKT version in a lot of its stores. And so I wonder if 2-5% of $20 times the tens of thousands or more CRKT Minimalists that get sold (because they're so inexpensive and widely available) doesn't end up paying him more than his custom versions, of which he only makes a hundred or fewer a year.

So Alan's small percentage is a steady trickle for which he does not need to do any additional work and on which he has no overhead expenses - he just gets a royalty check every month or every quarter or every year from CRKT. I suspect that's a good deal for him and that his design licensing does help him to be comfortable as a full-time maker.

But of course, licensing a production design is not a guarantee of sales success. Spyderco regularly takes a gamble on sometimes first-time knife designers if Sal and Eric really like it, but they also regularly discontinue these models if they don't sell.

So for the OP's question, I suspect that for those tiny number of makers who 1) have multiple designs licensed to production companies like CRKT, Spyderco, Benchmade, Civivi, WE, etc., and 2) have those designs be flagship models or consistently selling lines for those companies, that revenue from licensed designs does make up a significant portion of their income just from the production scale and the lack of overhead costs borne by the designer.

But I also suspect that the majority of makers with licensed designs do not in fact end up having those designs be flagship models or consistent sellers, and the majority of makers overall don't end up with licensed designs.

 

[Madcap_Magician]

Well said!

I think we've discussed how most full time makers either have a spouse with a good job and benefits, are retired with pay and benefits, or are terribly lucky, talented, & persistent (or all three).

Shop fire, you're out of the business. Hand injured, you're out. Illness, you're out. Divorce, you're out.

For a lot of them, success and the internet is also their worst enemy. No quicker way for a knifemaker to implode their business these days than to design something that the Instagram knife mob really likes, have it go viral, and then suddenly have an order queue ten years long. Then they take deposits to try and manage the queue and get enough equipment and materials to try and fill the orders. But then they can't keep up. And they've taken thousands of dollars in deposits, and something goes wrong, and then all the customers are furious, and then his or her name is mud.

 

[hso]

Success has been the bane of many custom knifemakers. What was once a joy creating becomes a job under the pressure of orders. The good ones that want to keep the joy of creating stop taking orders and make what they like and people buy or not.

 

[Valkman]

Success has been the bane of many custom knifemakers. What was once a joy creating becomes a job under the pressure of orders. The good ones that want to keep the joy of creating stop taking orders and make what they like and people buy or not.

Exactly, that's what happened to me. Making order felt like a grind.

 

[hso]

felt like a grind

 

[hso]

Making order felt like a grind.

I know several makers that gave it up because of that.

 

[lemaymiami]

Put simply... "Be careful what you wish for"... In many, many endeavors that start out as great hobbies - then turn into commercial propositions. I've been very lucky myself - still doing what I love at age 72 (even though there are days, and nights when I'd chuck it all and just retire, period). I was never in a position of making stuff - and then selling it. All of my craftwork was filling orders where a specific customer or shop had committed to purchase what I was making so that's one whole part of craftwork as a business that I avoided entirely..

I still like guiding enough that I even when one of my anglers runs a hook through one of my fingers (happened yesterday almost twenty miles from the ramp in the backcountry of the Everglades... we pushed it through, clipped off the barb, a bit of Neosporin followed by a bandaid and I was back in business...) any day on the water is still a great day...

 

[Zaydok Allen]

For a lot of them, success and the internet is also their worst enemy. No quicker way for a knifemaker to implode their business these days than to design something that the Instagram knife mob really likes, have it go viral, and then suddenly have an order queue ten years long. Then they take deposits to try and manage the queue and get enough equipment and materials to try and fill the orders. But then they can't keep up. And they've taken thousands of dollars in deposits, and something goes wrong, and then all the customers are furious, and then his or her name is mud.

The more reading I doo here and there, the more I here of this exact scenario.