i have a three quarter time employee that wants to make cutting boards to sell on the side. he's buying lumber for me at my costs (i agreed to this) and i'm trying to come up with some sort of charge to use my equipment. he's using pretty much everything we have to include our two head wide belt and ros sanders.

does anyone do this (charge for shop time)? if so, what is your agreed to rate?

i've thrown out $10/hr. with a cap of $500/month. this would include everything (glue, sharp blades, sandpaper, etc.). i think this is super generous, given the alternative of him buying all of this equipment himself, but he voiced concerns that i was overcharging him.

What happens if he has an accident?
What happens if he damages a piece of equipment?

We don't let guys work alone on side projects there has to be someone else here.

Whether you have WC or not, if there is a serious accident it will come back to you.

alan,

thanks for your reply.

he's only allowed here during our regular hours with others around.

damaging equipment - i wouldn't anticipate this and i'm not sure how different it would be if he were working for me or on his own. he's worked for me long enough that i feel confident he wouldn't break any equipment.

damaging other work in progress - same as above. accidents happen, and happen more frequently to the inexperienced.

insurance - we have wc, gi, auto, and a liability umbrella. i'd hope we'd be covered with any type of injury.

Don't hope on that insurance, get it in writing from the agent. If he's a valuable part time employee, just have him pay for expendables and no charge on the machines.

Insurance isn't a problem. If you've got w/c, you're covered.

I let guys occasionally do personal projects at the shop. But allowing an employee to run a business (however small it may be) using your overhead is just not a good idea. It's too messy. If he needs more income, then go find more work to keep him busy.

$10/hr seems incredibly low. Do you know what the equipment cost you? Work out an hourly replacement cost based on 3 year payoff, then add some for the rent and the consumables. I'd probably charge one of my guys $50/hr for full use of my machines if he was running a side business. (Not that I would allow that in my shop. Personal projects, sure. Money making: never.) Let him learn about cost and profit on his dime, not yours.

We let most of our guys use the shop for small side projects none of them have anything on going. Its normally using the planer and wide belt for a cutting board or maybe a cabinet or two for someone they know. They pay for materials and thats it just kind of as a perk of working here. If its not much like $20-$30 in material then we don't normally even charge them. I believe that if you take care of your employees they will take care of you. Not sure what I would do for someone wanting to run an on going business though.

I would definitely check with the insurance company about whether workers' comp would cover you if he gets hurt when he is not on the clock working for your business. I would be surprised to find that they would, especially if they find out he is working on his own for sale projects. Instead of charging him an hourly rate I would work out some kind of partnership where he pays you a percentage of his sales, even if it's a very small percentage, or maybe even run the sales through your business and let him keep a percentage. That might be a way to keep your insurance in force while he's working in your shop.

Context is key.

Are they making 10 cutting boards a week?

Or 100/week?

If the former, I don’t even know if I’d charge for the wood if it was from scrap pile.

If the latter, see Paul’s post.

There are a thousand ways this can go wrong, possibly way wrong and on the flip side there is not much upside.

Cutting boards? He's in business for himself and we can't afford a tablesaw and a random orbit sander, the satisfaction of you know actually being in business for himself...nah, I'll pass. I wouldn't do this in a million years.

This is a great thread. I'm glad that you are proactive in trying to be fair as well as helping your employee. I would err on the generous side of the issue. $10 an hour is more than fair. Making cutting boards, I could easily burn through $10 in glue, paper, knives, electricity, etc. If he is building high-quality cutting boards he will make a profit.

20 percent of the gross. He buys all consumables including sanding belts.

We had a guy doing the exact same thing at the shop I worked at in Calgary. Our shop rate to employees was $10/hr, which basically didn't cover the cost of running the machines and expendables, it was more of a perk. Anyway, I caught this fellow working on his cutting boards during work hours on more than one occasion, and a few days after I had shown him some very expensive Wenge we had in stock, it started to go missing. I looked in one of his tool cabinets after hours and lo and behold, there was a wenge/maple butcher block hidden in the back. We ended up firing him and changing our policy to $10/hr for personal work. Anything that was for sale to others was priced by the employee but run through the company, we only charged them cost but it usually worked out to about $25 per hour plus materials. I'm not saying your employee would ever do anything like this, but once they have their own clients to satisfy, your priorities are no longer theirs.

thanks for the replies.

he works three days a week for me, so his likely max would be two days working in my shop for himself. figuring an eight hour day, this would be a likely maximum of approximately 60 hours a month.

with the rate, yes, $10/hr wouldn't cover my costs. however, he's working along side of my guys, not working by himself in my shop. i'm not sure how much extra air he would use from the compressor which runs with or without him in the mix. same thing with hand tools, bits, and blades. we use the same lighting in the shop if he is present or not. my rent, water and sewer, security, regulatory compliance, g.i., bookkeeping, and others are all expenses that happen regardless of whose working. sanding discs would be easier to track but that's all i can think of this morning. i could have him use his own glue bottle and other stuff as agreed upon.

this comes from a variety of places but i saw a pbs show about a kitchen co-op. someone (some business) provides the space and equipment and rents access out to a variety of food businesses. obviously, the hard part to starting a business is securing the initial capital to purchase equipment, especially when a business is brand-new, not well-funded (like many are) and untested. this seemed to answer the capital question, lessens the risk considerably to the entrepreneur, and should provide income to the guy offering the equipment/space. i would guess the liability would be similar (although, i'm sure dismemberment is harder to achieve while cooking) if someone offered something like this for woodworking.

there are other businesses filling this segment already (guilds/clubs), but the one around my area is filled with equipment from home depot and frequently admits through his social media how close he is to going out of business. he services hobbyist. i would be interested in going after woodworking professionals. i think it would be a tough sell to say give me $1000 a month for a 15' x 15' area and full access to the equipment, because $1000 is still a considerable of money with nothing to show for it at the end of the month. however, those that have been-there and done-that (myself included) would jump all over this opportunity.

i don't currently have the space to do something like this, but wanted to test the ground with my guy and help support his adventure.

That would be too much for me. He could make 1000$ worth of product in that set up. At that point he just needs to get his own shop.

I just bought a woodmaster sander which is a toy compared to what you got, and I wouldn’t let someone borrow it for $80 bucks a day.

So, you are going to let him work on his business projects during your regular working hours? What happens when your business needs the equipment he has started to use for the day? Are you going to just issue a stop-work order for your projects? That in effect is what you are doing if you let him use your equipment during the day.

What happens when he starts complaining that he has made delivery date promises to his customers and now he cannot meet them because your equipment is not available when he needs it for his business?

My responsibility, as a business owner, is to my company's bottom line. That is what puts food on the table for my family and a roof over their heads. There is no way that I would risk that.

If you want to start a "school" or some type of "entrepreneurial incubator" for folks who want to start their own business, do it completely separate from your business. One accident or incident could threaten your entire business.

Like others have said, talk with your insurance agent/company and get everything in writing. Then, if you still want to proceed, get a written agreement between your business and this person who wants to run his business out of your shop that details everything.

Personally, I would NOT do this. But, that decision is yours to make. This is just my input which may or may not be of any assistance to you.

all things to consider more. i understand a lot of the bad stuff mentioned and know ways around it. i wasn't looking for all of the possible negatives, but appreciate them just the same.

like many of you, i'm always looking for opportunities to diversify my business. dedicating more time to increasing sales and production of our core product doesn't make me less susceptible to shifts in market trends or increased competition. i don't have a variety of incomes now, but understand their importance and am just entertaining one possible idea.

it seems like there would be a market for something similar to a co-op, only with fewer bodies in the shop and a more serious determination to make good things (sales, etc.) happen. i think it would be fun to do a little mentoring and i could possibly help facilitate a really good business for someone else. i'm probably going through a mid-life business crisis. thanks again for entertaining this with me. back to work.

Hey Google, was thinking about your idea while going through the motions today(picture frames will do that to you).

Your right, not many would pay 1000$ month, but someone that is wanting to get started and working on the weekends would/should pay $500. With the tools you have, I know I would have.

The key would be protecting yourself. Maybe talk to a lawyer about a separate llc. Require a buy in price, and training. Everyone has to be approved by you.

It seems like a lot of hurdles. But I think years back, using HD machinery. I wish someone would have sold me some direction.

I think my concern would be the legalities of him getting hurt, if all that is covered I think all other details could be worked out.
As long as he is doing your work when he is supposed to and not stealing your work, it could be a benefit for everyone.

On a side note, what is a high quality cutting board?

" but he voiced concerns that I was overcharging him"

To me, that says it all. He doesn't relate to the cost of putting machinery on the floor. I wouldn't do it.

I agree with Bruce. For the reason that if he feels over charged he will find ways of "compensating." I think all his time will need to be shown as employee working time to be covered by your insurance. Ask the agent, in writing!