$64,000 question right there, Eric. Over in Fort Wayne, what is the local sales tax percentage? All your overheads will contribute to the final landed cost of an item. That may make the item too expensive when compared with the products from other local vendors.
Start by looking at your fixed overheads… the ones you cannot escape and must pay regularly. Take your shop - it may be your own building but you still have to provide light, heat and energy to make your machine work. This cost is fixed (not in terms of amount) but in terms of you must pay it just to keep producing whatever you make.
Your machinery in your shop may all be deductable but in the UK only 10% annually is permitted for depreciation. You may of course buy things on some sort of lease purchase agreement that will give you tax advantages. This may mean you get less for your machinery as a deductable because the lease purchase is deductable.
So now you have your premises and you have your basic machinery. The machinery will need a constant supply of consumables, be it planer blades, sandpaper, saw blades, drill bits, endmills, glue &c. Then you will need your raw materials and the transportation to get it to your shop and to distribute the final form of item. Advertising, sales effort also has to be paid for and of course the bank account, banking fees and accountant’s fees.
At this point with everything in place, you can start to make stuff. You can choose to cost your time as a skilled machinsist and whatever hourly rate they make. If you cannot work fast enough or the machinery does not support the production environment demands, you wont make enough money via an hourly rate to cover your costs.
It may be simplistic but if you decide that you will not mind making twenty widgets a day and you can cost the materials and your time and make $150 daily (with the proviso, you work every day and do not stop) and the market for what you make is healthy, then you may make enough to live on but you will hate your work.
It may be easier to decide what sort of money you want to earn and then see if you can make enough goods at the right prices to bring in the earnings you want to see. You will not be making anything in isolation (this means looking at having a unique selling point that other people will not have) and you will be competing with folks from miles around and any folks who have an online presence. Having an online presence may help you to reach far and wide or you can look for local hobby clubs and interest groups that want what you can make.
Online presence and PDQ machinery or shops online take another slice of your fixed costs and you will find it tough to run an online shop without them. Web design and SEO are a part of that too and you may look for students who are studying web design who can work to a brief and want the experience rather than being paid a lot. It goes towards a useful CV.
Whatever product you make, when you set your selling price your product has to be as good if not better quality than any local product you have seen and it must be affordable, unless you intend to only sell to royalty. The sales price has to reflect the labour but it still needs a small component to cover tool replacement and all of your fixed overheads.
My suggestion would be to decide what you are going to make and then price that item from other vendors. Examine the quality and see if you are able to produce the same thing. Check the time it takes and the work resources such as electricty, heat in winter, tooling and materials and then see what you think is reasonable for price. Ask yourself if you would pay that price, given the competition, because if you think it is expensive, you are likely to be costing the job wrongly.
Some people I know use a formula that adds the same amount to every job. e.g. 5% of cost for rent, 3% of cost for lighting, 10% of cost for materials and so on. I guess that may work well providing you don’t spend more than you are collecting to run that job. Take care not to undervalue your craftsman’s time and don’t overvalue what you do because that can leave you without a customer base.
People will generally pay fair money for fair work. If you produce great work, you can ask top dollar. Do your market research and take a couple of weeks to look at the stuff you want to make. You will find it in local malls and online and that should help you to find a suitable starting price for your goods. Good luck!