Using the Rule of 33 to Calculate Profit for a Blacksmith Business: The Business of Blacksmithing
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- Опубликовано: 21 сен 2024
- Are you making a profit in your blacksmith business? Are you lost when it comes to quoting a job? In this video, we'll discuss how we use the rule of 33 to figure out our business expenditures and profit margin.
I’ve come up with a resource eBook to help you price your forged items called the BLACKSMITH CHEAT SHEET [see the vid here- • The Blacksmith Cheat S... ] or you can download the eBook for $10 from our website at www.blacksmithp... .
The three main categories that pertain to running most businesses include: fees (selling fees, credit card processing fees, and taxes), business expenses (overhead shop costs and material costs), and profit (in this case, the owner's cut, so you have some money to live off of).
We use this rule of thirds to calculate our own business expenditures here at Christ Centered Ironworks. You can also do the math backwards to calculate how much you should quote a job at.
This rule of thumb is great for blacksmiths, or a wide variety of crafters, and general businesses. If you run your business by different rules, we'd love to hear about it in the comments.
Check out my downloadable pdfs at www.blacksmithpdfs.com .
If you'd like to visit my youtube homepage, you can do so at / christcenteredironworks .
You also might like our intro video we did for the Business of Blacksmithing series: • The Business of Blacks...
The Business of Blacksmithing PLAYLIST • The Business of Blacks...
I’ve come up with a resource eBook to help you price your forged items called the BLACKSMITH CHEAT SHEET [see the vid here- ruclips.net/video/e5U_eobHx6s/видео.html] or you can download the eBook for $10 from our website at www.blacksmithpdfs.com .
Pretty much word for word what my dad told me when I mowed lawns as a kid...didn't have the tax man to deal with but did have to cough up 33% to him as a rental fee for his mower...didn't take long to start buying my own stuff...lol! Love your channel and y'alls personality, you are truly Blessed Sir!
I love rhat idea I will be doing that to my kid thanks
@@thestrappingentrepreneur2822 That's what my Father done for me, and I did for my Son. Your Son will learn that there is no free lunch, the smarter you work, the more you make, and don't abuse your equipment. That will bite you back real fast. Good luck raising your son. I had good luck with mine.
That's a good method. I don't do stuff for sale, but I have my own system: don't keep track of costs, that way I have plausible deniability when I'm asked how much money I've lost :D
Paul's Garage lol I love it (plausible deniability )
Thanks for watching
Paul's Garage Lol!!!...thanks for the laugh!
That doesn't work with my wife, she watches our money like a hawk, and lets me know just how much I've lost! :)
Hi Roy and Jessica ! I'm a young guy from Liège, Belgium. I got my hands on blacksmithing when I was 11 years old and couldn't really get it out of my head. I'm aiming to get my workshop started soon, mostly because I feel an urge to craft and do something more meaningfull than computer work or multimedia writting. Your videos and global work really motivate me, help me and inspire me towards the craft ! Thank you two for your kindness and honesty !
Glad to hear from you! It is very rewarding to work with your hands and learn new things. I bet you will really enjoy having your own workshop :) Thanks for being part of our community! Blessings, Jessica at Christ Centered Ironworks
how’s it been going?
i just want to say that your videos are very helpful as a beginner blacksmith/tradesman. Thank you.
To you and your wife.
Hey Todd, We're glad that you are following along in the series. If you would like to have any particular business topic covered, let us know in the comments! Blessings, Jessica
Man you look young in this video but still full of wisdom thank you for staying transparent
"I'm a blacksmith, not an English major." That's when I clicked the thumbs up.
Interesting to watch a left handed smith. Had to be fun training.
A simple but straightforward approach.
THANK YOU!
I will be keeping my desk job, and just look at blacksmithing as a hobby.
Nothing wrong with that :-)
Serious, I liked so much that way to think, that could be good to run any type of small business, thanks for that, I´ll keep it to my records.Good lesson, cheeers.
This is a great system for me. I'm opening a bladesmithing business in Tennessee in a few months, and being only 18, I have no bills to pay, so I can build myself a great cushion to pay for overhead! Thanks!
Love your talk about prices. I am in school now but before that I was in door to door sales and was pretty successful. I learned it's not about the price for most people. People who are all about price are not the ones you want yo buy from
Yes 33 rule is a good way to go about it.
I feel like many crafts don't realize to get their self worth (ie - how much is my time worth per hour of work) from their work. I had never thought of it in 33% method, so this is a new concept that I will practice when I get going with my project work.
Here big sam takes 46%. so that makes 27 for me, and that automatically results in bigger prices, and clients not understanding why it is so expensive.
That's what I have calculated. That self employment tax is a business killer. His 33% rule made me think I had miscalculated Uncle Sam.
Do a video of this in reverse. Figuring out price to charge for job. Then adding up material cost, labor, fees, etc. to come up with cost and profit margin. Ty for your videos.
Thank you for the advice.
Glad it was helpful!
Great rule of thumb. Thanks and God bless 📖✝
Another great video buddy!
Those 33 thumbs down are not getting the understanding of how the 33% Rule works! 😀
Good info. Simply having some sort of easy reference like that makes thinking about $ and how much to charge easier. I like this series. Keep up the great stuff. Define Your Legacy!
Warped Legacy thanks twan!
God bless
As an iron worker or blacksmith you should ask yourself. How much should I get paid for the item at hand.
How I keep everyone happy is I tell my customers I charge a certain amount per hour. Let's say you think you want at least 15-20 an hour depending on where you live you can charge more or less
You decide be ferm with your number about. The faster and nicer your work the more you can charge.
Because in the end the item cost the customer the same.
So let's say you want 20 an hour. Because you're getting good
Metal + materials costs you $70
You put in 4 hours to build a gate
20x4=80
80+70=150.
The price of the gate should be 150 or more but not too high then no one will buy it.
If they provide the materials to build the gate should only cost that customer $80.
You still are making the same on the gate.
Hope this helps everyone that is not understanding what to charge.
Thanks for Info in this video.
Profits = 😁👨🏭😊👰
Here is how it goes for an artist.
Spend $100 in supplies.
Spend 4 hours making artwork.
Sell art for $40
Be an engineer.
That's why I went I to engineering lol I love art but I love to eat more
You messed up the last part, it should be; "forget" to sell half of what you make, guy that buys your house and everything in it sells your hoard to rich hipsters for hundreds of thousands of dollars...
What you described is a HOBBY. Selling art can be a business and profitable if executed properly.
Thanks for these videos! I am working on starting a shop. Burnt Stump Forge. I'm still in the process of setting everything up. I'm only a part timer but it is one of my favorite hobbies and I could use a little extra income. Soli Deo Gloria!
I always have free time, so I just charge double the mat costs + the gas costs and just ignore the time it took to make it, but in the future this might be useful for me when I start charging for my time when I have more stuff on hand
I love the ending "I don't mind if you hit 👍 or 👎, either way it boosts the video"! I'm going to give you both to help the video reach more people......... ok, that didn't work...... I know, I'll just leave a really random comment instead 😁
This is very helpful to me for an ecommerce business! Taxes are so confusing but ultimately simple....it's just I just don't want to admit how much goes to the govt.
My costs are about half of my sale price. Based on this thinking I'm looking to keep bout
Outstanding video and thank you for the insight! Just starting up a legitimate A/C business after years of piddling with it for money under the table. I forwarded your video to my partner and we will now have at least somewhere to start as we try to stay out of tax jail and keep the money trail on the up and up. Thanks again!
I like that rule, I beat myself up with charging labour too but that's just the way it goes. unless you're loaded you're gonna have to charge labour
I’ve heard whatever price you come up with, double it and that’s what you charge.
Yes good, it'll get you close as normally people only calculate for materials (final not raw) and direct time. In semi repetition manufacturing this often represents about 50% of final price with a 17% profit.
How much would you charge for one of those beautiful roses 🌹. Lot of time and money 💰 to produce one!!
As some who just got serious about wanting to be a serious blacksmith this helps a lot. I had always thought " you know I would like to blacksmith, it's always seemed so cool, and I'd like to trade what in my opinion is a destructive hobby, video gaming, and do something productive that also could make a little bit of money." I'm 26 and just this past week I decided to get serious about it. My big problem is I have some crappy neighbors and I live literally 150 feet into the city limits, really annoyed about that... But I can't blacksmith in own my yard because I can't even use my own fire pit in my own back yard, without getting the city called on me. Does anyone have any suggestions?
I believe if you have it set up as a business, the rules change
Cool man, chuckles for sure
I hope she is putting in just as much work and effort to make you smile as you are doing for her.
This is a big help. I have a hard time charging what i should for my work.
I loved it! Great Simple to the Point!!!
What about tithe? Does that 10% of the hundred come from profit?
Nice rule! I always struggle with pricing items. Mainly because sometimes I feel guilty for making fair profit for work i enjoy doing. sounds crazy right? I'm going to try the rule of 33. Thank you.
I do much the same for my business also. I have found that having a great accountant makes that 33% to the governmental thieves much much smaller. Plus making sure that I donate items for sale to missions, local fish and game groups and so on helps to mitigate that also.
It also is affected by how your business entity is organized too. I feel that there is so much against us by way of the government that having a professional accountant figured into that 33% is a must. Right now I am essentially not paying myself anything. Been that way for a year and a half as I am putting about every penny back into the business so taxation is moot, although I have to show where that money goes either way. The last theft return I had done clearly showed that, but I was very happy to see that I had a goodly amount left over of that 33% which at the new year went into a brand new heat treating kiln, and since it is the new year I can take advantage of it for this years theft reporting.
As you can see, I look at taxation as theft LOL!
I know what the Bible says, but legally speaking, having to pay anything under threat is extortion, even though they don't see it that way.
We work very hard for the little we bring in. I think we must take advantage of every legal way of keeping it. It is the reason why we kicked the UK out of our side of the world after all, wasn't it?
Bruce Prosser Jesus said render Cesar what is Cesar's and God what is God's but he never said we had to like it lol.
PS. (taxation is theft )lol
God bless
We have no Caesar in the US ;)
Taxation is theft
Lol, he never said we have to like it. That is gold. I am going to use that.
@@ChristCenteredIronworks taxation is what fuels a country, it is the price we pay to live in a first world country. There are places in rural America that don't generate enough tax money to fund public services so they charge a subscription fee instead. If you miss a payment, the fire department will let your house burn down. Either you pay the government or you pay a private entity, the difference is that the government has to help even if you can't pay for it.
Wisdom!
My dad always told me about the law of 3rds, when farming and sharecropping
33 thumbs down , Good ole rule of 33 again ! I gave you a thumbs up .
So $33 to fees, $33 Back into Business, $33 for profit, and a measly $1 for lunch? guess we are going to the dollar menu :p
all you have to do is add 1 and put .xxx at the end ;)
at the time of watching this, there are 33k views on this video. This is a sign of some kind.
So it sounds like if I price out the materials, my time to make the item and the hourly wage thereof, add those two up, I need to charge an extra 67% to do OK. Got it.
Very accurate advice!
What about the 10% for tithe.
Or---- If you are just now THINKING of making a business of blacksmithing, simply write down the amount of after tax income you need/want, per week, and then multiply that number by 3. That will tell you how much, in Dollars, you have to sell EVERY week. If you can't figure out how to sell that much or more, ON A REGULAR BASIS, you may have to look for other employment.
I am new to the channel and I just want to say the videos that you guys do are awesome, and wondering if you sell t shirts?
bucksmith88 thanks for the great comment! I don't currently offer T-shirts but that's a great idea maybe for the future. I am glad you are enjoying the channel. trying to upload more and more on this subject and more :-)
Thanks for watching
God bless
what about what can the market bear in term of the product. Does it cost more to make in materials than time? Then what makes it profitable? Time is money, so if it takes a lot of time to make and the material cost is on the high end. The question is can the market bear the high price you have to put on the item to give you the rule of 33%. What market are you trying to target, what customers are you looking to target? If you want to target the upper middle class then you profits will be higher, than if you target the working blue caller class. Is your product Art or functional, structural? Is there a market for what you want to make? so If your item can't if into a rule of 33% then you can't make it unless you want to work for free. It all sounds simple. In time of rough economy art sells slow and in the structural, can you make cheater that the mechanized factory. Can you break into the 1%ers market. Is there an easy answer for how much I charge? The market price for a product you have to ask yourself can I make this in the time and material cost to fit the 33%. If it take me a day to make an item I can only sell for $100, do I make it? or do I look at as schooling for my craft. It will be more sweat dollars to find out your niche.
Good stuff.
Glad you enjoyed, Noah!
In the words of Dr. Bones: dang it Roy I'm a blacksmith not a calligrapher!
So lets refine that 33% for the Biz by comparing the 33% to a hard number. Or rather, lets figure out what the hard number must be. We should not just put 33% aside for the next project, we should make sure that the fee for this project pays for itself. The 33% must cover all the costs for the current project. This means cost of materials used, cost of (external)labor, cost of finish coating,and cost of delivery (unless gas and mileage have become free).
If all those costs come to $20 you can just multiply by 3 to get $60, add your fun money and tell the customer that it will cost $66.
Wait, the 33% for the bills and 1% fun money is essentially your salary. This means that the $26 is what you will get paid for this project. Can you do it in a reasonable time? Or would you better off doing a different project or charging more?
of course, it may be that if you made 4 or 5 items at the a same time there would be some economy of scale on your time. Now the material cost is essentially a constant, but your time cost is spread across all those items, each selling for $66.
Well, just a thought, and I am enjoying your videos. Good video style, and good info, keep it up.
It definitely helps if you can make multiples of a project for the same time frame. I like to tool up to do repetitive jobs efficiently. Like you say, you'll still have the materials cost, but less time into each piece individually.
Fun but a good margin. How you get to keep a third is beyond me. Keep makin money doing what you love.
Totally correct to charge what you have into it with the exception if you are improperly tooled or lack of knowledge. That gives any business a bad name.
That's where your 33 into the business comes in. To upgrade.
Can't charge a customer 4hrs labor to drill a hole through a piece of steel by hand when you can do it in less than a minute with an electric drill.
Your margins are great. Your funny as heck.
Sometime if you get a chance show your viewers where the 33 for the shop goes. Think they would be amazed on how much it actually cost to just keep the doors open.
200 dollars to the town just to hang a sign (in an industrial park). Insurance companies jacking your rates because a squirrel farted. Power company charging 2000.00 dollars a month just to have power available. So now I have to work 7pm to 7am (off peak hrs)
This only a few of the costs. Not a large business either. 1 acre. Trying to do good making wood pellets.
Renewable fuel and keep small time woodland owners and harvesters with
An outlet to sell there low grade wood. Pulp industry dying at an alarming rate..
I digress. Great video. God bless.
"4 hours labor to drill a hole through steel by hand"? WOW, no wonder you can't make a profit.
Many galleries want 50% of the sale price.
Most successful businesses sell at 'a price that the market will bear'.
If you are selling directly that is fine. If you are selling globally or at least country wide you are short selling yourself.
lol lol but for real this is the perfect method and it keeps the taxman happy as well but not as important as the wife. great video though. Don't sell your self short by giving freebees not only are you losing out on the 33 for the wife but in a since as an artest you do not want to be cheep but reasionable spicificly (spelling) lol because most of the stuff we produce as artest is one off quality that is not nessasarily easily reproduced if we as artest even want to reproduce something that in my mind is intended to be a one off anyway, if that makes since. Not only do I work metal but I also enjoy oilpainting on canvas so mabe this is were I get my outlook on my work lol lol..thanks for sharing this for many people it will help not to mention wouldn't it be nice to see the 33 for tax go down to the 15 . Fingers crossed sincerely, Blessings from Martin at M/S Blacksmithing and Blades
Shan Moldovan Thank you for another great comment!
God bless you and I am glad you enjoyed the video :-)
33%? How do you declare on your federal taxes? With the self employment tax, the federal tax man keeps closer to 40%! I need to dive back into my numbers. You're freaking me out!
Wife gets 33% you get 1%, as a married man I can say your math is right
👍 Great video and spot on the money
nice what is a good hourly rate i mean when you start its more for fun than money but how do you calculate the price of something like steel cost me 33 dollars so ill charge 100 dollars for my item or it cost me 33 dollars and 5 hours so at 30 an hour 150 plus 33 for the steel
I can answer. So $33 of steel is more than a $100 item. More like $300.
33%tax/fees
33%Biz cost+ material + time + overhead expenses
33% Profit (Yes, you have to pay yourself twice to stay in business.)
1% FUn
Biz cost= $33 steel, $33 time, $33 coal/charcoal/propane, electric bill, tools, Sanding paper,grinder wheels, oil and wax finishes, gloves, Building (unless you are Smithing in an open field). People will say, yeah, but your building is paid for, you own it... Sure, it's paid for, until the roof leaks, and a storm puts a tree branch through your window, or you need to run a new power line... What did your Anvil cost? Tongs? Hammers? Boots? Safety equipment? You have spent a few pounds of dollar bills before the first piece of steel gets hot in the forge.
So a $33 piece of steel had better make a $300 item or you are backing up. Material is maybe 10-12% of the cost of an item: $99 taxes/fees +$99 Biz Cost + $99 for profit +$3 FUN = $300. Even a free piece of scrap is going to take time, coal, tools, overhead, taxes, fees, and sweat to get to a profitable market. "Free steel" is only a 10% discount.
I must also say: "What is the first priority of business?"
To stay in business; not to go bankrupt. Most people think, "To make money." Sure you want to make money. First, you have to break even all of your startup expenses. Then you have to resupply the materials that you used to make the first bit of "paper profit."
Sure you made $99 CLEAR PROFIT on that $300 knife; but you spent $3000 on a Belt Grinder, an Anvil, and a Leg Vise. (so your $99 Biz cost leaves you $2901 left on those high dollar items.) Now, do you plow that $99 profit under to pay more on your debits? No. That will go toward new tools. You don't even know what additional tools you will need as your market grows. Sit on "profit" until you find a direction for your business. You can spend infinite money in every direction; especially n a startup.
When you buy a farm, you are going to invest $300,000 in your first chicken egg. So, if you are not in it for a decade; just buy your eggs from a farmer that has already pushed out his/her blood, sweat, and tears. (actually, you can raise chickens on a budget, but there is infrastructure.)
For me, as a hobby smith, and going to events on occasion to sell, I figure charging what the factory I work at pays for overtime. Unfortunately, I tend to sell myself sort OFTEN. I also have to remember the market I am selling to. Prices are different between a flea market, and a gallery, so the final call comes down to who is willing to pay, and what do I NEED to make. If an event costs me 100.00 between table fees and travel expenses to get there, this creates my baseline. Get what I mean?
grayem pepper I will try to address this question in my next video of this series. this way I won't be to long winded in the comments section.
Thank you for watching and commenting!
i do its good to find out these things
Where/when do you tithe to the LORD?
+Jason Hill you tithe on your personal increase and the profit of the company when the business does indeed make money for the first time
Christ Centered Ironworks remember that tithing is done in faith that GOD is your supply! He will provide even when you don't have when you put him first in all things. Tithing should come from the top of all even before the government gets his share, if he is first, GOD is not.
I have been running a business through the direction of the LORD for more than 7 years now and have never done without work and only when I do not put GOD first did I ever have lack. JESUS taught that all is God's and then we keep the rest. He gave the example of the woman with the two mites as having given more than all the others because she gave all she had.
I appreciate the videos very much. I am just starting to get into this with my children (I have been blessed with 5) (haven't even built a forge yet).
Give GOD all and allow your faith to sore. We are in the last days and must be ready at all times for the return of JESUS CHRIST!
What about the rule of 34?
33? Where was I for 1 thrue 32?
Buck a heat. See if you can get a dollar per step and stay within the price range at your fave price discovery place;Fleecebay or others. If yer outside the going rate parameters, figure out a way to combine heats until you can come in somewhere in the middle of your competitor's prices. Then make a hundred units to be certain about your accounting of heats. Then sell as many as possible before your competitors steal your best ideas, as it ever were, take it as a compliment. Then roll the eyes and wink at your Father, who created all, eh?
It is Said that 1 Out of 20 People Should Complain you're Too High Priced. if Your Stuff is Selling Like Hotcakes & Nobody's Complaining abiut the Price you're Probably
Too Cheap. I Do Masonry Work I Always Tell the Complainers... Hey, I'm Not Doing this to Wear Out My Clothes.
I'm pretty sure I've never met your wife let alone pissed her off!
I really enjoy your videos fella.
J.
Where is Gods 10%?
That's for you to decide...not me and therefore has no place for argument here in this comment thread. God bless
Christ Centered Ironworks not arguing, just wondering. I too am self employed and using your 33% rule, there is never enough and you must borrow from Peter to pay Paul.
The taxman stole it.
That's under fees
Really surprised you didn't account for a tithe to your church in there somewhere. But then I guess it isn't popular anymore to tithe.
+Rachael Myers the tithe comes out of your increase and that can be calculated many different ways.I didn't include it here because it is not widely applicable to the online community of blacksmiths.Thank you for the comment and God bless you
Forgot about an important 10% that will come back in blessings
My response when said "that's to expensive" ok you do it then
Ha! Taxes. Funny.
Haha, in Europe you may have to save up to 50% for tax only xD (if you're way above 30k€/year of income) ^^ -- (in this case Austria). Well that would chance your calculation to 50%, 25% and 25%.
Labor -?
So how did you arrive at the $100 sales price to begin with?
This is a serious way to run a business? Really? You are joking, right?
You have no clue how much to ask for something without knowing your costs up front. How much material went into the piece and an estimate of the consumables needed (if you have to pay rent for your shop, its a consumable). You also need to have an idea of the costs to SELL the item. Just the ebay fees or whatever the cost of selling (Walmart has lots of these since they have to maintain their brick and mortar store in order to sell to you). Once you know the cost, you can figure out how much you want to be paid for the time you spent making it. You can figure this as an hourly wage or as a fixed amount, whatever floats your boat. Costs + Labor = Price. Then you can decide how realistic that price is and adjust your labor cost, but those are personal decisions.
"But you forgot about buying that new tool and the taxes"
Assuming you are a sole proprietor, then you, personally, have to purchase the tool and depreciate it either by job or over time (as a consumable). And your company doesn't pay taxes, you do. You would pay taxes on all income from the business, which if done right will be that Labor cost we came up with above.
If you want to really get an idea of what to charge for something and not forget anything, pull out the 1040 schedule C and fill it out quickly for every job. Fill out the Cost of Goods and Expenses parts, then put in the amount you want to be paid on the Tentative profit line and back into the Sales. Literally takes 5 minutes if that.
+Michael T Shue Studios nope not joking at all! I appreciate your insights and delving in deeper to all the extra things that you have to think about when considering running a business. This video was for people who are starting to try to run a business and not over-thinking it. most people's problems in being successful for themselves in business is getting wore out at the starting line before they ever get started. The rule of 33 is meant to be an over shot of how to not end up getting hosed on a particular job when you are put in a position of needing an answer for a quote on a quick turnaround time. These are my thoughts on running a business and it is ok for you to disagree with me. I hope you are successful in your own business choosing whatever method you would like to run it by. Thank you for taking the time to watch and comment on this subject. God bless you and have a great day.
Roy, love your videos, I learn more and more from them every day. I'm not disagreeing with your 'rule of 33', but I do have to give the nod to Michael T Shue on this point. Personally, I feel that something needs to be added to Michael's formula of "costs + labor = price". What exactly goes into costs? Obviously the supplies needed to make something (steel/stock, coal/propane, hammers/tools) is part of the costs. Taxes to be paid is also part of costs. Labor, I assume, is what you feel your time is worth. $10/hour? $20/hour? What if you're making a quick and dirty item that only has $1 worth of steel in it, and it only takes you 20 minutes to make it? How do you apply the "rule of 33" to figure out how much to charge for that item? As I said earlier, something needs to be added to the formula. As far as labor goes, I once heard that you have to treat yourself as an employee working for a boss. The boss has to pay his employee a wage. The wage is the "labor". So if a boss goes by the formula of "cost + labor = price", then there is no profit because profit has been left out of the equation. Profit needs to be added into that equation, just like you have it in your 'Rule of 33'. But the question is, how do you arrive at what that profit margin is? 20%? 35%? "Cost + labor + profit = price". Back to my original example: Thingy cost $1 in steel. Takes you 20 minutes to make it. If your 'hourly wage' is $25/hour, then your time per piece is roughly $8.25 an hour. So now you're up to $9.25 in costs/labor. If you want to make 30% in profit, now your price is about $12.00. Add another 25% in taxes (local/state/fed), now you're up to about $15. I hope this makes sense. If anyone actually read all of this, thanks for your patience. The rule of 33 makes sense, but it's difficult to apply it and figure out how much to charge for a particular thingy. On the other hand, it may be a good rule of thumb to figure out how to break down each $100 you earn. Sell 10 things for $10 each, or one thing for $100, or whatever.