I was reminded of that yesterday, when a local woman - having admired a rather elaborate hat I had knitted for a mutual friend - asked how much such a hat would cost, were she to order one just like it for herself. I gave her the figure ($50), knocking a bit off the usual price out of good will. This was met with visible shock. "Oh," she said, politely, after regaining her composure. "Well, I suppose the yarn must be expensive!"
"Actually, it's more about the time it takes to do the work."
"How do you mean?"
"Well, think of it this way: What would you consider a fair hourly wage to pay someone for knitting? Now take that number and multiply it by 6 - the number of hours it took me to knit that hat. And that's before factoring in the costs of yarn..."
"Hm!" the woman seemed genuinely surprised by this approach to pricing. "I suppose when you put it that way, your cost is quite reasonable... you are asking only a fraction of what you ought to be."
Reasonable or not, the subject of ordering a hat was promptly dropped. Because, as with bicycle frames and other handmade items, people seem to have a difficult time accepting an hourly wage-based model of pricing when judging what the item "ought to" cost.
Bringing this back to the custom bicycle industry, I've been told by several builders that potential customers are far more ready to accept that a bicycle frame is "expensive" because it is made of exquisite high-end tubing and is finished with fancy paint, than because it took 50+ hours of manual labour to complete.
It's an interesting bias that seems to result from the abstractification of the "handmade" concept. The term has become synonymous with "folksy," "nice," or "luxurious," depending on the context, losing in the process the full implication of its actual meaning: which is that a single person (who, presumably needs to live, eat, and pay rent) dedicated X number of their waking hours to making the object in question. How else can the cost of such an object be determined but on an hourly wage basis?
In the post-industrial age we live in, making certain things one at a time by hand is extremely inefficient and can never, ever be financially competitive with automated production models. Clothing is one example of this. And while I'm not sure where precisely framebuilding falls on the spectrum, if you ask any builder active today - even the "successful" ones - they will tell you it is next to impossible to earn minimum wage handbuilding custom bicycle frames. Customers will simply not pay the prices they'd need to be charging.
So when considering how much a handmade bicycle ought to cost, consider first how many hours it takes the builder to make it. Then multiply by the hourly wage you feel your builder of choice deserves. Finally, add the costs of supplies (which will be marginal in comparison) and overhead. Armed with the figure you arrive at, chances are you will be pleasantly surprised by the figure the builder actually quotes you! Now, isn't it nice to get a bargain?