Pricing tips

[LisaE]

I think this information from a LinkedIn Group member is excellent and realistic regarding pricing.

Mckenna Hallett • Yes Lisa - Please do and make sure you mention I do mentoring and send them to mygoldenwords.com.

understanding how to price your work for wholesale so you can figure out if it is viable (competitive) in the retail shops is vital for the long term. If you are not pricing your work properly, you will never have the opportunity to sell to a store. And if you are relying on craft shows, you still need to make sure you are selling at or very near to proper retail pricing because the costs associated with doing a show are not to be ignored - not just the booth fees and transportation costs, but the cost of being away from your craft studio must also be factored into the equation. If you do a two day show and it will take you two weeks of work to replace those sales and cost you more in materials then you profited from the show, you are in big trouble - your price is too low. You need to do the math and what Barbara laid out is pretty standard. The only thing I would add is most galleries are doing a 2.5 mark-up as a standard these days. They have even greater costs for running their business then we typically do and 2.5 barely covers their costs of doing business.

Oh... and pay yourself at least $30 an hour. You cannot be in your studio for more than 25 hours most weeks and the other 15 - 30 are easily spent on other parts of the business' needs. 25 hrs at $30 is only $750 a week and if you are full time (if that is your goal?) then taxes, social security, retirement accounts, medical plans... Yes you can put that all into the "costs", but realistically, costs of goods is not meant to include every expense, but rather only the expenses used to make your product. Plus,but I like to have a cushion of income that I know will help me pay cash for my next car or vacation. Can't add those items into your costs of goods!


HERE'S the important thing to remember IF you want to make a full time living: I am not able to make jewelry when I am putting an order together and getting it ready it for shipping, I am not making jewelry while I am on the phone with a client or putting together an advertisement for a magazine, I am not making jewelry when I am doing my taxes or processing credit cards. Yet all the other activities ARE part of what I must do to run my business. SO...every hour in production MUST pay for every activity the rest of the week. THAT is why you must pay yourself based on 1) what you would realistically need as a "salary" if you were full-time divided by 2) the least amount of hours you would work to create that income. If you are able to work for just a few hours and make the standard of living you need AND end up with a price tag in retail value that is rational and will be easy to sell, then KUDOS! Most of us need to put about 20 hours in on production alone. My total work week varies from 30 to 70 hours depending on the time of year and volume of sales, but even in that 30 hour work-week, I am getting my "wages" paid. Some weeks I am barely in my studio, and sometimes I push extra hours - supply and demand rules. But I based my "wages" on my overall needs and a minimum of 15 hours in studio.

One of the other problems that people starting out face is they don't have the buying power to get raw materials at wholesale. But they need to to be competitive. If you are buying your supplies at a local craft supply shop, you are already buying at full retail. How can you then paint it, or glue it, or string it, or do anything to create an object and then put a 2- 3 times mark-up on the materials AND pay yourself a living wage? If you can figure out a way to buy your materials (co-op with a few others?) so you can buy from the same sources that the local craft supplier buys from then (AND ONLY THEN) are you really ready to make something that has a true wholesale price and therefore an acceptable retail price.

None of the above applies to anyone reading this who just wants to make a few things here and there for fun and not for profit. But... if you have ever considered that you would like to transition into a business, there is no time like the present to get your prices in line and your profits on target - even as a hobby. If you don't do it right now, you will have a nearly impossible time transitioning later and you will never be able to leave that day job.

John Iverson wrote the quintessential piece on the value of wholesale vs retail here: http://www.jiverson.com/FAQS/wholesale_retail.html

Thanks to McKenna Hallett for allowing me to share the above information.  Check out MyGoldenWord.com

[trusk4u]

I sort of agree with this. But having run my store for almost a year now, getting people to part with their money has been increasingly difficult. Mind you that items in my store are in no way "expensive", but people will visit multiple times before purchasing a $20 item. They are being very cautious with their money and for many, some sale is better than no sale. Handmade hasn't really caught on here yet with a lot of people. They will either go to Wal-Mart  :evil:and buy it super cheap, or they'll run to Tanger mall and buy a similar item for 4x the price because it has a "brand" . I really feel that artists must pay themselves some sort of wage, but with the economy the way it is, one has to be realistic too.

[LisaE]

I agree with realistic, that is why I aim at $20/hour for the meantime.  As a single woman, living on my income, I have to consider more that direct costs.  What you said about Tanger is to the point.  It is a matter of branding handmade.  Selling the value, the individuality.  That's the part I am still trying to figure out.  I am working on the idea of a youtube video with indirect marketing.

[trusk4u]

I agree with realistic, that is why I aim at $20/hour for the meantime.  As a single woman, living on my income, I have to consider more that direct costs.  What you said about Tanger is to the point.  It is a matter of branding handmade.  Selling the value, the individuality.  That's the part I am still trying to figure out.  I am working on the idea of a youtube video with indirect marketing.

Living where you do, the $20 is totally realistic. I really think much of this cost of living stuff is regional. Coming from the midwest, that price would apply there to. Being in the south now, where there are no unions, (or very few) and the general cost of living is substantially cheaper, the $8-$10 range makes sense.
AS far as branding, yes one must establish their brand. That is why I have not changed my banner, avatar because that is now my "brand" and I use it everywhere. I wouldn't mind getting a new one, but that's starting all over again establishing myself. I know many Etsy sellers change their banners and stuff frequently and I really feel that it hurts your store in the long run because your identity gets confused. Am I making sense?

[Malaya]

It is really a nice and helpful piece of information.
I'm satisfied that you shared this helpful information with us.
Please keep us up to date like this.
Thanks for sharing.

[Larissa]

I agree with realistic, that is why I aim at $20/hour for the meantime.  As a single woman, living on my income, I have to consider more that direct costs.  What you said about Tanger is to the point.  It is a matter of branding handmade.  Selling the value, the individuality.  That's the part I am still trying to figure out.  I am working on the idea of a youtube video with indirect marketing.

Living where you do, the $20 is totally realistic. I really think much of this cost of living stuff is regional. Coming from the midwest, that price would apply there to. Being in the south now, where there are no unions, (or very few) and the general cost of living is substantially cheaper, the $8-$10 range makes sense.
AS far as branding, yes one must establish their brand. That is why I have not changed my banner, avatar because that is now my "brand" and I use it everywhere. I wouldn't mind getting a new one, but that's starting all over again establishing myself. I know many Etsy sellers change their banners and stuff frequently and I really feel that it hurts your store in the long run because your identity gets confused. Am I making sense?

The branding absolutely makes sense and is important.  There's a reason you think "McDonald's" when you see a red/yellow color combo or the arches and don't need to have it spelled out for you.  Their colors and logo have been the same since the '50s?  '40s?  And look at ANY word in the font Coca-Cola has used all these years and see if you can stop yourself from thinking, "must be related to Coke," especially if it's in red & white.  Branding is huge.

[MamaSofia]

Thank you so much for that wonderful information. I agree when you said that you need to brand your products, but branding doesn't mean that you should quote your products expensively. Always remember to price it fairly, sum the materials, equipments used ( + electricity), labor and the area for display should also be counted.

Good Luck!

[Daft Crafts]

I use a cost+cost+50% of cost formula to factor pricing. Then I figure I am making 150% of what I put into it. I don't hand made things for money - I happen to make a living doing what I love, so I don't see the need to tack an hourly wage to that.

[LisaE]

I don't mean that branding should make one's things expensive.  It does, however, help people to see value.  In our society, like it or not, people pay for perceived exclusivity. 
I also make things because I love doing it.  But, I do want to make a living doing it.  By making a living, I mean supporting myself, rent, food, insurance, etc., so I do include an hourly wage.  I must admit that I resent competing for sales with people who do it as a hobby and support themselves through another occupation or a spouse's income.  As with other work that I have done, I would not want to compete for a job with someone who does not care about making a living doing the job.  To me, that represents unfair competition.  It is not that different from American workers having to compete with workers in third world countries where hourly wages are a pittance.  I think one must put it in that context because it is a realistic context.

[Daft Crafts]

... I wasn't trying to offend you by saying I do this because I love it and I hope I didn't come off that way. I simply love what I do, and I make a high enough profit margin to pay my bills so I don't feel the need to charge an hourly income... I also own a brick and mortar store that helps others achieve their dream of living off their art by selling handmade in America items. I have 44 amazing artists selling in our store right now. ♥ I love it. It's a non-profit store, all my money still comes from my monsters I make, but more than sewing the clever little monsters I love to help others get started selling their handmade brands as well. I'm very passionate about the handmade movement, I love these forums and seeing others that are passionate about it as well.