Okay! You've made the big decision to sell your handmade awesomeness
and now you are ready to price it...umm...yeah...but how?
It's a pretty big deal, getting the prices right. You want to be able
to make a profit otherwise you might as well go back to giving it away. You
want to be competitive with other artisans and crafters, too.
Do not sell your stuff cheaply! It, and you, are worth more than that.
Undervaluing your items hurts you in the long run, but it also hurts the
handmade marketplace. That being said, there is also a limit of what your
regional market will bear. Yes, you have to take your customer type into
consideration when pricing your items, but that doesn't mean selling an item
for less, sometimes it means revamping your line to fit your customer base
(i.e. making less expensive pieces for the church bazaar vs. the high end ones
you make for the gallery).
You have to remember, this is now a business. Even if you are just a
hobbyist, you are going to need to keep records of your supplies and what you
paid for them. You are going to need to know how long it takes you to make a
piece (including design time). You need to decide what your time it worth.
Imagine you did this as a job; what is your boss paying you per hour to create
your awesomeness? Most artisans rate their time in the $18-$20 range. I think
you're worth it, you should too. Trust me, you wouldn't do this job for minimum
wage. You also need to add some overhead for packaging and other materials that
can't make it into the rest of the price, because all of that stuff really goes
into making your sale.
There are several formulas for pricing items to keep you competitive
and profitable; the one I use is pretty simple. First I figure the base price,
that is the price it cost me to make it. I add parts plus time (labor) plus
overhead (I use a flat 20% on the parts + labor to get my overhead). To get my
base. (P + L + O = B)
My parts on this piece were $5, my labor was 15 minutes at $20, so $5,
my overhead then was 20% of $10, so $2. Adding these all together, my base
price for this item is $12. This is what it costs me to make this item. If I
were to sell the item at this price, I would have no profit whatsoever.
On top of my base price, I have 3 price points; wholesale, direct and
retail. The markup I use for wholesale is 2.5 times parts plus labor and over
head. (P*2.5 + L + O = W); for direct it’s 3 and for retail it’s 6.
So, an item that costs me $12 to make would be priced at $19.50 for
wholesale, $22 for direct and $37 for retail.
You will have to decide what you think is the right pricing for your
craft business, but remember, there is no benefit to you or anyone for
underpricing (and undervaluing) your work.