How to: Pricing!
January 27, 2010 by Lex
Filed under Articles + Reviews, Selling Handmade
One of the most frequent questions I hear from new crafty sellers is “How much should I be charging for this?”
Silver coin ring by silvercoinrings
A lot of beginners make some common mistakes and misjudgments.
For example, you may think that pricing your item way below competitors is a good idea, but pricing too low can actually discourage sales because people assume it’s of poor quality.
Another mistake is thinking of yourself as the target customer. If you base your pricing on what YOU can afford, you’re probably under pricing. Guess what? I can’t afford my own stuff.
Handmade goods mean attention to detail, quality craftsmanship, and a significant amount of TIME and SKILL, all of which mean HIGHER PRICE. When you’re pricing your items, I want you to repeat to yourself that YOU ARE NOT WAL-MART.
Brutus the Zombie Pig piggybank by CodyOlsen
The bottom line is to remember that you’re doing this for a profit. If you spent $10 on materials, then you better be charging more than $10 for your pieces, or you won’t be able to do this for much longer!
I should also note, there isn’t necessarily a Right or Wrong way to price your stuff. You will find what works for you.
At the very least, there are two things you need to account for when you’re pricing: Materials and Labor.
For our example, let’s say you just made a cute tank top. The materials cost as such:
Materials
main fabric – $8 a yard
lace – $2 a yard
elastic – $1 a yard
For this top, you used:
1 a yard of the main fabric ($8.00)
2 yards of lace ($4.00)
1 yard of elastic ($1.00)
Your total for materials is $13.00
Let’s see about labor. You’ll need to decide on your hourly wage. We’ll use $10, which I think is the absolute minimum you should be paying yourself.
Labor
$10/hour
For this top, you spent 2 hours working on it:
($10 x 2 hours)
Your total labor cost is $20.00
Add together the cost of Materials and Labor ($13 + $20) and you get $33.
One Hundred Dollar Bill Cuff by GetPersonalArt
Now hold on a minute… don’t go running off pricing your top yet, because $33 is NOT the price you should use.
Why?
Well, first of all, this is an extremely rough estimate as far as the cost of an item. There are a lot of “hidden” costs you’re not taking into consideration. For example- the cost of your sewing machine, the cost of your camera and your computer, the electricity used, the time it takes to photograph and list and item for sale, paypal fees, and on and on…. These costs are called “overhead”.
But mainly, $33 does not account for PROFIT.
I know, I know, you got $20 for your labor, right? Well, look at it this way. If you were an employee making this top, your employer wouldn’t make anything if they sold the top for Labor and Materials. Even wholesalers add on a bit of profit.
Photograph - Mindy dreams of pearls and the envy of all the girls at Kappa Nu by johnpurlia
Just add on a small amount at first if you’re nervous. Say, $5. That will cover at least some of the overhead and a small profit.
When you’re first starting out, it makes sense to keep your profit low (which in turn, keeps the prices low). But when you’ve got a decent customer base, don’t be afraid to increase your profit margin… and your hourly wage, for that matter. Especially since over time, you will probably become quicker at assembling your goods, so this same top may only take an hour to finish.
Anyway, for this example, we’ll tack on $5 for profit to make the total $38.
This is your wholesale price.
If you’re selling your goods to a store, this is the price you use. The store will then mark the price up, usually at least doubling it. If you’re consigning, remember to compensate for the consignment fee (which is usually anywhere from 20-50% of the selling price).
If you’re selling your stuff directly to the public, it wouldn’t be out of line for your to double the wholesale price. In fact, that’s extremely reasonable.
A lot of sellers say they feel guilty for charging anything more than a few dollars more than materials and labor. Well, consider this:
The United States of Wal-Mart by howardeyosha
Wal-mart buys material in HUGE quantities and has obscenely cheap labor. To make a similar tank top to yours, it costs them LESS THAN A DOLLAR. But they’ll probably sell it for $20. That’s a mark-up of over 2000%! Artists and crafters are the LAST people that should feel guilty for marking their pieces at a reasonable price.
Be forewarned that you will probably hear people make snarky comments like, “I could make that for $5″ or “I could get that at Wal-mart for less.”
Ignore them. Why?
Multiple Choice Question!
These people:
A. have no experience selling a handmade item, therefore they have no idea how much time/materials/effort/skill goes into it.
B. have no respect for quality. All they care about is getting the cheapest piece of crap they can find.
C. resent that your awesome piece of work is out of their price range.
D. are jealous that you have your own business making rad things.
Correct Answer? Probably all, or at least more than one of the above.
Dollar Origami - Two Dollar Jet Fighter F-18 by BeanyTink
Whew, that was a lot of info, I know. How about a 10 second recap?
- Prices too low can actually keep you from getting sales.
- Don’t price by what you can afford.
- Don’t forget that delicious word, PROFIT, when calculating your price.
- Remember that Wal-Mart is a greedy scumfuck corporation that’s ruining the global economy.
- Naysayers can suck it!
That’s it! Hopefully I have banished all questions regarding how to price your goods and made you hate Wal-Mart, all in one fell swoop!
Related posts:
Nevienoodle on Sat, 30th Jan 2010 4:12 pm
Thanks for the tips. I’m just starting in setting up a business and this issue is the one that scares me most. Luckily we don’t have Walmart in Ireland but i’ve seen pictures of those who do and sorry to say anyone shopping in walmart uses more than one trolley and in turn generally can’t afford anything nice after that cause its all gone down their throats!
Lex on Sat, 30th Jan 2010 8:43 pm
You are most welcome, Nevie!
The good thing about pricing is it’s not set in stone. You can always change your prices or put something on sale. And you’ll get more comfortable with it over time.
Good luck with your business!
updates « tickled pink on Sun, 31st Jan 2010 4:00 pm
[...] registered the prices will go up, since i’ll have to pay taxes & everything. i also read this interesting article on pricing handmade goods & was horrified at how much i’ve been [...]
Becky on Wed, 10th Feb 2010 4:14 pm
Thanks for the advice in this article… would you mind giving a little more?
I know for a fact that I am WAY underpaying myself, partially because I’m just starting out and am going for low profit to hopefully get a customer base. But pricing is, indeed, one of the scariest parts of running an independent business…
Here’s my problem. I can honestly say that I would never, EVER, buy a tank top for $76, no matter what it was made of or who made it. Now this is not because I disrespect your skills, don’t understand handmade items, or just want to get the cheapest price–because I, too, make handmade items and want a price that is worth my time, creativity, and skill. I just can’t justify paying more for a tank top than my entire weekly grocery bill.
So, there must be people out there who ARE willing to pay this much, since you and so many other handmade sellers out there are succeeding… but did you start selling your items at this level, or inch your way up there? Right now I’m pretty much charging double the cost of materials, so I doubt I pay myself much more than $2 an hour. I just don’t feel right charging $50 for a tote bag.
Any advice?
Lex on Wed, 10th Feb 2010 7:41 pm
Questions are more than welcome!
To answer yours, no, I didn’t start out charging this much for my stuff. I probably started out charging about the same as you- double the cost of materials.
One difference when I first started was that I was selling on Ebay, so the bidding dictated the price. And the main reason I stopped selling on Ebay was because the bidding dictated the price.
There was a brief period of time when people were getting what their items were worth on Ebay, but that time seems to have ended.
However, even when I first started my website and had a set price for items, I was not charging as much. Raising prices happened slowly over time.
Generally, one of two things would happen that made me realize it was time to raise prices.
1. If I’m working on an item and think to myself, “I’m not getting paid enough for this.”
2. I’m selling so many items, I can barely keep up.
I hope that helps. Especially when you first start, it can be so fun that you don’t really care how much you’re making. But at some point, if you really want it to be a successful business, you have to start charging what your time, expertise, and quality are worth.
Good luck!
Becky on Thu, 11th Feb 2010 1:06 pm
Thanks for the advice! You’re right, when I started about a year ago (maybe more), it was just because I wanted to sew so much that I figured that I couldn’t keep everything, so I might as well sell it. That was my last year of undergrad, though, so production dropped off… a LOT. Now that I’m starting back up again, I’ve changed the focus of my shop. I’m donating all of my profits to various charities I support, so it would be nice if I could make a little more money than I have been.
Thanks again, love your site! Lots of great resources here!
Mary on Sat, 13th Feb 2010 4:26 pm
Lex!!! What happened to the forum?! *weep* I know you’re still getting this thing back on track, so I am being patient lol. The site looks really cute so far though!
Lex on Sun, 14th Feb 2010 8:28 pm
Hi Mary!
I’m not sure yet if the forum will be back. It takes so much time just to battle the spam, let alone moderating the legitimate content.
For now, I recommend checking out DiyScene.com for your crafty talk needs.
Annie on Tue, 16th Feb 2010 2:20 am
Its great to see this article, I wish every fan of DIY clothing would read it! It sucks not being able to afford awesome clothes, but it also sucks to always be explaining to people how much time it takes to make something, not to mention materials/equipment/overhead costs.
New website layout looks awesome, by the way!
Lex on Wed, 24th Feb 2010 7:25 pm
Thanks so much, Annie!
I always hear people say that everyone should work retail at least once in their lives to gain the experience of having to wait on people… I think everyone should make something and try to sell it to gain the understanding that it’s not as easy as it looks!
CodyBlueEyes on Mon, 17th May 2010 6:13 am
Thank you for your wonderful article on pricing! … I loved your post & will direct others to it because I get the pricing question all the time from those new to selling their handmade items.
I have been selling my handmade items since 1981 (jewelry, pottery & hand-sewn items) & your article is one of the best I’ve ever read on pricing! …I am sick & tired of people saying “I don’t need the money, I just do this for fun”. So they price their wares ridiculously low! …They may have a sugar-daddy husband so they don’t have to work & can make things all day long at no profit, but if they are selling something similar to mine & they price their stuff to “have fun” & don’t make a profit, then they are making others (like me) who actually NEED the money to make a living look like our prices are high! Every artists hates people who undercut their prices, so my advice is this: If you don’t “NEED” the money & are only selling your things for “fun” then stop selling your stuff & just give it away to friends & family! OR, keep your prices in the same range as other crafters & artists!
CodyBlueEyes on Mon, 17th May 2010 7:15 am
I wanted to add, that if you don’t AT LEAST get minimum wage for your work, you may as well work at the seven-eleven! If you sell at Saturday Markets or Art Fairs, walk around & talk to other artists & check out their prices… And don’t forget to add the cost of your gas & wear & tear on your car in to the equation & ink for printing out your business cards, etc & also shipping costs for anything you order online! …Keep ALL business receipts, because all these things can be deducted from your taxes! Keep a notebook next to you & log your hours spent after each session working on something. In the end, you can average-out your time… Keep simple records & do the math, after a while, your pricing will come easily to you. Do yourself a favor & NEVER under price your work! …It’s easier to lower your prices than it is to raise them! Also, don’t use prices like $17.99 (it sounds cheap!) instead use whole numbers like $18 or $18.50… You don’t want your quality work to sound like it comes from K-mart! & NEVER apologies for your prices! You worked long & hard to make that one-of-a-kind item!
As Lex stated, I can’t afford to buy my own things either! But if I price them too low, not only will I loose money, but my things will look cheap! …I am not Walmart, I am more “Neiman Marcus”, with one-of-a-kind QUALITY artwork made with love & care. And I treat my customers like I would like to be treated. They are always right! …I’d rather loose money than loose a customer! …I have to mention this: Sell in the part of town that best suits your product. If your product appeals to city-folk, then sell your work downtown, if your work is pricey, you’ll have to go “where the money is” (in the more affluent parts of town) whereas if it’s something anyone can afford (lunder $20) then you can sell it anywhere. It’s worth the drive to go where your customer base is. Also, have things of varying prices, if your things are priced at $50 then also sells something that is under $10 (your “bread & butter” items). People have to “think about” anything over $20, but if you also have items for under $10 or $20, then they will buy on the “spur of the moment”.
My advice would be if you don’t “need” the money & are only working for “fun” & to make enough money to buy more whatever (fabric, beads, yarn) with, then why not ask for donations instead & give all the money above your actual cost to your favorite charity. There is a lady in my area who makes & sells wonderful hats & gives all her profits to the American Cancer Society… If you knit or crochet, there are groups that meet in local Senior Centers that make hats for the homeless. There are others who sew or crochet very tiny clothes for parents of stillborn babies to bury their tiny babies in & others who make dresses out of pillow cases for girls in Africa who have never in their lives owned a new dress! …So if you don’t need the money & simply love to make things, check out all the wonderful organizations out there you can help! & if you can’t find one, start up one yourself!
Lex on Wed, 19th May 2010 12:39 pm
Thanks so much for the tips and ideas, Cody!
Having a variety of items in different price ranges is a really good idea, and I think it helps some people with pricing the more labor intensive items. Sure, not everyone can afford a $100 dress, but if you also carry some small items like brooches, jewelry, small bags/purses, then you can have something for any budget.
Shawna on Sat, 5th Jun 2010 9:54 am
Lex! Thank you so much for taking the time to pass along this info! I had a lot of questions about how to price my items, and did feel a bit of guilt setting them “high” in my opinion. But not anymore! I am going to re-do all of my pricing!
Thank you so so much. This was extremely helpful.
Lex on Sun, 13th Jun 2010 10:19 pm
You’re welcome, Shawna!!