There are a lot of myths floating around out there about pricing. These myths cause pitfalls many an artist and crafter (newb and seasoned alike) have fallen into when pricing their wares. I am here to vanquish these fell beasts!
Myth #1 – You should only be compensated for the time you are actively creating. All the other “work” doesn’t count.
Everything I do is needed to run my business.
If I did the design work but outsourced the sewing work, I would pay the seamstress.
If I hired an assistant to handle my customer service, I would pay the assistant.
If I hired a model and photographer, they would either be paid in cash or goods.
(I wonder if the above model was compensated in doggie treats?)
Each part of my process is a job I would have to pay someone to do if I didn’t do it. If I do it, then I pay myself (or try to).
In response to this idea, some people like to say things like, “I’m a teacher, and I don’t get paid to grade papers at home or have meetings with parents after school.” That’s a very flawed argument. If those things are expected and required as part of your job, then your salary is intended to compensate you for it.
There are two reasons you should make sure you compensate yourself for ALL of your work.
The first is that you deserve to be paid for the work you do. Don’t let anyone make you think otherwise.
And the second is more important. Should you need to someday outsource a task you currently complete yourself, you need to be able to pay for that from the price of your goods.
Myth #2 – Time is free. You can’t charge for that.
I thought the adage “Time is money” was a bit of a cliche, but apparently not, as I’ve heard not only shoppers but actual artisans themselves saying that you shouldn’t charge for time.
Time is exactly what you pay for when you buy pretty much anything. The cost of materials for most products is a fraction of the cost of time.
Have you ever hired a plumber? I once had a plumber charge me $120 for 20 minutes of time. He didn’t even fix anything! There were NO materials to pay for. I wasn’t buying merchandise. That $120 was for his time and his time alone. Every job is about time.
Time is why custom costs more than off-the-rack. Time is why a bridal gown costs more than a bolt of tulle. If you aren’t comfortable charging for time, then you better get into the reselling business, because selling handmade is all about making sure you’re compensated for your time.
Myth #3 – As long as your prices are similar to your competition, you’re pricing correctly.
While taking the price of your competition into consideration can be part of the equation, I don’t think it’s wise to based purely on that alone. The number one complaint I hear from handmade sellers is that their competition under-prices. So we should follow suit and under-price as well?
No, sir, I don’t like it.
Your pricing should be dependent on YOUR skill, YOUR production process, YOUR quality, YOUR materials, and YOUR needs. Not someone else’s.
Myth #4 – If your sales are low or you want to outsell your competition, you should lower your prices.
Pricing too low can do as much damage as pricing too high. In fact, it can do more damage. If your prices are too high, you’re probably not making enough sales, but at least you’re covering your expenses on a per-item-basis when you do make a sale. If you price too low, you won’t make a high enough volume of sales, and when you do make a sale, you’ll be losing money.
If you talk to other sellers, you will be surprised how often you hear that their sales increased when they raised prices. How can this be? Talk to frequent buyers of handmade and they will tell you why: when they see items priced well below comparable items, they assume the lower priced item is of lesser quality.
Is that what you want to say with your super low price? I didn’t think so.
Of course, this doesn’t necessarily mean it would be a good idea to slap a $500 price tag on a pair of earrings that you’d normally price at $25, but dropping the earring prices to $5 might be an equally bad idea, because it’s sending a clear message: CHEAP! CHEAP! CHEAP!
Myth #5 – You can write it off on your taxes, so you shouldn’t include the cost in your pricing.
I think a lot of small businesses make the mistake of thinking that business expense tax write-offs are the the equivalent to “not costing anything”. It’s simply not true.
For simplicity’s sake, let’s say my annual sales are $100,000. If I pay taxes on the full $100,000 at a tax rate of 25% (again, just for simplicity’s sake), I would owe $25,000 in taxes.
For the year, let’s say I had $30,000 in business expenses, which I can write off.
When I write them off, my taxable income goes down to $70,000 instead of $100,000. So I now owe $17,500 in taxes instead of $25,000.
The point I’m making is that I don’t get $30,000 in freebies come tax time. I get 25% of that as a deduction. In this case that would be $7,500, and that’s quite a difference. I spent $30,000 but I only really “saved” $7,500.
Myth #6 – You should determine pricing based on what most people can afford.
There are two problems with this logic. The first problem is that you should be pricing and marketing for the specific audience that is appropriate for your items. Generally that means narrowing the field so that it’s not “most people”.
Let’s say Sarah is a seamstress that makes very elaborate costumes. She asks friends and family and people on the street what they would pay for a costume. The general consensus is “under $100”. However, she puts 5 hours into her average costume and $80 in materials. Pricing at $100 would mean she’s losing money.
The problem here is that there are certainly people in the market for high end costumes, but I wouldn’t say it’s “most people”. Even around Halloween, when “most people” are looking to buy a costume, they still aren’t looking to spend $350.
Sarah should price her items based on materials, how much she values her time, and what her target audience will pay. And if she wants to broaden her target audience, she can offer a line of costumes that can be made for and priced closer to $100 in addition to her high end costumes.
The second problem in thinking in terms of “most people” is that by “most people” we usually mean ourselves.
If you are a handmade artist, you are very likely not your target audience. In terms of taste? Yes. In terms of what you can afford or what you think it’s worth? No.
Take me, for example. I’m a total cheapskate. Especially when it comes to clothes. It’s sort of ironic, but it also makes sense.
We tend to devalue our own skills. When I see clothes, the first thing that pops in my head is usually, “I can make that.” Making a dress to me is not a big deal. And the problem here is that if I think of it purely from a “I made that, no big deal” mindset, I am going to under price.
Instead, what I should be thinking is the following: 1. Most people CAN’T make this. Charge accordingly. And 2. This is a unique item that you can’t find anywhere else. Charge accordingly.
Myth #7 – You should be ashamed to ask for that price.
You know how there’s no crying in baseball? Well there’s no morality when it comes to pricing.
A lot of people might say you’d be wrong to charge $5000 for a wedding gown that cost you $200 to make, but if that’s what people will pay, how can it be wrong? Hell, if you can charge $50,000 and get that price, I salute you.
Most handmade goods are luxuries, and they should be priced as such. You know what the difference is between a Lexus and a Toyota? About $40,000 and not much else. Lexus is marketed as a luxury brand and priced as such, but they’re made in the same factory with most of the same parts as Toyota. Yeah, the Lexus probably has a few extra bells and whistles and maybe a fancier interior. $40,000 worth? For my money, no. But that’s okay, because thousands of other people think it is worth it.
Unless we’re talking about life-saving medication or basic living necessities, then you have every right to charge as much as you can get.
It’s so nice to be reminded every so often not to under price my work and why. Thanks!
I hand piece and hand quilt my quilts. I put a lot of work into them, all by hand. I have a single bed quilt and a double size. It takes me almost a year from start to finish. What do you think they are worth?
There is a How To article here: http://whatthecraft.com/how-to-pricing/
I was in marketing for yrs, working wholesale trade shows, incl, the big craft shows on handmade crafts, made in usa, crafts and imports, ..
a quilt that takes a year of constant sewing should be Shown at a Quilt show, with at least a 10 thousand dollar tag…365 days a yr.? ..its not that expensive…. handmade, time put in, time put in. you have the cloth..I would hit the big ART markets,and ask some ‘quilters”. I know a few up in NORCAL..that the daughters have to start quilts, etc, and their daughters,
I would love to see this quilt.!!
bless your hands and heart.
I make numerous items but my biggest seller is the folding camping/patio tables I make and most of them are laser engraved with what the individual or company wishes to have on the tops…this is new to the market and I have managed to keep ahead as I have had the pattern copyrighted with the help of a lawyer…what I charge for these is of course all of my costs per unit plus a built in wage of $40.00 per hour..making one of my tables (laser engraved with the RCMP logo) worth $90.00…so far, since Feb 15, 2012, I have made just over 1200 of these tables with engravings as small as a personal name to large enough to cover the entire top…how would you recommend I charge for these…I have no idea if I am winning or losing at the bank….Thenk-you…Harry
I would suggest you read the How To article here: http://whatthecraft.com/how-to-pricing/
O, I love this article so much! I must admit, after I increased my prices I was worried about all of these points. However, my sales haven’t been affected negatively. Also I find I feel more motivated to create when I feel like my time is being appreciated. Thanks for keeping the DIY community informed and inspired. You rule!
As usual you have written an excellent piece on pricing handmade goods. Sage advice, which should be heeded by everyone in this marketplace!
Very insightful article about pricing. Some people have commented that my mohawks are a little pricey “for a hat.” But a lot of time goes into that hat and I won’t reduce the price. Those who think they’re too expensive are simply not my target buyer. I mean no disrespect by saying that. But you’re absolutely right when you point out that handmade goods are a luxury item. And people are willing to pay a price for luxury.