Pricing is definitely one of the trickiest and one of the most important decisions you will have to make when you start selling your handmade items. Take it from me it’s something I struggle with and agonize over often!
Pricing your items to just cover your costs or slightly higher will seem great when you’re selling a ton of things and thinking that means you’re wonderfully successful. Sounds like a fine idea if your only goal is to cover the costs of supplies for your hobby, so what’s the harm? By doing this you’re hurting not only yourself but also everyone in the handmade selling community.
Take into consideration that even if this isn’t your full time job you still deserve to be paid a fair hourly wage. What is your time worth? There is so much emphasis recently on buying imported “Fair Trade” items to make sure workers in third world countries are being paid a fair wage, so I don’t understand why so many skilled local artisans think it’s okay to pay themselves only pennies an hour. On the other end of the scale don’t pick a random dream salary. Base your hourly wage on your experience, quality of work and training you have. As you progress and become more skilled you can always give yourself a raise.
The cost of supplies is an obvious expense but you also need to think about the cost of marketing, packaging, tools, the cost to enter shows, your camera to take the beautiful photos, transportation to buy supplies or attend shows, the time you spend promoting online and selling at shows, classes you take to improve your skills…all of these things cost money and if you’re not charging enough to cover this overhead and still make a profit then you’re not charging enough. As a business these are all expenses that need to be considered and accounted for. Any successful business needs to earn a profit to be able to reinvest in itself and grow with new products and ideas.
Another concern of pricing your items too low is that it may give some customers the impression that it’s acceptable to expect to pay next to nothing for a beautiful handmade item. It lowers the value of everyone else around you who is trying to charge fair market prices and chances are you may alienate other sellers who could be wonderful contacts. I once read somewhere that it’s easy to pick out the amateurs at a show because they will be the one with the rock bottom prices. Nobody wants to be known as the amateur! I can almost guarantee that all sellers will get mixed opinions about their prices from time to time but if everyone you meet cries out “your prices are so low” then chances it’s time to rethink them.
If you search online you will find dozens of variations of the formula all claiming to be the best one. I will share with you the one that I seem to hear most commonly from other vendors and the one I see come up online most often. Keep in mind that many sellers don’t like to share these “secrets” so don’t be offended if you ask and they don’t want to tell you!
(Total Material Cost + Total Labour Cost) x 1.5 x 2 = Retail Price
Total Material Cost (don’t forget to include packaging costs in this number)
Total Labour Cost (include costs for photographing packaging and marketing the item)
1.5 (should cover your overhead expenses)
2 (is your profit margin)
The key using a formula is to find one you are comfortable with and be sure that you are accounting for all your labour, overhead and profit. Keep in mind with any formula you still need to use common sense and have an idea of what price you can reasonably charge to fit within the market you will be selling in.
You may find that some items just aren’t profitable enough to sell. And that’s okay, you can reserve those products to make as special gifts or offer them as part of your signature or limited edition collections just to showcase that exceptional talent!
Please don’t take anything I’ve said as an invitation or suggestion to gouge your customers, but if they are truly fans and appreciate what you make then they will have no problem paying a fair price for your work. And I do repeat fair…for both you and them!
Creativity should be encouraged and as a community we need to work together to make sure buyers understand the effort that goes into making something so unique. Make sure to offer information so your customer understands the quality materials and hard work that goes into each item. Reward their loyalty by giving them a wonderful personal shopping experience and an exquisite handmade item they can be excited and proud to own. ♥