This article will go over some of the things you should consider when pricing your home-crafted items for sale. In the end, you should create your own formula to make sure you are being paid what you and your items are worth.
How Much Did Your Materials Cost?
Hold on to your receipts to keep track of what you’ve invested in the project. You need to understand what your profit margin is at the end of the craft to see if the experiment is viable to generate income in the future. If you are spending too much on your materials, you could run the risk of losing money on every purchase.
Remember to include thread, glue, and other “smaller” materials. While these things seem cheap and you may use a small amount, it is important to estimate how much has gone into a project.
You also need to factor in the price of the tools that you purchased to complete the task. For instance, a sewing machine is an expensive investment. Keep the price of the tool in mind as well as items needed to maintain it. You can even set aside a little money for future repairs if necessary.
While you obviously won’t charge the full price of a sewing machine for every item you stitch, you do need to consider its price and maintenance as part of your overhead. Add a small percentage to each item to make up for the cost.
How Long Did It Take to Create?
Keep track of how long it takes to create a single item. If you make a batch of items, divide the time spent on the whole project by the number of your final creations. “Pay” yourself at a reasonable rate. Don’t discount the time you spent. While it is a temptation, especially when people consider the price of just the materials, you are saving others time and experience in creating the craft.
Note: if your creation took a very long time to craft and it is clear that people will not want to “pay you for your time,” you may need to consider doing something else. While you will find a few people who are willing to dish out funds for quality and expertise, you will have few sales. Alternatively, you can supplement your large projects with smaller, faster items that you can produce quickly and sell at a higher margin.
Calculate Overhead Costs
Keep track of your overhead costs. Do you own or rent a studio? What electric costs are used when creating your product? Do you maintain a website? What expenses come with that? How much does it cost to place an item on Etsy or other online marketplaces?
There are several “hidden” expenses that come with your craft, such as marketing, shipping fees, bank/credit card fees, and the gas you use to go to and from trade shows. Keep track of all external expenses and factor them into your pricing.
Price Crafts to Similar Products
Conduct some market research for your product. Look at online marketplaces, as well as local shops that sell commissioned items. Find items that are similar to your craft in quality and size. How are they priced? Are they selling regularly?
If you are at a local store, ask the clerk for any information they can give you on what sells the best. While you are online, look through customer reviews to see what they think of similar products. What are the craft prices for those online stores?
Make sure that your price is in the same range of similar products. Remember to bear in mind that your item may be made from better (or not-as-great) materials and also consider the craftsmanship.
It is a good rule of thumb amongst craft-sellers to price high at first, then drop prices later if items aren’t selling. It is a lot harder to raise prices than it is to drop them.
Create Your Own Pricing Formulas for Different Projects
There are many pricing formulas available online, but none should be taken as the ultimate formula. People are different, products are different. In the end, you need to do what’s best for you and your business model.
One of the most popular formulas is to add the material costs, the price for your time, as well as an overhead percentage, to get your base cost. At that point, you would multiply the number by 2-4 to get your retail value. If you wish, you can even make a “wholesale price” at a lower cost. Have specific rules in place (how many units must be purchased) if you decide to go that route.
Increase Your Productivity
For a higher profit margin, find ways to increase your productivity without sacrificing the value of your product. Here are a few things you can try:
If you manage to find your materials at a better rate, don’t charge less for your item. Instead, use better profit margins for better marketing or other aspects of your business.