Want to start selling your own homemade items? It’s a great way to earn some extra cash (especially around the festive season) and can even be the building blocks to starting your own business! This can be an amazing and scary step. I’ve already covered lots of topics from Are My Crafts Good Enough to Sell? to The Best Places To Sell Your Crafts Online, but there’s one simple question that many crafters stumble at: “How much do I charge?”
Some of us hate this bit of the job. Price it too low and you’re not making money, price it too high and you might price yourself out of the market! While it sounds like a complicated process, it doesn’t have to be. Below is a simple pricing formula that is a perfect way to begin pricing your items.
Let’s Look At The Equation – The Pricing Formula
This simplistic pricing formula covers all of your bases when thinking of the total cost of your merchandise. It will look something like this:
Materials + Expenses + Labour + Profit
Let’s break that down:
Materials - Everything it takes to make your merchandise (fabric, paint, hardware, etc.)
Expenses - This would be what you pay for things like transportation, extra equipment and research materials. Take some time to really think about the money you spend outside of just the physical materials, to make your business a reality.
Labour - This is a more subjective grey area that will really depend on your wants and needs. For example, if you wanted to be paid the basic minimum wage, currently at £6.50 per hour, you will need to figure how many hours the item takes to make and multiply accordingly. It is important to take into account all the roles you play to make your business work, and do not cut your own wages.
Profit - Yet another factor that can sometimes throw business owners. Profit should be set by considering where things are heading in the future. Are you considering an expansion down the line? Perhaps branching out into other product lines. Make sure you keep this number reasonable, but again do not undermine your own worth. As an example, fashion businesses tend to multiply their costs by three (sometimes four), a bricks and mortar shop might times their cost by two. It’s totally down to you.
That should give you a baseline to work from – but lets not pretend it’s that simple! There may be other factors you need to think about. For example:
Where Are You Selling?
If you’re going online (here’s an article I wrote all about selling online!) you will also need to factor in the selling fees from the site. You can shop around to get the best deal. You also need to think about the potential market. Just because it’s cheaper to sell, doesn’t mean you will nesscessarily make more money. One site might charge more, but has more buyers – so you will sell more overall. Also look out for postage costs – if you’re selling a heavy product remember to charge accordingly! You don’t want a shock when you get to the post office to send it off for the first time.
Not all craft fairs are the same. Some charge a lot per pitch, but again, they may have more buyers and therefore the potential to sell more. Some will be cheaper but you will sell less. It will also depend on the area the craft fair is in: is it an affluent market where people will spend more for example?
This is a whole (pardon the pun!) different ball game. Wholesale is when you sell your item to a retailer, who then sell it for even more money to make a profit. This is quite different to you setting your own price and making a profit. Retailers usually at least double the wholesale price they bought it from you at for the recommended retail price. This can mean the end price can seem very high.
If you want to sell by yourself and wholesale you will need keep the prices the same, as not to undercut the retailers.
A Fine Line…
As you can see it’s all a bit of a grey area. There is nothing wrong with having a bit of a floating price range when you start out, you don’t have to pick a price and stick to it forever more. Start with your base from the equation above and then you can tinker with all the external factors.
Also make sure you do market research. See how much other makers are charging for similar items, you don’t want to make yourself so expensive that people will look else where, and you don’t want to go so cheap that people won’t value the quality.
If your baseline cost seems quite high, you may want to think about materials you are using, and efficency of making, you may need to cut things out to make more of a profit. Eventually it would be good for your time management, organisation and sanity to have a price that covers all of the above! Sometimes you will make more, sometime you will make less but a cohesive pricing structure is good for business.
Always Remember The Value Of Your Time And Work
This is one of the more abstract areas for crafters, and artists to think of when it comes to pricing, but it is essential to consider. It is easy to come up with the cost of materials, but deciding how much you will charge for labour can be a bit trickier. You want to be reasonable, but also fair to yourself.
Some people are tempted to go for super cheap prices to make sure things sell, but you don’t want to work yourself to the bone for no profit! Consumers expect low prices from certain chain stores, but not from a small business that boasts handmade products. If they see a ridiculously low price, then they will begin to question the quality, and you do not want that.
The most important thing to keep in mind in this instance is that your time and skills are valuable. Too often artisans and craftsmen undervalue their own time, and expertise. However it is important that you do not undersell yourself. Time spent working on every piece, is time you spent dedicated to that particular item, and should be respected as such. Never gouge your customers, but realise your own worth – not everyone can do what you do! Part of the payment is for your talent and patience to produce the item in the first place; that’s your value.
I hope this helps you on your path to selling your handmade things! Make sure you sign up to my monthly newsletter to receive more informative blog posts, and please share this article!