The true cost of selling your handmade products
Pricing your handmade products is really, really hard. Not only do you have to include factors like your overhead and material costs, you also have to set a price point that your customers will buy at. Sometimes the true cost of your products and a popular price point don’t match at all.
So how much should you price your products for? Well, lots of crafters use the pricing formula below (transformed into a pretty picture by me) to determine the price of their products:
materials + time = cost; cost*2 = wholesale price; wholesale*2 = retail price
Setting Your Costs
For an example, I will use my crochet house slippers (click the link to see the item in question) to create a cost guideline. Each pair of house slippers requires two skeins of coordinating fabrics. Say that I spend $6 per skein on something that is mid-range in price, like Patons yarn or Caron yarn – the material cost comes to $12. I generally pay myself $10/hour to create crochet items, which may be high or low to other crafters, but considering I charge a minimum of $15/hour for my freelancing work, I think it’s pretty meager. It takes me a little less than an hour to make a pair, so say about $8 in labor. The total for my first formula of materials + labor = $20.
So, if I wanted to charge a wholesale price to someone, it would be $40. And if I were to charge a retail price for them, they would cost $80! To me that seems pretty high for a pair of slippers. Not that I personally don’t think they are worth it, but most people would not purchase a pair of slippers for $80. And even though I believe that I could sell my slippers for $40/pair, I don’t – I sell them for just $20, which means that I very rarely, if ever, make a legitimate profit from each pair.
What Did I Learn?
It’s obvious that I am selling myself short, and that I really need to take a look at my pricing structure again if I ever want to actually profit from my crafting. However, I get so many orders at the $20 price point, and I LOVE making things for people, so I haven’t raised them. I work very hard to make great products, and if I am not 100% happy with the finished product I will go back and revise/fix/improve until it’s perfect. The love, integrity, and time that I put into each product is worth something, and I fully believe that $40 is a fair price for that. Some people may not agree, but in the end, wouldn’t you want to sell your products to someone who truly wants them, and will truly cherish them for what they are – labors of love?
Conclusion
As you can see, it is very hard to set your pricing at a point that is fair to both you and what the consumer thinks is a valid price. If you want to actually profit from your crafting, you HAVE to charge what your product is worth. It’s going to be higher than Walmart pricing, and that’s okay, because your items are made by hand and that takes time, effort, materials, and more. If the consumer truly appreciates the products that you are selling, they will buy it, regardless of the price. The biggest factor is demonstrating the value to your customers. Once you do that, people will realize that your products are worth their cost, and you will see more sales!
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Posted on January 14, 2012, in Uncategorized and tagged Business, craft, Crochet, handmade products, pricing handmade products, Product (business), Wholesale, wholesale price. Bookmark the permalink. 4 Comments.
Reblogged this on AtomicLuLu and commented:
Always a very tough subjec to approach when you consider your handmade marketplace. This great thought helps demystify much of what someone should consider when pricing their efforts.
Thanks for the link love. It is indeed a very tough subject, but I think it is important that artists price their products according to their value, and that consumers understand the numbers behind handmade stuff so that they can appreciate the item for what it is, not its price tag.
I’ve seen that formula before but don’t know how anybody can actually put it into practise and still sell things! Having said that, I always hope that people who are interested in handmade items will realise the time and effort that has gone into them and will be prepared to pay for that – in the same way that people expect to pay a higher price for designer branded goods.
I have been wondering lately about how much I am adding to, and not charging for, the cost to myself in terms of packaging. Boxes, jiffy bags, tissue paper, cello bags, ribbons, tape, stickers, business cards – it doesn’t bear thinking about really!
Packaging is expensive, especially when it looks nice! I’m sure that the packaging alone adds at least a dollar to the overall cost of your products. While it’s not much in the scheme of thing, a dollar here and a dollar there will result in no profits.
Thanks for stopping by!