Pricing Your Crafts for Sale
- In This Quick Guide:
- Pricing Basics
- Quantifying Costs
- Other Pricing Considerations
Making your crafts was the fun part, but now it’s time to sell! Figuring out what to charge for your masterpieces can be confusing, but with the tips in this guide, you’ll learn how to price your items so that they will cover your costs, your time—and so that they will sell!
Pricing Basics
As a general business rule, you should price your goods high enough to cover your costs and to make some profit without going beyond what most of your target customers are willing to pay. You can estimate target prices by running some calculations and researching the market. But how much work you really put into pricing depends on your selling goals. If you’re not too concerned about making a profit, you can estimate your prices more loosely.
There are lots of pricing techniques, but most follow a common methodology: use formulas to make initial price estimates, then refine those estimates based on practical factors and savvy guesses. Over time, you can use your bookkeeping records to track how well your goods sell at which prices and adjust prices accordingly.
Let’s begin with the step-by-step approach I most recommend for crafters. Here’s a summary of what we’ll do:
- Quantify costs.
- Use a pricing formula to estimate a “working” wholesale price range.
- Use the working wholesale price range to estimate a retail price range.
- Use market factors to narrow down the retail price range.
- Use the retail price to determine actual wholesale price.
In the end, we’ll have a pretty good idea of how to price the necklace for retail and wholesale. I’ll note the retail price on both my product information sheet and my finished goods information list.
Quantifying Costs
There are two types of costs relevant to pricing: direct costs and indirect costs. Direct costs are the unique costs of making a finished good. They include the cost of raw materials and labor. Indirect costs are the same as overhead costs, which are general expenses that you incur no matter which finished goods you make. Once you quantify all these costs, you can plug them into pricing formulas.
Cost of Raw Materials
Determine your total cost of raw material components (based on average cost per unit).
Cost of Labor
You use the time you spent on design and assembly to calculate your estimated cost of labor. You need a cost of labor for accurate pricing even though you don’t actually give yourself a paycheck.
Ideally, your cost of labor should be a fair market wage for your work. It should be higher if you’re expertly skilled or your crafting process is complicated and lower if you’re a novice or your process is pretty simple. Many crafters use between about $10 and $30 per hour. You can better dial yours in by asking other crafters in your craft medium what figure they use.
Note that if your cost of labor is spread out over several copies, it’s lower than if you make only one copy. This is the main reason why you can price stock and limited edition designs below one-of-a-kind designs.
Other Direct Costs
Occasionally, you may have other direct costs apart from raw materials and labor. For example, if you drive a long way to purchase unique components for a design, you might treat your cost of gasoline as a direct cost. When you incorporate incidental ingredients such as glue or glitter in a design, you can also treat them as estimated direct costs.
Overhead Costs
Overhead costs are typically measured over a set period time, such as one year. Once you’ve been selling for a while, you can estimate them based on data from past years—but when you’re just getting started, you need to make an estimate. Your goal is to come up with a cost figure that you can allocate to the prices of your finished goods.
As a starting point, many crafters estimate overhead costs as a percentage of an item’s direct costs. Typical overhead percentages range from about 10 to 20 percent. If you’re a casual seller, the lower figure is probably more accurate.
Honing overhead costs beyond this estimate is tricky because some costs depend on how many sales you actually make. For example, you’re charged certain sales venue and payment processing fees only when an item sells. If you become a more active seller, you can use your bookkeeping records to estimate sales numbers—and therefore general overhead costs—more accurately.
Other Pricing Considerations
Try to identify any special factors that might raise or lower the demand for your crafts. For example:
- Are your products part of a new fashion or style trend?
- Are your raw materials more desirable to your target customers than most of your competitors’ materials?
- Have you received any special media attention, such as a feature story in a local newspaper or magazine?
- How popular is your craft medium among other craft sellers? That is, how much direct competition do you face?
- What’s the status of the economy, and how is it affecting your target customers?
With crafts, it’s often worthwhile to use the higher end of your price range, rather than the low end or middle. Depending on your craft medium, your target customers, your venue, and other factors, you may benefit from prestige pricing—where goods are perceived as being more valuable because of their high price. Higher initial prices also allow you to lower your prices over time without taking a loss.
Ultimately, the exact retail price you choose for your crafts is up to you. Do what you think is best based on all the information you have. Good luck, and happy selling!
From The Complete Idiot’s Guide to Selling Your Crafts by Chris Franchetti Michaels
