It can be so hard to set pricing for your work, whether you provide a service or sell products. You want to charge what seems “fair,” you want to position yourself correctly among your competitors, you want customers to continue to purchase from you, and of course you want to earn a living. I think that many small creative businesses are undervaluing their work, which I’m sure is not news to you. It’s funny, because if you’re like me, and call yourself “boss,” you’re in an enviable position where you can decide how much money you make – so why are we so hesitant to give ourselves a raise after years of dedicated work?
This information will apply best to you if you’ve been in the same line of work for a while, provide a very high quality service or product, and enjoy a steady stream of customers. If you’re just starting out or struggling to attract interest in your work, your efforts may be better focused on improving what you do and adjusting how you attract people who want to buy it. If you feel like you’re fairly successful right now, and would like to expand on that by positioning yourself as an expert in your field and being paid like one, I have got some ideas for you! And those of you just getting started, there will be some goodies in here for you, too. You will find that you have a hard time growing your business if you are undercharging from the start.
Why undercharging is harmful:
I’m sure you’ve heard this before, but as a refresher, here are some reasons why undercharging is an all-around terrible strategy for a small business:
It makes your prospective customers undervalue your work. They assume you are not very good at what you do, are inexperienced, or are not in it for the long haul if you aren’t charging enough.
It devalues the type of work you do in general. If many people are undercharging in your industry, that makes it harder for people who are charging fairly to continue to do so, and will be bad for your industry as a whole.
You’ll be forced to cut corners. If you aren’t making enough on each product or project you work on, you won’t have any extra time to make it truly valuable to your customer. You’ll need to do some “eh – good enough” type work so that you are able to make a living.
You’ll overwork yourself. If your profit margins are low, you’ll find yourself up late at night and on weekends, plugging away at your job. Wouldn’t you prefer to work less, earn more, and spend more time with your family or doing your own extracurricular activities?
Bargain hunters tend to be truly awful customers. They don’t respect you, they don’t value your work, they complain about everything, and they will continue to try to pinch pennies every step of the way. They also have no loyalty and will quickly sign up with any cheaper option that comes along. I mean no disrespect to people who are on a budget – it’s just that these potential customers are not where you want to concentrate your efforts.
Why charging what you’re worth is vital:
Your customers will perceive you as a skilled worker with a valuable product. Cost pretty much always increases perceived value. You’d rather be viewed as Anthropologie than as Ross Dress For Less, right?
You’ll be able to make more money doing less work. Say what? It only makes sense. If you don’t like the sound of that, you could instead hire a gang of wonderful people to work with you to make your business even bigger!
Your customers will be much more invested in working with you at your higher rate. They don’t want to waste their money! That means less late payments, less missed deadlines, and have less objections each step of the way. The customers who sign on at your new rate will trust your authority more, and be more committed to the project.
You’ll be forced to deliver your best work. Anxiety about being “worth it” and the money/time to spare will motivate you to throw in extras, polish things to a high shine, go faster, and make something you can truly be proud of. This is a completely non-vicious cycle of becoming better, then raising rates only to become better. This all makes sense, right?
Stay tuned for part 2! Next Monday, we will take this knowledge and apply it to your business! Be sure to let us know in the comments: How do you feel about your pricing? What are your worries? Have you ever struggled with pricing happiness?
Funny how perception works.. Here’s a quick story for you: I was looking to buy spikes to help me walk in slippery snowed conditions, but the 30$ they cost seemed expensive to me. Last week, we were hit with an unexpected warm weather (I live in Canada, we have average -22 degrees in winter times here!). So it rained and melted, and when I had to go out to the daycare with my son in the morning, I was dreading the trip! Everthing went fine until I manage to jammed the car in the snowbank. You see, we live in the mountains were everywhere is a slope 🙂 And now it was slippery AND I was trying to manage getting my car on the road again. Nedless to say that I would have pay DOUBLE to have those spike at the moment!
Perception and worth are highly subjective and variable. 🙂
Looking forward to Part II. I understand not charging enough may lower perception; however, what do you do when you live in an area with a low cost of living rate? I set prices according to what prices are in my state/community. Should they be targeted to a national average?
It is so hard to PRICE your items when 80% of the handmade community UNDERCHARGES their prices or most charge materials only and no labor costs. This makes you look so far out of line and greedy. I recently had to LOWER my prices because of this. Pricing is a constant battle and one that I struggle with immensely. *sigh*
Valerie, I love this story! Yes, it can be easy to think something is overpriced or not worth the cost until you desperately need it!
Sher and Katie, you’ll notice that though most of your local or online community are undercharging, there are likely a few people who “get away” with charging quite a bit for their work. How do they do this? Their customers believe they are either creating something unique, or something more valuable than the rest. What can you do to make your product be the thing that your dream customer just HAS to have? You probably can’t strand them in the snow, like Valerie, so you’ll need to work on making a product that stands out, has cachet, and simply must be bought!
Sometimes raising your prices will help with this perception, but of course first the work must be done to be sure your product is something that people will yearn for …and even save up money for.
It’s also important to get a little buzz going about what you do. Either online, in your community, or among your customers. There is nothing like seeing something on all your favorite blogs or hearing it talked about glowingly by all your favorite people to make you very interested in owning that item.
This is the article that I needed to read this morning. I definitely need to reevaluate my prices. I look forward to the next part of this series.
this should be a must read for anyone who does craft fairs, runs an etsy shop or sells their handmade goods.
this is a great article. i have had some terrible experiences working with people who don’t want to pay (or would rather ‘barter’), which leads me to sacrifice my own design to give them something mediocre.
i feel awkward talking about pricing, but i would be more inclined to give a great piece of work for an awesome client, at a higher price, then to give them something i am not proud of, for less money. it makes sense!
This is my biggest challenge right now. What is the right pricing for the market and for my income? It amazes me how often my work gets compared in price to items that are made out of the states. I know it involves some education and finding the right customers. However there is definitely a sweet spot!
I always check competitors that are hand making in the states to make sure, but I know I have tended to under price in the past. To correct, as my work grows, improves, and develops, I am slowly rising prices so no one gets sticker shock.
Thanks for this post! I definitely needed it.
Great post. I always have issues second guessing myself with pricing. I’m always so unsure!
Bartering is only good if you feel like you’re getting an equal value for your work. Even when you are getting an equal value and enjoying your trades, it’s still wise to keep them to just a small part of how you get paid, because you can’t barter for your home, bills, or groceries (usually)!
My key is that if I feel taken advantage of, or I’m doing my work begrudgingly any time during the process, it’s not a good customer/client situation.
Jenn, yes, that sweet spot is hard to find – but you’ll know you aren’t in the sweet spot yet if you consistently feel like you’re struggling or are unable to put in your best work for the price you’re being paid.
It seems counter-intuitive, but sometimes pricing yourself beyond what your current customers can pay will take you to the next level where you can do your best work.
I’m just rounding out a year in business and was wondering why it seemed that supply wasn’t meeting the demand. Just raised my prices, and am hoping to balance things out more and make consignment and wholesale deals more fair (to me.) No more late nights and weekends for me. Thank you for shedding light on these issues.
Congratulations, Jackie! It sounds like you’re making some good plans.
I can see that your ceramics are special pieces, and if you can adjust your work to pay ratio comfortably, you can continue doing great work while also feeling great about it.
That’s a great point, Arianne. As always the answer is in the work. 🙂 Im moving to more detail oriented objects that will require higher PP. It will be exciting to see what happens!
Thanks so much for this post! I just did my first wholesale trade show and the feedback from my rep was that my pricing was a bit high. I cringed but stood firm. There are a multitude of price points in my line with a selection for every budget. I abide by the rule that if your prices make you a little queasy then you are on target. Great post Arianne!
I am just loving all of this conversation & reading your stories! Thank you Arianne for starting this series and sharing your smartness with us-your response to Jenn “you’ll know you aren’t in the sweet spot yet if you consistently feel like you’re struggling or are unable to put in your best work for the price you’re being paid.” is truly wonderful. I call the feeling of being pushed outside of my sweet spot my resentment threshold and I know when I start to hit it that it is time to make a change. Some red flags are: I am not deeply excited every time I get work, I am spending lots of time debating over pricing to the point where I no longer want the job (then drop it or add a 50% pain in the head tax to the estimate;), if I feel taken advantage of when I hand over something I poured love into, I’ve fed the kids rice for a week, etc. Once I make a change to my structure or pricing that addresses the issue I am always excited to dive back into work. I think pricing has a lot to do with being good at setting boundaries for what you want/don’t want in your life & work- the clearer you get about that the easier it is to charge what you are worth!
We discussed this at our Local Etsy group meeting today. It was perfect timing. I shared your post with our group. Can’t wait to read Part II. Thanks!!!
This is a difficult choice we all have to make. Our Etsy store is: http://www.etsy.com/shopladylike. Our motto from the beginning as been “Quality over Quantity”. This article truly hit the nail on the head about customer perception to pricing too low must mean low quality and higher prices MUST mean top quality. Thanks again!
That’s an important point, Zelma! It’s one thing to raise rates, but quite another to stay strong in the face of direct criticism of them. Good job – it can be hard not to second-guess yourself, but being informed of the range of valid pricing for what you do is a big help in remaining confident.
Thanks for sharing, Diana!
And thanks for everything, Jess. 🙂
I’m bookmarking this article and revisiting it everytime I feel squeamish about prices or begrudging the time I’m spending on a piece – I hestitate so often raising my prices, but you’re so right – you need to make the price worth it for you to give it your all, become a better artist & send out a piece you know is worth every penny. This is totally a call to arms for artisans! Thank you 🙂
Thank you for this post. You are absolutely right! I do tend to undercharge and underestimate the worth of my handmade, one of a kind jewelry. I have to stop thinking like the bargain hunter on the side and not the artisan creating, struggling, refining my work!
I can’t wait for #2. I enjoy reading + hearing everyone’s perspectives on this. The “trade” question is a great one — as I just finished, what I feel, was a fair + excellent trade : traded letterpress packaging goodies to a wedding videographer in return for a really good business video for me!
Great post! I have definitely been guilty of undercharging, and have learned to adjust my prices, though it was initially a huge shocker (“I can’t possibly charge that much!”) It’s then frustrating when you see someone charging waaaaay less for a similar product…it undervalues both of your work.
It feels good to see that I am not the only one struggling with this issue. I bumped many times against customers that don’t seem to understand that quality materials come at a higher price. If you also want to factor in the design, uniqueness, work, time, etc., then you might be left with only a handful of people that want to buy from you, and as a result, your sales will go down. I recently had a trunk show where I sold my last year’s pieces at half the price, and my new collection at full price (my prices are very reasonable for the quality of materials I work with). Guess which ones sold? Yup, all of my last year’s pieces, and very few from the new collection. I totally agree with Katie who commented: “It is so hard to PRICE your items when 80% of the handmade community UNDERCHARGES their prices or most charge materials only and no labor costs”. We all want to make our craft businesses work and see the sales piling up, but there are so many factors that have to be considered… This article really hit home with me. Thank you for posting it Arianne! Looking forward to part II!
Thank you so much for this post! I’m bookmarking it as a reminder not to undervalue my work.
Thank you for this article! It reaffirms my philosophy on pricing. If I see a beautiful handmade piece, and then I see the price and it seems low, I think, “I wonder what’s wrong with it?” I do not want potential customers thinking that about my handmade leather masks! If they think, “The price is a little high,” I want them to then think, “… but the quality is so good, I can see that it’s totally worth it!”
I like what Jessika said (in comment #16) about the “resentment threshold.” I’ve hit that threshold with a couple of commissions, and it’s always a learning experience for next time.
I have had Jury Duty for the last couple of weeks so I have a looooot of OMHG catching up to do. This was definitely a great read and sooooo true. Thanks!
I’m glad I’m not the only one who struggles with this. With my PR business, it’s subjective based on a perception that’s not always accurate. I’m also an artist and make jewelry and decorative accessories out of recycled materials and it’s so hard trying to come up with pricing for items made out of other people’s trash!
ah! loved seeing my drawings on this post! 🙂 it made my day. Oh it’s always good to be reminded to charge more! Looking forward to Part II.
Thanks again, all!
Eirewolf, you’re right on when you say:
“If I see a beautiful handmade piece, and then I see the price and it seems low, I think, ‘I wonder what’s wrong with it?'”
Again, there’s that sweet spot you need to hit to have your work seen in the best light.
Pricing is something that I have struggled with since I started trying to sell my handmade bags. I certainly could learn to market myself better and research ways to get in the eye of prospective buyers. But I think my pricing may be hurting whether or not people purchase my bags. Sometimes I feel as if I’m pricing too high because I compare myself to other sellers in the same industry but instead of thinking that those sellers are UNDERPRICING their work (which is more likely the situation), I assume I’m overcharging. I’ve tried to cut corners as best I can, without sacrificing quality, and my pricing can still seem high compared to others. I think I need to start considering the fact that things might be the other way around.
It’s such a shame, too. Because it seems the whole handmade community would be better off if everyone just priced their work accurately.
Jill, I think if your prices were lower, I’d start expecting your bags to show up at my doorstep looking more “homemade” than I’d wanted. At your price point, I’m picturing bags that would be in fashionable boutiques around town and that look very well made and well thought out. I’m sure you could go higher if you were in the “right” shops and mentioned on the “right” blogs for your preferred client base.
Thank you for honestly putting this out there. I own a handmade children’s boutique. We had our items in a small, local children’s boutique and toy store in 2012, while we did well, I felt like we could make the clothing or hair accessories we wanted because the clientele was not willing to pay a higher price. In January we were invited to bring our clothing and accessories to a home decor and gift boutique in our town. We are finally able to raise our prices and create the detailed clothing we have been wanting to do. I was nervous about the feedback on prices at first, but everyone loves our new styles, fabrics and designs not a single person has complained about the price. It truly is all about perception.
Great story, Michelle, and exactly what I’m talking about!
These posts are so great… It’s applicable not only for small businesses but also just a great way to look at and examine your own worth. Not an easy task.
Thanks for the feedback, Arianne! It’s nice to hear the thoughts of someone who doesn’t know me personally (you don’t feel obligated to tell me what you think I want to hear for fear of hurting my feelings– like friends and family might).
I guess that’s a whole new topic for another day– getting your product into the eyes and hands of the right people/shops/blogs. Something I definitely need. 🙂 Thanks, again! You’re very knowledgeable and I’m enjoying reading what you have to say about this sometimes difficult subject.
Thanks for this post! It’s so hard for those of us in the competitive business of personalized gifts to even sell at retail. I feel like I have to lower prices to compete with the “deal maker” sites that sell everything 20% below retail. I needed to hear this though! Very true!
I know I undervalue myself! Years of low paying jobs have made me think me and my time aren’t very valuable =(
It’s something I need I work on.
Great advice! I never know where to start with pricing. I am new to selling my photography and this has been one of my concerns.
Great post… I have an an online coastal/cottage home furnishings store and work with wonderful handmade artists…. our pricing is always higher as their work deserves that…. agree with everything here. If we ever do our site over, love to talk to you. Have a great day and thanks again for this….
Can’t raise prices if you are not selling at the current lower ones. Does not make sense to me.
Thank you thank you thank you! I’m just starting out, but still value my time and work, I appreciate that I may not make as many sales to start by setting my prices at a realistic rate as opposed to undercharging, but in the long term, it will be beneficial…I was starting to waiver slightly on this thought process, but your article has just reaffirmed my original thinking x
great article , I have been sharing this article on etsy as I think it really hits the nail on the head . thank you
For product based home businesses, do you charge for your time? I’m discussing with my wife. Should we view our profit as a per product sold or as how many hours it took us to complete the project?
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