(hand stamped bracelet courtesy of ChrisClosetCreations)
I will admit something to you guys…I HATE pricing. I think it is one of the hardest things to do as a business owner. So many questions to ask… Am I charging too little? Is it too much? Am I devaluing those around me? So before we all need paper bags to stop the hyperventilation, I have a few things that I think can help put some perspective on pricing.
So how do I price? There are two ways to go about trying to price your products.
Honestly, this is my least favorite way to price. Mostly because if your competitors have lower costs or cut corners to produce their products then in the end you loose out. You never want your business to be affected by others so closely.
Quite opposite from competition is cost. I think this makes it easier for you to price your products at a rate that you deserve and in the end you will be happier with. To calculate your costs, you first have to decide what you are going to pay yourself for your time. Yep, you have to pay yourself a living wage! Crazy right? 😉 Get serious and think about what you would be comfortable making per hour. This may be dramatically different if your business is part time or full time.
Now, you will look at your materials cost. Write every little thing down and don’t forget to include items like packaging, shipping material and postage if necessary. Then add everything up…this is your total cost. To break even, this is what you would charge but since every business needs to make some sort of profit to succeed you may want to try and add an additional 10-15% on top of that, depending on your particular product.
Not so difficult right? As long as we take it in simple steps pricing isn’t really that scary and the great thing about owning your own business is that you can adjust things as needed so nothing is ever set in stone!
Since pricing is hard for so many of us please share your stories about pricing by competition and cost-what worked/didn’t work? How do you price your product now?
I was scared at first to properly price my items–I thought who would want to pay that much–but now I go basically by the cost, factoring in cost of materials, how long it took me to make it, and profit, and then I double it for my retail price. (I got that formula from watching an Etsy video which I guess I have modified slightly). So far it seems to be working for me! (I find that some of my competition unfortunately way underprices their products, in my opinion).
I become completely frustrated with this topic. Everyone seems to claim there is one formula for calculating price. Price is about what customers are willing to pay. It is supply / demand. It is pure economics. If you have an amazing & original idea and it is something people want or need then you can set a certain price. If you make something that other people make, well now the customer has a choice. For some the choice will always be the less expensive item & for others the more expensive item because expensive is better. There is so much more to this equation than can be answered in one post. Every situtation is unique. That being said, you should absolutely get paid for your time & materials. If you aren’t including all these elements of your business into your price then you will surely not be in the business for long. Sometimes you have to realize a design is either not worth your time & move on to something that can yield a profit. It is not just about raising the price of something.
Hi Jennifer! Thanks for your comment-I definitely agree there is way more to pricing than can be covered in one post, that is why we have spent the whole month of February exploring this topic:) You can find more posts on pricing/profit here: http://ohmyhandmade.com/2013/02/
If more creatives charged what they were worth and worried less about their “competition”, there would be far fewer “starving artists” in the world. You can be competitive and still charge more by offering more value/service.
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