C&T Q&A – How Do I Price My Handmade Goods?

 

how do I price my handmade goods

Today’s question is from Linda Ursin, and she writes:

How do you know what price to set for your crafted items?

Ahh, the age-old pricing question! We all ask it – and chances are, we’ll keep asking it for as long as we’re in business.

I hate to break it to you, but pricing is never a done and dusted thing. As your business grows – as you grow as an artisan – what you make and what you charge will evolve with you.

There is no one-size-fits-all magic bullet to pricing. Sorry!

However – there are some tools, guidelines and strategies to take into account when you’re pricing your wares to ensure you’re making the money you need to be making – and making what you and your work is worth, rather than underselling yourself.

Underpricing is a HUGE issue in the handmade community, and anything I can do to battle that is a good thing in my book 🙂

 

1. Price With The Head

Let’s start with the most basic of tools – the formula. I promise it’s not too scary!

I have found many formulas out there. The most fundamental and basic one is probably this:

Cost Price (labour + price of materials) x 2 = Wholesale

Wholesale x 2 = Retail

So, what does this mean to me, and you? Well, say you have a labour cost of $20 per hour (think about how much you could live on if this was your full-time business!). And your materials cost for an item was $5. Lets say I made a pair of earrings that took 1/2 an hour.

$20 x .5 = $10 labour + $5 materials = $15.

$15 x 2 = $30 = Wholesale Price

Now, if you want to make a profit – which is the amount you have to grow and re-invest in your business – you should double this amount for Retail, which equals $60. (By the way, the retail price is what you should be selling for online, and at markets.)

Sounds like a lot, hey?

But, in professional handmade business circles, this is standard practice. It is difficult for those of us who do this as a hobby to look at it like this sometimes – and when you’re competing with people who sell at a price that doesn’t even begin to come near their true costs, you might feel like you’re being greedy.

Remember – hobbyists aren’t trying to make a living out of selling their craft – they’re just trying to cover materials costs and maybe get a little extra on the side. That is how they can afford to charge so little – their livelihood is not relying on this money!

Also – if you’re selling internationally – and especially if you’re selling in another currency in some places (for example, I still sell in USD on Etsy because I’ve found through experimentation that listing prices in AUD puts off my American customers from buying, but it doesn’t bother Aussies to buy in USD) you need to take exchange rates/paypal fees/paypal currency conversion fees etc into account.

For those of you who want to do a super-serious, completely in-depth calculation to work out your prices, check out this excellent article by Australian Jeweller Simone Walsh.

When you graduate from a hobbyist to a business, you’re going to need to re-think your pricing. Starting with a simple formula like the one above is an excellent start… but it’s not the end of the story. Once you know mathematically what you should be pricing, you need to turn around and look at your price from another perspective.

 

2. Price with the Heart

There’s more to price than the basic in and out formula. Why do you think Apple has such a huge profit margin compared to other tech companies?

It ain’t because their materials and labour costs are way lower. No, it’s because they’ve built a brand that enables them to charge twice as much for pretty much the exact same technology as their competitor – and their customers are not only happy to pay, they’re ravenous, raving fans, just dying to drop another wad of $$ on the new model eye-phone, even when their ‘old’ one works just fine, thank you very much!

That, my friends, is the power of branding, and that is where pricing with the heart comes in.

Someone who outlines this very issue excellently is my friend Megan Auman. She actually wrote a new post on this recently – but she’s been writing and talking about this issue for a long time now.

You need to start looking at your brand from the outside – through the eyes of your customer. Visit your shop and pretend you have never been there before. That it’s just a shop you’ve stumbled upon while browsing Etsy. Even better, pretend you’ve stumbled across your band on a stand-alone website, or in a retail store! (Etsy can sometimes have the issue of making people expect artificially low prices.)

What does it say to you?

  • Does it say ‘professional artisan’?
  • Does it say ‘high-quality craftsmanship’?
  • Does it say ‘unique, exclusive design’?
  • Does your brand scream ‘cheap’ or does it scream ’boutique’?

I want you to be intentionally blind to the prices – blind to the fact that you make these things. I want you to pretend you’ve never made one of your whatevers, and that you don’t have the skill or the inclination to make it.

What would you expect to pay for it? What would you be willing to pay for it?

Take this to another level. Are you even your target customer? Because hey, maybe your target customer is someone who is willing to pay WAY more for your whatever than you would. What might someone really be willing to pay for your wares?

A good way to research this is to show your product to friends or family. Especially those who are a little bit removed from what you make. Ask them – ‘if you saw this in a shop, what would you expect to pay for it’? You might be surprised.

I’d like to let you in on a little secret.

I actually raised my prices 2 times last year. The first was a small, 10% rise in April. The second was a much more dramatic rise in September (and honestly, I have to thank Megan’s talk at the Artful Biz Con for finally giving me the push I needed to take that step).

For example: at this time last year, I was selling this pair of sterling silver earrings for $22 ($22!! I seriously can’t believe that figure now – SO low!). Then it was $25. Now it is $35, and I’m much more comfortable that I’m on the right track with my pricing. Megan would probably tell me off – tell me I should be charging about $60 retail for them – but I’m not quite there yet! Like I said at the beginning, you’re never ‘done’ with pricing.

In the first 2 months of 2013, I sold around the same volume of jewellery on Etsy as I did this same time last year. (I sold a lot more overall this year because the business on my own website is much, much higher now). However, guess what? My revenue – the money I earnt – from those same volume of sales? It’s DOUBLE what I earnt last year. Therein lies the power in raising your prices to what you and your work is worth.

Not only that? I am much more comfortable with my prices now. I am a professional artisan. This is my livelihood. I have years of skill and practice. I make an excellent, quality product. And my prices reflect that.

Do yours?

 

Homework

  1. Visit your shop and do the above ‘I am a stranger’ exercise. I’d love for you to come back here and share your findings!
  2. Take just ONE of your products and work out a price using the formula I gave you above. It is very basic, but it’s a good start. Share with us what you discover – are you pricing way too low?
  3. Do you know anyone who needs this info? Share it with them via twitter, facebook, pinterest or G+ below.

10 Tasks to Do in the Quiet Months: learn to use the times of slow sales to your advantage

don't panic and carry a towel - hitchikers guide to the galaxy eye chart

{image by the Pressing Pigeon}

This post is written by Katia Donohoe.

Didn’t have sales for a few weeks and wonder what’s happening? Are you asking yourself if it’s happening to your shop only or is it like this for other shops too?

Most likely it is. There are at least two months a year when the sales drop. Depending on what you sell, it can be January – February or June – July.

So what do you do?

Do you try to buy tons of advertising, discount your creations or get out there Facebooking and Tweeting like mad?

Definitely not!

All those things need to be consistent and time appropriate. It’s not going to make you look professional by overwhelming your reader/followers with tons of updates in their newsfeed and you don’t want to look desperate by selling your creations at a super low prices.

The fact is, it can be quiet for so many reasons – holidays so everyone is away, tax time and, if you are selling overseas, it can be weather, different public holidays and festivities.

After a 3 years in business, I did calm down a little.

I used to think that every sale was my last, got nervous and anxious when there were no sales for a week/two/three, started questioning why am I doing this, stare at the screen, go in circles checking my Facebook page, Twitter, mailbox every 2 minutes…

Sounds familiar? Then read on…

After a while, you will discover that there is no such thing as a quiet month in handmade business.

There might be no sales but you need to learn to think long term. There is always so much to do and there are always areas that you overlook while busy.

Remember, all business owners are going through the same, just at a different time of the year.

Here are a few areas that you might want to have a look at while there are no email popping up in your mailbox:

  1. Check you listing descriptions for mistakes, and maybe add more information about the item and the creative process behind it.

  2. Make sure you use all the tags in your Etsy shop.

  3. Take fresh pictures. After looking at some of my product pictures a few weeks later, I often find that the light wasn’t good enough on that day or I forgot to upload all 5 pictures in the listing…

  4. Pre-make packaging. It is always great to have all envelopes stamped with return address and have all the promotional information that is included with an item in one place, ready for the busy times.

  5. Look at your stock: what is underrepresented? My goal is to have 5 of each creation in the shop in different designs/colours (note: I sell only items in stock, no custom orders) If you take custom orders, then check if you have enough materials for all the items. You might have run out of certain supplies but forgot to take the listing down.

  6. Make new stock! There is no better time then now to create new things. Put them aside and release the slowly when there is just not enough time in the day to make anything.

  7. Tidy up the paperwork. All of us guilty of putting paperwork in a pile and moving it somewhere where nobody can see it. Go, take it out and at least sort it by month and file it.

  8. Research new supplies. Shopping for new fabric/beads/buttons is always fun! If you are not yet ready to buy, at least you will know where to find it.

  9. Research new ways to promote your business, and evaluate your promotional efforts up to date. Can a lack of advertising or marketing be the contributing factor to the slow sales?

  10. Visit those blogs that you love and leave comments.

In conclusion, don’t fixate on slow sales. Instead, use this time to concentrate on the other areas of your business that need attention.

{image by Katia}

Remember that you are in this for a long term and building a successful business takes time and determination.

If you have all those things mentioned above in place and keep adding a new stock to the shop, sales will come in and you will pat yourself on the back for using the slow months to your advantage!

____________________________

katia

Katia Donohoe is designer and maker behind Plushka’s Craft brand.  Being of Russian heritage she treasures handmade crafts and love spending time creating things by hand.

She cannot live without hand-stitching, hot chocolate and Mr. Plushkin, bright tights and suede shoes.

She blogs at Plushka’s Craft where she writes about Plushka’s handmade creations, inspirations as well as her main craft passions – cross-stitch and crochet.

blog facebook | twitter {@plushkacraft}

Some of you are not going to like this, but I’m going to say it anyway…

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Chances are, you became a crafter because you love making stuff. (I know I did.) By now, you’ve probably worked out what you like making the most. And if you’re here, reading this, I’m going to assume that you like making that stuff so much that you’re trying to make (at least part of) a living by selling the stuff you like to make.

Let me make it really clear – Making stuff you like is awesome. That’s why we craft: because we have a passion for it.

But here’s the bit you may not like:

Just because you love making it does not mean there are people who want to buy it.

The craft community is a warm and fuzzy place – that is part of what makes it so freaking awesome. We love to support each other, help each other, and share with each other.

We’re not so good at telling people the truth when we think it might hurt their feelings. I have been in the uncomfortable position of having to say no to featuring certain products because they (or, the photography of them) is just not up to scratch. It’s a place you find yourself in when you run something like my craft blog, or a magazine.

It sucks to say no. It’s really, really hard.

I hate doing it. But it’s part of the job I’ve made for myself. (And why is it so hard? Because I know there is a person there, on the other end of the e-mail, who is just like me. Who wants to make their dream happen – and I really, really dig helping people make their dreams happen.)

But back to my point.

When you start making for profit rather than for pleasure, your perspective needs to shift.

You need to stop thinking exclusively about you, and what you enjoy – and you need to start thinking about your customers.

Sweet Spot 2

If you’re doing all the right promotional ‘stuff’ but your work is not selling, I want to encourage you to really have a long, hard, cold look at your products from an outsider’s perspective.

I would advise you not to ask the opinions of friends or family, because – let’s be honest – they love you, and they will find it mucho hard to tell you the truth if they think there’s any sort of negative there.

Or, on the other hand, they may not understand what you do at all, nor that there is a possible market out there for your work in this burgeoning handmade movement. In short, they’re not objective – they have a vested interest in you one way or the other.

This whole crafting-as-a-business caper is hard – and it’s a never-ending process of growth and discovery.

I’d like to encourage you to have a peek at one of the very first things I sold in my Etsy shop.

Yep, pretty ordinary, hey? (And check out the totally heinous flash photos!!! Eww… talk about what NOT to do!)

I believe my product has come a heck of a long way since then. I’ve worked on my designs, my brand, my focus, my photos, my descriptions, my packaging… and I have no doubt that I will continue to work on all of those things in an effort to become more successful in my business.

Is my work/product perfect? No. Is my business model perfect? Hell no. But I believe I’m going in the right direction.

(And, just so you know, I don’t believe there’s any such thing as ‘perfect’. There’s ‘good enough’ and ‘awesome’ and ‘unique’ and ‘beautiful’ and ‘squeee’ – but no ‘perfect’.)

Is there some aspect of your product that you need to change? Are you doing/making the same thing as a million other people? Is there a market you could be tapping into, but aren’t? Heck – maybe the problem isn’t your product, but your photos of it – when you’re selling online, that’s the magic key to the door.

Go to it, people: examine, grow, adapt, take risks, and make something awesome.

__________

{top image by Amanda Mocci}

Awesome Tools for Anyone Starting a Craft Business

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{Image by The Sweet Light}

Today’s post is written by Ashlee McCullen.

Realizing your creative business dreams can be the thrill of a lifetime. But you know what else it is?

Hard work. Compliance. Accounting. Supplies and inventory.

While there’s so much to be said about planning a successful craft business, I’m going to dispense with that for now and get to some awesome free and cheap tools that can help you understand and more easily manage the essential (perhaps even “boring”) details.

Laying the Groundwork

  • Craft, Inc. Business Diary: I’m going to start with an analog tool. The Craft Inc. Business Planner offers a good all-in-one reference for starting a crafting business. It’s the companion to the Craft Inc how-to guide. You’ll find tons of checklists so you won’ forget to register your business or be caught off guard by your operating costs.
  • Enloop: Enloop offers a free, online planner for your business. Filling out its financial questions isn’t most people’s idea of a fun Saturday afternoon, but that’s almost the point. Perhaps you’ve never considered “How many days for accounts payable,” but you will now.
  • MyCorporation: If you decide to form a corporation (the above resources can help you make that decision), this nifty online tool takes out much of the tedium and helps you avoid mistakes.

Managing Finances

  • Freshbooks: Whether you’re selling on Etsy, at your local crafts fair, or all of these, you’ll want an efficient way to track your finances. Freshbooks is a godsend to anyone who’s ever had the misfortune of creating and filling out expense reports.
  • Lemon: Be sure to save your receipts. Lemon makes it easier than ever. You can scan them into your smartphone or put them through a desktop scanner. Lemon does all the number-crunching and organizing for you, making tax season far less painful.

Buying Supplies

  • Factory Direct Craft: If you’re going pro, you’ll want to consider saving money by purchasing wholesale from a provider like Factory Direct Craft. It’s not hard to meet the $250 threshold for its discount, but shop around and see what works for you.
  • Arts and Crafts CouponsThis is a simple, utilitarian app for Android that I’ve used before on my T-Mobile smartphone to find awesome steals. It’s a good resource if you’re running a small operation.

Reaching Out

  • HootSuite: Hootsuite offers the best social media dashboard I’ve used for tracking keywords and mentions of accounts. Implement it to supercharge your online marketing, networking, and customer service.
  • Constant Contact: Finally, don’t forget the awesome power of an e-mail marketing campaign. I personally recommend Constant Contact. It offers a good mix between ease-of-use and flexibility. You can get going whether or not you know e-mail protocols and HTML.
  • Hover: If you’re creating a website, you can find good deals and customer service fromHover. Plus, you’ll be happy knowing no elephants were harmed in the creation of your web presence.

__________

Ashlee McCullen is a staff writer for Apron Addicts, a website about kitchen fashion and home style. She also writes about mobile technology and self-improvement. When she’s not writing, she takes care of her two small children, finds new ways to organize and decorate her home, and takes immense pride in her killer cheesecake brownies.

8 Steps to Turn your Passion into a Successful Business

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A while ago, Vicki from In.cub8r The Valley here in Brissie invited me to be the speaker at the shop’s first birthday party! It was a pretty lovely and informal event, so I didn’t talk too much – but while thinking about what I would say I came up with this list.

These are the things you need to do to turn your passion into a successful business. I’ve deliberately left these generic because I think they would work for pretty much anything, not just craft…

Find the sweet spot that combines what you love with what people will buy

Just because you love it doesn’t mean other people will. But they might! So try and try again until you find the best balance between what you love to do and create and what other people need and want.

Be obsessive

Building your own business takes time, time, time. The more time you put into it, the more you’ll get out. So – be obsessive. If you are driven by an obsession, you won’t have to find the time – it will be an imperative.

Be consistent, passionate, and knowledgeable

Running hot and cold will make it much, much harder. The more consistently you work on your business, the faster/better it will grow. If it flows from passion, this will be easy. But you need more than passion to create a successful business – you need the combination of passion and knowledge.

Talk about it. A lot

To everyone. Online, offline. In the supermarket, at the dentist, at the party, on facebook. Don’t be shy – your friends and acquaintances will most likely be your first customers and your best method of spreading word of mouth.

Keep learning and growing

You are never, ever, done. If you’re done, your passion is gone. There is always more to learn, more ways to grow your business. Perfect example – Virgin.

Diversify – both what you do and where you sell

If you make/do just one thing – try to offer it in as many different colours/sizes/styles/price-points as possible. Sell your stuff in as many different places as possible.

Or, do a number of different things. With both my jewellery lines, my blogs, e-books, e-course and more – I’m always getting money coming in from somewhere!

Try new things – even if they fail, at least you’ve tried

If you don’t try, you won’t succeed. And sometimes you will fall flat on your face.

Who cares? Just get up, dust yourself off, and try something else. Thank goodness Edison didn’t give up on his first try to make a light bulb, or we’d ALL be in the dark…

Commit to things before you know you can do them

Want to launch an e-course, but don’t know quite what the content will be, or how you will run it? Pick a date, tell the world… and then use the motivation to work it all out!

Nothing lights a fire under you than external expectation that you will live up to your awesomeness.

What tips would you give someone who is striving to turn their passion into a successful business?

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{Image from Epheriell.com – Heart Necklace}