One of the biggest questions that faces a new crafter is how to price products. You want to figure out the fine line between what you’ve poured into the piece with what people will pay for it. It’s a big question with a relatively simple answer…just follow these steps:
- Make sure that you’ve gotten your supplies to make the product at the absolute lowest price. This means you’re wholesaling everything, buying in bulk and utilizing as much of the materials as possible. Throwing away supplies is like throwing away profit.
- Set up a spreadsheet like the one below. If you don’t have Excel, just use Google Docs (it’s what I used, and it’s free).
- In the left column, list each item that goes into your product. For the example, I’ve used a handbag. For a supply like thread (where it’s hard to calculate the exact amount used), just put an approximate cost in the “Supply Unit Cost” column. For example, if you use glitter that costs $5 per bag, and you can make 50 products with the bag, list $.10 as your “Supply Unit Cost.”
- To fulfill the “Per Supply Cost” column, don’ t use a calculator; let the spreadsheet do it for you.
- Total the “Per Supply Cost” column to arrive at your total cost per product.
- Multiply this figure by two and three. I like to use a 3X markup, but it’s up to you depending on competitive pricing and what you think your customers will pay.
- Finally, multiply the wholesale price by two to get your retail price. This is the final price at which your product should be sold. You can round it up or down to a figure that makes the most sense (you wouldn’t want to charge $52.74, but $52, $50 or $55 would be good prices).
Product Pricing Example - Click to Enlarge
Aside from using the formulated method outlined above, you’ll also want to consider the amount of time you’re putting into creating and marketing your product. As you get started, keep track of all the time you spend on your business. After a reasonable amount of time has passed, and you have begun making sales, divide your profit (revenue minus supply costs) by your hours. If you’re making less than minimum wage (and crafters often are), you might need to rethink either your pricing or your supply costs.
Also keep in mind that certain items can be priced higher than what the formula above allows for. A good example is jewelry–customers will often pay more for intricate and unique designs…but it probably also takes you longer to design and make these items, especially if they are custom pieces.
Another thing that will affect your pricing is overhead. I haven’t included it in the spreadsheet above because it’s very difficult to calculate if you haven’t been in business for a while. Overhead includes the following items:
- Business cards, postcards, email marketing fees, and other marketing-related expenses
- Farmer’s market booth fees, tent, tablecloths, etc.
- Miscellaneous office supplies
- Shipping supplies
- Equipment maintenance and purchase
- PayPal/Etsy/etc. fees
- Business licensing fees
- Taxes
So here’s a very important tip: make SURE you track these expenses like a hawk. Keep a folder of all your receipts, and enter them into an expenses spreadsheet (or Google Doc) as you accumulate them. After you’ve been in business for a while, you’ll be able to divide your total expenses by the number of products sold to get your “Per Product Overhead.” You can then add that to your spreadsheet and adjust your pricing, if necessary. Keeping such good records will also come in handy come tax time.
OH, Etsy also has several articles on pricing here. Check them out!
Got any other helpful pricing advice? Please share it below!
