For many crafters, determining the right prices to charge for our work is a challenge. Fortunately, there are tools out there to help us. Today’s guest post is from Gary Capps, owner of CraftMakerPro.com, who shares six strategies you can use to price your craft products profitably. Here’s Gary:
How do you price your handmade craft items? Does it sometimes seem like pricing your work is as difficult as making it in the first place?
There are no infallible standard formulas for pricing your work. There are, however, lots of guidelines and systems which may be helpful. At the end of the day, you should choose what works best for you. You are the one who must be satisfied with the prices you set.
Here are the most common ways handmade sellers price their work:
1. Cost Price: Your cost to produce your work, with the material costs and hourly cost included is really needed to identify your break-even point—where your total expense is equal to your total income. The foundation of your business is knowing your cost price so that you can accurately mark up your goods to make a profit.
2. The Going Rate: Find out what your competitors are asking or getting for the type of work you are doing. If there are a lot of products or services offered in the market that are similar, you may lose out if you are too expensive or too cheap.
3. Value-Based Price: Know the value of your work to your client or your client’s business. Do not underestimate what you make for your clients. Value-based pricing is based on how well you do your work; it is what your rate or worth is to the market. Typically, when you do custom work for a client, you can charge more than you would for premade items.
4. Wholesale Price: If you want to set a good wholesale price for your product, you must take into considerationsome important factors such as cost of goods, labor and materials used to create your product, your rent, utilities, supplies, phone, and profit—the margin needed to reinvest in your business.
Profit is important to make your business grow. In order for a wholesale agreement to be profitable, your mark up should be at least 2-3 times your cost. To manage this, you will often need to reduce your costs. Find the best prices for your supplies. Purchase some good inventory and pricing software. Automate your crafting process as much as possible to reduce the time you spend on each item. Develop a batch process or assembly line method if you can.
5. Discounted Price: Giving a discount doesn’t work for all creative businesses as it can make you look cheap, and creative products and services are rarely bought purely on their price. But having a sale at your booth if stock isn’t shifting or offering lower rates during periods of slow sales can be very useful to improve your income and make room for a new collection.
6. Fixed Project Price: Often a project has a total given price, which is divided into different stages with set fees, i.e. 30% deposit upfront, 50% creative stage, 20% delivery stage. A fixed price works well if you are efficient and experienced (you know how much time things really take by keeping clear time sheets over the years), you work with a more experienced client (so you won’t be wasting too much time in meetings, discussions, and revisions), and you work closely together at the beginning to scope the project into a clear design brief and adhere very strictly to deadlines. If the above doesn’t apply then be careful, and include at least 10% contingency in your budget.
If pricing is a daunting task for you, there’s a tool that will help you with pricing and calculating the costs for your handmade business. You can download your free copy of the crafting and jewelry pricing calculator from our blog and easily calculate the finished prices for all kinds of products for both wholesale and retail.
I hope this helps. Happy pricing!
Article written by Gary Capps of CraftMakerPro.com.
Craft Maker Pro software is designed to help small handmade businesses organize their inventory, pricing, customers, invoicing, and more so they can spend more time creating and less time on admin.
Editor’s Note: I have not used Craft Maker Pro, so I cannot comment on its usefulness. I did, however, test the free pricing calculator and it seems to include everything you would need to consider to set your prices. I had to unprotect two sheets to expand columns in order to read everything, but that’s no big deal. I did not receive any compensation for publishing this post.
How do you price your craft items for sale? Please share your tips in the comments!