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Bonus Mid-Week Lesson: Pricing Your Work

Feb 12, 2015

by Jess Van Den

Etsy.com handmade and vintage goods

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. Also, 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. You might have seen some too. We’re going to pick one to run with today that’s not overly complex. When you get more in-depth with your pricing calculation, there are lots of other factors to consider (such as your overheads) but let’s just start with the basics.

The formula is:

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 – this is actually a pretty low number), and your materials cost for an item was $5. Let’s say I made a pair of earrings that took half 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 in your Etsy shop, and at markets.)

Sounds like a lot, hey? 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.

You’re not. You’re a professional maker. You’re running a business that needs to pay your bills. You deserve to get paid what you and your work is worth. 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 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 need to be pricing in order to cover costs, pay yourself a wage, AND make a profit, 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 iPhone, 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.

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.

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.

Ask yourself:

What would you expect to pay for it?

What would you be willing to pay for it? And why?

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 relatively easy 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 have done this in the past, and been really surprised at the outcome. Years ago, when my prices were much lower than they are today, I had a number of people – friends and acquaintances – tell me that my prices were too low! And I listened to them.

There’s a funny paradox when it comes to charging what your work is worth. Every time you put up your prices, you are scared – I know I was! You worry that no-one will ever buy anything again. That sales will dry up. But something I’ve noticed over and over again, not only in my own shop, but I’ve heard this same thing from many of my students, is that sales usually stay the same, or even increase!

And if they don’t? Well, let’s say you’ve realised that the original prices you set were way too low, and you’ve doubled them. Even if your sales drop by half, you are still making the same amount of money (actually, more, because more of each sale is profit) with half the amount of work. That frees you up to do other work to grow your business. That doesn’t sound so bad, does it?

 

Homework

  • Visit your shop and do the above ‘I am a stranger’ exercise. I’d love for you to come back here, or to the Facebook group, and share your findings!
  • Take 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?

 

 

20 comments

  • treechangedolls

    Sonia from TreeChangeDolls said 4 years ago

    I've been waiting for this. It's very timely. I certainly need a lesson in pricing. I'm a bit scared of getting it 'wrong'.

  • jacmatsuo

    Jacqueline Chan from whimsymilieu said 4 years ago

    I agree with the handmade community underpricing - we should be proud of our designs & creations, and reward ourselves well for our skills, effort, and all the blood & sweat & time we put into perfecting/enhancing our creative skills! :D I like the visiting my own shop as a 'stranger' - I'll be sure to do it and see if my products need re-pricing! :) Thank you!!!

  • kathenglish

    Kath unsworth from ScratchyBirdDesigns said 4 years ago

    Love that formula and will aim towards pricing my art like this, although it is scary to charge such a high fee when Im starting out. Thanks.

  • emmapro

    Emma from BreathofJoy said 4 years ago

    I can't wait to look through my shop 'as a customer' although I think this will prove difficult. It is scary increasing prices, especially when your new and not sure how things will work out... I actually, last weekend raised my prices by $1 and my coupon expired that I had going and I got 2 sales! Which are my first:) fingers crossed everything goes smooth. But I guess you do need to know your items are beautiful and worthy to be out there. And of course not always for everyone either:)

  • bystrux

    Beate from SchoenByStrux said 4 years ago

    if I calculate my prices so, then everything is more expensive. :) The big question, whether it still sells.

  • chelseamaydesigns

    Chelsea Hantken from Pollypixels said 4 years ago

    My pricing is along similar lines to the wholesale price. Which means it should be doubled... but I'll never sell any artwork for that much! If you look around on Etsy, A4 art prints usually sit around the $20 mark. I can't charge $40! Man this is hard work.

  • bebymarcy

    Marcy Langworthy from ManhattanHippy said 4 years ago

    Great tips! Always interested in how other markets are doing. Greetings from NYC!

  • priyaamrit

    The White Fire from TheWhiteFire said 4 years ago

    This is an interesting article, we are just starting out on Etsy and pricing is a tricky one. We definitely cant double the wholesale price though, it just seems too expensive.

  • leonieie

    leonieie from Thingswelike2knit said 4 years ago

    Very timely and useful article for me. I'm just starting out, and have no idea really.

  • WriteHere

    Bronwyn Stephenson Goddard from WriteHere said 4 years ago

    Interesting article but I too would price myself out of the market if I did this. I guess it may work better for sellers with higher priced items. Mine vary from $2 - $22.50, otherwise people would buy from someone else.

  • WriteHere

    Bronwyn Stephenson Goddard from WriteHere said 4 years ago

    I looked at other Etsy sellers from all over the globe and really I have to compete with them even though the basic costs here in Australia are higher than for example the US. You can still make profits, you just make more on some and less on others!

  • LittleGoosePaperCo

    LittleGoosePaperCo from LittleGoosePaperCo said 4 years ago

    Perfect! I will keep this in mind. Thank you

  • julietmatthews

    Juliet Matthews from FabulousLittleGifts said 4 years ago

    As always - really, really helpful. I am re-pricing now!

  • IsabellaDiSclafani

    Isabella Di Sclafani from IsabellaDiSclafani said 4 years ago

    As a painter selling on ETSY, I've found that pricing my work too low can backfire on you….for a short time, I had some smaller clay sculptures that I wanted to move quickly and so I priced them at $20.00. Next thing I knew, I had customers requesting custom clay works expecting the same price. I realized that pricing too low confuses your customers. I've always had different artworks at different prices in my shop, which is a good thing because everyone has different budgets and logically, a small work on paper doesn't sell for the same price as a large painting on wood panel. But now, I make a very serious effort to differentiate between the various types of works that I make and sell and to create very clear sections in my shop.

  • dawnmteasdale

    Dawn M Teasdale from DawnMTeasdale said 4 years ago

    Great article! I've adopted the pricing model you suggested because I really want to get into wholesale in addition to selling on Etsy - maybe even Etsy Wholesale???. My shop is still quite new - so I'm still tweaking a lot of details. This course has been really helpful - Thanks!

  • GelCandlesLady

    Katarina Pavlovic from NaturalYardRemedies said 4 years ago

    Thanks so much for that Jess. One of the ladies on the Facebook page told me I was pricing too low, so I've doubled the price and I will see how far that takes me. I haven't had any sales yet, since I've opened the shop (which is fairly recently) so I look forward to the "feedback" so to speak :-)

  • julieforrester3

    Julie Forrester from JuliesKnitties said 4 years ago

    I'm in business in my non-Etsy job, and I agree totally with everything you say. I've experienced the 'fear', then 'surprise' at putting up our prices to find we made the same money for less work. But in my Etsy shop, I'm not so sure. My product, if priced correctly would be 4 times the price it is now, which is in line with what others are selling similar products for (on Etsy and elsewhere). I sell to retail and they agree with my current pricing. In the short time my shop has been opened, I have had lots of interest, but no sales at all and I think raising my pricing might be the worst thing to do. It would make knitting a jumper from my yarn, cost about $600. I'm actually wondering whether this business is simply not viable. :(

  • mettaville

    Guatyen Koh from Mettaville said 4 years ago

    Pricing is still a learning curve for me. I know I am still selling my items way lower than the suggested formula given. Thing is, when I see other sellers of similar items selling at lower prices, I am tempted to lower my prices too. It's tough competition. If I'm to think like a buyer, I'd go for a more cheaper priced products. It is not as simple as it seems... but I'm still learning.

  • janinephilip

    Janine from AllsortsofSoaps said 4 years ago

    Thank you for this informative article. As a soap maker I can't sell at a high price. Also I am just starting as a seller on Etsy and even to get a view of my shop is taking some time! :) I think that you are very generous to share your expertise with others who will benefit.

  • MadeInNorthMelbourne

    MadeInNorthMelbourne from MadeInNorthMelbourne said 4 years ago

    "Visit your shop and pretend you have never been there before... What does it say to you" What great advice - thanks!

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