Many artisans are overwhelmed when it comes to pricing their handiwork. How do you put a price on all the time and effort that goes into the creative process?
Here are some of my tips from running my own online business selling handspun yarns and fibers for 8 years. These tips may not work for everyone in every craft, but they have worked well for me and so I am sharing them with you.
Caro Sheridan's WebForm mini quilt
1. Online market research
What is the price range of what you are selling? Go sites like Etsy and see what similar items are currently selling for. Keep in mind that jst because an item is listed for $100.00 doesn't mean it will sell for that price. Check the sellers "sold" listings to see if similar items have sold recently. Although you cannot see the price that the item sold for, if a seller has a shop full of expensive items and no sales, they have priced their shop too high for that market. Once you know what the price range is for similar items in your craft, you will know the range of where you can price your items and expect to see sales.
Ideally you should be able to price your items right in the middle of this range unless you are using a higher quality material or there is something truly unique about your specific craft. However, if you are brand new to the niche you are working in, with many other shops online, I suggest pricing just below the average price to draw more people in, increase your sales and build your prices with repeat customers.
Berry Birdy's Coin Purse / Wallet PDF Pattern
2. Cost of supplies
This is a cornerstone in being able to set a fair price on your work, and make the highest profit you can. Never pay retail price for your supplies. Do your best to secure all your materials wholesale or on sale. The lower price you pay on your materials, the more profit you have an opportunity to make.
- Knitter A buys a skein of yarn for $10, knits a scarf that sells for $20, and profits $10.
- Knitter B buys the same skein of yarn with a coupon for $6, knits a scarf that sells for $20, and profits $14.
3. Your hourly rate
This is the most challenging factor in pricing your homemade goods -- and the most controversial. I know many artisans who charge $10/hour for their time. If you are acquiring your supplies for free, charging per hour will help you set a fair price. But if you are charging $10/hour while you're crafting and watching TV, I'm not sure charging $10/hour will help you set a price that is fair in the market. Are you really working most efficiently while multitasking and being entertained? You see, many of us are crafting during what we would otherwise call "free time." Free time is $0.00 per hour. Some of us are crafting while our children run around, between cooking meals and talking the dog for a walk. It's very hard to get an accurate estimate on how much time we spend on a project. Also, some of us create faster than others.
- Crafter A: spends 4 hours crocheting $5 yarn into a baby hat. Cost of project: $45
- Crafter B: spends 2 hours crocheting $5 yarn into a baby hat. Cost of project: $25
It's going to be very challenging for Crafter A to sell her hat for $45 if there are other hats for sale for $25. She may look at Crafter B's work and think Crafter B is underselling the market, when in reality she just works slower than Crafter B. This is no one's fault. I happen to be a very fast spinner, so if I literally calculated the cost of my time into my yarns, I would offend a lot of artisans because all my yarn would be under-priced.
I recommend that Crafter A spend some time doing market research to see what baby hats are selling for, and price hers accordingly. Crafter B might also benefit if she does some market research and raises her price by a little bit. After both of them do their market research, they may both do well by pricing their baby hats in the $30-$35 price range.
If you are an artisan that is working uninterrupted in your studio to create an item to sell, then tracking how much time you spend on a project will help you set a fair price. But if you're a crafter who is multitasking while creating, you might end up charging too much for your time and overpricing your product.
In closing, here are some formulas that have worked in the past for finding a fair market price in my craft economy.
- Cost of Supplies + $10 per Hour Time Spent = Price A.
- Cost of Supplies x 3 = Price B.
- Price A + Price B divided by 2 (to get the average between these two prices) = Price C.
- Compare Price C to your Market Research and adjust accordingly.
For example, it takes me 2 hours to spin $20 worth of fiber into yarn. $20 Fiber + $20 Time = $40 (Price A). $20 Fiber x 3 = $60 (Price B). $40 + $60 = $100. Divided by 2 = $50 (Price C)
$50 should be in the range of the fair market price for my item. If $50 is too high, I'm either spending too much on supplies or I may work slower than other crafters. If $50 is too low, I may work faster than other crafters, or I got a great deal on my supplies and should raise my price a bit to have a fair market price and support the other artisans in my field.