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HINTS ON PRICING - Part I of III

© Barbara Massie

PRICING seems to be the biggest obstacle in business for many, many crafters. Pricing is one of the most difficult things to tell someone "how-to-do." Read this set of three articles, go to craft shows to look at comparable items and their prices, then just sit and figure what the best way is for you to price your items. After you find a good formula, be consistent and try to always price your "like" items in the same way.

The two previous articles "Homework Before Setting Price" told of the many factors to consider in setting the price for your product.

To help figure the cost of the items you are making to sell, you must know exactly how much it costs to manufacture your product. Design a chart for each item you produce. List all related costs to find the "real cost" price. Why do this? Read examples in the article Identify Profit Centers, Keep the Winners, and Lose the Losers on the Business Resource Center site.

"REAL COST" PRICING:

Determine the cost of your supplies, all merchandise used, and labor costs. Added to these, calculate overhead costs and what you want as a profit margin. Real Cost pricing is the most accurate of the different ways that business people use.

List ALL of the materials you use. Sometimes you really don't count those extra screws used to make the item solid, or you might add more ribbon to make the item more attractive. These are profit-eaters if you have not figured them into the cost of materials.

Make any packaging you use as attractive as possible and figure it into your cost. The labels you use, any bags used to bag a purchase for a customer - these are all expenses to you that need to be recouped.

Your labor can be another story! Be fair to yourself. Many craft people drastically undervalue their time and consequently undercharge for their products.

Figure the time spent to make an item, then give yourself a fair hourly wage. Do minimum wage if you want, but do take the time you used, times that hourly wage, to add to the cost of the item.

Example:

If you used 15 minutes to sew an item and your hourly wage is $5 per hour, you should add 25 percent (1/4 of an hour) or $1.25 to the item.

If providing yourself with a reasonable wage for your time causes the price to be too high to be competitive, you may need to find other ways to cut production costs. If this is impossible, face the fact that the product is not a profitable one to produce.

The copyright of the article HINTS ON PRICING - Part I of III in Crafts is owned by Barbara Massie. Permission to republish HINTS ON PRICING - Part I of III in print or online must be granted by the author in writing.