Price it Right

One of the hardest things to do is put a price on your own work. As a crafter it has hard to get your business head on and be ruthless about the true costs of making an item.

Many a time I have gone to a craft fair or market stall selling hand made items and thought there is no way that can be cost effective.

It was brought home to me when a friend of mine needed help with his tax return. He was meticulous at keeping a record of his income but less good at keeping receipts. He had no idea of the hours he worked but I knew they were well in excess of 40. He was a superb cabinet maker and restorer, who had a great love and pride for his work.

To cut a long story short, the bottom line showed he was earning just £1 per hour. And that wasn't counting a proper rent for the double garage space he was using or the free help from a partner. It was a shocking revelation when at the time minimum wage was over £5. Within 3 months he got a job as a cabinet maker for a small company and was paid well. The home workshop then became used for hobby projects.

If you are crafting as a hobby and just want to get money back to buy more stash or equipment, then what you charge is probably not a grave consideration. If, however, you intend to make a living from your art, then you must take everything into account.

I work out my costs by working out an hourly rate for the workshop part then adding in an hourly rate for my salary. You will then need to add the cost for the materials of your item. I ignore any marketing and selling time at this stage - this is purely for the making.

To work out how much  it costs you to have your workshop you will need to include the following -
           * Electricity
           * Heating
           * Rent
           * Phone
           * Computing
           * National Insurance
           * Miscellaneous inc postage and transport.
Work this out for a year and divide out for an hourly rate.

Now add your salary rate for a total cost of each hour you work. Don't forget you will have to add in tax on these earnings which you will have to pay.
To price an item, add the cost of the materials to the cost of the time to make it. This gives you the cost you should sell the item to a retailer.  The price you should charge if you sell yourself should be twice that, giving you the money to cover unproductive time and the cost of selling.

Taking an example, let's suppose your hourly workshop cost is £1.50 per hour and you would like to earn £7.50 per hour. That's a total hourly rate of £9.00. Now if your item takes 20 minutes to make the cost of the time is £3.00.
Now add in the cost of the materials, say £3.00 and your wholesale cost is £6. If you have an outlet to sell for you, this is the minimum price you should charge them. If you sell yourself you will need to double this to match the retail price. This is very important as you will need to cover costs of selling time, stalls, online shop fees and/or advertising. There is a reason the outlets you might sell to, double the cost they buy in for.

If you think that you cannot charge that amount, you need to be making something else. It is as brutal as that.
I find this particularly so with card making. I know I could not make a living solely from making cards. I did, however, when teaching and demonstrating so that could be an avenue to consider if you find it doesn't pay to make what you want to make.

One tip to improve the viability of your products is to make that item have a higher value. For instance use sterling silver instead of base metal. It reduces the percentage of the cost of your product that is taken up with overheads and increases the value by much more than the extra materials cost. If you make a knitted item from cheap acrylic yarn, you have made a cheap jumper, make it from Mohair and you have a luxury item  that commands many times the price. The increase in your total costs is very much smaller. Your time is too precious to waste making cheap goods, and you will never compete on price. Overseas work from certain countries will win hands down, even if it is hand made.

Many years ago, when I first started selling at Craft Fairs, the organiser of the fair I was at told me my prices were too low and that I should put them up - a lot. As I was struggling to sell, I didn't understand but took the advice given. Suddenly the people who came to look started buying. Now my prices matched their perceived value, and they would buy. I took nearly £1000 that show (3 days), which met my target for the month!

Good luck with your enterprise :)

Do you have another way of working out your pricing? Have you found you can charge more for some things than you expect? Do you make your craft pay by demonstrating or teaching?