How To Correctly Price Your Crafts
Total Costs x 2 = Wholesale Price
Wholesale Price x 2 = Retail Price
Cost of supplies is pretty obvious; you just work out per item how much the supplies cost. For me this took a little work and time but I had a handy reference then to use for any new products. I started by working out the cost per item of my tin candle. This involved calculating how much wax was needed for the tin (175g) and then figuring out the cost of scent, wick, labels etc. As I buy wax in bulk I had to divide the full cost down until I got the 175g and the same process applied to scent etc. A bit fiddly and time consuming but worth it in the long run!
Also, another point worth noting is that if you source supplies from another country with a different currency; make sure you work out the actual cost in Euro as well as including the shipping and tax. Currency rates do fluctuate so your product may end up costing slightly less or more depending on the rate.
Labour costs are up to you really! Basically you decide on a price per hour and then estimate how long it takes to make a particular product. You might keep it at a low figure like €5.00 per hour but really I think it’s important to value your time and set a realistic labour cost per hour, like €10.00 - €15.00.
The overhead costs are an important thing to factor in and these will differ from business to business. Do you need to drive to pick up supplies? Your petrol costs then would be considered an overhead. One of my overheads is use of the gas cooker to melt the wax and I’m sure there are lots of other things I haven’t thought about related to other businesses.
When you have worked out all of the above and have a final figure, you just double it and violá; you have your sales price!
I should probably add that for items that are very labour intensive, you may end up with a price that’s totally unreasonable. What you can do in this case is lower the price to one that people would be willing to pay and perhaps add a little bit more to items which are quicker and easier to make in order to balance out your final profit.
Also, it’s worth remembering that shops normally expect to pay a wholesale rate of 50% of retail price, i.e. what I sell to a shop for €6.00, will be priced at €12.00 for customers. If you are considering approaching shops, be sure that your wholesale price gives you some profit and that doubled, still seems like a reasonable price to pay for your product. It’s important also that the price that the shop charges is the same as the price you charge at markets or online. There can be small differences of course but no shop owner will be happy if you are charging half their price at a market down the road! They’ll be very reluctant to order from you again.
What if you need to change your prices? Well, as it took me so long to get my own prices right, I can totally understand that you might need to do this. My only suggestion would be that you increase slowly and if customers question it, you can just explain that the cost of supplies necessitated a change in price. There really isn’t any point in putting in endless hours of work if you aren’t making a profit unless you decide there’s too much work in running a business and stick with doing it as a hobby.
Here are a few more of my #craftbiz posts:
Crafter's Guide to Christmas Selling
How to Sell your Craft Product to Stores
Craft Business on a Budget
Great info Cliona and I have realised like lots of others that I never calculate the price correctly. I love that formula and I think I will place it in VERY LARGE print on the wall beside my desk! x
Yes, it's a great formula, I've always found it really handy as a base guide, otherwise it's hard to know where to start with pricing!
That's really interesting - and useful - I think there's a natural tendency to undervalue what we do and then wonder why there isn't any profit! :/
This is great to know as most people think homemade products are over priced.Now I see it laid out like this, I can see why makers should price their products accordingly.
This is a great blog post for new business owners, I am constantly amazed at how little people value their talent and can see they'll end up with a loss if they don't change their pricing. Turning a hobby into a business is learning a whole new mindset if your not a natural business person. I personally would love to photograph and give everyone beautiful framed prints for free (unfortunately I'm not a millionaire!)
I'd love to craft more and the thought of selling my crafts has come to me before, but I never knew where to start! Thanks for the tips x
Pricing is so hard, especially if you're getting compared to mass market prices. When people start making their own, they then realise how much items really cost.
This is really useful for me right now, I launch my children's clothing line in December. Although I work in fashion so know a little bit about mark ups already, it's really good to read over posts like this to make sure I don't miss anything x
This is a great post and includes all the things you need to take into consideration when putting a price on your work, great tips
This is very useful, I'd love to get into crafts properly but I don't know if I could make it a business! As far as upping prices goes, at the end of the day stuff costs money, supplies, etc, so prices going up is natural. I think people will always find things to complain about with pricing though! :P Exchange rates going mad can also have a huge impact on supply prices. If I ever go into selling crafts I'll definitely have this blog bookmarked for pricing :)
It' must be really hard parting with things that you've invested alot of time into making. I know I would find it difficult.
I need to show my friend this post! She often asks what I would pay for particular items and undercharges.. She's fab! I think people need to remember how much hard work goes into hand made crafts xxx
I have a friend who has started a craft business and I think she would find this really useful. Thanks for sharing, it's valid for all aspects of business.
Interesting post and very useful.