Putting a price tag on all your time, work and creativity can feel like the hardest thing in the world. Too high, no one will buy it. Too low, you won't be able to keep your business running. How do you find that sweet spot? We've got some tips to help you nail it.
Do Your Research
Start by scoping out your competition. Figure out the range of pricing on similar products. And remember to look at how successfully other sellers are moving their goods, too. You may notice a seller with high prices, but no sales — which could be an indication those prices are too high for the market.
Once you've gotten a sense of the range, the best bet is to price your items right in the middle. If you're using higher quality materials or there's something truly unique about your specific craft, you might skew higher. (But if you do this, you've gotta make sure your marketing really stands out!)
If you're just starting out and facing steep competition, try pricing yourself just a bit below the average price to draw more people in. You can work your prices back up once you establish a customer base.
Take a Hard Look at Cost of Supplies
There's no getting around the fact that it takes money to make money. How much you're spending on supplies directly affects your ability to sell your product at a fair price AND make a decent profit. When sourcing your raw materials, never pay retail price (did you hear that in the back?). Do your best to secure all your materials wholesale, or at least on sale.
Consider Your Time
Each hour you spend working on your craft is an hour you should be paid, right? This is the most challenging factor in pricing your handmade goods — and the most controversial. How much is your time worth?
To get a handle on a fair approach, ask yourself a few questions: Is your working time purely working? Or are you multitasking? (Many of us are reallly good at knitting and watching TV at the same time.) If you're sneaking your crafting into what is otherwise your free time, and not giving it your full attention, it's really hard to set a fair hourly rate. It's also hard to calculate the hours that go into your project.
Bottom line: If you're a multitasking crafter, be cautious of charging too much for your time and overpricing your product. We've got some formulas at the end of this article that can help you avoid this pitfall.
What about makers who are doing this as their full-time gig? If you have dedicated time and space for your work, then tracking how much time you spend on a project is a lot easier, and will likely help you set a fair price.
Now that you've thought about the costs and time that go into your product, test out these formulas to help you calculate a fair price.
- Cost of Supplies + $10 per Hour of Time Spent = Price A.
- Cost of Supplies x 3 = Price B.
- Price A + Price B divided by 2 = Price C.
- Compare Price C to your Market Research and adjust accordingly.
If Price C is much higher than your market research range, you might be spending too much on supplies. Or, maybe it takes you longer than average to complete your crafts. Look for ways decrease costs and make your hustle more efficient so you're making enough to support your business.
If Price C is much lower than your range, maybe you're getting your supplies for free? Or you're extra speedy in your work. Consider raising your price a little to keep it within the range. You'll increase your earnings, and avoid undercutting your fellow makers.