At Folksy we are constantly asked for advice on how to price work. How do I know I’m not underselling, how do I make my rates competitive, how do I cost for my time? It’s one of the yucky parts of selling that keeps us makers up at night because, unfortunately, there is no definitive answer. Luckily, however, there are plenty of things you can do to make sure you’re on the right track.
Our tips for getting your pricing right
1. Start by working out your labour costs
Do this by working out how much you would need to earn to cover living costs if you were doing this full time, and set yourself an hourly rate based on that figure. If you’ve spent time and effort mastering your craft, then take this into account – don’t devalue your skill! Once you have your hourly rate, set a timer and see how long it takes to make each piece of work. Multiply the time taken by your hourly rate to get an accurate figure for your labour costs.
2. Work out your making costs
Your making cost for each piece includes all materials you have used, taking into account any waste, and packaging materials. Other costs to consider include overheads like equipment and tools, advertising, studio rent, utilities, public liability insurance, broadband, phone, website fees and bank charges. To make things easier, you can work out a figure for all those overheads annually, then divide it by the number of things you make a year. That will give you a general figure for your overheads. Add this to the material costs for that piece, and you have your total making cost.
3. Calculate your wholesale price
It’s standard practice among professional makers to double the making cost to get to the wholesale price. So put your two costs together (your labour costs + making costs) and double it to get your wholesale price. The difference between your costs and the wholesale price is your profit. You need a profit for your business to be viable.
4. Calculate your retail price
If you are selling to retailers, they will buy your work from you at the wholesale price. They will then sell it at the retail price which is typically 2 x the wholesale price. This is their profit. If you start selling to larger retailers, the mark-up from your wholesale price can be 2.4 rather than 2 (or even higher). So your costs x 2 = wholesale price, then wholesale price x 2 (or 2.4) = retail price. Got a headache? There’s a great online toolkit available from Sarah Thelwall at mycake.org
5. Consider your customers
Now set your calculator to one side and look at your products as a potential buyer. Would you pay that amount for that item? Does it show craft, skill and unique design? Show your products to friends, to colleagues, to anyone who can give an idea of what your work is worth. Remember that your cost price is the minimum price you can sell your product for without making a loss!
6. Shop around
It can be a minefield trying to compare your work to the work of others, but done carefully it can be a great way of making sure your pricing is on the right track. Look at sellers whose brand is similar to yours – are they in the professional high end market? Are they a hobbyist? Are their materials similar to yours? If you can find two or three makers who you feel are on a par with you then using their prices as a guide for your own is a great way to make sure you’re not over or under pricing your work.
7. Don’t undersell yourself
It’s really important not to undervalue your work – if a piece is made by hand and with skill, it should have a price tag that reflects that. Also, bear in mind that being undercut by cheap pricing makes it harder for professional makers to make a living. So proper pricing is better for you and for other makers too!
Case Study: Little Moxie
Kim Channon has worked in the jewellery industry for over 10 years. She has exhibited in more that 15 galleries in the UK and Ireland, and sells her own jewellery on Little Moxie at folksy.com“When it comes to pricing my products I try to be realistic about how much an item is worth and what my customers will pay. I am careful not to pitch my prices too high or under value my work.”
- It’s important to keep up-to-date records of the individual costs of any materials and packaging used. I keep a running price list of these items (boxes, tissue paper, labels, padded envelopes, etc.) so that all costs are covered in the final price.
- Be a time keeper! To calculate the price of a product, you will need to keep a record of how long it takes you to make that item. I use my iPhone as a stop clock! Once I have refined the process of making any given piece, I can budget a timeframe for making that item.
- Allow for a little contingency – it’s not practical to account for every tiny detail in pricing, such as the special pen for writing on envelopes or the wee bit of washi tape for packaging. Selling direct involves more time – and has its own expenses – so, to account for these little extras, I add 5% to my retail price.