How to (really!) cost and price your handmade work
Last week we held a free workshop for Folksy Plus members on how to cost and price your handmade work, run by the incredibly knowledgable Patricia van den Akker of The Design Trust. There were so many discussions about pricing on the Folksy Forum beforehand that Patricia decided to turn it into a full-blown workshop rather than just the Q&A planned.
The session was full of eye-opening, thought-provoking, practical advice and gave a taster of what you can expect if you sign up to their upcoming online short course Costing & Pricing your Creative Work Confidently, which runs next week. (If you’re a Folksy Plus member you can enjoy a 15% discount on that if you sign up before Friday 21st April. Check the Plus account page in your dashboard for the code.)
Here is a summary of Patricia’s tips on how to cost and price your work in order to have a sustainable creative business. If you’re a Folksy Plus member and would like to watch the full webinar, email us at email@example.com and we can send you the link and password to access the recording. Please note it will only be available until Friday 21 April 2023, so don’t miss out.
The Design Trust’s advice for realistic costing & pricing
1. Consider why you create
First up, before you even start to figure out what to charge for your handmade work, consider why you create. What’s the purpose of your making? Is it your profession? Do you aspire to have a business with staff? Do you consider yourself a craftsperson, an artist or an entrepreneur? Do you make to supplement your household income? Do you do it because you love making and if someone buys something, then that’s a bonus? Perhaps it’s to help your mental health and wellbeing, and money is not the main motivator?
All these options are equally valid, but having a clear understanding about the purpose of your making helps you get into the right mindset when it comes to costing and pricing.
2. Set a financial goal for the year
The act of setting a goal makes all the difference. Without a goal you don’t have a plan. So what is your financial goal for the year? To figure this out you need to know:
- What salary do you need this year from your creative business (to cover bills etc)?
- What are your business costs for the year (studio rent, fees, market stall costs, photography, materials etc)
Add these two figures together and you have your turnover goal for the year. For example, if you need to make £20k a year to live and your annual business costs are £15k, your turnover goal is £35k. Doing it over a year rather than monthly is important because it accounts for any fluctuations and seasonal variations.
How much you set as your salary is a very personal choice. Everyone’s answers here will be different. Some people will rely on their creative business to make a living and pay all their bills, whereas others will have other sources of income or financial support. The stage you are at in your business can also affect what you need or expect from it financially. But, whatever the figure you set, you can only be a profitable business if you cover both your salary and your costs.
3. Calculate your daily rate
Now take your goal for the year and divide it by 48 weeks; then divide that figure by 20 hours to figure out what your daily rate as a professional maker should be.
Using the £35k example, this works out as:
- £35,000 ÷ 48 weeks = £729 a week
- £729 a week ÷ 20 hours = £36.45 an hour
- This is equivalent to £2,916 a month or £255 a day
This is what you need to be earning to reach your financial goal.
Shocked? Most artists and makers will be – especially if you consider that a recent survey by a-n and Industria reveals an average hourly rate for artists of just £2.60 per hour. But before you dismiss it as ridiculous, this is simply the maths behind the goal you set. Remember, everyone will have different goals, so everyone’s hourly rate will be different.
If your daily rate feels impossible, read on!
IMPORTANT: This daily rate is based on spending 2-3 days a week making and creating. A common mistake is to divide your goal by 52 weeks and then 40 hours a week. However, the reality is that you cannot work this much, as it doesn’t allow for holidays, sickness or any time for marketing or other business tasks. Most successful, sustainable creative businesses spend 40% of their time making, 40% on marketing, 10% on research and professional development, and 10% on admin and finance. If you spend more than 50% of your time making, you are are not leaving enough time for marketing and selling, so you are likely to be left with a lot of unsold stock.
4. Work out the number of sales needed to reach your goal
So now you have your annual turnover goal and know what your daily rate should be. The question is how are you going to make that happen? How many items would you need to sell, and at what price, to achieve your goal?
Using our example above, if you need to generate £35k a year in revenue, you could sell:
- 7 items priced at £5,000 each
- or 140 items at £250
- 350 items at £100
- 1,400 items at £25
- or 7,000 items at £5
Is that possible?
Again, this can be a bit of a reality check BUT it can also be incredibly motivating and eye-opening, and a valuable opportunity to reassess not just your prices but even what you make.
5. Understand the ceiling price of your products
Many items, especially functional items like mugs, have a strong fixed price. Customers and, if you sell to shops, retailers know what they expect to pay for them and it is very difficult to charge more. The ceiling price on these is a natural law that only a small number of high-profile makers are able to circumvent.
So if your products fall into this bracket, work backwards. Start with the price customers expect to pay, and if you sell to shops start with the retail price, then work out the wholesale price, then your cost price. For example, if your mugs would cost £15 in a shop or gallery, you’ll get roughly £6-7 wholesale for them. Can you make them for £4 or £5? If not, you will be losing money on every mug you sell through a retailer. This is why it is really important to calculate your cost prices and know how long it takes you to produce something.
To be able to charge more, you’ll need to increase the ‘perceived value’ of your product. See below for more on how to do that.
6. Consider how you can charge the prices you need to reach your goal
How do you feel at this point? Are you energised? Have you had a moment of clarity… or are you feeling utterly demoralised?
If the prices you need to charge seem totally unrealistic, or the number of products you need to sell feels out of reach, what can you do?
This is a topic that The Design Trust covers in much more detail in their Costing & Pricing your Creative Work Confidently course but here’s a snapshot of options available to you:
- Adjust your salary expectation
- Lower your business costs
- Become faster or more efficient (eg speed up your making process; spend less time on details customers don’t notice or value; spend less time scrolling on Instagram and more time on intentional effective marketing)
- Increase your prices
- Diversify – add new income streams (eg workshops, selling patterns)
- Change what you do or make (eg what could you charge £1,000 for?)
- Increase the ‘perceived value’ of your work (read point 6 below)
If none of these avenues are open to you, it could be time for a reality check. It may just not be possible to earn the salary you need and cover your costs – in which case you can’t run a sustainable, profitable business.
That doesn’t mean you have to stop making. But it is useful to know because it brings clarity, and it can even take the pressure off feeling the need to “turn your passion into profit”. There is real value in doing the thing you love, particularly if it benefits your mental health.
7. Raise the perceived value of your work
If you need to charge more, one option open to you is to increase the perceived value of your work. You can do this through changes to the actual product you make, the channels you choose to sell or exhibit through, as well as the content you produce as part of your marketing strategy.
Here are just a few examples:
- elevate a piece into ‘art’ (eg could you display a beautiful textile sample in a bespoke frame?)
- create haute couture pieces
- limit the amount of pieces you sell to increase desirability through rarity
- create exclusive customised or bespoke pieces
- work with precious metals or gemstones
- create vessels rather than functional ceramics (which have a ceiling price)
- raise your profile and reputation
- emphasise your craftsmanship, skill and experience in the content you share online (across social media, your website and shop, your product listings, ‘about me’ page, product photography, blog, and email marketing)
As these tips show, there is no ‘one-size-fits-all’ magic formula to pricing. Setting the “right” price is individual to each artist or maker, and depends on their circumstances and financial need, as well as market factors. But understanding what you want from your business, what you need to earn, and what that means for the prices you set, the products you create and the marketing you do can be genuinely eye-opening and empowering.
15% discount off Costing & Pricing Course for Folksy Plus members
Need more practical & strategic costing & pricing advice? Want to charge more? Become more professional & make more money? Sign up to The Design Trust’s upcoming online short course Costing & Pricing your Creative Work Confidently here.
Over five consecutive mornings from Monday 24 April – Friday 28 April (10am – 12.30pm UK time) Patricia will take you step-by-step through the following:
- On Monday we will focus on how to calculate your cost price, wholesale & retail price that cover all your costs so you know you make a profit. Learn how to calculate your daily and hourly rate as a creative freelancer, and as a product-based creative.
- Tuesday: How to price your work properly! 15 different ways to price your creative products and services – including which one to use and when. Are you charging what you are worth?
- Wednesday: How to price for wholesale and include galleries’ and shops’ commission. What to do if you are too expensive to wholesale or for consumers! Loads of practical and creative solutions, and thought-provoking ideas to raise your prices and fees confidently, without losing clients. We will boost your confidence too!
- Thursday: Is your business making you money? You will create your own financial forecast for the next two years, and find out what to do exactly if your numbers do not stack up. What do you need to do to make your business viable and worth all your hard work. You will leave with a clear action plan!
- Friday: How to cost and price your creative workshops or commissions. And plenty of time to answer your costing and pricing questions on our final day.
Special Folksy Plus offer: get 15% off the course or the course and 1-2-1 coaching with Patricia! Find the discount code in the Plus page of your Folksy seller dashboard. Deadline to join: Friday 21 April.
Can’t make these sessions live? No worries! We record all 5 x 2.5-hour workshops and you will have access to the recordings + presentations + Excel templates + homework exercises + private hub till end of December 2023.
Bit short of money? You can pay in 3 monthly instalments of £50 (£42.50 x 3 for Folksy Plus members!).
Want private advice about your costing & pricing dilemmas? Then upgrade and select the option to get a confidential 45min coaching session with Patricia!
Become a Folksy Plus Member to take advantage of this offer and access more features, discounts and special events.
I watched the video yesterday and having read the summary as well I realise I would benefit from spending some time on marketing in particular newsletters of which I found a great article on the Folksy blog yesterday. I’ve been creating to sell since 2014, I do make sales and have a loyal custom base but don’t make the profit I need or would like. I personally thought the figures were a bit optimistic for most creative sellers although I do realise they were just examples and the suggested amount of time to spend on marketing and finances very high and not possible if you are creating time consuming products like myself. However, I think there was some good advice for newcomers or those looking to change the products they make. For those of us who have been doing it for a number of years the changes are not as easy but it has got me thinking about some areas that I need to pay more attention to.
I have just read the summary above and it is so useful and really comprehensive. So often pricing guides only focus on how much you need to earn versus how much it costs to make what you are selling. I had already worked out how much I needed to earn, and my hourly rate, but I hadn’t actually costed up what I make each year to see if it reaches my target income. I’ve just done that now and it almost does(!) which was reassuring – I just need to make a few tweaks, and of course review it each year. And the advice about only spending 40-50% of your time on making is spot on – I usually spend 45% of my time and I was always wondering whether that was a good proportion. So thank you – your article was much appreciated.
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