Pricing For Time Intensive Handcrafted Items
If you are like me you have read dozens of articles, posts, and comments on how to price your handcrafted items. And if you are like me you have been confused more often than not. The number one thing I have learned is that there is not one single formula that will give everyone the right pricing technique. Each type of handcrafted item is created differently. Some are made with expensive jewels, some with cotton yarns. Some take a few minutes to put together, while for some it is the time invested that gives them value.
This article is geared towards those who create handcrafted items that are time intensive. I will share how I have priced my items that fall into this category, and what I have learned along the way.
When thinking about how to fairly price your crafts, you must take into consideration both the cost of your materials, and the cost of your time. There are many pricing formulas out there that only use the cost of materials to figure out the price. That obviously will not work for time intensive crafts because you will not be getting paid for your time at all. Then there are other formulas that have you add in your time cost plus material costs and double, triple, or even quadruple that to get your wholesale price. Again, this will not work for time intensive crafts. You will find yourself with over-inflated prices and no buyers!
The key to the right pricing formula is to make sure you are getting paid for your time, for your materials, plus any overhead costs. This is the formula that I have come up with after months of tweaking:
[(time x $per hour) + 2(cost of materials)] x 1.1 = wholesale price
wholesale price x 2 = retail price
How much you should pay yourself per hour is up to you. I’ve seen a lot of advice saying that the bare minimum should be $10, so that is what I have started with for myself. I’m sure I will increase that as time goes on. The reason I double my materials cost is because there are always overhead costs. Having materials shipped to you, some materials getting ruined, materials you use that you don’t know how to calculate such as glue. I figure these are all covered by doubling my materials cost. Then I multiply by 1.1 to add 10% to my wholesale price. I do this to give myself a little profit and a little wiggle room. There are always overhead costs such as electricity that are hard to calculate in. This gives you that room. Plus even if you are selling wholesale it’s great to be able to get a little profit from those deals! You can then use this to re-invest in more supplies! I choose 10% as my profit markup, but you can put whatever you feel comfortable with.
If you are planning on trying to get some wholesale accounts, you definitely have to double your wholesale price to get to your retail prices. Most retailers will expect to get your goods at half price. This retail price is then what you should be charging customers.
When I first applied this formula to my items I gasped a bit at the prices. I asked myself, “who would pay that??” But then I took the advice of many crafters and artists and reminded myself that those who cannot make what you make WILL pay that price for it! I know I look at many crafts that I do not have the skills for, and I’m happy to purchase their items because they are well made, gorgeous, and it’s awesome to buy handmade! And I know others buy my products for the same reason.
Another thing to consider is the costs such as advertising, listing on etsy, renewing listings, time it takes to photograph, packing, and numerous other expenses! I figure that because I am charging retail price in my shops, I am covering those costs. So basically my “profits” are really the costs for all of that. When I sell wholesale I don’t have those costs, so I don’t feel comfortable adding in those costs to the wholesale price. But some people do, so feel free!
I consider my pricing formula to be very flexible. Once you have a formula that works for you and your craft, and you are happy with your prices, you can leave it for a while. But if you feel it needs some tweaking – maybe you find your overhead costs not covered, or maybe you decide to start putting your marketing and photographing hours into your time (something I have not done yet) – go ahead and tweak it!
If you create time intensive handcrafted items I hope you have found this article helpful. Let me know what your pricing challenges are and how you are handling them! Happy pricing, and happy selling!