Pricing your craft is an area where you should be spending a good amount of time and research on. For a lot of people their pricing research goes as far as getting on the web, or often Etsy, and searching for the product they sell then choosing the price that they think would be a good fit.
A lot of other folks online will tell you to start off on the lower end when it comes to pricing, and while I agree with that to an extent, my philosophy is for you to consider each of these areas listed below first then adjust to the higher range.
If you're new to your craft and your work isn't yet up to par then that's the exception to pricing on the lower end (after you've evaluated the pricing areas below) and raising your price once your skill increases. By that time you should be venturing away from Etsy (or even keeping your Etsy shop, like myself) and building your own eCommerce website.
You should always start your pricing research offline, thinking about what your monthly costs and goals are. I'm going to take you through 7 areas of consideration when it comes to pricing your craft.
This will be different for everyone. It's an obvious element to pricing what you sell but so many beginner makers skip over this for some reason or another. This will include things like your rent/mortgage, car, phone, groceries, hospital, debt, loans, etc.
2. Operating Costs
These are costs associated with making your product. Materials, machinery/equipment, packaging, shipping materials, etc. Let's say you're not charging a percentage for the computer you use to run your business and one day your computer stops working, you're going to have to pull that money from another area (i.e. profits, material costs, rent, your labor, etc.) to make up for your operations cost that you haven't been factoring in.
While your operating expenses include things you need to make your products, your overhead makes up for costs that you would still need to pay even if you shut down your operations temporarily. Some of these expenses include your studio rent, employee payroll, phone bill, marketing costs, etc.
4. Cost of Goods Sold (COGs)
Although this would go under your operating costs, I like to keep it separate since it's such a significant element to figuring out your price. This is often the only element folks seem to think about, probably because it's directly related to selling your craft.
It's always, always best to source your materials at wholesale costs. But, there are cases where that's just not feasible, especially with a lot of one-of-a-kind designers who don't want to keep using the same bead, yarn, color etc.
Cost of goods sold accounts for the yarn you use to make a hat but not the needle you use to make it with. It accounts for the wood you use to make a shelf but not the wood glue. Whatever the customer physically receives is considered the cost of goods sold. The glue and sewing needles go under operating costs.
5. Your Hopes + Dreams
Oh yea. This is the fun stuff. This is where you get to figure out how you want to live.
Do you want to give yourself a raise every 6 months? Want to move into a bigger home some day? Want to take a week long road trip and sleep in a different Airbnb each night? How about the way you eat? Do you want to shop at wholefoods or Walmart?
These are your hopes and dreams. They all have a cost associated with them. You need to be accounting for these things.
This element could also be considered your profit but I notice people tend to shy away from the profit part of pricing so by acknowledging your profit as your "hopes and dreams" makes it more fun to incorporate into your pricing.
6. Your Labor
First of all, labor is not profit. These are two completely separate things. When people get to this step they think about minimum wage for some reason. "Oh, I'll pay myself $10/hr." This is an issue for me. You are building your own business with your own two hands. For most, you do everything in your business. Pay yourself generously.
How much does a woodworker make in your area? Probably around $17-$20/hr. However, think about all the other things you do in your business. You do way more than just your craft. Consider everything you do; customer service, packaging & shipping, accounting, administration, marketing, etc., etc.
Depending on where you live and your cost of living, consider $60/hr + 8 hours a day for 5 days a week = $124,800/year. Give or take depending on how much time you spend on your business a week. But this is a really great starting point.
Just because you "enjoy what you do" and if there was no need for a monetary system you'd do it for free doesn't mean you have to struggle while following your dreams. I mean, consider your ultimate goals. Do you really want to scrape by your entire creative career? If you value your work and your time so will your customers.
7. Perceived Value
Perceived value is the difference between the amount your customers are willing to pay for your items and the price of their alternative.
Their decisions will be based on things like the service you provide, originality, design, quality of craftsmanship, packaging, etc. After accounting for all the areas of pricing above you then need to step back and determine if you can raise the price based on perceived value.
There's a lot that goes into pricing your craft for success. You have to really roll up your sleeves, dive deep into your business, market and lifestyle to come up with the perfect price you need to create the life you want.
It goes way beyond the labor, materials, overhead, etc. I hope this guide has been extremely helpful for you and I have much more I want to write about pricing so keep checking back or join the Maker Mob to get new posts sent straight to your inbox.
What have you found to be successful for pricing your products? Leave me a comment below, I'd love to hear about it.