Pricing my craft item — how much should I charge?
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EmailYou’ve mastered your craft, made your products and you now want to start selling. How do you figure out how much to charge?
Often , crafters who start to turn their craft into a business neglect to pay themselves a fair wage for their time or misjudge the amount of time it actually takes to create a piece, start to finish. Using a formula to calculate your price will give you a good starting point for what your labor is worth. While you might not use the exact cost the formula produces, it will give you an unbiased estimate of what you should charge.
Of course, the first thing you need to do is establish your cost of materials and cost per unit produced.
Crafting can be considered “skilled labor.” Not everyone can do what you do nor have they honed their hobby into a professional status. Many professional crafters use a rate of $12 to $20 per hour to calculate their labor costs. You can lowball this number if you feel it is too high. I will use a rate of $10 per hour in the example below.
In her Tips for Pricing your Handmade Goods blog on Craftsy, artesian entrepreneur Ashley Martineau suggests this formula:
- Cost of supplies + $10 per hour time spent = Price A
- Cost of supplies x 3 = Price B
- Price A + Price B divided by 2 (to get the average between these two prices) = Price C
For example, you have determined the cost to purchase supplies to make one unit of your product is $4.28 and it takes you a half-hour to complete it, then your formula would look like this:
- $4.28 + $5 = $9.28 (Price A)
- $4.28 x 3 = $12.84 (Price B)
- $9.28 + 12.84 = $22.64
- $22.64 / 2 = $11. 32
You also need to calculate the tax for your item:
$11.32 x .06 (sales tax in Michigan) = $0.6792 ($0.68)
So, your starting price (with tax included) would be $12.
While it may need some modification as you find your target market and observe the market for your product, it is a good place to begin when determining your starting price.
Market research
You can also recruit a focus group of your target market and question them on what they would be willing to pay for the product. Finding your target price, the price that will reap the best possible outcome per units sold, can be done with this focus group. You may want to start with a price a little lower than the price the formula determined. In the example below, 25 potential customers were surveyed.
|
Price |
Number of people willing |
Potential income |
|---|---|---|
|
$11.00 |
25 |
$275.00 |
|
$11.50 |
25 |
$287.50 |
|
$11.75 |
24 |
$282.00 |
|
$12.00 |
24 |
$288.00 |
|
$12.50 |
23 |
$287.50 |
|
$13.00 |
20 |
$260.00 |
|
$13.25 |
20 |
$265.00 |
|
$13.50 |
18 |
$243.00 |
|
$14.00 |
15 |
$210.00 |
|
$14.50 |
12 |
$174.00 |
|
$15.00 |
12 |
$180.00 |
Results of the focus group confirmed a selling price of $12 would bring in the most income. However, depending on your venue, you may want to look at charging $11.50 or $12.50. Try charging different prices in the highest profit range and see how you do. As you keep track of actual sales at different prices, it can help you focus in on a perfect price point.
A good craft pricing formula, some market research and good record keeping will:
- Take the guess-work out of determining a price.
- Help you determine your niche market.
- Ensure you have factored all of your costs to create one unit.
- Give you a starting point that will allow your business to grow and be truly profitable.
Michigan State University Extension and Michigan 4-H Youth Development help to prepare young people for successful futures. As a result of career exploration and workforce preparation activities, thousands of Michigan youth are better equipped to make important decisions about their professional future, ready to contribute to the workforce and able to take fiscal responsibility in their personal lives.
To learn about the positive impact of Michigan 4-H youth career preparation, money management and entrepreneurship programs, read the 2016 Impact Report: “Preparing Michigan Youth for Future Careers and Employment.”
