Product pricing of handmade crafts
Why is my small business still in the red? Particularly, you’ve charged twice the material cost?
What is the reasonable price that will attract more customers to keep coming back? Most importantly, where is the price level that can make profit and reward yourself for all those hours labouring behind to make that masterpiece.
Well, determining the right price might be tricky at first. But, it’s not a daunting task to figure it out.
How to price handmade crafts?
We all have been there guesstimating. Wondering how to price our products to attract more customers while still make a decent profits to reward our hard work and creativity.
A simple pricing calculator will add up all material cost and labour cost before marking up the price. However, this formula often undermines the sustainability of the business as it leaves out overhead costs entirely.
Overhead costs are the costs that is imperative in operating business but not directly involve in producing your items. They includes equipment, venue for pop-up sales, marketing cost to promote your business and so on. For instance, if you’re using Etsy platform to sell your handmade crafts, listing them incurs a small fee. When you successfully sell your products, there’s another transactional fees. Furthermore, if you provide free shipping, it will add up to your cost. Worse still, margin will further shrink if you run ads to promote your items. These fees might seem to be small, it represents quite a percentage and will eat into your margin. In long run, with a good grasp of your overhead costs, you will have more control in driving your small business to the path of success.
So, here is the product pricing calculator that provides you a yardstick of your pricing level.
Main parameters of product pricing
Cost of material
The price of raw material, supplies and tools acquired for making your product.
Number of items made
Total number of products made with the material.
Labour hourly wage
How much you want to reward yourself for making the piece while being able to pay bills.
Time Spent
The total time spent on designing and making the product.
Overhead cost
- Free shipping
- Platform product listing fee
- Transactional fee
- Cost of prototype
- Marketing cost e.g. social media ads, google ads or affiliates
- Rental for atelier or pop-up sales venue
Markup
Each industry has different markup range. This is how much profit you will earn.
Rule of thumb: Do not undervalue your masterpiece.
For more details of pricing handmade craft, read 3 Steps of Pricing Handmade Crafts.