How to price your products
Often we think about how do we price our items for sale so we make a profit? Here we're going to help and give you some tips on pricing.
For many makers, the creative aspects of running a small business come easy. Choosing ingredients, design, color, and fragrance is what makes creating fun and rewarding! However, Selling is where it gets confusing - specifically how much to charge for each product you make. While there no way that's set in stone, there is some general information on pricing, this article can help you get started.
Before we dive in, keep in mind these numbers are meant to give you a place to start. You can adjust them to fit your needs.
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 $12 per hour in the example below.
- Cost of supplies + $12 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 + $6 = $10.28 (Price A)
- $4.28 x 3 = $12.84 (Price B)
- $10.28 + 12.84 = $23.64
- $23.64 / 2 = $11. 82
You also need to calculate the tax for your item:
$11.82 x .08 (sales tax in Arizona) = $0.9456 ($0.95)
So, your starting price (with tax included) would be $12.77, we will round that to $12.80
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.
Remember, this is just a general rule, it is suggested that maybe if your price is $12.75 to offer for $12.00 and keep your customers coming back for more.
