How to Price Your Items
Posted on May 28, 2011 in Build Your Brand by Katie Oskin
Often, Etsy will give its users very good information regarding all things relating to the small business owner. Etsy has given it’s users a basic formula for pricing handmade items. I would suggest to each of you that you follow this model (or any other self made model that works for you) to keep your items at a standard level of cost. For example, if your polymer clay earrings are $5 and your necklaces are $10, but your sculptures of polymer clay cost $50 then people are more likely NOT to buy because they can’t relate to the standard of pricing. Following a model helps to keep your items at a standard base line that fits for any item across the board.
Here’s Etsy’s suggestions from Daniellexo. Daniellexo writes for the Storque, the blog section of Etsy.
Figuring Out Your Prices
“Here’s a simplified formula, a good place to start:
Cost Price (Labor + Materials Cost) x 2 = Your Wholesale Price
Wholesale Price x 2 = Retail Price
How do you figure out your labor? Take the time spent creating the item (remember to include shopping for supplies, creating packaging, etc.) and multiply that by the hourly rate you’re going to pay yourself. Don’t skimp — be a good boss to yourself. Think of the time you’ve invested perfecting a skill or technique! Don’t know where to start? How much would a skilled worker get paid per hour? A web search can help you figure this out.
Maybe you don’t sell your work in brick-and-mortar stores, so you might be considering selling your work on Etsy at the wholesale price. Not so fast! If you do this, you’ll most likely be undervaluing your work and you won’t give yourself room to grow and offer wholesale work in the future. Perhaps you have a buyer who wants to purchase a large volume from you, such as gifts for wedding guests. They’ll surely want a discount, right? Or, if it’s the end of the season, what are you going to do with all those scarves? You want to be able to put them on sale for 30-50% off with no worries.
This formula doesn’t really get into the nitty gritty of running a business, but it’s a good place to start. I suggest hiring an accountant who specializes in small businesses to help you keep track of all your overhead expenses.
One last thing you should think about — what do you want to invest back into your business? You want to keep growing, right? Quit your day job one day? What if your sewing machine breaks beyond repair and you need a new one — a small business nest egg would come in handy, no?” To read the whole article on item pricing directly from Etsy, please click here.
So you might be asking what my formula is. I modeled my formula after Etsy’s formula, using a standard of pricing that I considered fair and reasonable.
Wholesale Cost = Cost Price (Materials + Labor + 5%) x 2
Retail Cost = Wholesale cost x 3
Clearance Cost = Wholesale cost x 2
You might be asking why my “formula” looks to be higher than what Etsy suggests. The reason is because of FEES. Not only do Etsy & eBay take out fees, but so does PayPal. Also, when I do craft shows the prices are the same as on Etsy to help account for gasoline and the cost of the table/space. However, when I do home shows, I automatically offer a 25% off coupon for every purchase made that day.