You’ve got an awesome product that your ready to show to the world. Now what? You gotta put a price tag on it. But, let’s be real. Nobody likes talking about money. If you’re in sales in any capacity – whether offering a service or selling your handmade wares – you’ve most likely experienced someone haggling you over price. It’s understandable. It’s called a budget people and we are all on one.
So how do you properly price your handmade products while appeasing the masses? Is there like a magical formula to do so? YES! All I can say is stick to this magical little formula and don’t get greedy. Be fair to yourself but also be fair to your customers.
Also, check out this handy product pricing worksheet!
We’re Talking Mathematical Magic ✨
I first read about this formula in the book Craft, Inc. and have since seen something similar mentioned on Etsy. Before we can really dig into the formula and properly price our products, we need to know some of the tiniest little details about our product.
It basically boils down to this: if you want to make any sort of profit you NEED to figure out the cost of your materials, your overhead expenses and the amount of money you want to be making an hour. Do the math, figure out the numbers right down to the pennies and have fun doing so. Get your calculators out and let’s get nerdy!
Material (and Packaging) Costs
What is the cost you are spending on the items needed to make your products? How much are you spending on packaging for each product? Don’t forget to factor in packaging! And also, It’s okay to estimate a teensy bit.
For my medium sized journals I need the following materials:
- 2 Covers – Front + back: $0.40
- 48 sheets of paper: $2.50
- 1 label wrap: $0.50
- Screen printing ink: $0.10
- 4 pieces of string: $0.05
- Box filler, shipping label, ink cost: $0.08
- Shipping boxes: $0.72
Actual shipping costs can be calculated by Etsy and shouldn’t be included in your material cost pricing. Etsy bases the cost on the dimensions + weight you put in for each product: DO THIS. It will save you money. Don’t try to estimate the costs yourself unless you are absolutely sure.
✨ Material Note ✨
I struggled with the cost of the paper for the insides of the books for quite sometime. That’s a big chunk of my cost and I was trying to find ways to do it cheaper. But, in the end – quality won out over quantity. I use French Paper Company paper and it is absolutely gorgeous. It’s thick with a little bit of texture, which is perfect for drawing. That means I can market my journals as both journals and sketchbooks because of the awesome quality of the paper.
Fact: people WILL complain about your prices. You don’t need to justify your prices to those people. If you are making a beautiful product, and you love making it, folks will see that and appreciate the handmade quality enough to pay the price.
This is basically your hourly rate. Don’t go crazy. If you are just starting out or still learning the craft you should NOT be charging $100 / hour for your time. If you’re a master artisan who has been doing the trade for 10+ years… yeah, you deserve $100 / hour.
I’m paying myself $10 / hour to make books. I’ve been dabbling in the craft for over 4 years and that’s the price point I feel comfortable at and the price point that makes my books still totally affordable. I will probably raise that once I’ve been selling them for more than a year or so.
Sit down, make your product and keep track of the time it took you to make it. That includes everything from start to finish – drawing designs, cutting paper, prepping the package for shipment, etc. etc. etc. Multiply that amount of time by your hourly rate and that’s the labor cost you factor in.
It takes me about .65 hours to complete each book so that’s $6.50.
✨ Labor Note ✨
Keep in mind, my pricing is what works for me. Because my handmade goods are solely a hobby project right now and not something I am doing full time – I don’t have a ton of extra management I need to factor into my pricing. If you are crafting full time, you’ll want to pay yourself accordingly and be sure to calculate every task from answering emails to the time it takes you to post those beautiful Instagram shots.
Overhead costs are the extra expenses that don’t fall under materials or labor. These are things like Etsy fees, the cost of craft fair fees, studio costs, tools, promo materials, etc. etc. etc. This should be broken down into a logical manner, trickled into each product.
As Etsy says: “Document all of these costs, then divide them by the number of items you have or plan to produce this year. That will give you an estimated overhead cost per item.”
The only one I factor into my pricing right now are the Etsy fees for product listings. It’s $0.20 / product.
Wholesale as a Starting Point
If you are planning or dreaming to someday sell wholesale (to small boutiques or large retail chains), it’s VERY important to remember that when pricing your products from the very beginning. Wholesalers typically expect to pay about 1/2 of your retail price. You want to make sure what they are paying is completely covering all of your costs or you will be loosing money.
The Formula (a.k.a Mathematical Magic) ✨
(cost of materials + cost of labor + overhead costs) x 1.50 = Wholesale price
For my medium sized journals here is how I calculated the wholesale price:
($4.30 + $6.50 + $0.20) x 1.50 = $16.50
Finally! The cost the world will be paying for your product. This should also be the retail price you suggest to anyone who wholesales your product.
Wholesale price x 2 = Retail price
For my medium sized journals here is how I calculated the retail price:
$16.50 x 2 = $33.00
Online vs. In-Person Selling
This is a great place to start when pricing your products for an online shop like Etsy. However, keep in mind when you are selling directly to customers at a craft fair – you won’t be using the shipping boxes, labels, etc. Make the price fair for your customer based on their circumstances.
That’s why I list my journals at $30.00 and sell them in person for $30.00. The remainder is covered by a handling fee I have set up via Etsy.
The Product Pricing Worksheet
To make things a little more easy on you (and myself) I created this downloadable product pricing worksheet. Simply download and print out for each of your various products (or product categories), fill it in and you’ll be a product pricing pro in no time! ✨
Don’t just guesstimate when it comes to pricing your products. Be precise and aware of all of the associate costs – and also be fair and loving towards your customers.
Is there a different method you use for pricing your products? I’d love to hear it!
Happy Monday friends! Let’s make this week awesome.
Previously on My Etsy Business Adventure: