This topic has been completely overdue for some explanation. It is one of the most widely asked questions for newly starting businesses and even established businesses whom wondered where their profits gone after acquiring a multitude of sales.
You craft for fun.
You enjoy it a lot.
You want to sell your creations.
What do you do now?
The first fact to be known about pricing your handmade goods is that not every artisan knows how to price their creations. This can create an unfair advantage when competing in business. Most artisans are unaware of what the appropriate pricing should be for their product. There are those whom are satisfied with any form of minimal profit. This doesn't mean it is savvy for your own business and career ambitions. In pricing your items, many factors are to be considered in cost and accounted for before you can even consider the term profit and what that amount in actuality should be.
When you made the decision to sell your crafts you are inadvertently creating a business; not a hobby for extra cash. The exchange of goods and services for money is considered a form of business exchange. Like any other business that operates in this form, you have raw materials/supplies used to produce your products since you are considered to be the sole manufacturer in it all. Building space is used, utility usage, phone lines for communication, and the internet for running your business. Other factors may be mileage on your vehicle, advertisement costs, and above all your precious time in charge of labor.
In order to establish your labor cost you need to calculate what you want your pay rate to be. Some would say minimum wage should be considered at the very least. As you progress at your business and craftsmanship skills you will be able to introduce a form of pay that increases along with your product quality and sales. To account for time accurately, you must consider the time spent every little second devoted to that item being created. You will more or less figure out that the labor rate is something that is easily dismissed in pricing and most likely never considered on an accurate level. If you are currently operating a business now this is a good time to adjust your prices and become more efficient. The cost of your items should involve a basic equation such as the one below:
Production (and/or) Labor * (Materials + Tools + Supplies) = Sale Price
Please stay tune for:
Pricing Handmade Goods for your Craft Business (Part 2) - Determining Specific Costs