Continuing on with our pricing discussion, about how to price your handmade items and crafts for sale, here is the second way you can work out how to price your items.
Cost Plus a Wage Plus a Margin
Now your starting to think like a business person. You see businesses don’t exist just to pay for their supplies and wages. They exist to provide a return to the shareholder. And you are the shareholder in your craft business. So to use this method of pricing add your costs to produce the item, plus your wage for the time taken and then add on a little profit margin for yourself. I would start at about 10% until you get comfortable with this – but I would be looking to move to about 30-40%.
Ultimately you are intending to grow a business and one day you may need extra help and decide to take on staff to help you build your empire. If this is the case your overheads will go up. If you have been making a little extra margin, then you will be able to absorb this additional costs. If not, you will have to reprice all your items accordingly which will be messy and may turn your loyal customers away.
I would encourage you to revisit your pricing and consider – have you included a margin in your selling price. If not, commit to yourself from this day forward, you will always charge a margin on all your products.
Next week will discuss the third method of pricing. If you want to make sure you receive it straight to your inbox, hot off the press, be sure to subscribe via email or RSS in the column on your right.
If you want to review any previous Pricing Strategies: