Part 2: Pricing; From needle and thread to "business as"

I had decided to go ahead and try to sell my handbags. I knew I wanted to do everything legally – from forming the biz to taxes (yech!). I will go over this next time because what I really had to know first was whether or not it would be worth it financially. So, how do I price things?
There are many opinions on this subject in the arts & crafts world. This probably has a lot to do with the fact that many people just want to sell enough to recoup cost and make just enough to buy more supplies while others want to make a living on their sales. I am somewhere in the middle. I am not expecting to become the next littleoddforest (whose bags I just saw at a local boutique here in Ferndale, Michigan - and she's from Singapore, plus has 190 items listed and sold over 1200 items since 7/05) or Daphnenen (who's bags I admire - who has 75 items listed and has sold over 550 items in the last 2 years). These numbers are something I cannot even begin to imagine, especially since even if I worked a regular 40 hour week I would only have about 8-10 bags...so that's months just to get that much listed, let alone keep up with 5-8 bags being sold every week). But yes, I would like to make some kind of profit. So I attacked this from a business standpoint.

Businesses have set policies for just about everything, and pricing is most definitely one of them. Crafts are a little tricky. Crafters Guide to Pricing by Dan Ramsey tackled the issue very well craft by craft. Simple pricing like materials multiplied by 2, works well for more of an easy going approach. But I want something with more formulaic that will take into account my time as well. I feel not enough artisans do this. Our time is just as important as anyone’s and should therefore be taken into consideration when pricing.

There were 3 main formulas that kept showing up in the books (all of which I found at my local library). I myself use these with an Excel spreadsheet to quickly and easily calculate pricing – without losing it. These all take into account both wholesale and retail pricing. I do not see myself venturing off into wholesale land, but just in case, I have set my prices somewhere between the two. I figure this way there won’t be any kind of sticker shock (to buyers or myself) if I do venture into the big world of wholesale.

So without further ado (aren’t you happy)…

1. (materials + labor) x 150% = wholesale price
wholesale price x 100% = retail price

2. materials / 25% = wholesale price
materials x 12% = retail price

3. (materials x2) + labor + overhead = wholesale price
wholesale price x 2 = retail price
note: if material is quite inexpensive then do as (materials x 3)
So what do I charge for labor you may ask? Well, every single book came up with the same $10 per hour for starters (at least with sewing). Different crafts have slightly different starting prices, mostly depending on if there are studios or renting specialized tools involved.

As to overhead, this is more complicated. Essentially they all suggest figuring your monthly costs such as rent, electricity, equipment, insurance, guild fees, regular supplies (like the needles, thread, bobbins, etc) and everything else into account. Then take that total and divide by how many items you can do every month. I was not up for the task so I used $2.00 (that seemed to be the most consistent amount in all their examples).
No matter how you reach your pricing, you should keep it consistent if you want to run it business like. Even after all the math, you still need to take into account the market and what it can bear. Look around etsy and other sites that sell items like yours and see where your numbers fall. Remember, no matter what price you choose, not everyone will like it or agree on whether or not it is reasonable. Do what feels right for you. It can always be adjusted with a sale or gradual increase.