Thursday, November 6, 2008

From needle and thread to “business as”… Part 4: more pricing and overhead…

Pricing can be such a headache to figure out. And no matter how you price your items, there will always be people who will complain that they are too high or even comment on how low they are.

So how do you ensure profit? After all, that is your first concern. Just like in math class – double check your answers. If you priced an item at $25 but spent $5 on materials, $2 on overhead, and it took you 3 hours to make…you just lost about $12.

Overhead may be the biggest pain of all the pricing components. The Crafter’s Guide to Pricing by Dan Ramsey has a really good form for estimating this cost. Things to consider:
Rent – even if you work out of your own home, you can calculate the cost of the space you use
Tools – these can often be expensed or depreciated for tax purposes
Utilities – again, even in your home this can be calculated
Taxes – collection of sales tax can add to your overall costs

Keeping a pricing book (either written or spreadsheet) can help you keep track of all your costs associated with your work. Include a materials worksheet, labor and overhead worksheet and any rules of thumb you may have developed.

Next week: markup and profit

Previous articles:
Part 1

1 comment:

Glad you stopped by and said hi