Pricing Your Handmade Product | Ole L | Skillshare

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Pricing Your Handmade Product

teacher avatar Ole L, Physical Product Management

Watch this class and thousands more

Get unlimited access to every class
Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Watch this class and thousands more

Get unlimited access to every class
Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Lessons in This Class

9 Lessons (35m)
    • 1. Introduction

      0:49
    • 2. Know Your Cost

      4:34
    • 3. Other Costs

      1:50
    • 4. Know Your Market

      1:13
    • 5. Ways to calculate Retail Price

      2:52
    • 6. 6 Calculating Retail Price

      13:07
    • 7. Calculating Wholesale Price

      7:25
    • 8. Wrap Up

      2:32
    • 9. Bonus

      1:04
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About This Class

Class Description

How do you decide what the best price to sell your product for?

If you make and sell products or are thinking about selling products you have made, either online or in a brick and mortar store, knowing how to price your products is essential to the continued success of your store.

This class shows you how to come up with a profitable retail price to charge for your products, that works for physical products that you have made.

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Meet Your Teacher

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Ole L

Physical Product Management

Teacher

There is no reason to stop learning and the best way to learn is to share the knowledge you have.

Through sharing my knowledge I hope to add to mine.

Having been fortunate to have worked in buying departments as a Merchandise Planner on three different continents, I have been able to gather a wide range of experience and have accumulated a wealth of knowledge, as a Merchandise Planner, which I am now imparting on others.

What is a Merchandise Planner?

A Merchandise Planner is someone who through planning sales and inventory increases profitability by maximising sales and minimising losses within a retail buying department.

Have specific questions related to planning? Email me at [email protected]

You can also join the SloppySuccess mailin... See full profile

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Transcripts

1. Introduction: do you make your own products and want to start selling them? Have people ask you how much you sell one of your fabulous creations for? Are you sick and tired of selling your products at a loss? Are you ready to price your products profitably? If you answered yes to any of these questions, there's classes for you. Why symbols in this class? You learn the fundamentals off, coming up with a profitable retail price for your product. How? Click the button to enrolled in this class and discover what process to follow at the end of the class. Don't forget to leave a review and a thumbs up. 2. Know Your Cost: you find it easy to make things yourself and struggle when it comes to calculating costs and deciding how much to charge. Not to worry, I'm here to help with that. In order to get your products to market, you have to know how much of creation has cost you to make and how much you'll senate for. So you make a profit. The first step to take is to understand the constant golden, making your partner from conversations I have had with people who make their implements. The answer to how much it has cost them to make their product is not something they're able to tell you easily. This generally is because the initial focus has been on creating the product. I'm not selling it, say, with the help of a couple of examples, we're going to show the steps to follow to come up with a total cost of making a product also known as your cost price protects. Working teas are the fabric, cross body bag and a fabric cosmetic pouch. Let's start with the fiber across body back. First thing to do is to list out all the materials used to make it back way have shell fabric lining fabric Heavy interfacing needed me to facing heavy fleece into facing zip base threat square rings slider. Magnetic class. Second step is to add the constant used to beach material way. Have 1.4 mazes of shell fabric. 1.4 meters of the lining fabric. No 0.9 meters heavy interfacing no 0.9 meters medium interfacing, not 0.45 meters heavy fleece interfacing one sick one base a meter threat chase wear rings one slider one magnetic class third step is to add a cost against the quantity used to feature Teoh Shell fabric was $7. 50 lining fabric $7.50 heavy interfacing $2.50 Region interfacing true Don't city Heavy fleece interfacing $3 Zip gondola base 25 cents Threat 10 cents square rings, $2 with two slider, $1 magnetic class, 50 cents Adding all this together is us. A total cost of $27.85 will now do the same exercise again, this time for the fabric cosmetic pouch. Step one is to list out all petunias. We have shell fabric lining factory medium interfacing zik threat Step two is to attach quantities to each material way. Have no 0.2 meters of shell fabric. No Richard meters off the lining fabric, no 0.3 meters off the major interfacing one zip and half a meter of threat. The third step is to add cost to the quantity off each material used shell fabric was $1.25 . Lining fabric $1.25 Made him interfacing 70 cents zit one Dola threat five cents. Adding these costs together gives us a total cost for $4.25. Now you know the three basic steps to calculate your cost. Wants just to be cat step saw. Step one. List out materials step to attach quantity to teach material. Step three adds cost to the quantity off Each regional used during these steps would give you the cost price off your product. And this is the most important thing to do in order to get to the final goal off setting up retail price 3. Other Costs: before calculating your retail price. There are other costs that can be attributed either directly or indirectly to each product song. These additional costs do not form part of the cost price calculation that we went through in the New York cost lesson as they full bore the cost category off doing business Robber one. The cost. Catch me off making a product. Other costs that can be directly attributed to each put up sold are very clear for those selling products online, as each product sold comes with a cost of packaging and postage to customers. We know how much is needed to package a product with suitable materials that would not establish a planet in any way, and we also know how much it costs to paste each bottle around the country. Therefore, online liters, postage and packaging costs can and must be considered when calculating overall costs and profitability. 20 for those who sell their products from the physical medication, such as a brick and mortar store or a market store, additional costs like postage and packaging are not directly attributed to each product sold as customers pay for and receive their products immediately and take it away with them in some sort of carrier bag. All say, for products sold from a physical location, things like rent, utilities and wages. If there any staff members are the types of additional costs that would be paid for out of the amount left over after paying for the cost of making a product. 4. Know Your Market: during your cost price is the first step in coming up with a profitable retail price for your product. Now we've followed the three steps in the know your cost lesson and have a cost price. The next step is to know your market. After all, there is no point charging $35 for your product. If everyone else is charging $100 use sites like Etsy and Amazon to search with similar handmade products like yours. You can also do a product search in Google to see if there are any other places selling handmade products. Make a mental night or take screenshots off the prices being charged as that would help finalize the price you'll charge for your product. This step is about researching what others are selling their products for and what customer expectations are when it comes to what they get For the price being charged. Use the discussion area to comment on your findings or, if you need additional help searching for where your product is sold 5. Ways to calculate Retail Price: Now we have a cost wise. It's time to calculate the retail place before we start the exciting tasked with playing with numbers, we're going to go through three ways. The retail price can be 11. $1 figure here simply adds the profit figure we want to the cost price to get the retail price. Minimal calculation is needed when this method is used. 11. To target margin for this method, way would need to decide what modulates you want to achieve and add this to the cost price margin rate. Also known as the gross margin rate, or gross profit rate, is the difference between the retail price, less any tax and the cost price. This is a more difficult marriage. Two years as there are a number of steps involved in calculating the retail price is in a target. As for what target margin tease, the best place to start is by Googling phrases like grace, margin by sector for retail grace. Margin by industry for tell. This would give you a list of sites, but you should get you. You'll be able to find documents like this that tells you the difference. Margin rates are by industry. If your industry is not listed, use a related industry instead. For instance, if you're unable to find the average gross margin rate for bags these shoes instead, as they're both accessories and give you a good starting point, you can always adjust. The margin if the return is calculated. Doesn't look right based on your findings from the New York Market Lesson. Third is the market pamphlet. This is one of the most popular methods use as, unlike the margin where you're adding a percentage that, in effect, is your profits. Figure the market. Mefford increases the overall cost price by a percentage to derive the retail price. Personally, I prefer method to target margin method, as this allows you to predict overall profit levels more easily with four costs in future cells and lodging. But this is a subject for remember class. We now have three different ways to calculate a retail price which one of the three would be used to get our results place for the fabric, cross body bag and fabric cosmetic pouch. Find out in the calculating your retail price class 6. 6 Calculating Retail Price: I say far, so good. Are you still with me? This lesson is what this class is all about. Coming up with a profitable retail price. What do I mean by profitable retail price? Well, the retail price that puts money into your pockets rather than taking it out. We now know we can use three different ways to calculate a retail price. So let's now calculate the retail price will get for the fabric, cross body bag and the fabric cosmetic pouch using each method. Here are the formulas you need for each method for the dollar figure method. Is that simple? As adding a dollar figure to the cost price for the target margin, you need to initially deduct the margin you want to achieve from 100% to get the inverse margin and divide that into the cost price. For the markup method, you need to add the markup percentage you want to achieve to 100% and then multiply that by the cost price. So, for instance, if you want to achieve a 50% markup, you would add 50% to 100% to get 150% and then you would multiply that by the cost price. Let's say we want to achieve a $22 profit figure for the fabric cross body bag. Using the dollar figure method or will need to do is add $22 to $27.85. Given us the retail price off $49.85 if we want to achieve a 35% margin using the target margin method for the fabric cross body bag, what would need to do it is deduct 35% from 100% which leaves us with 65%. Then divide that 65% into the cost price. This gives us a retail price of $42.85. And for the third method, which is Marca. If we wanted to mark up our bag by a cross body bag by 100% what would need to do is adds 100% to 100% which gives us 200% and multiply that by the cost price off the fabric cross body bag, which we calculated as $27.85. This would give us a retail figure of $55.70 doing the same exercise again, but this time for the fabric cosmetic pouch for the dollar Figure Method Way. Want a profit off $5? Therefore, we add $5 to the cost price. $4. 25 cents. Giving us a retail price off $9.25. The target margin method. We want to achieve a margin of 45% so we start off by deducting 45 center on 100% which leaves us with 55% and dividing that into the cost price of $4.25 which gives us a retail figure retail price figure of $7.73. And for the third method, the market method. We've opted to go for a 200% markup on this product, which means what, at 200% to 100% given US 300% and more supplying, backed by the cost price off $4.25 which gives us a retail price figure off $12.75. These figures are exclusive or any taxes. Speaking of tax in most countries outside of the US such as Australia, the UK and other European countries. Tax is included in the price you see on the shelves rather than added at the check out. I currently live in Australia and the tax rate known as the G S T, which stands for the goods and services tax, is 10%. And this is the tax rate I'm going to use in coming up with the retail price. Inclusive of taxes in the UK It's known as value added tax, which is abbreviated to be 80 and is currently charged at 20% in the US it's the sales tax . It's also worth one knighting that the tax charged would not affect the margin calculation as margin is calculated. Net of tax Here is how we add text to the retail price. We've built a retail price figure exclusive of tax, using the dollar figure methods for the fabric cross body bag. We came up with a retail price of $49.85. We now need to increase that by 10%. To do that, we're going to add 10% to 100% to come up with 100 and 10% and multiply that by $49.85. This gives US retail price inclusive of texts off $54.84 during the same calculation. Again, we have the retail figure exclusive of tax. What gets asked the 10% tax by more supplying that retail figure by 100 and 10% gives us a retail price inclusive of tax off $47.13 for the target lodging method. For the market method, we came up with a retail price figure, or $55. 70 exclusive of tax By adding tax. We have a retail price, including tax, off $61.27. We'll also do this for the fabric cosmetic pouch, So the $9.25 figure we came up with using a dollar figure method becomes $10. 18 Inquisitive tax 7 73 we came up with using the target margin method becomes $8.50 inclusive of tax and the $12.75 figure we came up with these in the market method becomes $14.3 inclusive of tax. One more thing on Texas. Before we move on, please speak to your accountant who would advise you on how to pay these taxes when they become due. Let's move on now. The retail price we get inclusive of tax requires some tidying up as they're not attractive to the eye. $14.3 $10.18 $47.13. Just don't look quite right. Nor does it roll up a tongue easily to do this. The game to around the prices to a price points customers are used to seeing This type of pricing method is called psychological pricing and suggests there are certain numbers we respond to better than others. Se 11 99 looks better than $10.18. When rounding, use the protein structure. You tend to see the most within your retail sector, for instance, 9 99 11 99 14 99 instead off $10.13 $11.58 or $50. 10. And be aware by rounding the retail price, the final gross margin rate would be affected. You can choose to either round up around down the retail price, so $10.18 can be either 9 99 if you want to round down or $11. 99 If you round up, do not around to 10 99 as having prices in multiples of 10 for prices under $100 isn't visually appealing or attractive to customers. How many Times GC, a product for $40. 99 cents? Here's Hellas grounded the fabric, cosmetic bag and fabric cosmetic pouch prices for each of the three methods used for the fabric cross body bag. Using the dollar figure method, I've rounded $54.84 to 54 99. He's in the target margin Eppard around it $47. 13 to 49 99. For the markup method, I rounded $61.27 to $64. 99 for the fabric cosmetic pouch, using the dollar figure method around a $10.18 to $11.99 for the target margin method, I rounded $8.50 up to $8. 99 And for the market method, I rounded $14.3 up to $14.99. Now to check your product is profitable. This is done by calculating the gross margin dollars and the gross margin percentage. Gross margin dollar figure is calculated by subtracting the cost wise from the retail price . Excluding tax, it is very important to use retail price excluding tax miscalculation, as the text is to be paid to the government. Margin percentage is calculated by taking the gross margin dollar that has been calculated and dividing that again by the retail price excluding tax. Once you have that figure, you multiply it by hundreds to ConvergEx to be a percentage by making each product sold profitable. We're trying to ensure there is enough money left over after costs paid to cover all the other business related expenses. Here are the gross margin, dollar and rate for each off the methods used to calculate the retail price for the fabric , cross body bag and the fabric cosmetic pouch. Using the dollar figure leopard for the cross body bag where we increased the retail price by $22 and we rounded the retail price inclusive of tax to 54 99 grace Margin dollars comes out at $22.14. Gross margin rates comes to 44.3% for target margin. My margin dollars $17. 60 and our margin rate is 38.7%. Using markup margin. Dollar is $31.23 and I'm margin rate is 52.6%. Fabric Cosmetic pouch. Using the dollar figure method where we increased the cost, surprised by $5 rounded the retail price to $11. 99 Gross margin. Dollar is 6 65 and our margin rates is 61%. Target margin grace margin dollars. What sounds? At $3. 92 cents at a rate off 48%. And by marking up for cost price by 200% and rounding up the retail price to 14 99. Our grace margin. Donald works out to be $9.38. That's a marginal rate of 68.8% 7. Calculating Wholesale Price: with the retail price you're selling directly to members of the public. What if you would rather sell to other businesses? How much would you sell your product for? Along with setting a profitable retail price, you can also come up with a profitable wholesale price. That way, you're able to sell to other businesses, knowing you would still be making a profit on each product sold. Determine your wholesale price goes through similar steps as coming up with a retail price , the starting point being never your cost, then knowing your markets and then set in a retail price. So, having come up with a retail price based on the three different methods identified in the calculate your retail price lesson and lower your wholesale price has to be lower than the retail price. We now need to come up with a wholesale price that is profitable using the same fabric, cross body bag and fabric cosmetic pouch, or demonstrates how to come up with a profitable wholesale price. Using the dollar figure method for the fabric cross body bag way have a cost price of $27.85 and we're going to add $10 as our profit figure to the cost price, giving us the wholesale price excluding tax of $37.85. Using the targets margin method, we're going to increase the cost, surprised by 10% to get the whole sell price. Excluding text, which becomes $30.90 on for the market method brigades add 50% to the constant price. Given us a wholesale price off $41.78. Tax still needs to be factored into the wholesale price as the government still wants that cut from you. Therefore, wholesale price inclusive of tax is $41.64 for the dollar figure method, $34.4 for the target margin records and $45.95. Remember in the calculator retail price by nations that I live in Australia on the tax rates, or GSD goods and services tax is 10% which is what has been used here to calculates wholesale price inclusive of tax. When you calculated to the wholesale price, there's no needs to round these prices as retail buys are used to seeing places that have not been next, we're going to check that both the wholesale price and the retail price is profitable for all will do this by calculating the profit figure for each method. There are two things to remember when calculating these profit figures. Firstly, you've got to use the wholesale or retail price excluding tax, to calculate the profit figure as tax has to be paid to the government. And secondly, wholesale price inclusive of tax is now Retailers cost price. So let's calculate the whole cell profit figure for the fabric transporting back using the dollar. Thinking like that, we have a profit figure of $10 which is a marginal rate of 26.4%. Using the target large ING method, we have profit figure off $3 in nine cents, which is a marginal rate of 10%. And for the Market Method Way have a profit figure of $13.93 which is a marginal rate of 33.3% for the retail profit figure for cost price for each method has changed as it is the whole self price inclusive off tax that now becomes the cost price. So for the dollar figure method. Cost price for the retailer is $41.64 which gives US a profit figure off $8. 35 cents at a marginal rate of 16.8% for the target margin method. The cost of ice is now $34.4. Fisk Obsess profit figure $11.41 in a grace margin of 26.6%. And for the markup members are cost places now $45.95 giving us a grace margin for profit figure off $13.30 on gross margin rate of 23.6%. I would also like to point out that I am using the rounded retail price that we calculated in Calculates your retail price lesson now for the fabric cosmetic pouch using the dollar figure Mecca and adding $2 to the cost price. $4.25 WAY have a wholesale price excluding tax off $6.25 using the target method where we increase the cost price by 15% way have a whole cell price, excluding tax of $5 and for the Market Methods Way added 100% to the cost price given us a wholesale price excluding tax of $8. 50 with tax included. The wholesale price becomes for the dollar figure method $6.88 for the target margin records. $5.50 for the market method. $9.35 next brigade to calculate the profit figure, starting with the wholesale profit figure. These are the dollar figure method. You have a profit figure off $2 and a marching rate off 32% for the target margin methods. Profit figure Work sounds at 75 cents. I was actually quite know that profit is a profit margin right off 15% and he's in the Mall Cup like that way. Have a whole cell gross margin or profit figure for $4.25. Ana Grace Margin rates off 50% for the retail profit figure again here, the cost price would have changed as the cost price is now the whole sell price. Inclusive attacks say for the dollar figure method are cost price is there 6 88 which gives us a profit figure $4.3 at a marginal rate of 43.5%. Using the target margin letters are cost prices, now $5. 50 giving us a profit figure of $2. 67 cents on a grace. Marginal, plentiful wait 6% and for the markup methods are cost. Price for the retainer is $9.35. Give us a Christ margin figure or $4.28 at a margin rate off 33.5%. Again here for the retail price are used. Rounded retail price as calculated in the calculate your retail price lesson. 8. Wrap Up: to come up with a profitable retail price. We started by calculating the cost price using a three step process step almost missed at materials. Step two is to attach quantities to each routine. You Step three was to add cost to the quantity of beach material used. We then went on to identify some additional costs that can be directly or indirectly contributed to each other. Before we started calculating the retail price, Way conducted a bit of market research to see how much competitors charged for their products. And then we learned three different methods to calculate a profitable retail price. These tasks were all done before we got to the heart of the class, which was calculating the retail price here. Calculated potential retail prices for the fabric cross body bag on the fabric cosmetic pouch. Using each of the three methods from the ways to calculate retail price. Lesson Way also showed the profit margin in both dollars and as the percentage rate. When we go to the wholesale price, we calculated a profitable wholesale price which would become because price for retailers. We also checked that retailers would still be in a position to make a profit based on a suggested retail price. Now it's over to you. Go through each lesson in this class and come up with a profitable retail price and wholesale price. For your handmade creation, use the attached spreadsheet to enter your findings and up late to the project section. Once completed. If you have any questions or additional ideas you would like to share with myself or other students, please use the discussion board. If there is anyone you think that would benefit from this Kloss, feel free to share the costs linked with them. I know that's consumer that overwhelming, so I advise you to watch the class a few times as I find watching something multiple times helps me understand it better. Thank you for watching my class. Please don't forget to leave a review under thumbs up. Oh, and follow my channel for more retail concepts explained simply 9. Bonus: one area we all tend to overlook when running a business is our time. Chances are you're able to pay yourself a present girls of this it is worth while keeping a record of how much time it takes you to make each product on attaching fanny to that time. My suggestion here is to charge minimum wage for your time. So if something takes you three hours to make, multiply that by the minimum wage in your country to get a dollar figure, why do this? So you can plan and allocate your time better amongst all the tasks you have to complete running your business to help you get started with this below is the minimum wage in three countries. Well, straining it. Us and the UK I have attached a link is to where you got this information.