How To Price Handmade Items For Profit

1. Introduction How To Price Handmade Items For Profit: in this video, I'm going to show you two ways to price your handmade items to sell for profit either online or craft shows or wherever you want. This video is for jewelry designers, so if you make rings or pendants or year rings cufflinks, whatever woodworkers of wood tenors, blacksmiths or just just crafters in general. So I'll be honest. I'd be running my online shop. Zambrano Woodcraft now for well, yes, like seven odd years on. I thought about this all figured out, but apartment researching for this video, I quickly realized that it's a rather deep rabbit hole. There's a lot of nuance when it comes to talking about how to price your handmade items. So I'd like to start out by saying that there is no one size fits all pricing formula. For every handmade business, every business is different. Every has different goals on the prices you charge really will reflect those goals on the value that your customers perceive in your product. No, I've said in previous videos that handmade items should be priced fairly to you, the creator to your customers onto the market in general. So I'd like to just take a few minutes on just delving. Till that on, we'll explore two different price and structures. I'll show you what works for me on Ben. Hopefully, by the end of the video, you'll be a boss at price, not your handmade items. It's even more craftspeople. Seriously, ever sound their work on bring makers? You guys are really bad for this. So hopefully this will advice will help some of you. This is Buck. Let's just buckle up and get it. My pencil pencils. 2. Calculate Your Costs: Okay, so here is how I personally price my items. Now what? You have a way. You choose to do this? The first step you need to do is figure out your costs on the cost will be split into three main categories. So the 1st 1 will be your material costs. So your supply costs on this is fairly self explanatory. It covers all of the raw materials you need to make products. Any sundries, blues finishes just anything that goes into making the final product. So, for example, when I'm making a Damascus steel ring, the cost will be like the Damascus. They'll be the any wood that I use. Any clues of finishes, san papers, apportion compounds, buffing wheels and stuff for the rotary tool on. Then I've got the price of the ring boxes at the end for the finished products on bond. You know, like any envelopes or boxes or anything. I used to send the product out. So it costs just all the stuff that the raw materials that you use to make your product the second cost will be your labor. Now. Ah, lot of craftspeople really trip themselves up with this one I mean, you wouldn't expect to go toe working for your boss to pay you, you know, half of a minimum wage on you should be paying yourself or paying your staff, obviously a decent wage to make the products. So when it comes the labor costs. I like to do this per hour. So I figure out my pair hourly rate based on my ideal day rate. So ideally, for a full eight hours day off work, I would like to be paid £200. So if you divide that up by the eight hours of the working day comes to £25 per hour on, I think that that's a very reasonable amount to ask for. Considering, you know, I'm a craftsman. I spent a lot of time letting what to do. I also do everything else for the business. Literally sweep the floors, I make the rings, ascend the emails that I make the stupid videos so you can put yourself wherever you want. But in order to calculate the labor cost of your product, you would take the number of hours with the amount of time that the product takes to make and then but obviously multiply that by your by your price per hour. So problem takes four hours, £25 an hour. The labor cost is £100. The third cost, then our overheads on the over heads or something that's often overlooked in a lot of other handmade pricing structures have seen. So the overheads will cover everything from like it works, so wrecked the cost of electricity to keep the lights on and keep the ladies running any other utility bills, like water rates or gas, whatever hosting fees for your website. So to calculate the overheads for a particular product, I will take the overall amount I spend per month and then divide that by like 30 days. So safe exactly spent £300 of months on keeping your workshop active on all of your overheads. Divide that by 30 days. We'll give you £10 per day, and then you might only take four hours of that working day to make the product, so that will be £5. Some excites over makes sense. Just factor in your overheads and your labor time. Those the most important things that a lot of people overlook 3. Add A Profit Margin To Your Handmade Items: Okay, so the next part of your pricing will be your profit margin. Now, a lot of craftspeople and artists, when they think a profit margin there just makes makes him feel a bit icky, you know? But at the end, the day you are running a business of the whole point off businesses is to make money and make a profit. So don't feel upset by on. Do you know I don't feel like your customers will be put off by this because they understand the businesses need to make a profit, bro. So this margin that you add on top of your profit will be the money that you used to in further invest in your business. But that's buying new tools and machinery to kind of speed up your processes and make you more efficient. Or it might be, You know, you spend money on advertising to bring in more customers, So this is really mega important. You must charge a profit margin. When I was starting out, I was doing just would working on the side for fun. I was pretty much just happy to cover my material costs and give myself like a minimal hourly wage. But I quickly found that this lead to burnout because I was just kind of running on this times the wheel, this treadmill where I was getting orders but never really making any money so really important to add a profit margin on top. Can't stress this enough. So this is just the way it I do it. The profit will be all of your costs and absolute, your labor and your overheads. Andi, uh, your materials on the profit margin will be those costs, plus at least 50%. That's a 50 to 200%. That's up to you. You can charge mawr if you want, but I wouldn't go any less in the 50% profit margin. My advice, really is to go towards the higher end because you know money is cool. It's not the end of a less money is cool. You like what you need to learn. Now go off and make somebody not just joking. Finally, what I do at the end of my price and formula is like then add on the postage cost, so that might be a little bit overwhelming. So let's do a quick example. So could break down the numbers and you can see it on the screen on it will all make sense 4. Pricing Structure Example No.1: So, for example, if I was to price up, this stunning Damascus steel with King would ring. So in this example, the materials and the sundries and all the other bits. Ive worked it out to be about £25. That covers the steal, the word, the finishes, the packaging, everything, £25 of raw materials, then for my labor cost that will be takes around four hours on average meat and make one of these rings. So four hours times £25 will be £100 for them, for the overheads, £15 per day generally eyes the for a full day in the workshop and then I took four hours to make the rings or divide eight by two to get four hours, which will give me a total overhead costs of £7.50 which means that the total cost of making the product, including all my labor, will be £132.50. Next we add on a profit so profit, which is 132 bomb 15 which is the cost ties by two to get £265 which is a pretty nice price, but I forgot to add one overhead on which waas the at sea sailing fee as I pretty much only sell on at sea. However, I am looking to guarantee my making my own website so the exit fee would be the £265. It's about 10% for etc. When you factor in the payment processing fee on the listing fees and everything on the final transaction fee. So yeah, 26.50 for the 80 fee, which would be 265 plus 2 26 month 50 comes to £291.50 and then we had on the postage which is £8.50 bringing the total cost a total price of the product to £300. As I popped out into a calculator and Iran on, that came to about $388. So listen, that's the way that I do it. I'm really happy with that price. I feel like I get paid fairly. The customer gets a good price profit has been made on. This is ah, good price for the market. It's sort of towards the higher end was definitely above average. Anyway, it was fair to the market on the other sellers in my knee 5. Pricing Fairly To The Market (Analogy Time): just a quick side tangent slash runt. Why should you care about the other salads in unleash on the market? The competition at the end of day show you want to take all their sales right under this In a really weird way on, it makes quite a good analogy. So I thought I'd share this with you. Okay. When I was a plucky young, 23 year old lad, I went on a working holiday to Australia for a year. And it was also, you know, I got the party loads met no, to cool. People got travel and see the beautiful sites in Australia on it was also really challenging as I went in, got lots of different weird jobs so that I could, you know, survive one of the jobs, like, oh, was waking on a bar crawl, which is boring. The best job you could hope for a za backpacker. So what that job entails is you would go to the ticket office in the morning of the park role and you would pick up a bunch of tickets on your job was then to go around and sell the tickets. Two Backpackers and tourists on people who wanted to come on the bar crawl You then go back to the office About 5 p.m. On any tick itude sold would cost you $10 on. Basically, you could sell the tickets for anything over $10 normally about 25 bucks. So my first day I went out, I got my tickets. Bunch of tickets from the office I went out on. I managed to sell 20 spots on the bar crawl, which was awesome. My tactic waas they're gonna knock down the price. So I got to speak to a group of people on picture in the bar, crawl and then tell them that they could get onto the CrossFit did it, threw me for 20 bucks instead of 25 bucks. And then they get to come another wild night out. So the end of the day I was really stoked on, obviously made myself well, like 200 bucks, $200 for a days where this is pretty cool, that I got to got to go out and have a party in the night time as well, which is even more so for me back then when I was 23. So when I got the office, I was totally stoked. Side sold all these spots, but one of my friends and coworkers, I was really annoyed at me. And I was like, Dude, why you so annoyed? Why you So you know what? You're so angry at me. I sold 20 spaces shooting. That's good. You know, we need the people on the on. The cruel will be really good for the local businesses and everything. And he explained to me, He says, You've ruined it for the rest of us now, like when it comes to selling this bark role and that's a couple of days. We've all got to sell tickets a $20 now, because ever will be expected to go up for that price. So by me dropping my price, I'd actually lowered the value off the other tickets on this kind of the same for if you're selling your handmade stuff. So I mean, if you come in on your selling on no bentwood rings full of $30 on everyone else's seldom of the $150 then basically the only thing that you're doing is devaluing everybody else's work on the overall price of the product will eventually come down. So charge appropriately the charge, the right amount and charge as much as your peers, if not a little bit more, because in the long run it just hurts everybody, including you. 6. Pricing Formula 2: Wholesale: So that's my silly little analogy. Tangent over on. That's my pricing strategy, which I find works for me now. I like to work that way because I'm a custom jewelry. Each piece is normally individual, and people want to change materials and different elements all the time when they might want to add engravings or customize it in some way, which so that pricing strategy works really well for me. I have no aspirations to stop wholesaling my goods or using resellers or anything. So I'm really happy with the way that price instructor works. I get paid. I make profit. Customer gets a good price. The you know, it's towards the higher end of the market of no representation off UIC aid, but that might not be suitable for all different types of business. So the second pricing option is suitable for you. If you run a business where you make products in large batches on, you'd like to incorporate a wholesale model into your business and pricing. So this is the way I would do it. You would use your costs plus labor costs, overheads. So that's, you know, the cost, things that we worked out in Iran on to find your wholesale price you had multiply that by two or more, even reports another player by 22.5, sometimes even by three if you want to, then to find the retail price, which is the price that you sell it directly to customers to you would take your wholesale price on your multiply that by either two or three or more, depending on how awesome your product is. Now. If I personally use this pricing strategy for my rings, I think that they would be prohibitively expensive and they would never sell anything, as I would just be, like so much more expensive than everyone else. Probably doubles expensive was everyone else in my niche, However, if in your business your product creation is either automated or done in large batches, so say your running CNC machines, our laser engravers or your printing stuff, or even you know, if you're making hand made soaps or candles or something, where makes sense for you to make things in huge batches, then this is the model for you that will work the best. It gives you enough wiggle room so that you know you've got profit in your wholesale prices on then, for your retail, you could You got enough wiggle room to put on sales or whatever you want. 7. Final Thoughts: so there are two options for you now. None of this is set in stone. Andi. I think that you are allowed to be quite fully read with your prices. If you want to pay with any amount of selling experience, you will quickly find out that actually the market and your customers will dictate the prices that you can charge. Over time, you might find that you've priced your items too high on ditz. Prohibitively expensive on. Nobody wants to buy it. Say, for example, if you're trying to sell a pen for 600 patents, this is never gonna sell. Surely on the flip side, you might find that there's a really high demand for your product on Did that. You can get away with charging more. Perhaps you can add an extra 30 to £50 on. People will still buy it on. You'll still make enough sales to run the business, in which case also, So if you had some coaches, they call this value based pricing, which is all based on the value that your customers will perceive in your product on affect the price that they will pay the main takeaways. I want you to have from this video. Don't be afraid to, uh, pay yourself a good wage and charge. According before it on, Don't be afraid to make a decent profit. So thanks very much for watching. Uh, do you have any questions about selling the stuff that you make? Leave me a comment on. I will gladly help you out. Take it easy on. I will see you in the next one.