In my other life, I am a niche retail buyer. I work mostly with up and coming artists or hand-makers just beginning to sell. A lot of them have no idea where to start, and want me to tell them what to do. Most often, I am asked for guidance on how to price their work for sale. That’s when, if you came to me for advice, I would give you my crash course on pricing.
How to approach pricing your handmade products for sale:
- Decide to treat your new venture as a business and not a hobby. You want to make this into your livelihood, so don’t undervalue yourself just because you do this in your spare time.
- Figure out how much money you need to make to live. Figure that number into your time when you’re deciding how much to pay yourself.
- Figure out how much money you need to stay in supplies. If you aren’t making enough money to cover your supplies, you’re done before you even started.
- Don’t forget about wholesale pricing. Yes, you might start out online or at craft shows, but if you want to get into a brick and mortar store, you need to be able to sell to them at discounted rates and still make money.
After you’ve adopted a business mindset and decided to pay yourself, sit down with this simple formula and figure out your pricing.
Simple Pricing Formula:
- time + cost of materials = cost of goods sold (cogs)
- cogs x 2.2 = wholesale price
- wholesale price x 2.2 = retail price / MSRP
The wholesale price is what you would make per item if you sold to someone like me. Even if you are selling on consignment, do not go below this number. This is the lowest number you can sell at and still make money.
The retail price is what you sell your product for at art shows or the prices you give in your etsy shop.
MSRP stands for manufacturers recommended retail price. Stating your retail price as your MSRP when you sell to a buyer will keep consistency in the price of your products across all of your selling platforms. Customers like consistency. Whether they buy from you directly or from a store, they know they are getting a good product for a good price. Either way you win. The more they buy from you, the more money you make. The more a store sells of your work, the more often they will order from you.
When you take the time to set both retail and wholesale prices, you will end up making more money off individual sales you make directly, whereas with wholesale orders, you make money by giving a discount for large quantity orders.
More important than anything else is to remember to pay yourself. So often, budding entrepreneurs don’t feel worthy of a paycheck for doing something they love. Don’t fall into this trap. If you want to do something you love for a living, you have to make money doing it. You deserve a paycheck for the work that you do.
What’s next? Figure your pricing! How does it make you feel? Does the number seem too high? Too low? Take a few days and get used to associating worth with your work, especially if your business has been a hobby until now. Get comfortable with those numbers. Practice saying them without flinching or cringing. Do it until you can talk about your product with confidence. Feel your worth.
Is there anything you’re making that you feel is too expensive with this pricing structure? Tell me about it in the comments!