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This is one of the biggest questions and hurdles crafters face. There are so many things to consider and it can be quite daunting. This post will break it down and help you systematically come up with a minimum ballpark figure.First of all, before you consider the rookie mistake of “low balling” to try to get the most sales; you need to understand that your price points say a lot about you and your products – and it may not be flattering.
If you are charging barely above wholesale prices; your potential customers are going to wonder why so cheap? Perhaps you are using junk materials, it isn’t really handmade, or isn’t high quality. That’s not the message you want to send as a professional.
Also, if you price your items too low, you will not make a profit. People who do this are not considering all of the costs – including being paid for their time. Here is a list of things to consider when setting your prices (and how to keep your costs down)
- Materials (get an EIN and wholesale items when possible)
- Time (How much time does it take to complete your item?)
- Salary (How much do you want to earn per hour for your time?)
- Fees (Rentals for fairs and travel fees)
Now let’s look at each of these in detail.
Calculating the Cost of Materials
To figure out the materials costs you need to sit down and make a list of the “ingredients” in your product. This includes your item and the packaging! consider how much each one costs.
Let’s say I am making hair bows. My product includes the barrette, the ribbon to make the bow, the glue to affix it. I also package them on cardboard backers slipped into plastic sheets.
For simple math lets say the following for each hair bow
- One wholesale package of 10 barrettes is $5.00 so each piece is $.50
- A yard of ribbon is $3.00 and I use a 1/3rd of that so another $1.00
- Packaging materials are 10 for $2.00 so your per piece price is $.20
- The glue is one of those items you can kind of fudge on – who knows how many drops are in the bottle right? So use your best guess. Add maybe 10 cents or whatever you work out is appropriate.
So we have $1.80 in supplies.
Calculating Time Costs
Let’s say you can make 6 barrettes in an hour and you want to earn $10 per hour you take 10 and divide by 6 and get $1.66
So now we have $1.80 in supplies + $1.66 in salary which comes to $3.46, but we aren’t done yet!
Calculating Projected Sales & Fees
The next step is to consider how many can you sell per month? At first, you will be estimating, but over time a clearer picture will emerge as to how many you can sell. For this example let’s say you can sell 200 per month. ($692)
Next, we have to figure out your other expenses. How many shows will you do? Let’s say this is a sideline and you are only doing 2 craft shows per month. The rental fees are $80. Your travel expenses are $20 and your hours worked at the fair will be 20 total. (yes these numbers are generic for the sake of easy math lol)
Ok, so now we add these fees 80 + 20 + 200 (hourly rate) for a total of 300.
We said earlier we were going to sell 200 per month – so now we take this 300 add it to our 692 from earlier for a total of 992.
Take your $992 total and divide it by 200 for a total of $4.96
This means to meet your basic goals you need to sell each barrette for $4.96.
The next question becomes can you sell for that price in your local markets? If so, price your items accordingly.
If not, you will have to cut some expenses or change your production somehow. Perhaps you’re willing to take $9.00 per hour instead and you can find a less expensive wholesale price for your materials, but still keep them high quality.
Maybe you are not being the most efficient when it comes to assembling your items? Once you reconsider these scenarios, rework your calculations and your new number should be something the market will bear. If not, craft fairs may not be the ideal market for you and you may want to consider other avenues (or even a different craft)
Remember – people will pay for high-quality handmade items if they deem them to be truly high quality. If you are selling “cheap” – then your customers will believe your time and products to be “cheap” and will not pay fair prices.
When you set your prices too low; you not only shoot yourself in the foot – you also do a big disservice to all other crafters!
Other Fees to Consider
Consider also in this scenario I did not include fees for credit card transactions. Every company is different. Not every crafter can afford or wants to accept debit (but your sales will usually be better if you can manage it without cutting too deeply into your profits)
If you decide to accept these payments then you need to factor those in as well.
There are some free calculator apps out there that can help you, but I recommend working it out on paper yourself first. Every person is going to have different things to consider and it’s very important that you understand how and why you are coming up with the price points you are.
If you have any further questions or need some help hammering it all out feel free to comment below and I’ll work with you to ensure you are getting the right numbers.