1999 Volunteer Leadership Training Guide
Pricing Your Crafts
Handout 1
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Are You Really in Business
• What's in a Price?
• Pricing Components
Are You Really in Business?
If you are like a lot of other craft producers, you didn't start out in
crafts with the intention of selling. First you made things for yourself, then
for family and friends, and then almost without realizing it you began selling a
few pieces. At that point, you were not in the "business" of selling; that
happened when you made a conscious effort to turn your craft activity into a
profit-making enterprise.
There are two important questions to ask yourself before deciding to enter
the marketplace:
- Is my work good enough in design and quality to compete in
the crafts marketplace?
- Can I produce efficiently in sufficient quantity to make a
decent profit?
If your market research shows there is a demand for your work, you must
decide on a fair price for it. This is a serious problem for craft producers B
not only because they lack basic business skills but also because of social and
emotional factors.
The making of crafts has the status of a leisure-time activity in our
society. One segment of the buying public believes that making the item gives
you great pleasure and uses time that would otherwise be wasted. You may
contribute to this notion by not placing value on your time and talent.
The emotional factors that interfere with realistic pricing come from the
close relationship craft producers have with their work. Sometimes this leads to
overpricing or to the production of objects that have little demand in the
marketplace.
It's important to recognize and deal with this emotional factor by realizing
price is not a judgment of you, as an artist or craft producer, but is a
judgment of the cost of production and what the customer will pay.
Because of the design of the product, the quality of materials, and skill in
craftsmanship, the product must appeal to a particular customer in a particular
setting. You, the producer, must earn back the cost of your materials and
overhead plus a reasonable profit.
For those of you who are independently wealthy, or philanthropists, who can
afford to subsidize the consumer, remember that your selling practices threaten
the existence of craft producers who must sell to survive. You should always
price your work as if you had to earn your living from its sale.
What's in a Price?
The reason for a pricing system is to make a profit from your work. Profit
depends on costs, selling price, and the number of items (units) you sell.
The best price is the one that will maximize the profits from your business.
The price that sells the greatest number of units and brings in the most sales
dollars is NOT necessarily the best price. This is because you may not realize a
fair profit even with the sale of a substantial number of units and dollars
earned.
Your price should:
- Be high enough to cover all production and marketing costs.
- Help you make a profit.
- Be reasonable enough to attract customers.
- Build sales volume.
Pricing must cover all the requirements of producing and selling your crafts.
Specific items depend on the craft itself. Elements of the price:
1. Materials
• Raw materials.
2. Labor
3. Overhead costs.
• Tools, equipment, depreciation.
• Workshop/studio maintenance, utilities.
• Marketing and storage.
• Special fees, insurance, taxes, bookkeeping.
4. Profit
Pricing Components
There are certain components in all pricing requirements. The combination of
components will vary from craft to craft, but YOU MUST SATISFY ALL THE
REQUIREMENTS.
These include:
1. Materials
• Every ounce of metal, clay, fabric, or fiber
2. Tools and equipment:
• Purchase
• Maintenance
• Depreciation
3. Production costs:
• Workshop space or rental
• Utilities
• Insurance
• Assistants, helpers
4. Taxes
5. Special fees, registrations, licenses
6. Marketing costs
• Shipping to customers
• Transportation to markets
• Membership in guilds
• Office supplies
• Bookkeeping
• Subscriptions to trade papers
7. Profit derived from one or more
• Mark-up on materials
• Hourly wage
• Professional prestige (special ability)
• Demand for skill and quality
The basic formula is simple. The sum of the above over a certain period of
time (day, week, month, year) divided by the number of items produced equals the
selling price of each item, or the unit price.
The cost of materials, tools, and equipment is fixed. Even so-called free
"found objects" take time to collect and prepare. You pay those costs and must
apply them to the unit price of each item you sell. If you don't, you will be
losing money on every item you produce.
This information is very general in scope. There are many books and
periodicals available that deal in detail with pricing formulas as applied to
specific crafts. Check your local library for the titles.
Prepared by Sharon Heidingsfelder, Family and Consumer Sciences Specialist
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