How to Price your Handmade Work
Written by Sophie.
As a maker, it is often difficult to know what price point is suitable for your work. This is because it can feel difficult to put a price tag on your creativity. In terms of handmade work you are stuck between a rock and a hard place – if you charge too much you won’t make enough sales to keep your small business afloat and if you change too little profits will be too low for you to survive. Therefore it is essential to land on a happy medium.
Below is a simple guide to pricing your handmade work…
Before starting any sums its a good idea to begin with some market research. You can do this by identifying products that are of a similar style to yours that are currently on the market. When doing this make sure that you are aware of your USO (unique selling point) as this will effect the type of other products/brands you are inspired by and how luxury or affordable you want your items to be. For example, if you are a bespoke jeweller creating one of a kind pieces research the cost of other makers producing something of a similar standard. Remember don’t attempt to undercut large chain stores – you are offering something that is handmade and therefore cannot be compared to jewellery sold within a high street chain.
Once you have this market research as an initial guideline – you can begin calculating your costings. The first stage is working out your cover amount, which is the sum total of your predicted yearly earnings (how much you would earn in the year – remember to be realistic) and your overhead costs (regular outgoing costs and rent). This is then divided by your number of yearly working hour to give you a hourly rate.
This hourly rate is a good platform on which to build your pricing. But in addition to this you need to add on your total material costs, which are specific to each product you produce (this includes any sort of raw materials, in addition to packaging costs). These two amounts added together act as a guide cost price. Remember that if you are selling your handmade products in another venue they make take a commission – so factor this into the final amount.
For example, As a fairly established maker producing handmade ceramic bowls…
Say you plan to work 2 days a week for 7 hours a day. You would like to earn 15k and have 7k overheads per year. Each bowl you make takes 2 hours and has roughly 2 pounds of material costs.
48 weeks x 2 days x 7 hours = 768 working hours per year.
768 working hours divided by 22k (cover amount) = 28.65 per hour.
28.65 x 2 hours = 57.30
57.30 + 2 pounds (material costs) = 59.30
Total guide cost price = 59.30 pounds
This is the amount you should then aim to sell each product for in order to achieve your aspirational profit. Once you have generated this cost price (and you feel it sits in line with market research) its essential that you stick to it. For example, if someone asks you for the price of your work avoid bartering with them as this both literally and methodically cheapens the value of your work. Stand your grown in terms of cost – know that what you have made is worthy of the price you are selling it for.
TOP TIP! A great resource for more information related to product pricing try The Design Trust: Pricing Strategies .
Of course this method is just a guide to pricing your work – you may have a different method that works best for your small business! Why not connect with other local makers and join the conversation by becoming a part of our network now – MCDC Network.