5 Tips On Pricing Your Handcrafted Goods
We get this question on the weekly "What do you think I should price this at?" To be honest........that's not such an easy question. Especially if your products differ drastically from ours.
Andrea and I have found pricing our goods to be one of the more difficult and time consuming tasks of being business owners, makers, and creators. In the beginning we had NO IDEA what we were doing. The truth is, nobody does. It's always a bit of a guessing game how much somebody will be willing to pay for your item. So here are 5 tips and tricks we follow when figuring out pricing on our items.
1. Do You Want to Be Walmart, Pottery Barn, or Somewhere in Between?
-Walmart - goal is to have lower price point, appeal to the masses, and sell a lot of items at those discounted rates.
-Pottery Barn - goal is to attract select clientele willing to purchase items at higher price point because of "quality" and "prestige" factors.
We as small businesses may never reach the sales quantities these larger retailers do, but their pricing structures still apply to us. There is no right or wrong, but before you start pricing it's important for you to decide and stick with your pricing strategy.
2. Leave Emotion Out of It
I will be the first one to admit I struggle with this.
If there is a piece that I REALLY love, I always want to price it higher. To make matters worse, I have a tendency to push for higher prices on our items already. Luckily, I have Andrea to bring me back down to earth (she is definitely the more pragmatic one).
3. Make sure you are including your time in your COGS.
You and your time are not free and you need to figure in a compensation rate for the time you put into a piece. If you are spending 5 hours on a piece you are selling for $10 - that is a waste of your time and you essentially are not making any money.
50% Mark Up Equation
PRICE = ((Hours Spent x Hourly Rate) + Cost of Materials) X 1.5
75% Mark Up Equation
PRICE = ((Hours Spent x Hourly Rate) + Cost of Materials) X 1.75
So as an example:
I buy a dresser for $75 + $50 supplies and additional materials = $125 Cost of Materials.
My time in is 10 hours at $15 a hour = $150
Total Cost at 50% mark up is $275 x 1.5 = Price $412.50 or at a 75% mark up $275 x 1.75 = Price $481.25
***Remember - this is the minimum you should be pricing your items at. If consumers are willing to pay more, by all means CHARGE MORE***
4. Compare Your Prices with Similar Items on the Market.
We utilize so many different selling platforms when we are looking to price something new. It is not uncommon for us to price check similar items on:
Other similar businesses
Below is an example of how we look at price comparison. We know we want to be less then Pottery Barn and on par with other reclaimed furniture painters, but offer that same high quality product. We use this in our marketing by showing our products and prices next to comparable pieces and their prices.
We consider this a good business practice to pay attention to our market and what others are doing. If you are low balling everybody else: you are hurting not just those other businesses but yourself by depleting the market. If your way to high, chances are your customers may love what you are doing but will go elsewhere.
5. Stick to Your Guns
It happens to all of us. You have an new item. You price it and put it out to the public. Somebody contacts you saying they love it, but asking if you'll lower your price. Our answer to this has become a consistent no and here is why.
We put a lot of time, effort, and thought not only into the piece, but into our pricing.
We just put that item out for sale. Most people probably haven't even seen it yet
I can always run a discount or lower the price in the future and attract similar buyers. If I accept their offer of a lower price, I'm not giving my item its full potential for money making.
One last thought for you: Nobody knows your business like you do. Nobody knows how much time and money you have into any particular piece. You have to learn to trust your own gut and your own instincts when pricing unique items that you are creating. Don't be afraid to bounce pricing questions off to your friends, family, or strangers on the street. Take their feedback at face value and apply it as best you can.