If you’re thinking about opening your own handmade shop, there are so many different things to consider. It’s not all about just having fun making arts and crafts. You actually have to build a business around those items that you make so well.
Part of that is learning how to price your handmade items. You have to carefully consider what price points will be likely to appeal to your customers while still allowing your business to operate successfully and sustainable. Here are some tips on how to price your handmade items for sale.
How to Price Handmade Items
Consider the Cost of Supplies
It’s likely that you’ll need some supplies to complete your handmade products. If you knit scarves, you’ll need to figure out how much yarn you use for each scarf and how much that amount of yarn costs you. If you make jewelry, you’ll need to calculate how much you spend on the beads, wire or other supplies that you use for each piece. You’ll need to factor whatever the cost of those supplies is into the final cost of your items.
Consider the Time You Put In
In addition, you need to pay yourself for the time you put into making your goods. The hourly rate you charge can vary depending on what kind of work you’re doing and how much experience you have. But you can look up what people in your industry normally make for their work and base part of your decision on that. But you also just need to make sure that it’s a rate your comfortable with. If you wouldn’t accept minimum wage for your work, then you need to come up with a higher hourly rate that you would work for. Then figure out the amount of hours that you put into each item and base your labor cost on that.
Consider the Competition
It can also be helpful to look at what other handmade sellers are charging for similar items. This shouldn’t be your only determining factor for pricing. If you are using higher quality supplies or if you have more experience crafting those items you sell, then it can certainly make sense to charge more. However, if you find that your items are priced significantly lower than the competition, it could be a sign that you aren’t charging enough for your labor or that you’re forgetting to factor in some of your other costs.
Consider the Market
Likewise, the market for your particular product might have an impact on the price. For example, if there isn’t much competion for your particular product and it’s been selling well, that could be a sign that it’s time to raise your prices. Or if there’s a particular holiday or event that has to do with your product, that could have an impact on what you’re able to charge. So it can be beneficial to constantly keep an eye on the market for your products and consider input from your customers as well.
Consider Extra Fees
When coming up with your expenses, it’s important not to forget about all that goes into your products aside from just your supplies. For example, if you sell on Etsy, you likely have to pay Etsy and/or PayPal fees. If you have your own website, you should factor in hosting and domain fees. And if you ship items, you should factor in shipping and supplies if you don’t charge separately for that. Other costs might include advertising, transportation and office supplies. Of course, you shouldn’t add the whole monthly cost of your studio space and other expenses into each and every item you sell. But if you add up all of your monthly expenses and then divide that number by the number of items you’d like to sell each month, that should give you a pretty good idea of the extra costs that go into each item.
Consider Your Business Goals
The last factor that you should consider when attempting to price your handmade items is your goals going forward. If you want to sell products so that you can open up a physical store or quit your day job, then you’ll need to earn an actual profit from each item, not just break even with your expenses and labor. So consider your business growth goals and figure out how much of a profit you’ll need from each item in order to reach those goals in a reasonable time frame.
Don’t Short-change Yourself
It can be tempting, especially for new handmade business owners, to try and get your shop to stand out by offering the lowest prices. But if you price your items significantly lower than everyone else’s, you could cause customers to see your items as cheaper or less desirable than others. In addition, you could potentially even drive down the market for your items. If customers get used to seeing whatever it is you sell at a particular price point, it could cause other handmade sellers to discount their items as well. And then when you get to a point where you want to actually charge a reasonable price for your goods, you’ll be trying to sell them at a price point that customers aren’t accustomed to.
Handmade Photo via Shutterstock
This article, "How to Price Your Handmade Items for Sale" was first published on Small Business Trends