How to price your crafts (and actually make a profit!)
A common question in the craft world is "how should I price my crafts?". I'll tell you how to price homemade items and share the pricing formula I use and recommend for handmade crafts. I have degrees in accounting and business, and am in the top 10% of Etsy sellers. If this is a business that you take serious, I would highly recommend accounting for all of your costs, paying yourself a decent wage, and offering wholesale discounts. These items factor into a pricing formula that will tell you how to price handmade goods.
1. Account for ALL materials used.
Pricing homemade items is not hard if you know the costs involved. Lets say you sold you item for more than the materials cost. (Sale price)-(materials)=(profit), right? Absolutely not. When pricing homemade goods, it's essential to consider ALL costs involved. Think of small supplies you may have forgotten (thread, adhesive, ink). Determine how many yards of yarn, square inches of fabric, or ounces of paint you used. It's up to you how exact you want to be, but you need to know what your costs to know how much to charge for your crafts.
Pricing crafts is also dependent on costs like packaging. I use small zip bags for protection and aesthetics. Depending on size they're between about 1.5 and 4 cents each. Don't forget the tissue paper, thank you cards, marketing materials, etc. I've heard Etsy sellers say they're offended when people ask for bulk discounts. If you know packaging and shipping materials cost, you'll know how to price crafts in a way that allows discounts for bulk orders.
I don't count booth fees, but anything attributed to an individual item should count. Etsy is currently 20 cents per item, and charges sales commission at 5% of sales and shipping costs. I believe Amazon is at 15%, but no listing fee. Credit card processing fees are typically around 3 or 4%. If you'll be a new Etsy seller, use this link to get 40 free listings: https://etsy.me/2NXReAg Don't include costs of non-renewable items. (Printer, laptop, tools, crochet hooks, paid patterns). These are business expenses and are typically a tax write-off.
2. Pay yourself a decent wage
When pricing handmade goods, determine how long the project would actually take. This may change as you get more experience. If you zone out watching TV while you're making it, or have to stop halfway through to tend to your kids, figure out how much time it would have taken if you were actually 100% focused. Count time you're physically working on the project- not set up/tear down, or the hours that paint has to dry. Is it the type of project you'd get done faster if you could make 5 at once in an assembly line fashion? This will help you know how to price handmade items at bulk discounts.
3. Sell wholesale and retail
When pricing handmade items, add your material and labor costs to get the total cost of your item. I see too many people sell at what would be "cost". This is the amount you'd have to make just to break even. There is zero profit.
Take your cost and double it. That's what you wholesale at. Wholesale doesn't always mean bulk selling thousands of items. It means you're selling to somebody who plans to resell. It could be to a boutique that wants 2, or a store that wants 20. Some places may wish to do their own packaging- consider this when pricing.
Now double wholesale to get the final retail price. That's right- 4x the cost. That is how to price homemade things. Seem like a lot? It might be, but as a new Etsy seller, it's better to start high and leave room for discounts and coupons, rather than surprising your customers later by raising prices. Low prices might help short term sales, but can really hurt long term profits. Remember- you are not your target audience. Even if you think "I'd never pay that much", there are many customers who will think (or even tell you) you need to raise your prices. People going to craft shows or websites are specifically looking for high quality handmade goods. Pricing crafts higher is a good marketing tactic. It gives consumers something called "perceived value".
After determining retail price, check out competitors. (Obviously this can be hard, depending on the type of crafts you make.) I've seen many crafters suggest revising your price to be close to the competition. I highly disagree. The competition might not know how to price crafts. You are not a store that's buying an item at cost and reselling it. Every crafter has different knowledge, skill levels, material quality, and costs involved. Determine why your prices are different, and educate the customer. If they're lower, you can explain that you have high sales which means you can purchase materials at wholesale prices, or that your experience level requires less labor. If they're higher, explain the quality of the materials used, the education you have in the subject or why the process is more labor intensive. Remember to keep notes of costs so you can offer wholesale or bulk discounts.
Accurately accounting for all materials used, and paying yourself what you're worth will play a key role in knowing how much to charge for crafts. I hope I've fully answered your "how should I price my crafts?" question. I welcome any questions or comments. The contact and subscription info are both on the homepage. Be sure to check out the rest of my site. I have free crochet patterns, blog posts and crafts tutorials. I love helping people (especially fellow crafters!). Please feel free to share this article.
Disclaimer: I provide links only for items I use and believe in. Some of them may pay me a small referral that goes toward some of the costs of running a website. It doesn't cost you any extra, and in fact, I try to search for the lowest prices so you don't have to. "Etsy" and "Amazon" are registered trademarks.