Today I attended one of the Summit of Awesome seminars via the Etsy Virtual Labs on pricing your work and branding your image. Of all the sessions I've attended, this was by far the most thought-provoking and useful for me, especially the discussion on pricing. This section was presented by Marlo from Creative Arts Consulting. As soon as the PowerPoint slide came up that stated raising your prices = increased time and decreased stress, I was hooked! I've often felt that I might be underpricing my work, but I'm fearful of turning away buyers who are shopping for rock-bottom prices. Judging from the responses in the Lab, many other sellers are having the same struggle.
Within the Etsy Virtual Lab chat, we got into a discussion about how much each artisan was charging for their work. Several of us (myself included) were charging around $10/hour. The rest of the forum was shocked - including an Etsy admin! It seems the average rate is somewhere around $20/hour - twice what I was charging! Marlo had said "there is nothing wrong with selling your products at your worth", so my gears started turning.......am I under-valuing my work? Am I under-valuing my work by that much? Perhaps I am.
Marlo shared a formula with us to determin the cost of any item you list for sale. The formula takes the following costs into account:
-Labor Cost (how much your time is worth for how long it takes you to make it: the aforementioned cost/hour debate)
-Direct Cost (materials cost, packaging; all costs associated with creating your product)
-Overhead Cost (your shop's rent, utilities - monthly fixed costs related to your business
Initially, I tuned out the parts about Overhead Costs, as I work from home and felt I had no overhead; everything I use for my shop (computer, internet access, a space to craft, etc) is something we'd have in our home regarless of my crafting-for-pay status. However, attendees in the Lab suggested later that a portion of housing costs be considered your overhead in this situation - brilliant idea! Others suggested that we factor in education costs, non-product supplies like camera batteries, gas to pick up the supplies, etc. Unfortunately, I had already missed some of her slides relating to this, but I got a good chunk. She discussed figuring out how many items you need to make per month to break even, etc, but I'm not ready to go there yet. In this post, I'm only concerned with basic item pricing.
Marlo's formula for calculating your item prices looks like this:
Labor Cost + Direct Cost x 3 = Wholesale Pricing, and then
Wholesale Pricing x 2 = Retail Pricing
After the seminar, I went into my shop and looked at calculating the true value of my items; the thought of earning more was too exciting to put off until later. I debated on whether or not to give numbers here in this post, but suffice to say that when I calculated the cost of some of my pricier items using Marlo's formula (pricier items defined as items that were listed in the $75 - $85 range), I gasped at the suggested $250+ price tag - and this was just for wholesale! Even after I reminded myself that my work has a value, that I am doing this as my career and need to be paid as such, and that many of my items take 4+ hours to create, I still could not enter a $250 price for any of my shop items. I did work out a forumla I was comfortable with, using a per-hour fee that I feel is justified for my work, and my shop prices now reflect this.
Even though I didn't use her exact formula, I still feel that my shop grew by leaps and bounds today. Marlo said something else at the beginning of the seminar that really hits home now: raising your prices will help you feel confident as an artist (this was one statement that I didn't actually write word-for-word, so sorry Marlo if I was a little off!). And you know what, she's right. Deep down, I knew my work was grossly underpriced, but I was too afraid to do anything about it. I knew I wasn't pricing my work at a value that reflected the time spent. Now that I put a fair price on my items, even though that meant raising some prices substantially, I felt this surge of confidence! Several sellers admitted that they often saw an increase in sales after a price increase, and I'm curious to see if I have the same experience. Here's hoping!
I'm curious to hear the stories of other sellers; please feel free to post your comments below!
$10 an hour would be grand. I'm seriously pricing myself at $5 and hour, plus costs for materials & overhead. Not x 3... not even x 2!
ReplyDeleteI would love to raise my prices to what they're worth, but I'm scared... I guess that's the same old story for everyone, hey?
I'm at 15 an hour right now and no overhead and people are still telling me I could increase my prices. I came up with a formula (after some business coaching at a Youth Center) to include the materials (times 2 - the coach said it should be X3 or 4), gift wrapping and Etsy/Paypal fees. I hope it works :)
ReplyDeleteNerdy Steph - $5 an hour?! Are you crazy girl? Your stuff is fantastic and looks to be very high quality. You can always bring your prices back down! You could also check into ways to lower the cost of your materials and/or overhead.
ReplyDeleteFantasy - I agree, you could increase your prices and not appear overpriced. It depends on the cost of your materials and how much time you spend, but it seems like you could definitely do it.
I'm ashamed to say this... but I don't think I'm even factoring an hourly wage into my prices! I tend to do my work in fits and starts when I have a few minutes when I'm not at work or tending to something else so I don't even keep track of time spent on each piece.
ReplyDeleteI've been doubling my materials and calling it good unless something took me a really long time to make or was difficult, in which case I'll add a few bucks.
People are always on me to raise my prices but I struggle with that so much because *I* won't spend that much for something, even if I know that's what it's worth, because I am perpetually broke as hell. It's like, if I won't spend that, what gives me the right to charge it to someone else, you know?