Home1How to calculate the price of arts and crafts for sale
Even if you initially assumed that hand-made would be just your hobby, there will certainly come a moment when you want more and your product will become someone’s lucky purchase. Each product has its own price, but setting a price for crafts usually is not easy. Knowing basic pricing rules will help you to sell your product at a profit.
Step-by-step scheme for calculating the cost of handmade products
Of course, the cost calculation is based on the amount of time spent and materials’ cost, but there are other nuances. Let’s take a look at each costing point:
Everything is quite simple here. You know exactly how much money you spent on necessary materials. Just be sure to take into account everything to the smallest detail. You can overlook some stuff like trimming ribbons, beads, buttons and threads, so without them, the cost price will not be entirely realistic.
2.Evaluation of time
This is a very important point. After all, the time spent can become practically the main pricing factor. For beginners, we suggest starting from such a simple standard as the average salary per hour for the region in which you live. Over time, as you become a well-known master with an excellent customer base, this amount can grow bigger.
You can also calculate the hour of your work based on the analysis. If you are already selling, the calculation is straightforward. Divide the amount you earned for the month by the number of hours you made your product.
Remember that it is very important to know how much your work hour is worth!
Depreciation is the expense of a fixed asset over its useful life. To calculate it the cost of the equipment must be divided by the operating time, after which we plan to replace the tools.
Using the warranty period as the depreciation period will be the easiest way.You can find all characteristics of tools, warranty period and more at CraftOnline. And for tools without an expiration date, the depreciation period is determined by the craft master.
When appointing this period it is necessary to take into account the intensity of the use of the tool. For example, a self-healing rug will be used in the manufacture of all postcards and curly scissors will be used only one-time. That’s why we plan to replace the first tool in a year, and the second one – in 2-3 years.
Very often novice crafters overlook such moments as overheads, these include:
Packaging costs. Consider all the materials you use to pack products: tapes, scotch tape, paper, boxes, bags, envelopes for shipping, etc.
Online expenses. All services that you pay for on the Internet and they are related to your creativity and sales must be included. Like if you have a site, you need to pay for domain and hosting.
Advertising and promotion costs. You can pre-define a specific advertising budget for the month. Analyze which ad campaign performs better and brings in more sales for a lower price. It is safer to plan your promotion budget in advance.
Rent of premises. If you rent a room for master classes or a store include the amount in the price.
Payment for utilities. Not an obvious cost item. Light, water, gas, it all depends on what exactly you use in your work.
Registration of the company and taxes. Don’t forget about the mandatory taxes, which must be included in the price.
Determine the percentage of profit you want to receive. Here are some points that increase the markup:
skill level (exclusive and high quality);
the fame and authority of the master (extensive experience, reputation, results);
individual order or customization for the client;
product of increased complexity;
World practice shows that at least you should set a margin of 100%. However, almost all sellers simply multiply the amount received by 2.5.
And one more tip for calculating the cost of crafts
You should definitely research the market and understand what price is set for similar crafts. And do not reduce the price of your products even at the start. The lower price for a similar product may cause associations that these products are of lower quality.
After a while, you will be able to develop your own unique formula for pricing that will be perfect for you. Be sure to closely monitor material price changes as well as competitors’ prices. This will help you both optimize costs and quickly adjust your prices.