Are you a crafter looking to price your handmade products? Are you unsure of where to start? You’re in luck! This blog post will teach you how to price your products so that they are both fair for you and your customers.
We’ll cover everything from materials costs to labor time, and give you some tips on how to make sure your prices are competitive. So what are you waiting for? Start reading!
Why is calculating my craft product prices important?
Many crafters spend countless hours perfecting their craft, and rightfully so. It takes a lot of time, effort, and skill to create something beautiful by hand. But unfortunately, many crafters undervalue their work, resulting in products that are priced too low.
This may seem like a good way to attract customers, but it can actually be detrimental to both the crafter and the customer in the long run. When products are priced too low, it sends a signal that the craftsmanship is not worth very much.
As a result, customers may be less likely to appreciate the craftsmanship that went into making the product, and they may be less likely to value the product itself. In addition, underpricing products can devalue the entire market for handmade goods. If customers come to expect low prices, it will be harder for crafters to charge what their products are actually worth.
So while it may seem counterintuitive, pricing products accurately is actually the best way to ensure that both the crafter and the customer are getting a fair deal.
See more: 4 common pricing mistakes handmade sellers make »
The elements of craft product pricing
Pricing handmade products can be tough - on one hand, you want to charge enough to cover your materials and labor, but on the other hand, you don’t want to price yourself out of the market. So how do you strike the perfect balance? Here are a few factors to consider to begin with:
The cost of materials: This one is pretty straightforward - if it costs you $10 in supplies to make a product, you’re not going to be able to sell it for $5 and still turn a profit. Make sure to factor in the cost of all materials, even those that may be leftover from previous projects. Read more on how to calculate your product cost price »
Time spent: How long did it take you to make the product? If it took you 10 hours to knit a sweater, you’re going to want to charge more than if it only took you 2 hours. Time is money, after all! Read more on how to calculate your handmade labor costs »
Overhead costs: If you have any overhead costs associated with your business (rent for a studio space, for example), make sure to factor those in as well. You’ll usually want to tally up your last year of overhead expenditure and apply a proportion to each product you sell - here is a rundown on how to best factor in overheads to your craft pricing »
Fees & commissions: Any costs of selling online or offline also need to be factored in. Make sure for all channels you are completely aware of all fees and payout structures and build these into your costs. As an example, if you sell on Faire wholesale, you can use this calculator to determine your payout and commissions payable for your products.
Packaging: the costs don’t stop when you have finished making your product. Ensure you factor in the costs of sending your craft to the customer, including packing material like bubblewrap, and the postage costs themselves.
Competitors: Take a look at what similar products are selling for and use that as a yardstick. Remember, though, that you don’t know the reasons why they are choosing the prices that they are and if they are making any money from it, so take any data you get from this exercise with a large grain of salt!
Using a pricing formula for craft products
So how do you combine all the elements above in a way that results in a price that customers want to pay and also makes you money? Good question!
From here, you can create a pricing formula to determine the right prices for your handmade craft creations using some or all of the elements suggested above. Once you have a formulae, you will be able to put in different inputs and get out standard prices that reflects the costs you have put in to produce your items. The benefit of having your own formula is that you can decide exactly what this will be, and can tailor it to the exact needs of your craft business.
Using a standard pricing formula will also lead to:
- Taking the guesswork out of pricing, so you feel more confident
- Making pricing decisions based on data, not emotions
- Ensuring that you have fully factored all costs into your prices
- Your business having the profit margins to grow
When you have a pricing formula in place that works for you, you will also be able to clearly see:
- The costs involved to produce your handmade items
- The exact amount you’ll need to charge in order to produce a profit
- If your products can be sold at a profit at a price that customers are willing to pay
Read more: How to set the right price for your craft products »
Why you should use a craft pricing calculator
If you are not the type of person that likes fiddling around with complex formulae in Excel, creating your own pricing formula may not be the best way forward - it can be quite a costly exercise to realise you have made a math error with your pricing engine after you have started to sell products.
A dedicated craft pricing calculator can instead be a helpful tool in setting prices for your products quickly and easily as it uses standard ways of calculating costs and profit margins.
By inputting your material and labor costs, as well as the desired profit margins, you can come up with a fair and competitive price for your items instantly.
A good pricing calculator for craft sellers is here - this one also factors in the costs of selling online via Etsy:
Pricing calculators that are built into modern craft inventory systems can take this one step further as they can help you to keep track of your costs over time so that you can adjust your prices as necessary. This is great for situations when materials become suddenly more expensive - your pricing guidance is calculated and updated instantly for you to use and update across your sales channels.