Crafts: How to price for profit

If you’re thinking of selling the crafts you make, one of the biggest decisions you can make is how much to charge for your items. If you don’t price your items correctly, you won’t have sales if an item is priced too high, or you’ll go out of business if items are priced too low for you to make a profit. While there are many formulas for calculating prices, they are all based on certain common elements.

First, know your market. If the items you make are priced higher than what people normally buy in your area, you need to be priced lower or sell on the market that will support your prices. Trying to sell high-end jewelry pieces at a flea market won’t work, but finding a specialty boutique or juried fine art show will. Once you’ve decided who your target market is and how much they’re willing to pay, you can start working with your numbers.

Make a list of all your expenses related to creating your crafts. This includes materials, labor, overhead, and profit. When calculating material costs, this includes everything from glue, thread, markers, etc. Don’t forget to include the shipping costs for those materials if you have to order them by mail. Calculate how much the material costs to produce each piece, this gives you the price of the raw item.

Calculating work is a bit more personal. How many items can you produce in an hour? How much do you want to be paid per hour? If, for example, you can produce five of your items in one hour and want to earn $10 per hour, then your labor cost on each item would be $2. Obviously, this amount will vary depending on how many items you can produce in an hour and how much you want to get paid. Add this amount to your materials cost per item.

Overhead is complicated. While most crafters work at home, don’t think you don’t have overhead. There is the space it occupies in your house for your work, pens, paper, telephone, electricity, etc. used during your business process is counted as overhead. The easiest way to do this is to keep good receipts and open a separate checking account to purchase anything for your business. For utilities, take an average household bill (such as electricity) and divide the total amount by the percentage of square footage your business occupies in the home. Once you have this total number, you can break it down into a daily or hourly number to make calculations easier. Add this figure to labor and materials.

Profit is one of those things that people add to the calculation of work or do it separately. It depends on whether you have someone to help you make the items or not. Profit is really the number you want above and beyond the cost of the item to be made. So if you want an extra dollar of profit on each item above your work, add that amount to the cost of each item. If the cost of manufacturing your items makes your retail price lower than area averages, you can add profit and increase the price, keeping it in line with the average price.

Once you add these four items, this is the price you want to sell your item for. As you can see, the profit number is what you can adjust to keep your item price in line with your market.

What if your numbers make the item too expensive for your market? The first thing to look at is the cost of materials. This may mean finding new sources for your materials or buying in bulk to cut costs. Don’t forget to search the internet for your supplies; you can often find great prices on materials that way. It could also reduce your profits, or possibly your workforce, although these are the last options you should take.

Take the time to work the numbers and you will be more likely to be successful in business selling your crafts.