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If you’re making crafts to sell, you want to know how to price your work and what to consider when you price your work. Maria Nerius gives you some things to think about in this Craft Business article.
One of the most difficult tasks you have when you sell your work is putting a price tag on your work. There is no magic formula. Pricing considerations include the amount of labor (your time), cost of goods (supplies used), and your overhead (electricity, phone, rent). These are the basics! You may be thinking that since you work at home you don’t need to include a percentage of your price to cover electricity or rent, but you do. You are a business and need to price like the professionals.
At least once every time you create a design you need to write down every supply used (Cost of Goods/COG) and how much time you spent making it. It’s not the fun part of selling your work, but you need to document details so you can quantify the costs of material and labor. Time is money and as creative people we don’t often realize just how much time an item takes to make. Making one of an item takes more time than if you can create several in an assembly-line method (paint all five at once, then attach the decorations to all once the paint dries, etc.). You’ll need to average your labor between custom orders and “mass” produced items.
The basic formula for pricing is: (Cost of Goods + Labor) x Overhead= Price.
There are numerous percentages used for Overhead. Overhead can range from 5% to 45%. Note that when companies are tightening their belts or trying to get expenses down they tend to cut Overhead. I advise to streamline your Overhead. Take a good look at your electric bill and rent/mortgage and think about what percentage you feel you are using or you want covered.
By: Maria Nerius, FaveCrafts.com Resident Craft Expert
CreativeIncome
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this is sooo informative,thakyou for the articles..i’m just starting up,and forgot to price my merchandise i bought prior to getting to the sell point..i guess i wiill never know that part..oh well,thanks again
This is so informative. I am a newbie trying to get started. Thanks
Hello
I am new to this and a little confused. Can you provide an example?
If the cost to make an item was $4 and the labor took 4 hours with a 10% overhead 4+4 =8×10%=.80
The base price would be 80 cents? I think I am missing something…do we then add what we would like to profit?
Thanks for your help!
Hi Aimee,
Labor here refers to how much you would pay someone per hour to make your item. So for example, if the cost to make your item is $4 and it takes 4 hours to make and you want to get paid $8/hr your formula would look like this: (4+(8×4))x10%.
I hope that helps!
…which means:
(4+(8×4))x10%
which means:
(4+32)x10%
equals 34 x10%
you have to get the 10% of the total expenses + labor, hence 34×10%
so, you’ll get 3.4 (is the ten percent of 34)
if your total expenses plus labor of the item your created is 34.00 plus 10%, the price of your product should be 37.4
at least, that is how I understand it.
sorry, but 4+32 is 36
I think she means materials + labor+ 10% of that total?
what if it is yarn and you are only using part of the entire skien? Maybe only like 1/4 of it? Takes an hour roughtly to make the item and the yarn.
I think in that case you would divide out the price of your yarn. For example, if the yarn cost $4 and you only used 1/4 of it, your materials cost would be $1. Does that make sense?
I use yarn in my business. I weigh each of my projects by oz (since that’s how U.S. shipping is weighed) and calculate that way.
So if a skein of yarn costs $5 and weighs a total of 3.5 oz, then it costs me roughly $1.43 cents per oz of yarn that I use. I can make a note of how much yarn it takes to make a product and I can be certain about how many products I can make with one skein.
So my materials equation is a little bit longer (product weight × yarn cost per oz)+labor + fees + overhead= Price
Isn’t it ironic that most of us have avoided math our whole lives, and then we end up in business?
But I think all craft businesses need to base their prices on earning a living wage. Even if you only make and sell your art or crafts part time, you should base your prices on what you would need to charge if you were to live off the income.
You owe it to yourself and to all the other artists out there to charge more than $8 an hour.
One problem we run into is that there are so many crafters out there selling their items for next to nothing, so the consumer expects to pay next to nothing. For instance, even a simple crocheted doily is going to take a few hours to complete, but you can find any size, color, and design of doily on Etsy for less than $30, and some for less than $10! How do we convince the public that our time and skill is more valuable than what they’re used to paying?
I agree with you!
I agree, so many items are priced below what they are worth. I think formula’s like this one misleads crafters into pricing down their artistic work. As we can see by the posts. Example show above…1/4 skein of yarn at $4.00 would use $1.00 and if it took an hour @$8.00 giving $9.00. Multiply by .10% gives a sale price of $0.90. This represents the cost to produce the product not what it should sell for.
Crafters should then multiply the cost times the amount of profit desired. This is were you can look at the avg sale price of similar items and the venue it will be sold. I multiply the cost by 3 so my >90 cent item sells for a minimum of $2.70. If I am at a craft fair i need to include the expense of the table….I hope this is helpful!
Don’t forget to add in the amount of buying supplies to replace what you used. I keep track of the materials used and double that amount. That way none of the money I spend on quilt supplies comes out of my house money. I buy fabric and supplies from my quilt profits. I use this formula: supplies used + restock amount+ $10.00 hr labor+$15.00 overhead. My overhead is small because I hand-quilt my quilts. Hope this helps. Never forget the money you will have to spend buy more supplies.
I think about what I would want to pay for something if I were to go to a retail store and buy that exact item. I have a simple scarf that used about 1/2 a skein of yarn, and was fairly easy to make, but if I were to buy it at somewhere like Charlotte Russe, it would be at least 15-20 bucks. Despite the fact that it was fairly easy, and very fun to make, I want the same amount of money that another store would charge for something not as well-made. So many people think that because it’s homemade, it’s not as good quality. That’s bull. My homemade items last so much longer than items I buy at stores that were “mass produced.” So I would expect to pay a little more for something that I know is going to last a long time. I expect the same thing from my customers. If you want something good quality, expect to pay a little more money for it.
Exactly! Just like the saying that goes “you get what you pay for” If you pay for something handmade and a bit pricier, your obviously getting something that is HANDMADE with LOVE and will last longer than something made by a machine that will break in 2 weeks. I sell and shop handmade. I love the love people put into their work. I put love into my work. And that’s the magic of selling handmade items
That’s funny….I was always told you don’t get to charge for your time. I see more people OVER pricing their things rather than UNDER pricing them. And besides that….most people don’t get how long it takes someone to make a certain type of craft. Believe me…I’m a photographer and hardly anyone appreciates the efforts I go to to get great pictures. And no one really cares how long it took you to make something…..they just want to know how cheap they can get it. Unfortunately that’s the way of the world. They put crafters in the same box as something made in China. No one appreciates the actual craft of things anymore.
April:
I could not agree with you more! I was just in a craft show this weekend. All our items are hand made. We were competing with people who bought JUNK cheap from China and reselling. There is no way someone like all of us can compete price wise with someone who sells junk for pennies on the dollar. Oh well, lesson well learned.
My understanding of the example is: (cost of material + (hours to make + hourly wage you want to make)) x overhead.
Materials $4.00
4 hours at $8.00 per hour
10% of rent or mortgage, utilities, phone, internet, etc…
(4+(8 x 4)) x 10%
(4+ 32) x 10%
36 x 10% of overhead would be the selling price.
Is this correct or am I way off?
Okay it’s 4(4×8)x10%=36×10% 3.6+36=$39.6 therfore you round it up to $40.00
I have an alteration business in a small town, I have a hard time with knowing how much to charge for my time I have been charging about $15.00 per hr plus supplies for custom sewing. and alterations I base it on how long it takes me to complete that task, I have a hard time charging the prices that are charged in the bigger cities. do you have any suggestions that mite help me?
thans
i do alterations also, i once heard a comment ” she’s good, but can be expensive”. i considered it a compliment, just because i’m not Sears doesn’t mean i’m any less! i have flat rates for certain things, hems, rips, tears etc.. and many times i’ll say i need to see it, (everybody’s perspective is different, lol)When i have a customer that may make a face at the cost, i run down all the things that go into their project or i may have to do, once they can see that’s it not just “getting on the sewing machine” they feel better about spending their money. They don’t consider all that goes into it and especially YOUR KNOWLEDGE! ,Time spent with them, and then you get the “special ones”!. They want quality at a cheap price., so im of the mind now that If they don’t like it, i have no problem letting them go! My work speaks for me, let yours do the same.
this is confusing, my supplies cost 6.00+8hrs of work+10% ?
I embellish t-shirts. The shirt costs me $2.00 and the embellishments $3.00. I’ve made a template so I can make a shirt in 15 minutes. So far, my cost is $5.00. I pay myself $15.00 per hour or .25 per minute. So, for me to make a shirt my direct cost is $5.00 + $3.75 labor(15minutes x .25) = $8.75. My overhead is made up of all the other costs – rent, utilities, office supplies, ink, etc. since I haven’t done an overhead calculation, so I double my cost. Now don’t forget the greedy state, counties, cities want their share, at least where I’m at so I now multiple my cost by 3. So that little embellished shirt retails for $26.25 or $30
That is how I learned to price things, unfortunately, people under charge for their work and it makes it difficult to make, not even a living, but pocket change on the side
The way I understand that formula is the 10% everyone is using is the overheadwhich would be whatever you are uusing in you taxes for your home business. If you are using 10% of your home for your business then you would take 10% of your rent /mortgage, electricity, etc and multiply that by your costs and labor. So your overhead is 10% of your household costs and you then multiply that by your cost of material. Using that formula, if your material is $10 plus 3 hours of labor@$10 an hour would be 40 times
200 for your overhead would be $8000. So then do you use that same 10 % to come up with a price of $80? depending on the product that might work. Of course you can only get what the market will bear. Some craft shows you will not be able to get that price because others are pricing too low. I have just started and was unsure how to price and I was making to order so I let the customer set the price. I was surprised when they were paying more than I would have asked.
The whole overhead/percentage thing really threw me and obviously from the confused math a lot of other people as well. As someone just beginning to consider crafting for income(I do it anyway for fun) I have a few questions. As an example let’s say I would only be able to produce one queen size afghan a month working on it 8 hours a day/5 days a week, plus two days for final finishing for a total of 22 days. So 22×8=176 hours give or take. Now if material costs for that afghan were $50.00 and I wanted to make minimum wage($7.75/hr.) that would make the afghan with just time and labor cost around $1400.00. No one is going to pay that so I think that’s where multiplying the percentage of overhead comes in. In this case this makes sense because someone would pay $140.00 for my afghan. However, I would be getting underpaid @ approximately 50 cents per hour for labor at that price. In the case of smaller items I also find this does not work out well. For instance if I make a scarf…one skein of chunky yarn gives a material cost of $6 plus two hours work is$21.50 multiplying that by the same 10% would mean selling the scarf for around $3.00 which does not even cover materials costs. I am certain I would sell a ton of scarves but I am just as certain I would not make any money. So my question is simply this…how can you adequately say that a formula of this type is functional in the real world? In the real world no one wants to work for 50 cents an hour nor does someone want to sell their items for less than they cost to make. In the real world people don’t pay $1000’s for an item that could easily be replaced by something similar from a big name store for a couple hundred or from Walmart for under $50.00. It is my opinion that things must be priced by what the market will bear. If I would not buy it for more than a certain price I will not sell it for much more than that however it does no good to produce an item that will not sell until it costs less than your supplies or will not feed you when you are depending on it to. So after reading this and all the confusion in the previous comments I am still without a good feel for adequately pricing items. Luckily for me this is more about getting future finished items out of the house than it is about eating and I am in no real hurry. Yet, I do desire to price things in an manner that neither makes my effort seem less than others who do craft for a living nor significantly under cuts those who do depend on it for income. As I will be attempting to sell only my finished items in the future I’d like to know if anyone has a different formula or way of computing pricing that has proven effective for them. In addition I’d like to hear what people think on the issue of shipping. A queen sized afghan can get heavy. Is it better to add in a flat shipping fee to your product costs, require the customer to pay shipping, or like so many merchants I’ve dealt with lately charge a percentage based on the purchase price. Do you price adjust based on location if you ship internationally or even just to Hawaii?
Well ladies, I have read all the comments that was on here today about pricing your items. First let me tell you , I been crafting for about 40 years and owned a craft store for about 30 years and this is the way I priced my items. I work in many mediums from yarn, material, wood, Styrofoam to flowers and more. The easiest way I have found to price my items is take what it cost me to make the item and double it. If it coat me 35 dollars for a piece of wood to make what I am making and painting it and cutting it out. It is going to cost you $70.00 to buy it.. plain and simple. I knit a lot of head bands from left over yarn. very simple pattern and I sell the for $2.00. maybe a little cheap but hey sell. When you start getting into your lights and rent and labor , that is silly you are going to use the same amount of lights if you sit and watch TV or you sit and knit. So ladies do not make your brain work over time adding and subtracting and multiplying on how to price your items, make it easy…. life is easy and fun… do not stress out……..
Finally someone that makes total sense. Don’t overthink things. If people like what you’ve made, and they want it, they will buy it. If not, they won’t. Someone else will.
The way I have always done this (figuring how to charge for my items)
step 1) How much are my materials
step 2) Multiply that amount from step 1 by 3… (*this covers A)materials; B)overhead and C) your earnings per item… the total is the sale price.
Example: $3.00 for materials x 3 equals $9.00 for selling price.
step3) compare my price with other similar items on selling sites (Etsy, Facebook, etc)
I used this price for a bib/burcloth sets that I make…
I will sometimes add $1.00 per item if at a market/vendor event to cover my cost of table and gas.
These are my base prices, if someone wants a special ordered item then it is negotiable depending on fabric, or other materials and time, shipping is always on the buyer.
I agree with Carol. Don’t hurt your brain by trying to figure out the overhead and all of that. Feel out your customers. I know myself, price your items with what you would pay for them, of course considering that the things that are handmade, are made with love and care. Relax and enjoy what you do. When it comes down to it, you will know by watching your customers faces what to charge for your work. You all know that when you price too high, no one will buy, and I am sure we all want to sell our goods. So just feel it out, but don’t cheat yourself, and don’t stress over formulas. Have fun, that’s what it’s really all about!!!
Thanks for the information. It was very helpful for me. I am a jewelry designer and sometimes I get my supplies for free or for .50 or .97 and if I use all my beads on making a pair of earrings that cost me $2.47. And it took me 30 mins to do…or less. How do u do the math for this one?
I make jewellery too.
When it was a relative my new hobby and friends and colleagues asked me to make things for them I started keeping a close eye on costs and charged them only the price of the materials. I decided to leave the day job and start making jewellery full-time on the day that I counted five of my colleagues wearing my jewellery.
I tried all sorts of pricing formulae. I’ve always kept very good records of my costs so I had a good basis for pricing. My friend Anne also makes jewellery. Her approach is completely haphazard. She just makes a piece and decides on the price according to how expensive the piece looks! s
After applying all the formulae I have come round to Anne’s approach to pricing. I calculate a break-even price which includes costs of materials and overheads like fuel, premises, insurance, membership of professional organisations etc, and the pitch fee if I’m selling at a fair. I will not sell for less than this price under any circumstances; I would prefer to take the piece home and break it up to remake. Otherwise the price is set according to how expensive the piece looks and what I think the venue can sustain. I research similar pieces online and in local shops and sometimes my prices are higher or lower but I always know that my jewellery is well made from quality materials and I can justify my price.
It has taken me a long time to have confidence in my prices but I got an object lesson in perceived value when I was selling at a fair a few years ago. I had just learned to solder and been practising by making little silver rings. They were simple, round, a little texturing and I put them on the stall at £2 each. There was no interest at all in them. Then the legendary Anne came along, gave me a lecture on pricing and respecting my own work, took the £2 sign away and replaced it with £10. Three of the rings sold in quick succession. I overheard someone saying, “only £10!” Underpricing can lose you as many sales as overpricing.
I wish you well x
So, in an effort to figure out how I should be pricing items that I make for future sale, I came across this formula: (Costs of Goods + Labor) x Overhead = Price.
Well let’s just see how this works out on my current project. I am making a baby sized hand knit afghan from commercially produced yarn. It is supposed to take only 1 one pound skein of yarn. The yarn cost $9.99. It’s going to take me roughly 25 – 30 hours to knit it. Now, if I pay myself Federal Minimum Wage, which is $7.25 (I think), that makes the labor costs somewhere between $181.25 and $217.50. On to overhead.
Overhead is basically going to be a small percentage of my electric bill and my mortgage as well as a few other odd and end costs. My total monthly mortgage and electric bill combined are about $650 (this varies due to changes in the electric bill). I figure in a 2% use of this cost as overhead. That’s $13.
Back to our original formula: (Costs of good + Labor) x Overhead = Price. My cost of goods: $9.99. Labor (we’ll figure on the low end): $181.25. Overhead: $32.50. Let’s plug that all in and see what we come up with as the cost of the final product: (9.99 + 181.25) x 32.50 = Price. Remember order of operations state we should do what’s in parentheses first. That means that 9.99 + 181.25 = 191.24. Now we’re supposed to multiply that by our overhead. 191.24 x 13 = 2,486.12.
Really??? According to this formula I should be charging $2,486.12 for a baby afghan? That is pure insanity! I know my time is worth money when I make things. I know my materials cost money to buy them. But over $2000 for a baby afghan?? I think I need a new formula…..or maybe richer friends wink emoticon . What say you?
Where it says 32.50 in the formula it should read 13.
I’m just confused
Question- I buy my items with coupons and an employee discount. Should I base my cost on the price I actually pay, or the base retail price? It won’t be much different for smaller items, but for big ticket items, it could price myself out of a sale.
People don’t seem able to multiply by 10% so the figures are coming out wrong. For example: cost of materials 10 ($/£, whatever), time to make 3 hrs @ 10 per hour, overheads 10% of total cost of item …. 10 + 30 = 40 × 10% = grand total 44
Thank you for the information, and for the concise no nonsense way you stated it. I think the asvice you give about including “overhead” is very important.