Every business owner out there sells something or other, but then there are the makers. At Shopventory, we're lucky enough to have clients all over the world who are truly makers—of everything from watches to screen-printed art. When you work your behind off to create something truly one-of-a-kind—how do you possibly put a price tag on that special handmade product?
To price this tricky (but amazing) type of inventory, try this simple formula from Etsy:
Materials + Labor + Expenses + Profit = Wholesale x 2 = Retail
Materials: Include all your most insignificant materials, packaging, shipping, etc. for each item. It adds up!
Labor: What would you (or do you) charge per hour? Multiply your hourly rate by the hours it takes to create each item for your labor cost.
Expenses: Include studio rental, utilities, repairs, web hosting, office supplies, product donations, promotional materials, advertising, meetings with wholesale clients, gas to deliver products, processing fees for PayPal Here or Square, and every other cost to run your business. Divide those monthly costs by the number of items you sell each month (or plan to sell) for your expenses/item cost.
Profit: How much profit would you like to make on this product? Be honest. Don't be stingy with yourself.
Add the above up to get your wholesale price. Multiply that by two for your retail price. Easy-peasy.
Higher prices can either turn customers off or turn them on. Your packaging, branding, quality of work and price will determine the perceived value of your goods. Pricing your products too low can make your customers question the value, so try to find a happy medium. When in doubt, estimate a little high. MAKE zine cites a the owner of a wedding stationary shop that raised her prices in order to focus on what she thought would be fewer clients. Instead, pricing herself as the most sought-after designer in town made her the most sought-after designer in town.
Is your craft your full-time job? Do you want it to be? Here's where that old saying comes in: Dress for the job you want, not the job you have. Price for the business your want, not the business you have. Yes, you might still be sending dozens of free lotion samples to beauty bloggers to generate buzz and build your client base, but it also means that you are confident enough in the quality of your products that you will charge your friend's cousin's dentist full price.