Pricing for a profit

Since I started say it in September, it's been a steep learning curve. And as I learn about different aspects of running a business I like to share them, just in case it will be of use to you too. Something I've been thinking quite a bit about recently is pricing. I'm trying to make money so I want my prices to be high enough to bring in a profit, but if I price items too high they won't sell. I'm sure everyone who tries to sell their handmade items struggles with this at some point.

I've done a fair bit of reading and digesting what others have to say. There's quite a lot of helpful information out there when you start to look. There's an interesting blog post and discussion on The Crafty Network about pricing your crafts that's well worth a read.

It seems that there are three main ways that people work out what price to charge for an item:

1. Research how much similar items sell for and price it within that range
2. Decide how much you would be prepared to pay for your item
3. Work out the cost of the materials used, plus an hourly 'wage' for your efforts

The problem with options 1 and 2 is that often the price that seems reasonable doesn't take into account the cost of the materials or the amount of time that the product has taken to make. Many artists/crafters/designer-makers tend to end up under-pricing their work this way. It's not too much of a problem if you're not aiming to make much of a profit or bring in an income, but it's not a business mindset.

When option 3 is used, the calculated sale price for the item can end up so high that you just laugh at it. This is particularly the case for crafts that take a long time. If you made a crochet blanket and the wool cost you £15 and it took you 5 hours to make (I have no idea if this is realistic, I don't crochet this is just an example!) you might calculate the final price to be £15 + 5 x £6.08 (the current minimum wage) = £45.40. But then you think to yourself £45.40! No-one's going to pay that for a little blanket!

The common element to all three options for pricing your items is that they begin with the finished product. You've made a lovely bag/card/cushion/bowl and now you'd like to sell it. I want to suggest that this is possibly a backwards way of doing it, particularly if you are trying to run a business and make a profit. Perhaps you should start with what you think is a reasonable price for your idea for what you would like to make. Then think about how much you could afford to spend on materials, and, pricing your time, how many minutes you can afford to spend making it. Nine times out of ten you'll probably work out that you can't make the item quickly enough, or you can't buy the materials cheap enough, to be able to make a profit. This is why I advise thinking about your pricing before you get out your sewing machine/craft knife/knitting needles.

For example, I make cards. I think they are lovely cards but realistically no-one is going to pay £5.99 for them. So I choose to price the majority of my cards at £2.20. It costs me approximately 62p to sell each card online. So I have £1.58 left to play with. My time costs me 51p for every five minutes I spend making (at the minimum wage), so if the card took 15 minutes that would be all of the money spent. I need to allow a little for materials. So, realistically, if I can't make the card in under 10 minutes and using resources that cost less than 56p, it's not worth making unless I am prepared to charge more for the finished product. And that's not taking into account any time I spend advertising the product, packaging it and taking it to the post office - you may also want to factor this in.

Think about the costs first, not last. If you want to run a business that makes money, design products that you know are going to bring in a profit (of course, there's also the small matter about actually finding people to buy them...!). Think about the margins before you start splashing out on those amazing buttons/fabrics/stamps. Buy them for yourself because you like them, but don't buy them with your business hat on unless you've worked out that you can afford them. I have lots of card designs that I make because I like making cards. They take me way longer than 10 minutes, and use lovely materials that aren't cost effective. These are the cards that I keep for myself to give to friends and family - they might be nice, but they won't bring in a profit so they're not headed for my shop.

Folksy Five #3

The more you look, the more amazing shops you find on Folksy! There are some very talented designers and crafters selling their work on there. Here are five more of my favourites. Click on the shop banners to head through to Folksy and browse their lovely handmade goodies.

Your name: Sarah

Shop name: Dottery Pottery

Describe the items you make in 3 words: fun, whimsical, quirky

How long have you been selling on Folksy: nearly 4 years

On average, how many items do you make in a week: between 20-40 but if it's a button week it could be 300-400!

What are your 3 favourite items from your shop:

~~~

Your name: Louisa Oakes

Shop name: Beady Daze

Describe the items you make in 3 words: bright, colourful and fun

How long have you been selling on Folksy: 11 months

Do you have a ‘day-job’ as well as running your shop: I am a primary school teacher - I usually do maternity covers, so when I am in-between teaching jobs I concentrate on my jewellery making

What are your 3 favourite items from your shop:

~~~

Your name: Melanie Green

Shop name: Feltmeupdesigns

Describe the items you make in 3 words: cute needlefelted birds

How long have you been selling on Folksy: 4 years

Where do you make your items: Sat on the sofa in my front room, usually watching Crime drama DVDs!

What are your 3 favourite items from your shop:

~~~

Your name: Di Keeble

Shop name: Di Keeble Beads and Jewellery

Describe the items you make in 3 words: Colourful, individual jewellery

How long have you been selling on Folksy: 4 months

What materials or resources do you use most of: I love to use polymer clay to make beads and pendants, and I particularly enjoy using inks and stamps with it.

What are your 3 favourite items from your shop:

~~~

Your name: Carly

Shop name: House of Handmade

Describe the items you make in 3 words: Fancy, personal, handmade

How long have you been selling on Folksy: 6 months

What materials or resources do you use most of: I use lots of swarovski crystals in all different colours – they sparkle so much more than the normal diamante crystals they really make a difference!. I also use a lot of sequins and chiffon ribbon.

What are your 3 favourite items from your shop:



And as usual I asked each featured seller to choose their favourite item from the say it shop. They chose:

Aquin dad card chosen by Dottery Pottery

Skiddaw button magnets chosen by House of Handmade

Rhodes map notebook chosen by Feltmeupdesigns and Beady Daze

Rapa Nui card chosen by Di Keeble Beads and Jewellery

Get 15% off

~ Special offer for all blog followers and facebook likers ~

Get 15% off at the say it Folksy shop when you spend over £5.
Quote code FB15% in the note to seller box at checkout and the discount will be refunded within 24 hours.

Please note that you must be a follower of the blog or have liked our page on facebook to qualify (but this is easily done if you've not already!).

The offer lasts until the end of July, so don't miss out on your chance to save. 

You could buy a birthday card

Or a notebook

Or a wedding card

Or some magnets

Or a necklace

Or absolutely anything from the say it shop. Just make sure it's over £5 and that you quote FB15% when ordering. 

Folksy Friday Giraffes

It's been a while since I've done a Folksy Friday and I've missed browsing Folksy looking for items that catch my eye. But it's ok, because this week I have had fun looking for giraffes! I don't know why, but giraffes always make me smile. And I've found some real cuties to show you...

As always, just click on a picture to find out more about the item. Everything is handmade and available to buy on Folksy.

Giraffe get well soon card Rosie's Illustrations

5 scoops high print Lisa Hunt Illustration Doodle Shop

Little Giraffe The Hunny Bunny Company

Felt padded giraffe Handmade by Sally

Giraffes hand drawn picture Tillypepperart

Giraffe lino cut print October Kiss

Baby giraffes pencil case Handmade by Edwina

Too tall giraffe canvas Original Art by Clare

G is for Giraffe Cloth Kat

Giraffe painting Winter Smoke

Giraffe amigurumi pattern Claire Sibley

Dreamy giraffe amigurumi pattern Quirky Crochet Critters

Giraffe baby bodysuit Zara Emily

Hello! Giraffe bib Nell

Newsletter June 2012

Here's a copy of the say it quarterly newsletter that was emailed out on 20 June 2012. If you'd like to join the mailing list, please email sayhi2sayit@googlemail.com with 'newsletter' as the subject or leave a comment below.