How much should I charge for Craft Items?

How much should I charge for Craft Items?

Author : Michelle Willliams

How much should I sell my Products for?

I'm just doing this quick video because I'm getting quite a lot of questions about how to price handmade items, how to calculate product costs and how much to charge for Handmade Craft Items. So, I would just like to give you a quick demonstration on how to price crafts and things you make to sell.

This demonstration, is specifcally for my Craft Ecademy Customers and people who are interested in starting their own Baby Hand Casting or Keepsake Jewellery Business.  However, the information that I will be sharing in this video is relevant for any Crafter or Handmade Business, who is looking to understand how to price handmade items, crafts and things you you make to sell.

How much should I charge for my Craft Items?

In repsonse to your question about how to price your craft products, let me set one thing straight.  Quite Often people tell me, that they have no pricing strategy at all and are simply copying their competitors pricing. This is a big mistake on a number of levels:

  • How do you know that your competitors have calculated the correct pricing themselves?
  • Have your competitors accurately calculated product costs?
  • You should never force yourself into the position of competing on price.
  • By competing on price you are not factoring in time or material costs or valuing your time.

Never make the mistake of basing your pricing strategy on what your competitors charge. It's important that your pricing strategy, is a well planned and thought out process, which should be part of your overall Business Planning Strategy.

How do you calculate product Costs?

I just want to illustrate, some of the things that you should consider, when calculating product costs and thinking about how much you should sell your craft items for.  In this video, I'm going to share my screen to bring up a spreadsheet I've created, to help calcuate products costs and work out how much I should sell my products for.

Let's assume that you want to calculate your product costs for baby hand and feet casting to determine your pricing strategy.  

  • Break down your product into component costs.
  • Review all the raw materials that go into making the product
  • Calculate the quantities of all raw materials used per product
  • Calcuate the cost of each of the raw material
 
Calcuating your product costs, needs to be a strategic exercise, as part of your overall business planning strategy.  You will need to review all elements of your business, i.e, Who are your suppliers? What materials are you buying from them? What price are you buying at? etc. So, in this demonstration, I'm just giving you a very small overview of the financial planning process, that you should conduct at the very start of your business and on a regular basis.
 

How do you Price Crafts and things you make to sell?

 
Once you have worked out the individual component costs and calculated the cost to produce a particular item, you then need to factor in your time, i.e how much time does it take for you to make this product? This is really important, because a lot of Creative Entrepreneurs undervalue themselves.  They don't factor in the amount of time that it takes them to make their handmade items. in doing so, they are underselling themselves and their business potential.
 
You need to think about, how long it takes you to make each product and the hourly rate you would be happy to be paid for your time and talent. Then think about percentage profit you want to make over and above your time and material costs.
 
When determining how to price handmade items, you should do this in conjuction with the Competitor analysis, that you should already have done, as part of your wider Business & Financial Planning. i.e you need identify and understnd your strengths, weaknesses and unique selling selling points, in relation to your competitors. You also, need to review your competitors pricing, to see how your own pricing compares.  You never want to simply copy your competitors pricing, but you do need to be aware of it and your own advantages and disadvantages over your competition, so that you can reaffirm that your pricing is justified, both from a sales and profitability perspective.
 

How to justify premium pricing?

 
When comparing your own pricing to competitors, don't refrain from setting your prices higher than your competitors. So long as you are clear on the reasons why your products command a premium and this is reflected in your branding, you can easily justify higher prices.  Customers will always pay more for premium products and services, so long as this is reflected in your Branding, as follows:
 
  • Identify the features of your products & services, which are high-end and highlight those elements in your marketing, i.e this might be the frames that you use, the backing card, your packaging etc. (What will be your wow factor?)
  • Highlight your differentators across your branding and marketing efforts.
  • Explain the value to your customer and why it's worth the extra money.
  • Offer something different in the product or the services you offer, that your customers will percieve to be of value.

It is never a good idea to highlight the weaknesses of a competitor, as a means to justify your pricing.  You will have far more success with premium pricing, if you concentrate on creating value in either your products or the services that you offer, which then make your products worth the higher price. 

Benefits of Premimum Pricing

There are many benefits of charging a premimum over compettitors prices. Here are a few:

  • Increases the pereceived value of your brand
  • Produces higher profits
  • Creates additional revenue for advertising
  • Extra profits and advertising costs helps to fend off competitors

Sales Forecast Planning

Once you have calculated your product costs and your product pricing,  the next thing you will want to do is a sales forecast to calculate how many products you will need to make and sell, per day, week, month and year to reach your desired income. This needs to be done as part of your entire business planning process.
 

Marketing Planning

 
Once you are clear on how many products you need to make and sell per annum to reach your targets.  You then need to create a detailed marketing plan to show what marketing and promotional activities you will engage in to make your sales target a reality. As you can see, working out your product cost and prices, is a small part of your wider business planning.
 
Business & Financial Planning is a big topic and not something that I can go into detail during this short demonstration. However, it is something that you need to be conscious of.  If you would like any more help with Business Planning and would like to gain access to the use of the spreadsheets I have demonstrated with here, you can access them on my Business Planning Course or as a member of Victress Entrepreneurs.
 

Links

http://go.thecraftecademy.co.uk/creative-home-business

http://go.thecraftecademy.co.uk/timeandfreedom