Before the holidays hit, and your shop is all abuzz with gift givers looking for that perfect item, you might consider digging a little deeper into your pricing process. Wouldn’t it be a shame to sell all that stock and subsequently do the math, only to find out you don’t have any money left over to reinvest in your small business? So today, in our next Etsy Success Holiday Boot Camp post, I want to chat about reevaluating your prices.
Figuring It Out
Here’s a simplified formula, a good place to start:
Cost Price (Labor + Materials Cost) x 2 = Your Wholesale Price
Wholesale Price x 2 = Retail Price
How do you figure out your labor? Take the time spent creating the item (remember to include shopping for supplies, creating packaging, etc.) and multiply that by the hourly rate you’re going to pay yourself. Don’t skimp — be a good boss to yourself. Think of the time you’ve invested perfecting a skill or technique! Don’t know where to start? How much would a skilled worker get paid per hour? A web search can help you figure this out.
Maybe you don’t sell your work in brick-and-mortar stores, so you might be considering selling your work on Etsy at the wholesale price. Not so fast! If you do this, you’ll most likely be undervaluing your work and you won’t give yourself room to grow and offer wholesale work in the future. Perhaps you have a buyer who wants to purchase a large volume from you, such as gifts for wedding guests. They’ll surely want a discount, right? Or, if it’s the end of the season, what are you going to do with all those scarves? You want to be able to put them on sale for 30-50% off with no worries.
This formula doesn’t really get into the nitty gritty of running a business, but it’s a good place to start. I suggest hiring an accountant who specializes in small businesses to help you keep track of all your overhead expenses.
One last thing you should think about — what do you want to invest back into your business? You want to keep growing, right? Quit your day job one day? What if your sewing machine breaks beyond repair and you need a new one — a small business nest egg would come in handy, no?
How to Compete
Have you recalculated your prices and now have some self-induced sticker shock? You may have been trying to compete with mass-produced goods, or pricing your work at an amount that you could afford. Remember that handmade items have more value, and perhaps you should price for folks who have more disposable income than yourself. You are not always your target market. Your buyer is willing to pay more for something that comes straight from the hands of an artist. Price for them, not for everyone.
So how do you compete, or market your work to to the right buyer? Don’t be bashful. Point out right in that item description why your work is valuable. Give your buyers a good idea of the techniques you have mastered, offer an insight into your creative process or just let them know what makes that item unique (and how owning that item makes them unique, too). Remember to make your mystery and sell your story.
Sometimes I find myself contemplating an item as a gift, but it’s priced much lower than what I want to spend on that person, so I go hunting for something more expensive. Consider that your buyers are on the hunt for the right gift, not only now with the holidays just around the corner, but all year round. Who are they buying for and what price point are they aiming at? Would your work make the perfect wedding gift for a close friend? Would that item be $25 or $50? This works both ways — if you’re currently selling an item for $52, you might want to consider knocking off a few bucks if it means getting into the carts of buyers looking for gifts under $50.
Sell Less, Make More
I’ll let you in on a little secret. I nearly doubled the price on a popular ring in my Etsy shop. I did this over the course of six months because I couldn’t keep up with the demand. Did I sell less of this item? Yes. But I spent less time laboring at my workbench and made the same, if not more, profit. If you can’t keep up with demand that might mean you’re undervaluing yourself. Sometimes we are so focused on number of sales (I’m guilty of this, too) that we forget about maximizing our profits and valuing our time. I found that my design became a real treasure to those who were purchasing it. In fact, my buyers were now investing in the ring as an engagement ring — giving it the value and meaning it always deserved.
Give Your Voice Value
One very important element we often forget to factor into our prices is our unique point-of-view as artists, creators, designers or knowledgeable collectors. Why wouldn’t our buyers be willing to pay a little extra to own something special? Something we’ve been pondering and perfecting for weeks, months, years or decades. Your incomparable voice is the culmination of your creative life: your education, research, travel, dreams, personal experiences. This is valuable, so give it value.