When Hana Brewster first started selling on Etsy, paying herself wasn’t a top priority. In fact, she wasn't sure how much she was paying herself — or if she was paying herself at all. “I just kind of winged it,” she says. But as her ceramics shop, Quiet Clementine, has grown, Hana has had to refine her approach to personal profit. “Now I make sure to calculate how long it takes me to make a product," she says. "And I pay myself based on the number of hours I spend working.”
When you’re a solo entrepreneur, making an investment in yourself is also an investment in the long-term health of your business. When you’re first starting out and sales aren’t steady, paying yourself might not seem feasible. However, understanding your expenses and your labor costs can help you set more accurate prices. Paying yourself for the time you put into your business can prevent burnout by keeping you motivated. Plus, it can help prepare you to meet future financial goals, such as investing in a new piece of equipment or renting a studio space.
“The more you know about where your money is going the better, even if you choose to leave that money in the business,” says Graham Ashcraft, an Etsy staff member who teaches seminars on pricing for shop owners.
Are you paying yourself enough for the time and skill that goes into making your products? Here's how to develop a pricing strategy and make sure you get paid what you deserve.
Value your time
Whether your Etsy shop is your full-time job or a passion project, paying yourself enough for the time you spend creating, shipping and providing customer service is important. “You don’t want to get to the point where you feel like all you do is make other people happy with your creations, but aren’t making yourself happy with proper wages,” says Hana from Quiet Clementine. “Paying yourself for your time and creative talent gives you the freedom to continue making, grow your business, and create the life you want to live.”
Christina Misic of leather-jewelry shop Boo and Boo Factory in Chicago, Illinois, tracks the number of hours she puts into her business, sets an hourly wage for her time, and builds that into her prices for each item. For example, Christina knows how much time it takes her to cut the geometric leather pieces that she turns into statement necklaces and adds at least $30 for each hour of her work into her prices. For more elaborate pieces, like her hand-painted leather clutches, she might pay herself $45 or $50 an hour. This wage is included in her prices, in addition to material costs. The “right” wage will be different for everyone. Christina defined the amount she wanted to be making from her shop by looking at what she was giving up. An architect by training, she wanted to make sure she could earn enough from her Etsy shop that she would be satisfied not pursuing a career in architecture.
Labor, materials and shipping supplies should all be accounted for in your cost of goods sold, the total cost of creating an item. Use this template to calculate the cost of goods sold for each of the products you create in your shop.
When you set an hourly wage for yourself, improvements to your workflow mean more money in your pocket. For example, Christina used to cut the unique leather shapes for each of the pieces of fringe that go into her earrings. Now, she cuts the same three shapes for each pair, which means she can make more pairs in the same amount of time.
Value your skill
If you haven’t been paying yourself enough, you might need to increase your prices to account for your time and labor. It’s a process that can make some Etsy shop owners feel uneasy. You may think, “I wouldn’t pay that much for this item,” but you may be doing your shop a disservice by underpricing your items. “Sellers have to remember that they might not be their shop’s target customer,” says Christina.
Most shoppers don’t come to Etsy looking for a deal. They come looking for uniquely designed items. “If the price makes you a little uncomfortable, you’re probably on the right track,” says Christina. When thinking about prices, it's helpful to brainstorm a list of the features and benefits of your product. Features are things that your product will do for a customer and benefits are the added value your product will bring to customers’ lives. For example, a feature a leather clutch from Boo and Boo Factory is that it is 100% handmade, right down to the painted design. The benefit that comes with owning this clutch is knowing you have a stylish edge and will attract compliments from your friends. Now ask, “What are these features and benefits worth?” Thinking about all the things that make your product special can help you get over any discomfort around charging higher prices. Use this worksheet to help identify the features and benefits for one of the products in your shop.
Increasing your prices is not the only option you have to create more profit in your business. Introducing a premium version of your product with a higher price point can allow you to sell fewer items but make more on each sale. The price of a product also sends a message to shoppers about its quality. Too low a price might signal to buyers that the product is of poor quality. When Christina began pricing her larger statement necklaces at more than $100, she worried people wouldn’t buy them, but the higher prices have actually helped her sell more. “I value my work and put myself out there as an expert and an artisan,” she says. “My buyers know that, whether it’s a $20 pair of earrings or a $200 necklace, it’s going to be good quality.”
Keeping track of your expenses, charging prices that take into account your unique skills and paying yourself for the time you invest in your shop all contribute to the financial health of your business. When you pay yourself enough for your time and skill, you’ll be extra motivated to keep working toward your long-term success.
Words by Taylor Combs
