Seller Handbook

Advice and inspiration for successfully running your Etsy shop

A Simple Formula for Pricing Your Work

It's simple math: accounting for materials, labor, and expenses will allow you to reach your small business goals.

By Danielle Maveal May 14, 2012
Photo by INgrain

Imagine this: a beautiful jewelry studio, a soldering station, an anvil on a nice old worn wooden stump, a handmade jewelry bench, and on top of all this lie piles of finished pieces. Behind the bench sits a jeweler who has yet to sell a single one of her creations. What's holding this talented artisan back? From my years of listening to your stories, putting a price on your work is one of the most intimidating first steps to selling, and delays many from opening their shop. I'm here to share my favorite pricing formula with you, and to break it down so you have the confidence to get out there and sell!

Know the Formula

Here's my favorite formula: Materials + Labor + Expenses + Profit = Wholesale x 2 = Retail

I picked this up from the amazing Megan Auman. What I love about this formula is that your profit is properly accounted for!

Now let's go through every part of this formula and break it down.

-Materials Make sure to cover all your material fees. Often forgotten: the little things like the cost of thread, and the bigger things like the cost of packaging. If you're going to "guesstimate," err on the higher side!

- Labor If someone wanted to hire you and they offered you $7 an hour, what would you think of that deal? Be a good boss to yourself and do a bit of research. How much does a seamstress make in San Francisco? Find out! (Also remember, you're probably more than a seamstress – you are the designer, the marketing department, the accountant, the janitor, and the administrative assistant, too.)

  • Expenses Bubble wrap, that ebook  purchased at 3 a.m., studio rent, bus passes required to make it to the studio every day, a new scale for your shipping station. How the heck can you fit all these things into the price of a single item?

Here's a  way to do that:

  1. Jot down every expense you can think of — for example, include your Etsy fees, office supplies, rent or utilities.
  2. Next, come up with the number of items you'd like to sell a month. Divide that number into the total expenses.

Tip: Start doing two things to help you come up with an even more exact price:

  1. Track your expenses carefully so you can come back to this as you learn more about selling!
  2. Start figuring out the big investments. How many items can you get out of that sewing machine? How long will that postage printer last before it needs to be replaced?

- Profit

Think hard: where do you want this business to go? Do you want to quit your day job? Do you want to pay off a student loan? Accounting for profit now will help you get there. This number really depends on what you are selling, and will make up for someone like a printmaker, whose material costs are low, labor hours might be low, but should be paid for their unique talent and point of view! I leave this up to you. I'm trusting you here — don't disappoint me with a low ball number!

Bringing It All Together

All right, this gets us to our wholesale price. Some of you might wonder if you can use the wholesale price in your Etsy shop. Wouldn't this be a a great way to offer your work at an affordable price? No, no, no. Here's why I'm going to beg you to double your wholesale price and sell your work at a true retail price:

  • Selling your work at a wholesale rate undervalues those who price their work at the proper retail price. When the majority of sellers in a category price their work thoughtfully, the entire category benefits.
  • Customers will wonder, "Why?" Why is your work so much lower than everyone else? Is it because it's not handmade? Is it because you're using cheaper materials? Your price tells a story: make that story a good one!
  • You're putting yourself at a disadvantage.Let's say a big catalog reaches out to you and says, "We'd like to buy 100 of these items! Please let us know what your wholesale prices are." This is a big opportunity; an opportunity you can't afford to take.

Did you just come up with a price that you are sure the market won't respond to? Here's the trick: if the item is priced too high for the market, it's not the price you need to alter, it's the design or the way you produce your work. Get creative and see how you can adjust the item to reduce your costs. Can you buy your materials discounted in bulk? Can you produce the work in multiples, reducing the labor? Don't take the easy way out by slashing your prices.

Remember, the right prices will allow you to reach your small business goals.

What's your best pricing tip? Share your ideas in the comments.

Author

Danielle Maveal from daniellexo

Before working for Etsy, I also managed two jewelry studios/shops in Toronto and Detroit, and even had my own gallery in Brooklyn. Then I found a really cool website that allowed me to sell my own work. Within 3 months, I quit my job and ran an Etsy shop full time (I almost hit 1,000 sales before Etsy hired me!). I sold work in 30 galleries and boutiques worldwide and taught classes in goldsmithing, acrylic plastic and metal etching…

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