Navigating the New Normal – Pricing your Products

A New Blog Series for Creative Business Owners

As we prepare for our new normal and do our best to embrace the changes of the past two months, CPiF has started a new blog series to help our community navigate this uncharted territory and face the challenges ahead. 

Many of us with small businesses and artisan workshops rely heavily on the foot traffic of tourism and the student population. With the future of those industries still unclear, we must prepare for a difficult year ahead.

While some of us sell directly to the public, others have created relationships with wonderful tour guides and personal shoppers who make it a priority to showcase locally handcrafted products and bring their clients to our spaces. Many of us also sell our goods at fairs, shows, and markets, most of which have been postponed for the foreseeable future. 

So what’s next? For many of us, selling online is where we will now be focusing our attention. 

We have reached out to a few seasoned online sellers as well as marketing and social media professionals, and photographers who have generously offered their expertise on the topics that artists and designers struggle with most. We are also offering a bit of our own experience that we have accumulated over the years working as professional artists and designers. 

Today we are going to start with the basics: pricing — one of the most difficult parts of selling our products and artwork. We asked the talented jewelry designer Joy Franklin from A Thousand Joys for some insight on this elusive topic. Joy has been running her business for over 10 years and makes a large portion of her sales online though her Etsy shop. Her jewelry has also been sold on althropologie.com as part of their curated seller section of handmade products. 

Here is Joy’s fantastic advice on how to approach pricing. 

PRICING 101

Pricing for me was one of the hardest things to learn when starting my own business. It can be really overwhelming putting into numbers all the time and energy you put into making something. I mean, how do you put a price on doing what you love? It seems like this super well-kept secret that no one likes to talk about and no one wants to teach you.

It’s one of my biggest complaints about art schools. They spend years teaching you techniques to make art, but they don’t teach you how to sell it. They send you out into the world with no tools for making living as an artist. When I was first about to open my online shop I spent months researching online trying to figure out how to do it. 

One of the most important things I learned is that you need to start out already thinking big, and price your work from the beginning as if you were going to wholesale. You have to be ready for the day a store comes to you and says they want to sell your work. They may only be paying you half of your retail price, but you still need to be able to make a profit. This also helps keep things fair within your market. It’s important to keep in line with what similar items are going for. If you go and sell your work for half of what others are selling for, that only depreciates the whole market.  

*PERCEIVED VALUE 

You can’t price compete with cheap junk made in China, there is just no comparison. The art of handmade work is already dying, so if we artists price ourselves out we’re doomed. Luckily there are still people searching for truly handcrafted artigianale work who are willing to pay for the love and energy that goes into it to help sustain it.

THE FORMULA

Everyone has a slightly different formula for pricing their work, but they all have the same basics to make sure you cover all costs to make a profit and leave room to grow. You have to factor in everything to make sure you are getting paid for all the time you put into a piece, not just the actual making of it, but also the time you spent designing it, photographing and editing, walking to get supplies, etc. In this way, as you grow in the future, you could even hire someone else to do some aspects of your business.

The basics that need to be included in your pricing formula are: 

• Cost of materials used to create your product, including tools and supplies. 
• Labor/workmanship: This is non-negotiable and a very important part of pricing! Don’t cheat yourself, as you might have to hire someone else in the future. To get an idea on what to pay yourself, do research and see what similar jobs in your area are paying their workers per hour. Once you set an hourly wage, time how long it takes you to make one piece, and this will give you your labor costs.
• Overhead/expenses: rent, utilities, website fees, etc.
• Profit: the margin needed to reinvest in your business. Without profit you can’t invest, grow, or take a break from your business. Even if you’re doing what you love everyday, you still deserve a vacation once in a while!

Once you have these basics figured out, you can play around with a formula that works best for your business. 

Here’s s breakdown of what a basic, simplified pricing structure looks like: (by the author)

COST OF MATERIALS INCLUDING TOOLS AND SUPPLIES

• Materials – €2 
• Supplies – €2
• Tools  – €1 
• Total cost= €5

LABOR  

Let’s say you decide to pay yourself €10 per hour and it takes you 2 hours to make a piece that = €20 for your labor cost  (this is hypothetical and not a suggestion)

OVERHEAD/EXPENSES

Rent – if your rent cost is €250 per month + another €100 per month for bills and fees, that’s €350 per month which, breaks down to €11,66 per day. If it takes you 2 hours to make a piece, that breaks down to €.097. ( You can also decide to calculate this by dividing it by the number of hours per day and number of days per week you spend in the studio. We did this divided by 24hrs based on 30 days)

PROFIT/MARKUP

When selling wholesale, vendors are going to need to mark-up your prices 2.5 times what they are buying it from you for, and remember you still need to make a profit, therefore you will need to markup your prices twice. Once to get your wholesale price and again to get your retail price. It is important to remember that you should not sell your work to the public for less than your retailers are selling it to theirs, its bad practice and makes your retailer look bad and it is unlikely that they will purchase from you again.

• Materials (€5) + time (€20) + overhead (€0,97) = €25,97 is your item cost 
• Item cost (€25,97) x 2.5 = €64,92 is your wholesale price 
• Wholesale price (€64,92) x 2.5 = €162,31 is your retail price 

This will take some getting used to in the beginning but it becomes easier and more intuitive over time. Of course you can also round your numbers up or down. We hope that this helps!

*FOOTNOTE FROM THE AUTHOR:

This brings up an excellent conversation regarding perceived value. As artisans, if we attempt to price our work in competition with mass produced, cheap goods, then our public will believe that our products are not of high quality. We are charging a higher price because there is VALUE in our time, skills, and extensive knowledge of our materials. If you sell something for less than it’s worth, you are saying to the world that handmade products are not worth the prices other artists are charging. 

Often when our products don’t sell we automatically believe that it’s because our prices are too high, however, many times it’s the exact opposite. It may very well be because they are not priced high enough. People come to artisans because they are looking for value and quality, when your prices are too low it sends the message that quality is lacking in your product. I realize that this may feel uncomfortable in the beginning but remember that all growth happens when we step outside our comfort zones.

As a small business owner myself, I know that there will be times when you will be asked to explain your prices, and that’s OK! Part of our job as artisans is to help those who may not be familiar buying one-of-a-kind products to understand the amount of work that goes into each piece.

We have an opportunity in this case to educate people about our process from start to finish. The more people know about each step that goes into creating the piece they are interested in, the more they will appreciate it and the more likely they are to make a purchase. Once again it goes back to the conversation of perceived value.

HOW TO HANDLE PEOPLE ASKING FOR DISCOUNTS 

While you may not have to deal with this as often while selling online, you may still encounter it from time to time. I’ve had to deal with this often in the store when selling to the public and I have found that a good way to handle this is by again, explaining the work that goes into creating each piece, but also by simply saying, ‘I really wish I could but my pieces are already priced as low as possible’. Sometimes I will offer a small discount if they purchase a second piece. I try to be as nice as possible but if they keep insisting, I let them go. They are not my customer. Period. Don’t let other people control your worth or your prices.

If you start lowering your prices people, will begin to think that you’re not worth what you were asking in the first place. I know how hard it can be to let a sale go, believe me, but I know another customer will come along who appreciates my work and is unquestionably willing to pay for it.

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