Though I've been selling my jewelry semi-seriously for the last five years, this article brought to my attention some things that I truly never considered about pricing. And while it's fairly specific to jewelry, I think the concepts apply equally to other artistic endeavors.
The article outlines four parts for pricing:
- Supplies - the easiest portion of cost to calculate since supplies are a fixed cost that can be added up for each piece. Although I do find it difficult to calculate the cost of PMC and wire.
- Labor - to me, the most difficult piece to calculate. What am I worth? What is my time worth? Should I make minimum wage? I sure don't think so ... maybe when I first started but I think I've worked my way up beyond that now. But something I never considered about labor - all the costs that I would incure if I paid someone else:
~ Health Insurance
~ Sick Leave & Disability
And, when you work for yourself you're supposed to pay self employment taxes (although I think for artisans/crafts people this is a little different, I'm not entirely sure how it works).
"Keep track of all the time you spend making a piece, but don't base your labor cost on that first piece ... After you've made about 10 of the same or similar pieces, start the clock. Multiply that time by your hourly wage for your labor cost. If it seems high, don't start cutting your hourly wage unless you know it's more than it should be. Instead, look at your time. How can you simplify the design or streamline your process?"
- Overhead - I've written about this particular piece of the pricing dilema before because I think it's almost as overlooked as labor. There are many intangibles that artisans overlook in pricing.
"...paper towels, shipping boxes, and packing materials. Overhead also includes expendable items that you use for all your work and that much be replaced: investment, gas for your torch, buffs, compounds, solder, saw blades, flux, beading needles. Figure out how long tools should last you ... divide the tool cost by the expected lifetime and add that percentage to your annual overhead. Total your overhead for the year and divide by the number of hours you put into your business in a year. Then when you have this hourly a mount, multiply it by the number of hours it takes you to make a piece..."
It's a little overwhelming, but as the article states, if you are losing money and aren't sure why, it might have to do with your overhead.
- Profit - the last piece of the puzzle. So many people, especially in the artisan world, think that profit is a dirty word. It is NOT! We all deserve to make some money and if we can do so doing something we love then all the better.
"You do want a vacation, right? Or retirement? If you forget to figure this in - whether it is 3% or 150% of your costs - you may as well work for someone else."