Sticker Shock

While I knew on some level the price of silver and gold had been rising over the last two years I was not quite ready for how truly high the price had gotten.

I've designed several new pieces in the past few days and I'm super excited about them. Unfortunately, after pricing them out I'm a lot less sure that they are "good enough" for the price they have to be due to current silver prices.

Of course, I'm pricing based on the current cost of materials...in other words, what it would cost me today to replace the materials I used in each piece. Even though I did not pay $40+ an ounce for silver two years ago I realize I have to be able to replace my supplies. It's a painful process.

The same piece I may have priced at $50 two years ago may need to be up toward the $75 or $80 mark now, if not higher.

I can understand why there are so many people no longer using silver as a foundation of their jewelry. They can't afford to buy the metal and people can't afford to pay a fair price for their work. If I put $40 worth of silver into one piece I have to charge at least $120 ... and realistically $150 or more to account for wholesale pricing. That $40 in silver does not include my time and I've decided I deserve to get paid more than minimum wage at this point. And it does not include any other extra things like accent beads. And yes, I have used a full ounce of silver in a couple of pieces. It's not hard to do when using thicker gauges and PMC.

My hope is that I'll be able to combine a combination of hand forged metals, PMC, and beads to have affordable price points for everyone. I have a feeling though with my own expensive taste in materials that my jewelry may reach a price that even my mom will find too steep.

Profit is Not a Dirty Word

The latest Jewelry Artist magazine had a fantastic article about pricing jewelry. All too often we jewelry designers (and other Artsy folks) price our work much too low. I'm guilty of it for sure, and I see it on Etsy all the time.

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:

1. 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.
   


2. 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
   ~ Vacation
   ~ Sick Leave & Disability
   ~ Retirement
   
   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?"



3. 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.
   


4. 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."

I highly recommend taking a look at this month's issue of Jewelry Artist (February 2010) and read this article. If your goal is to make money and a living from your jewelry (or for that matter any sort of craft) it is important to value your work. If you don't, no one else will.

New Business Ideas Get Me Revved Up

I am so excited and my brain is going a thousand miles a minute. A coworker gave some people this really neat gift that she made. I've never seen one exactly like it out there in the crafty world so I told her she should sell them at our gift show next year.

Then I said she needs to set up a site on Etsy. I think she'd do really well! Of course I can't tell you what exactly she's doing but it's personalized and very affordable. =)

What are the first steps to take if you think you have a great idea that can be sold online?

First, research. Research. And research some more. I did not do this when I first started selling jewelry. As with most of my life, I jumped in with both feet without a second thought. In reality it would have been to my benefit to do research first.

Research the cost of supplies. Since her items will all pretty much be the same (with slight predictable variations) she can pretty easily estimate her costs. Knowing the cost to create a widget is vital.

Not only do you need to account for the precise cost to produce the widget, you need to think about the intangible costs...

• Power/Electricity - it costs money to turn your lights on and if you need other types of power it will cost that much more...and it can add up.

• Space - how much space will your work take up in your home? Or will you need to actually go out and rent space?

• Advertising - Business cards, fliers, and any ads you may take out can quickly add up. If you haven't factored in the cost of this into your product you may come up short of funds.

• Office Supplies - I go through a lot of pens. And order forms. Right now I am totally out and really need to go pick up more. They aren't super expensive but every penny adds up.

• Photos - Online sales can only be as good as the photos showing your widget. You should see some of the hideous photos I took when I first started. I cannot believe anyone ever bought a single thing from me (not that I had many online sales at first). I tried to pick a horrible one but this is the worst I could find...and it's a huge improvement from when I truly first started.And it costs money - real money and money in terms of time). A good digital camera is vital. For me, a photo 'tent' was a priceless investment as well. But it was an investment. You can build your own, but I could never make one as good as the one I bought.
  

Include all of the above expenses in the cost of each item. It doesn't have to be an exact cost for all of these intangibles, but they need to be accounted for somehow.

Once you figure out the actual cost of your widget you need to decide what sort of profit you want per widget. Some people figure out the hourly wage they want and then figure out how long each item takes to make.

Others just take the total cost of the widget and multiply it by a certain number. Sometimes two, sometimes three, it just depends on the person. The problem I find with doing it this way is not always accounting for time. Something that doesn't cost a lot in dollars may still take a long time to create.

I sometimes use a combination of the two pricing methods...figuring out a total cost and factoring in my time as well. I don't really want to work for less than minimum wage. =)

My juices are flowing now with ideas from my coworker ... and it's not even my business!

There are other factors to research and consider when starting up a new business but we can talk about those later.

Love These!

Okay...I'm not a super funky chick. I am very conservative in just about everything, including the way I dress and the jewelry that I wear. But I saw these Resin bracelets today being featured on Etsy's front page and was pulled in. They are gorgeous!



I do not understand how she can only charge $15 a piece. Seriously. I took a resin class a couple of weeks ago and did NOT like it at all. It is not an easy material to work with. I seriously ended up throwing away 99% of the pieces I made in the class. And I burned myself during class. I know some people are just naturals so Resinated must be one. I think she should be selling these for at the very least $30 each. I think she'd even sell more at that price...perceived value and all that.



Each of her hand crafted resin bracelets requires filing and polishing. Plus they are just fabulous!

Charging for your time is a very important aspect of pricing that many artists don't account for when thinking about their profit. Sure an item may only "cost" you $2 to make. (Just an example, I have no idea how much her resin bracelets actually cost to make.)

That is $2 in materials outright. Now ask yourself how long it took you to make that item. I've made some very complex pieces that didn't necessarily "cost" a lot to make but they sure took a lot of time and energy.

I harp on charging enough for your work because charging too little hurts you and other artists. Handcrafted work needs to be valued and the consumer sometimes needs to be reminded why it is worth it to pay a little more to buy directly from the artist as opposed to shelling out less at Target or Walmart for something mass produced in China.

Think about alllllll the other random expenses that we don't always consider when creating our pieces. I have invested money into so many things that don't factor in to my final "cost" of an item.

For example:

• Business cards
• Advertising
• Professional Memberships
  
• Tools Purchased (I have almost more tools than hubby)
• Storage Containers and Bins
• Plastic Bags for material storage
• Work Desk and space taken up in my home (this does have a value)
• Electricity used - not just light...when I use my drill or kiln (if I had one) and Tumbler, it takes electricity
• Materials used that are hard to price like Liver of Sulfer and Solder that are hard to price per piece
• Pens and Receipt Books
• My Digital Camera
• Time spent Photographing and editing photos
• My laptop
• Internet connection
• Magazine Subscriptions related to my craft
• Classes I take to improve or learn new skills
• Oh and TIME

I'm sure there are tons of other things that people spend money on and don't take into account when pricing. I didn't even include packaging - that's another issue all together.

I know I'm guilty of not remembering to factor these costs in sometimes as well. But when you really write out all the things that "cost" us as artists you may realize that you're not making as much of a profit as you thought.

Perception is Everything

Etsy is a wonderful community of talented people creating and selling handcrafted (and some vintage) goodies.

As much as I love the variety, one thing that drives me bananas is the tendency for artists/crafters to under price themselves. Handmade products have MORE value to me than something cranked out in a nameless/faceless factory. And I believe that if we, as artists, do not value our own work, then how can we expect buyers to appreciate it and pay for it?

Take for example this lovely ring made by Beads in the Belfry (love that name!). It is made with sterling silver wire and a flower of Shianna Hill Tribe silver (not cheap), and a green Aventurine stone. These are all very good quality materials and, with the price of silver bounding towards $17 an ounce, they aren't cheap.

Nina is currently charging $19 for her ring. I have suggested to her that she raise her price. One reason is the materials - while it may not be a LOT of wire being used (and she may have bought her wire when the market was closer to $14 an ounce) she needs to remember that when someone buys all her rings - she will need to buy more silver at the current market value - which will inevitably be higher than when she first purchased.

Not only that, but while the "materials" include the silver and the stone, there are other costs that aren't so tangible. Business expenses need to be factored in as well - business cards, receipt books, tools purchased to create, time spent educating one's self, internet charges, advertising (time and money) Etsy and Paypal fees, and on and on and on. These things add up.

My second reason for suggestion she raise the price is perceived value. If I see something, let's say a pillow, that I like and someone is charging $20, I consider it a 'good' price but I will keep looking. In fact this actually happened to me at Christmas. I kept looking and found a $40 pillow and bought that instead. Why? Perceived value.

I'm sure the $20 pillows I found were just fine, but to me as a buyer, a person only charging $20 is either just starting out or not serious about their business.

For this ring, $19 is not enough for a highly perceived value. It should be at least $30 for a buyer to perceive it as valuable. Nothing about it has changed except perception.

I am not saying that people won't overcharge or price inappropriately for the materials / time. I have seen rip off prices too. But the biggest issue I see on Etsy is underpricing.

What's It Worth?

Ahhhh...pricing. The age old delima. It's a surprisingly touchy and personal subject. I am shocked by how personal some people take their pricing and any criticism or questioning about how they figure their prices.

Jewelry pricing is a tough one - especially handcrafted jewelry. You can find people selling handcrafted bobbles for as little as $1 up to thousands and thousands of dollars. Who is to say who is correct? If it works for them and they are able to sell why does it matter what they charge?

I think it does matter though. While I am just one random person in the universe and my opinion matters about as much as that rock outside, my views on pricing have changed drastically over the last few years.

When I first started creating jewelry to sell I worked with glass and base metals. I wasn't shopping carefully for wholesale - I just went to the local bead store and bought what caught my eye. Selling a pair of glass and base metal earrings for $5 when you first start out isn't completely unreasonable.

One thing I didn't think about when I was selling those $5 earrings - Are the people buying $5 earrings the same people I want to target in two years? What about when I start using sterling silver, or gold, and gemstones? The type of customers who want $5 earrings aren't as concerned about the type of materials I use - they just want a cheap pair of cute earrings. There's nothing wrong with that, but spending time building my customer base with these people doesn't make a ton of sense.

Additionally, it never occured to me that while the materials going into the earrings may have cost me $1 out of pocket, there are tons of other expenses that aren't as tangible - "Overhead."

Things to consider when figuring out prices:

• Electricity - Yup - it takes power to create. Lights, drills, tumblers...stuff takes electricity to run and help you create
• Rent - Sure you're working at home but you're using space in your home that would otherwise be used for something else. If you were to try to create elsewhere you'd have to pay rent. It's not free to use space at home either.
• Tools - It takes quite a few tools to create good jewelry. My husband swears that I do not need one more hammer. He's wrong. I have all sorts of pliers and cutters and hammers. They cost money. And I use them to create my jewelry.
• Mileage / Wear & Tear - Whether it's driving to the post office to mail orders or driving to the local bead store for that emergency bead run, you put mileage on your car. It counts.
• Shipping - Do you factor in the shipping costs from the bead store to you? I didn't. If I bought a strand at $10, that's what I thought it cost. Well, duh...if I ordered 10 things and shipping as $10 I need to add $1 cost to each thing I ordered.
• Packaging - Whether you put an item in a small plastic zip lock style bag or you have gone out and had silky personalized baggies created, this cost needs to be recouped. Then there's bubble mailers or boxes, bubble wrap, tape, tissue paper, gift boxes, etc. It adds up.
• Show Fees - Do you do shows? I hate them but I still do them. It costs a lot - it's not just the show entry fee. You have tables, table covers, canopy for outdoor shows, receipt books, pens, display items (busts, earring stand, etc.), and the list goes on and on. I'm always shocked how much stuff I end up bringing to shows.
• Website - Do you sell online? Did you pay for your website? I did. It's not cheap (although for me it was soooo worth it). Even if you have a "Free" site (a friend or family member, or even you, created it) it's not free. You, or the creator, spent TIME making your online storefront. Then there's upkeep and maintenance. Oh and the cost just to connect to the Internet - don't forget that. Nothing is ever "free".
• Photography - Take a picture, it'll last longer. But getting good photos is HARD! It requires a digital camera if you're going to do it yourself. Then you need time to learn and take good photos...which can take years. Don't forget photo editing software. And the time it takes to edit photos - which can range from 5 minutes to an hour for each photo. Don't even get me started on hiring someone to take good photos for you - it's worth it but your jewelry has to be priced higher to help pay for it.

I'm sure there are even more overhead type expenses I could come up with if I thought about it longer. But I think this list is pretty good. I don't see how anyone could really figure out a per piece cost from all of that, which is why it's so hard to factor overhead into our pricing - even though it is really important.

I think I need to go raise my prices now. That list depressed me!

Want more? Visit Rena's Home Jewelry Business Tips on Pricing. She's got some great articles. Eni Oken also has a price calculator you can use as a guide for pricing your work.