One question that I often get from new entrepreneurs in the handmade and artisan product industry is “how much should I charge”? Individuals who enjoy working with their hands usually love creating things for the pleasure that they get out of it and they often freely share the fruits of their labors with others. Designing and creating handmade products to give away as gifts and freebies is generally the norm for these individuals. Oftentimes they don’t even consider selling their products or goods until someone else suggests that they do so.
If they decide to heed this advice, they are typically confused about what rates to charge or uneasy about charging what they deem to be “high rates”. This is especially the case when they once gave away their items for free. Such decisions are even more complicated for people who are benevolent and charitable by nature.
Entrepreneurs and small business owners in this category are not alone. It’s not always easy knowing what to charge when you have little to no experience in operating a business. This is why it is important to do some research and soul-searching before putting your products on the market. Doing some preliminary work will make the process much easier now and in the future.
I have compiled a list of some items that I often encourage my clients to consider when they are trying to price their goods. These suggestions may also help you in your handmade business journey.
The first step to accurately and fairly pricing handmade products is to check the market value of the goods. This step is essential and should never be overlooked. It is generally not a good idea to arbitrarily choose a price for your products. You could be making a costly mistake by doing so. Keep in mind that the value of any product is based on what the buyer is willing to pay.
If you overprice your goods, you may make a few sells but you will probably lose out on greater revenue in the long run. If you under-price your goods, you will be selling yourself short and possibly take a major loss in your business over time. However, if you price wisely you will most likely realize a steady stream of income for years to come – assuming your product meets quality, value, and other standards.
Market price evaluation is very simple. A quick Google search will often yield an abundance of products similar to your artisan or handmade products to price compare with. I always recommend checking the prices of both mass-produced and handmade products. It’s important to gain a wider perspective of the broader market for pricing and other purposes.
While your products will be unique and attract a different type of buyer, it is still important to assess all competitor rates. It is very common for similar products in the same category to range significantly in price. For instance, in helping one of my clients price her handmade body butter we saw prices ranging from $4 to $140. These prices were inclusive of mass-produced and handmade body butters.
Mass produced products will typically be cheaper than handmade goods. This is because they are less expensive and faster to produce. However, handmade products take time, care, and craftsmanship to produce. Therefore they will tend to sell at the higher end of the price spectrum. And that’s perfectly fine as long as the price takes into consideration other elements such as labor and overhead costs and craftsmanship fees.
Labor and Overhead Costs
Calculating labor and overhead costs can be a bit more complicated. There are many factors to consider in this category. You need to think about every expense involved in making the product from start to finish. This includes supplies, equipment, legal fees, electricity, packaging, labeling, shipping, retail space, website maintenance, marketing, etc.
Additionally, you need to include the cost of labor for producing the product. If you are the sole producer, you should consider how much you would pay yourself as an employee. Obviously if you have employees or otherwise pay someone to help you make the products you need to include their salary or hourly wage expenses as well.
Once you have the total cost for each element involved in producing your goods, you will need to determine the per product expense for each individual item that you produce. This is the complicated part because it is difficult to get an exact figure, especially if you don’t measure or otherwise account for the amount of supplies or products that you use to make your handicrafts. However, it can be done if you take the time to carefully consider the elements that you use to construct or create your handmade goods.
Finally, you must know your value and worth as a craftsman. Are you a skilled artisan who produces detailed work of the highest professional quality. Are you a stay-at-home parent who produces semi-professional handmade goods in your spare time? Are you a working professional who makes amateur handmade goods as a side-hustle? Or, do you fall somewhere in between?
Understanding where you fall in the handmade industry will do a lot for helping you to assign a price to your work. Just like in any other career field, the more specialized, high level experience you have the more you can expect to make. And, of course you can and should adjust your price as your skill level grows. However, your skill level along with market value, and overhead and labor costs should always be considered when pricing your products.
Need more assistance with pricing or similar services related to your handicraft business, contact us and we will be glad to help you grow your business.