Okay, now that you have all the dreary business stuff out of the way its time to talk pricing. Wait, what about what to sell, you may ask. Well you if need to ask what to sell, then this business is not for you. If you've even considered a crafting business, then you already know what your going to sell, whether its the baby blankets everyone raves about and begs you to make for soon to be born children, jewelry, Christmas ornaments, or a combination of craft items that fuel your passion. And you should always work with the items that give you pleasure to create. Don't jump on a craft bandwagon just because its popular and "everyone else" is making tons of money off it. (would you jump out of an airplane without a parachute just because everyone else is doing it?). Okay off my soap box now, (although the added height is nice) and back to our regularly scheduled post.
There are several different ways to come up with a price. Not all of them are viable, and different methods work better or worse for different items. You can do a cost plus a percentage for overhead. You can do an hourly wage plus cost of materials. You can do 2.5 times the cost of material. You can do 3.5 times the cost of materials (this seems to be a pretty popular one). You can do so much times the square footage of the item made. Or any combination that works. For small items that take me less than an hour to create I use 3.5 times the cost of materials, plus $1.00 toward overhead. (these are all items that sell for $10.00 or less). For large items such as afghans, wall hangings, pillows etc. I use the formula of cost of material, plus 5 cents per square foot, plus $10.00 toward overhead. For things like scarfs, hats, etc I charge 10.00 per hour (something that takes 1.5 hours would be $15.00) plus cost of materials, plus $3.00 toward overhead.
Okay I keep mentioning overhead, and I bet your wandering what that is. Overhead is the cost of fixed materials (sewing machines, knitting needles, crochet hooks, patterns, storage containers). If selling from a brick and mortar local, the cost of rent, electricity, help, city / county / state licenses, packing supplies for sold items, sales slips, display shelf's, racks, etc. Basically anything you need to run a successful store.
If selling at craft shows, festivals, farmers markets, etc... in addition to the cost of fixed materials you will have booth rental, cost of sales slips, packing supplies, wear and tear on your vehicle, storage containers, display tables, racks, shelf's, etc, and unless it is indoors an outdoor canopy.
If selling online, there will be a portion of ISP, the cost of fixed materials, cost of a good digital camera, a display rack, (mannequin, shelf, table, whatever you need to display your items to their best advantage when taking pictures), lighting for your display, printer, printer ink, printer paper, computer (can't sell online without one), packing supplies, wear and tear on your vehicle from taking packages to and from the post office, a good quality digital scale for weight packages. ( you don't want to send something off that you assume weighed 1 pound only to have your customer receive it postage due because it weighed 1 pound 1 ounce and should have been shipped at a 2 pound rate.
And don't forget you should have business cards as well. You can have them printed for you or print them yourself if you have a decent printer.
So take some time, and sit down with pencil and paper and work out what your overhead will be. And you thought you'd never need all those math classes you took in school :)
Next time will discuss how a good pricing plan can make or break your business.