Thursday, August 25, 2011

Making Crafting Profitable - Part 5b

This post is just to give you an example of why you need to worry about pricing. We will follow 3 different people selling the same craft item (lets assume a fancy beaded Christmas ornament) at the same outdoor festival.  First lets assume the following

  1. All three have the same overhead for this show $25.00 booth rent.
  2. Cost of materials to make 100 items is $50.00
  3. Time to make each item is 1 hour.
  4. Additional expenses (tissue paper, receipt books, bags, etc) is $25.00
Now lets introduce you to our crafters.  Mary, Sue, and Dory

Mary is excited, this is her first show.  She has paid her booth rent, and created her items and is ready to go.  She has decided to price her items at $3.00, just below the cost of similar mass produced items in a local discount store.  At the end of the day she has sold out and has $300.00 to show for it.  After taking out her expenses and cost of materials she has $200 left.

Sue has done a few shows and is still working out the kinks in her pricing system.  She has settled on 3.5 times the cost of materials plus $2.00 to cover cost of additional expenses.  This gives her a selling price of $3.75. At the end of the day she has also sold out and has $375.00  after taking out expenses she has $275 left.

Dory considers herself to be an professional craft artist.  She charges $10.00 per hour, plus 3.5 times the cost of materials, plus $2.00 overhead.  Her selling price is $13.75 per unit.   She only sells 50 of the units, leaving stock of 50 units toward her next festival.  Her gross take home is $687.50 with a net of $587.50.

As you can see a wide range of prices from the above totals.  And while someone who considers themselves a hobbyist might be happy with and extra $200 dollars when its all said and done, someone who considers themselves to be self-employed would more than likely be upset at such a low profit.

Don't sell yourself short.  If you think your worth $10.00 or more per hour, and you carry yourself with confidence you'll inspire the confidence in your customers.  More than once I have seen people at craft shows pass over a lower priced item, to purchase an almost identical item that is 2 to 3 times higher in price.

Another thing, just because its getting late does not mean you should reduce your prices.  You can always take extra stock home and build on that for your next show.  You can always have a box of seconds at a reduced price stuck back under your table. (these can be things that didn't turn out as  good as you expected, or maybe you realized you didn't enjoy making them, or perhaps the color just doesn't work and you really want to get rid of them.)

The best piece of advice I every received when I first started and couldn't figure out why I wasn't making enough, was when an established crafter told be to triple my prices.  To say I was shocked at the difference in sales would be an understatement.  Lets face it when faced with two items one priced at $3.00 and once priced at $12.00, most people are going to assume that the $3.00 is lower quality than the $12.00.  And lets face it, human nature being what it is, when we can afford it we're going to buy the item we perceive to be the better quality item.

No comments:

Post a Comment