If you are a crafter and have been selling some of your creations for fun, you might want to think about turning your hobby into a side business selling what you have made at craft fairs. Unfortunately, many people who would like to do this do not know anything about business, including how to price their home-made stuff.
It is important to understand that pricing appropriately is the key to success. It’s not like you are buying something wholesale, and then tacking on the “manufacturer’s suggested retail price (MSRP).” With your own goods, it’s not quite as easy as that.
Now, if you are reading this website with the goal of selling your woodworking projects as described in Jim Morgan’s WoodProfits course, you will learn a lot about pricing strategy as part of the program. (Note: If you haven’t seen our review about Jim’s course, it’s on the home page, here, of our site!)
Let’s Look at Basic Pricing Strategies
But, if we are looking at the basics, when it comes to deciding what to charge, there are two basic strategies. One starts with price and works backwards to find out how much you will spend to finish your project. The other one starts with the cost of the project and works towards the price.
However, some people prefer to take a simpler approach by selling their items at 3 or 4 times the cost of their raw materials. Thus, if you are planning to sell a few pieces each month, the simplest approach might be the best option. Essentially, tracking costs will be as simple as pasting a sticker on each purchase or tagging each purchase with a store receipt. Afterwards, you can total them up to determine how much you have invested in raw materials.
This practice of charging 3 or 4 times the cost possibly goes back to traditional mom-and-pop stores. They would use this system figuring that one would cover the overhead cost, the second would cover the cost of purchasing the item, and the third time would cover the profits. The fourth, however, allowed them to give discounts if necessary.
Pricing Isn’t Always Cut & Dried
The problem with this particular method is that costs can vary significantly even for the same end product. For example, you might purchase all materials from a retail craft store while another crafter uses pieces and bits found in yard sales and other cheaper places. When you multiply the of supplies three or four times, the difference can be strikingly large.
In addition, if you want to turn your hobby into a side business, you need to determine how much your time is worth. If you just want to earn enough to pay for your hobby, then time is not a big factor. I have a friend who looks at it in just this way. If she were trying to live on what she sells, she’d never make it. But, as she tells me, she is retired. She has a dependable retirement income, and this is just a way for her to stay busy, and also social since she has a lot of fun setting up at fairs. She figures that she makes enough to cover her materials, and the time spent is simply for her own enjoyment. So, for her it is totally win-win!
However, if your goal it to earn some money, you will need to think about what you could be making at a regular job because it is very easy to find yourself working for pennies on the dollar.
Another problem with pricing your pieces based on cost is that you may find that few people are willing to purchase at what you decide to charge. If that is the case, you might want to trim down your costs or decide to create something different. One way to maximize your profits is to make items that are hard to duplicate, unusual, or both. For example, anyone with basic skills can create a gift basket; however, it is more difficult to duplicate intricate handcrafted work.
A different method for coming up with a price is to work backwards. i.e., determine an appropriate price for your piece. However, professionals try to include many things into that decision. For a home project, however, you do not need anything fancy. All you need is an idea of what similar items are selling for. You can get this information by touring craft shows or checking out online sales for similar items. Fellow crafters may also tell you what they think your products are worth.
Running a profitable crafts business means being comfortable with doing some simple math, especially when pricing your creations. However, you will not be dealing with calculus. Therefore, you do not need to panic. Finally, before you even embark on such a venture, it would be a great idea to visit some fairs and talk with vendors about how they are coming up with what to charge. I think that if you tell them your ideas, and assure them that you won’t be competing since you’ll be setting up elsewhere, they might be willing to talk with you. It’s worth a shot!