Has someone ever said to you about your handmade product, “This is nice, but it’s too expensive.”
Or maybe you’re afraid that if you price your products higher, then nobody will buy…
Today, I’m covering how to price your handmade products for profit to attract the right customers and get paid what you’re worth (without feeling guilty)!
I’m going to show you how to take everything you think you know about product pricing and teach you bunches more, and make it ALL work for YOU in your handmade business.
Formula to Price your Products
Pricing your products isn’t as quick and straightforward as some would think, but there is a simple formula that can help you get started.
You can google this so it’s no big secret, but it’s a great starting point when pricing your products. However, keep in mind there’s much more that goes into pricing your handmade goods. If you don’t consider the other factors that I’m going to cover later, then you will end up undervaluing your work and not making a profit.
For wholesale products the formula is (cost of materials + cost of labor) x 2.
What may be a wholesale product in your business? It could be unfinished products, materials, or DIY kits you sell.
For further example, let’s say that you sell kits to make earrings. The supplies that are included in the kit totals to $5 and it takes you about 10 minutes to put it all together.
From here, you need to put a price on your labor, and you can choose it to be anything you want. In this example, let’s say that 10 minutes of your time equals $10.
So $5 + $10 = $15. You’ll now times that by two giving you the product total of $30.
Next, let’s look at the retail formula. Retail = (cost of materials + cost of labor) x 4.
Retail products in your business are finished products.
Let’s again go over an example. Say that you make earrings yourself and send them to your customer. The materials were still $5 but it then took you 30 minutes to make and you have decided that that’s $15 of your time.
Again, $5 + $15 = $20 but now times that by four. Your earring total is $80.
Other Things to Consider
As you price out your products, you need to also consider the fixed costs of your business and be sure to calculate those in as well.
You need to consider the costs of software you’re using to sell online. Do you use Shopify to sell your products?
That’s what I personally use, and I make sure to consider the fees that come with using that platform into the price of my products.
You also want to consider the money that you may be putting into advertising to get a new customer. How much does it cost to acquire a new customer? Calculate that in.
Finally, you want to factor in the cost of the tools you use to make your product, plus the packaging you use to ship it out.
Considering all of this, I can already hear you saying, “Amika, this is getting expensive and I can’t charge this much for my handmade products!”
I totally hear you!
First off, you CAN charge that much, but let’s go over ways you can make adjustments to your pricing.
Changing up Variable Costs
Two ways you can change up your product pricing are by looking at your cost of materials and how you can decrease your labor.
With your materials, are you buying them one at a time? This tends to be more expensive and what you can do instead is buy in bulk.
Another tip is to look at the pricing from different suppliers. You may be able to get your supplies for cheaper somewhere else.
Now to lower labor costs, without actually devaluing your time, a huge tip I have for you is to batch your work.
Let’s go back to the earrings example. What do you think is faster: making one pair of earrings at a time or breaking it down into smaller, repetitive steps?
The answer is breaking it down into smaller steps!
It’s much more time efficient for you to do one step 100 times and then another step 100 times instead of creating each pair of earrings individually.
Another way to reduce labor costs is to hire someone. Many times in our craft, there are repetitive, low skill tasks that need to be done, but they don’t have to be done by you. Especially if your time is worth $60 an hour.
You can hire someone for $10 to do the simple tasks while you focus your time on the harder tasks of your craft and this in turn will help bring down your overall labor costs.
Consider the fact that maybe the price ISN’T too high
Okay this may seem like the opposite of what I was just talking about, but hear me out.
Increasing your product markup beyond the 2 or 4 times ensures that you’re not just covering your costs, but ALSO making a profit. The product markup allows you to pay yourself and re-invest in your business. It gives you a cushion!
A healthy product markup also makes it possible to offer discounts with EASE instead of with discomfort.
Now this is a mindset shift, but I want you to start thinking about your ideal customer.
Ask yourself this question: what if the price of your product determines the quality of the customer you attract.
Are you trying to attract someone who is fine with grabbing a $5 pair of earrings at Walmart (no shame in that!), or are you trying to attract someone who is about to go to a ski resort with her husband and wants the perfect pair of earrings to match her outfit when they go out to dinner?
The second woman is the one who’ll be willing to pay a higher price.
You want to attract high end customers with your prices and repel the others that aren’t ideal for your product (and wouldn’t have bought from you anyways).
Increase Perceived Value
Finally, let’s talk about increasing the perceived value of your product.
The first thing you must be doing when selling online is have high quality images. TRUST ME.
Let’s go over another example. Buyer one is selling handmade earrings for $80. She has one picture posted and it doesn’t have the best lighting so it’s hard to see the quality and skill that went into making them.
Buyer two is selling very similar earrings but for $100. She has multiple pictures posted with great lighting. She also included a picture of a model wearing the earrings.
Now, who do you think sells more earrings? Buyer two!
When you are posting images of your product you want the customer to envision wearing your product or using it.
So here are my tips for you:
- Include lifestyle pictures
- Include multiple photos with multiple angles shown
- Use good lighting
Another way to increase perceived value of your product is in how you package your product.
Now, I know customers won’t see this until after they purchase, but this can help turn them into a returning buyer.
When you are packaging your product, some simple things I recommend are using brand color tissue paper to wrap the product, and writing a simple handwritten thank-you note. This will set you apart from other crafters and your customers will feel more connected to you and your brand.
And tada, you now have your perfect pricing formula and you don’t have to feel guilty about it.
So my next question for you is have you started your online craft shop yet? Or maybe you have one on Etsy, but are thinking about switching over?
I strongly recommend you use Shopify for building your business and I have a Shopify Quick Launch Mini-Training that will help you!
Grab it here —> Shopify Quick Setup Mini-Training