Selling your handmade items online can be hard enough without having to worry about under or over pricing. I have spent years creating jewelry and pricing was always something in which I knew I had to come up a solution. I can say that having a successful shop consists of many aspects, such the will and determination to make your shop a success, hard work, and tons of social networking (Yes, where you actually have to go out in the “REAL” world and interact with actual people!) and of course networking online with such places such as FaceBook, Myspace, Twitter, Pinterest, Digg… Etc. You really have to work at promoting your shop. Your efforts will not only increase your sales, but also increase your brand awareness and your shop name!
When wondering about profit you are probably wondering how to figure it into your price. Pricing your products for too low a cost can have a disastrous impact on your shop. You must remember that shoppers want to feel that they are getting a quality creation. The same goes for overpricing a product, it can be just as detrimental in a sense that the shopper will be looking at your competitors pricing. You must also take into consideration if you are targeting a high end shopper or a “Bargain” shopper.
Next, you will want to be sure that you take into consideration any expenses that you can such as rent, artistry tools and equipment, repairs, cell phone, electricity, water, internet, subscriptions and memberships, artistry supplies, advertising fees such as business cards, online venue fee’s, craft fair entry fee’s, instructional classes and the list goes on.
If you are working from home you may will need to calculate a percentage of your utility costs. A safe percentage to claim when running a business from home is 10% of your monthly utility may be applied as business related when considering electricity, water, gas or phone. You can claim 100% if you have a personal business phone line and internet that is strictly used for business purposes. You can also find out what your state tax requirements are as per costs of doing business.
How can you determine your prices?
First you must figure your profit as minimal and your overhead costs maximum. To do this you must take into account your cost of supplies and creating shop inventory (your actual created goods) I suggest beginning with a profit margin of 50% . This is a pretty fair assumption of profit.
Lets use this as an example:
1. Overheads: $10,000
2. Profit: $5,000
3. Overheads + profit = $15,000
4. Divide $15,000 by 50% = $7500 ( You are using your profit margin of 50% to gain this estimate)
Now we need to work on figuring your retail price: Below is a very simple formula for determining retail prices.
Cost of Goods + Markup = Retail Price
Retail Price – Cost of Goods = Markup
Retail Price – Markup = Cost of Goods
Pricing your items doesn’t have to be scary, it can be a simple process once you know what you are looking at. When running your own shop it is very easy to track your inventory and all your expenses. Working for yourself as an artist can be fulfilling in so many ways, and profitable once you learn how to set your prices.