Читать книгу Start & Run a Craft Business - William G. Hynes - Страница 13

Pricing is very important. If your products are priced too low, you will undercut the market and end up working for nothing. On the other hand, if you put too high a price on your work, you will find your goods priced out of the market.

Set a wholesale price for your work first. If you are also selling your work at retail, simply add on an appropriate retail markup. (I discuss this below.) If you are selling the bulk of your work to shops, bear in mind that most shops will compute the selling price to the customer by doubling your wholesale price.

There are two basic ways you can go about setting wholesale prices for your work:

(a) Cost of production: Using this method, you determine all the direct and indirect costs of producing a piece. You add a certain amount over and above this as your profit and you have your wholesale selling price.

(b) What the market will bear: Using this method you look at what similar products are selling for in the marketplace and try to set your prices so that they are not too far above or below those of the main competition.

In practice, you will usually find that a combination of both methods works best.

Start out by calculating all your production costs or the costs of all your material and labor. Material costs should be fairly easy to calculate. Don’t forget to allow a certain amount for waste, and remember to include all the materials you use.

Labor costs are a bit more difficult to determine, especially in the beginning stages of your career. Minimum wage rates or prevailing wage rates in your area are of little use to you when you are working for yourself. More important is the time it takes you to produce a price in relation to the time taken by an experienced craftworker. You certainly can’t charge more for a piece simply because it takes you longer to produce it! On the other hand, you do not necessarily have to lower your prices as you become more efficient. As you gain experience, you will earn more per hour from your work.

After calculating your labor and material costs, you then determine your indirect or overhead costs and add a portion of these to the cost of each item you produce. You start by estimating your total overhead costs for a given period of time — usually a year. Be careful not to overlook anything. Think of heat, light, rent, telephone, office supplies, and postage. In addition to all these, include the time you spend managing the business, designing products, purchasing supplies, and selling. All these are very real business costs, and if you do not factor them into your selling price, you will be that much out of pocket.

When you have an estimate of your total yearly overhead costs, divide this figure by 12 to arrive at an estimate of your monthly overhead. Estimate as accurately as you can how many of each item you make per month and divide your monthly overhead figure by this amount. The result will be the amount that should be added to the cost of production of each item to cover your overhead.

Now you can add on your net profit figure. This will be the amount you want to clear on each item after you have paid for all the costs of production and overhead costs. You do not need to make the same percentage profit on each item. On some of your bigger, more expensive items you may not want as high a percentage markup as on some of the smaller items. On average, you should aim for a net profit in the range of 15 percent to 25 percent.

Check your price calculations against the prices of similar work in shops. If your prices appear too high, you must go back to your cost of production figures and recalculate your profit percentages, reduce your hourly labor costs, or try to cut the costs of your raw materials, perhaps by bulk buying (see chapter 10). Alternatively, you may want to avoid selling to shops and instead concentrate your efforts on selling your work directly to the consumer.

Aim for the highest possible price at which your product will sell.

There are many successful craftspeople who never market through shops because their work will not sell once the wholesaler’s markup is added on. In such cases it is possible to proceed directly to the second method of pricing; that is, charging what the market will bear. Even if you sell the bulk of your work at wholesale, it is a good idea to try out your prices at craft markets.

In selling directly to the public at craft shows, beginners are more likely to underprice than overprice their work. This is because they are determined to succeed and they often feel that their product will sell better if the price is low. Also, they are aware of the “flaws” in their work, the minor imperfections that are not noticed at all by the public.

You should try experimenting a bit in the beginning with prices. Look at the prices of competing goods or goods similar to your own and aim to come roughly half way between the highest and the lowest of these. If you sell everything very quickly, you should raise your prices gradually, though not so high that they hamper sales. If your initial prices don’t attract a sufficient number of buyers, you will have to lower them. Aim for the highest possible price at which your product will sell.

Your net profit will usually be much higher when you retail your work at craft shows — as high as 50 percent to 80 percent, depending on the show costs and the costs of your material. This is certainly a good argument for selling as much of your work as possible at shows, even if you also have a large wholesale business.

A factor that is sometimes important in retail pricing is the consideration of various “price points,” such as $10, $20, $50, above which, for some products, there may be a certain amount of consumer hesitation. In such cases, it is often desirable to price a product just slightly below one of these points — for example, $4.75 or $4.95 rather than $5.

It is also important to be able to offer your customers a range of prices; that is, to have a product line with items in each of the main price ranges. Some people may be looking for an inexpensive gift under $5. Others may not be able to afford your large Number Ten Widget and instead settle for a medium-size Number Ten.

It is best to be as versatile as possible and offer a range of products to appeal to different pocketbooks.

There are also differences among various craft markets in terms of what people can afford or are willing to pay. It is neither advisable nor ethical to adjust your prices upwards or downwards to suit a different clientele, but you can offer a range of products and prices for different types of customers. At Christmas time, we sell a lot of our less expensive toys at a market in the north end of the city in a predominantly working class area. At another market, in the “upscale” south end, a few weeks later, we sell quite a few of the more expensive items. When times are good, we sell more of our higher priced items than when times are not so good. It is best to be as versatile as possible and offer a range of products to appeal to different pocketbooks.