Running your own business can be extremely challenging. And if you guys are anything like me, you kind of just like to make the stuff, wishing you had someone else to help you deal with the technical end of things. Crocheting and knitting come easily to me. I can create things like it's nobody's business and have worked for years to perfect my craft. But the business side of things, yeah I sometimes feel like a fish out of water, flopping about all over the place until I figure things out.
And even though it feels slightly uncomfortable to bring this subject up, I think it's important that we creators start talking more about money and what we are worth. I mean, we are not Wal-Mart. We don't have someone overseas creating our pieces for extremely cheap wages and we aren't always able to buy our materials in huge mass quantities like large retailors do, making it so that the cost is super low and a huge profit is made. Lots of us are just gals (or guys) working from home, pursuing a crazy dream to build an awesome company from scratch, buying materials from our local stores, making everything with our own two hands, and trying to do all that we can business wise on our own. But we are not a sweatshop. And we shouldn't be paid sweatshop wages. We put our heart and soul into everything we make and we deserve to be fairly compensated for our talents.
I feel like money can be such a hush hush topic, perhaps even more so in my creative community. No one really talks about how they price their pieces. There are many great articles online that give guidelines on how to fairly price your etsy products, but, at least from what I've seen, those articles seem to be aimed toward jewelry makers or creatives in general who can buy their materials super cheap and can pump out lots of product quickly.
But what about us crocheters and knitters? Those of us who spend a good amount of money on quality yarn and each project takes a least an hour but sometimes several more to complete. How are we supposed to price our goods?
Just to prove my point, the formula I see all the time (and I'm pretty sure even the etsy webpage itself suggests this as a reference for shop owners) looks a lot like this:
Time + Materials = Cost
Cost * 2 = Wholesale Price
Wholesale * 2 = Retail Price
I tried this formula when I first started out and I just about died. Now don't get me wrong, I'd absolutely love to make this kind of money. (Who wouldn't?) But for reference, I'll show you what this formula looks like as a pricing guide for one of my mini baskets. If I'm super focused, I can make a mini basket in about an hour and I believe I deserve at least $15 an hour for my talent (most webpages think we should charge at least $20). Each mini basket uses just under a skein and a half of yarn where if I'm lucky (and I take the time to track down each skein of yarn online), I can buy them for around $6 a skein.
So let's do the math using these numbers.
$15 (Time = 1 hour * $15 an hour) + $9 (Materials = 1.5 skeins at $6 each) = $24 (Total Cost)
$24 (Cost) * 2 = $48 (Wholesale Price)
$48 (Wholesale) * 2 = $96(Retail Price)
Ummm yeah I'm pretty certain there are few individuals who could afford and be willing to spend $96 on a (ridiculously adorable) miniature basket. And I'm pretty certain that the wholesale price listed above doesn't work because I've have business deals fall through where they say that even me asking for $30 a basket isn't enough meat on the bones for them to be interested in reselling. Yeah that's right. Six dollars more than just my total cost is too much money for retailors to want to buy from me wholesale.
So how in the heck am I supposed to know what to charge?
It's not my fault that my talent maybe isn't super profitable in this world. It's what I absolutely love to do and it's what I'm good at. I still believe that I deserve to make as good of money as the rest of society.
And even though I am maybe in no place to give advice, I see people all the time in my field way undercharging themselves for the things they create. It breaks my heart because I have no idea how some of these individuals are even covering the cost of yarn let alone making any profit.
If you price your pieces too low, you end up undervaluing your work to potential customers but you also end up undervaluing yourself both personally and financially as well. Customers may assume, based solely on price, that what you have to offer may be of poor quality just because your prices seem low. Have you ever heard the saying, "You get what you pay for"? Because I feel like this totally applies in this situation. If you've worked for years, spent hundreds of hours, bought loads of resources to help you hone in on your God given talent and through all this hard work you are able to create magnificent pieces, do you not deserve to be fairly paid for the work that you do?
I've only been at this a year, but I personally know just how much running an etsy shop can consume your life. I know it's not healthy, but I work pretty much day and night on my shop (and my instagram and my website) five to six days a week. There is so much time and work (and so many steps) that go into each and every piece I make from the initial dreaming up a pattern to the moment where I can click publish on my new etsy listing.
I truly believe that handmade is best made. Handmade typically means a high attention to detail. It means a personal touch and human connection. It means affecting one another's lives. It means quality made and unique items that can't be bought anywhere else. And it means way more time and work than our sweet customers perhaps even realize.
So in an effort to help us all to better make the money we deserve, here are some things to keep in mind when pricing the goods in your shop:
- Cost of Materials
All these things together should at least add up to be your etsy listing price.
Let's break it down.
Cost of Materials: This is how much it costs you to make each and every piece down to the exact number of skeins of yarn to the little tag with your shop name you attach at the end. Take into consideration the cost of the string you use to attach the tag or any other little expenses that go into each item.
Labor: Keep careful track of how long it takes you to make a piece from start to finish. I have a little notebook that I keep track of all my projects in, making a tally mark for each new skein I use and writing down the amount of hours until the item is completed. Multiply your time by an hourly wage which in all honestly should be at least $15 an hour (but I've heard we should charge at least $20). We are uniquely talented artists after all who make something incredibly special. We deserve so much more than minimum wage.
Overhead: Now I'm still learning about this part of the business but overhead is all the little things you have to pay for to keep your business running. This can include anything from etsy fees to website subscriptions costs to even the slow wear and tear of our computers and cameras that a few years down the road will eventually need replaced. I think you take your total monthly cost for overhead and break it down to smaller chunks, adding a little percentage to each item you sell. This amount depends on how many items a month you need to sell in order to keep your business afloat.
Profit: Profit is so extremely important. It is what helps your business to grow and prosper. It is your future. Without adding in profit, I'm sorry to say this but you are most likely going to fail. I'm still learning lots and I'm not exactly sure on the precise number you should add to each piece to account for profit but it is something ya'll need to consider adding in.
For those of you who think I'm overreacting and are like, "Oh but Megan my pieces already seem so expensive and I'm paying myself an hourly wage. That should be enough. I don't need to worry about profit." Well let's just take a second to imagine that your business is flourishing and you are so busy that you're to the point where you need to hire help. This whole time you've just been charging customers your hourly wage plus the cost of materials. Well now you have this new help and they are getting the hourly wage and all you're getting is the cost of materials. See how this prohibits your business from ever growing? Trust me, no company successfully runs without profit. Even if you don't plan on ever hiring help, profit is still necessary because it helps your business to become the best it can be. It helps you save for the fancy computer you need to run your company a little easier. It helps you save for that brand new camera that will help you take perfect listing photos which will lead to more sales. It helps you to buy your yarn in bulk wholesale (oh but to dream). It helps you to grow your current business into your dream business. Like I said, profit is your future.
I'm still working on creating that magic formula as a pricing guide but I'm guessing this whole pricing process is all just a little trial and error. I do the math based on the key points I mentioned above and then I go with my gut on what feels right to me. I'm working every day to build more confidence within myself and with the prices I have listed in my shop. I used to feel like I had to justify why I charge what I do, but I'm beginning to realize that I've got something really special to share.
I hope some of you found this useful and if you ever have any questions, please don't hesitate to ask me.
How do you guys price your goods? Wanna talk about it? Any advice you'd like to share? Let's chat about it in the comments below.
Love you guys!