Wondering how to calculate retail price of diy crafts? You’ve got your diy craft business, you are ready to make money from home… But how much do you charge? What is your craft worth? Find out below.
You are Reading Chapter 4 of our DIY Crafts Guide: How to Sell What You Make.
How To Calculate Retail Price of DIY Crafts
After deciding what you want to achieve with your business you need to learn how to price your work. Pricing is where many homemade crafters have a hard time in their business, by either overpricing or underpricing their products. I will show you exactly what to do to make sure you don’t fail in this area!
Pricing is very important because if you overprice your products you could lose out on customers. However, if you underprice your merchandise you may sell more, but you are losing money which is even worse.
Some mistakes that are often made are selling yourself short. Don’t forget that you put time and effort into this product, and you need to pay yourself first. This is a handmade product you are selling. You can not compete with the cost of merch that is made in factories overseas. That stuff is cheap for a reason! You are not cheap.
Here is a general guideline on how to price your things perfectly.
Use this price calculating formula:
Wholesale Price = (Materials + Labor + Overhead) × 2
Retail Price = Wholesale Price × 2
This is a basic formula that will get you on the right path. In terms of the labor section of the formula, You need to pay yourself decently based on the item made.
For example, If you are making a dress, and it took you 12 hrs to make it and you want to be paid $10 an hour. here is how that would go: Let’s say the materials cost you $35 dollars, and overhead(percentage of utility bills) is $25 dollars. 35 + (10 x 12) + 25 = $180(wholesale price). Times that by 2 for the retail price and we get: $360
Wow! That sounds pricey for a dress. Now you understand why handmade goods are so expensive! While you’re still starting out you may have to pay yourself less money an hour, or knock some numbers off the retail price. I’d be happy getting $200 for a dress I spent 12 hours making! When you sell your products to boutiques, they buy it from you for wholesale, and then they do the markup. This is a whole other ballpark, which we will get into later.
For now, experiment with different prices and try to find the sweet spot – the price where people are willing to buy your products at a steady rate so you can pop them out, but still make enough money to sustain yourself.
If you notice you are selling out quickly, increase your price, this could do two things for you.
1. If your item is in high demand that means people are willing to pay more! Great, increase the price!
Or 2. if you want the orders to slow down, you can raise the rate, making only the people willing to pay the higher price want to buy your item. This allows you to put the time and care into the product and still get a higher price in return.
However, if no one is buying your product there are also probably a few conditions happening. Check for these variables:
1. The item may be overpriced. Lower the cost of your product and see what happens.
2. It may just not be a desirable item at the time. Rethink your product, think about your competition, and ask yourself “what about this product makes people want to buy it.” The best thing you can do is find your niche, and make them HAVE to buy your product…. It has to be so good that they can’t imagine life without it!
That’s my advice on pricing. Best of luck out there in the real world market! I hope you all achieve success in pricing your items fairly so the customer and the maker can benefit. We’ve got more great information on selling crafts coming up next.
That was Chapter 4: How To Calculate Retail Price of DIY Crafts of our DIY Crafts Guide: