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How to Set Prices for Handmade Goods
- ghaff 5y agoOne of the things the post just touches on glancingly is that many handcrafted items may just not be worth it as a business if you set a reasonable market price. If something takes you a day to make/sell and the biggest profit you can reasonably make is $50, it may just not be worth it. At least, unless it's something you would do for free anyway and just let the pottery or whatever pile up in your house. I write fairly well and fairly quickly but my ghostwriting price for an article/blog has a definite floor. I might come down a bit if the work is interesting and the client is being professional/easy to work with but I won't come down that much.
- detaro 5y agoOr becomes a businesses targeting a different niche than first intended. It's sad to see how often people get nasty because "XYZ is only making things for rich people" when really if you think about the work involved, XYZ is pricing that way because they'd like to make at least minimum wage. Many couldn't afford their own products.
- boppo1 5y agoHow does one get into ghostwriting?
- ghaff 5y agoI don't really do much of it. I'm just a known writer (among other things) in tech and know a lot of people so professional friends reach out to me from time to time. Honestly, random companies wouldn't pay what I would consider my base rate which is at least $1.50+/word or so. I'm pretty sure none of the gig-work sites would. So ~$1500-$2000 for a blog post is pretty much my floor but if I bring some brand to it, it's substantially higher.
- deleted 5y ago[deleted]
- exolymph 5y agoGet into freelance writing, the gigs are all over the place. But mostly they're terrible — writing for <$1.00/word is an unsustainable grind unless you live overseas where the dollar goes a lot further. As with consulting, landing the high-ticket contracts is usually more about who you know (and who knows you / knows of you).
- jnovek 5y agoSomething that the article glosses over that I often ask about these kinds of businesses is _how exactly_ one finds and documents their costs. The author gives examples —- keep track of your time, keep receipts, etc -- but often a creative process is so organic that it just doesn’t feel as straightforward as that. In startups it’s popular to use accrual accounting methods and, if you’ve ever had an opportunity to look at a startup’s books, it can get complicated. Several years ago, I worked on an enterprise product that had a bunch of variables and a long sales cycle. Without good accounting practices it would’ve been easy for us to screw up pricing and take a loss. Maybe it’s just me, but it seems like the variables that go into a creative process are nearly as complex but the scale is smaller and documentation slimmer.
- dazc 5y ago> Maybe it’s just me, but it seems like the variables that go into a creative process are nearly as complex but the scale is smaller and documentation slimmer. This may be true but a 'creator' only needs to make enough money to pay him/her self and to buy materials. Once this has been achieved then it's simply a case of increasing the selling price to whatever the market will bear.
- mdorazio 5y agoOn the financial cost side, use a credit card that is only for the side business. Then you can easily use that card whenever you buy something and look at the end of month totals. For time, I personally divide days into quarters instead of hours and think back to how many quarter days I spent on the activity. “That was two afternoons” = 4-5 hours.
- jnovek 5y agoThe credit card is a good idea. Thank you! Honestly, I think I’m just a bad time estimator. It’s definitely something I miss from working together with people — I know I’m a bad time estimator and I can ask for help. Maybe this is just a “learning to work solo” thing.
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- cenazoic 5y agoNot sure how useful this is for many handmade items; for candles, as they mention, sure. But - I quilt (not to sell). Quilting is expensive in terms of both supplies (typically 100% cotton fabric, thread, batting, machine, etc.) and especially time. It's difficult to convince people that the relatively simple (looking) quilt made by a skilled quilter, which 'only' took 20-30 hours to make is worth $500-$1000+. Couple of interesting articles here:- - https://sewingreport.com/2016/02/quiltonomics-the-real-cost-of-quilts/ https://sewingreport.com/2016/02/quiltonomics-the-real-cost-... - https://sewingiscool.com/handmade-quilt-prices/ https://sewingiscool.com/handmade-quilt-prices/ - https://quiltdom.com/price-handmade-quilts/ https://quiltdom.com/price-handmade-quilts/
- detaro 5y agoYeah, the time aspect is something people very quickly ignore or underestimate. And in reverse often interesting to see what kind of thing crafters/artists/... offer cheaply, because it is a variant that can be done relatively quickly.
- ghaff 5y agoOf course, valuing your time for something you're doing on the side is not straightforward. Most well-paid people with day jobs can't just work some more hours for the same hourly rate. A lot also depends on whether it's something you actively like doing vs. you find it a real chore you're just doing for the bucks.
- s0rce 5y agoPretty much, I'm salaried, I can work more but I don't get paid more and I don't think people would really notice that I'm getting more done. Incremental time is basically worthless. Sure, I could find some hourly part time gig but it wouldn't make enough to be worth it unless I built a real freelance technical consulting business or something that I could bill more for.
- jnovek 5y agoThis is the hardest part for me. I undervalue my time and I know that customers do, too.
- Vixel 5y agoI agree with all of this. I don't think people that sell their own goods realize that every situation has different COGS. So you can't price the product based on the market. Especially considering non-handmade items that can be made for pennies in bulk.
- medion 5y agoThe article is a bit thin on two difficult and important factors for makers: How do you decide what your hourly rate is, when it is also unlikely you are making something so unique no one else makes something similar - ie. how do you create compelling arguments for differentiation. In the first instance, in a first world country, to cover the high cost of living and to also take retirement and other such things into account, I’d estimate $50/hr is the floor. Where I live a plumber will earn $80-120hr so even then it’s on the low side if you are a skilled maker who has had to develop skills over years. In the compelling differentiation department, I think it comes down to storytelling and materials + workmanship. This trifecta has to be woven into a credible narrative to sell your product. After all that, you need to market it… and we’ll that’s something else entirely…
- medion 5y agoAlso, another factor in pricing is ‘brand power’ or in this case ‘artisan power’ - pricing based on materials and time alone is no different than being a tradesmen. In the luxury goods sector much of the price is based on brand power and are almost in no way related to manufacturing costs (although at the high end the goods being made are also being produced by skilled artisans with expensive materials in the first world, ie. Hermes). So a maker must also consider brand building too, and the value in that over time - again connected to storytelling.
- quesera 5y ago> in a first world country ... I’d estimate $50/hr is the floor That's $100K/yr, well above the median. My pricing strategy is to start with your needs. $50/hr might be reasonable, but it varies by person and life circumstances. Figure out how much time it takes to produce the second (or later) work product. Do some hand wavy math over the amortization of research, design, and first product over the quantity you could produce in a few months, if that was your only product. This will be a larger factor in new work than in iterations on previous work. You now have a selling price, which the market may or may not bear. This can be tested, and you can use the results to inform your decision on whether to continue production. Most of this can be estimated early in the design phase. My premise is that starting from anywhere else (COGS, market price) and working backwards to compute valuation of your time is .. well .. backwards. Accepting a temporary, or introductory, devaluation is reasonable. Just know what your targets are, so you know when things are not working.
- jimnotgym 5y ago> Patrysha is a certified small business coach Is there a Chartered institute of small business coaches?
- OJFord 5y agoWell they claimed 'certified', not chartered; yes I'm sure there are any number of small business coaching certificates available.
- will_walker 5y agoThis is such a helpful post, but it also doesn't factor in the cost of R&D to make a new or unusual product. For example, I spent years figuring out how to make a specific kind of porcelain planter for succulents that would be self watering. Nothing else exists like it on the market, and customers like it but there's a ceiling to how high I can price. Now I have a lot of sunk costs that I'll probably never recoup on sales. Also selling isn't trivial in terms of cost - figuring out packaging and shipping loss rate can be a double digit portion of sales for fragile handmade goods. Of course this is on me as a designer and maker - it's a labor of love - but it keeps my work from becoming a serious business that I might try to go out and count on for income.
- bradly 5y agoI do woodworking and I just use my hourly rate plus materials. There are a surprising number of people who will pay high prices for quality hand-made goods. What I've found works is to create the best product you can and have a story around it. For example, for my shaker trays I describe the process of picking out the wood, cutting the bands, boiling the wood, bending it around a hand made form, hammering in copper tacks over an anvil, hand finishing, and then applying multiple coats of hand made shellac. For larger furniture or slab work the story of the actual tree can really add to the value as well. People want a story. To lower the cost you can create router templates, jigs, or even CNC projects to lower the hours spent and reduce the overall cost, but these need to be balanced with the selling of bespoke goods.
- jotm 5y agoDo you create content, then? Articles, pictures, videos (especially well produced ones) of the various processes would be very interesting and could supplement your income pretty well (ads, sales/orders, patreon/sponsors, etc).
- bradly 5y agoNo content yet from myself except some Twitch streaming. I do have some ideas in the hopper though... - A small e-book or online course for software engineers to learn woodworking. Working title "Burnout to Burn Box: How to quit tech and start woodworking" - I'd also like to create a software/hardwood shop where workers can choose to do either software engineering or woodworking any given day, but that will take more than a garage shop. You'd only need experience in one discipline to get started. Working title "Bits to Bits Studio". I'd also like to have a small coffee shop in the front to display finished goods. - I'd also like to start a community woodshop on Lopez Island to help islanders learn skills and start their own company.
- whoisburbansky 5y agoI'm interested in how you adjust that for expertise; do you bump your hourly rate for items that took you longer to learn to make well? How do you figure out how much to bump by, if you do?
- mauvehaus 5y agoAs someone who builds furniture professionally, this article wasn't as useful as I'd hoped. As other folks have pointed out, one of the hardest things to figure out is what to value your own time at, and the article doesn't really touch that beyond "the customer is paying you to do it because they can't do it themselves". One of the trade offs I find myself making is when I'm doing something new. There's a certain amount of inefficiency, and sometimes you end up having to pay yourself less hourly to hit a more-or-less established price point for something. Sometimes that's worth accepting for the sake of doing something new or developing a new set of skills, but you don't want to do too much of that either!
- jay_kyburz 5y agoYou could look at it this way - your time is worth what somebody is willing to pay for it. If you don't have a job and can't get one, your time is worth $0. If you get a job a MacDonalds you time is worth about $10 an hour. If you make products, your time is worth what you can sell the product for divided by the amount of time you worked on the product. There is no upper or lower limit. Some people make $1M a year, some make $0. Update. The real question is, "Should I keep making furniture given how well it sells, or should I go get a job at MacDonalds?". There is far more than money to consider in that question.
- mauvehaus 5y agoMcDonalds, shit. I used to write software. There's definitely more to it than the hourly rate. Just the same, it's a good thing my wife's job offers good health insurance :-) Back to pricing though: I shoot for an hourly rate when I quote things knowing full well that sometimes I won't hit it if I run into unanticipated learning opportunities. Sometimes I price myself out of work/the customer doesn't have a realistic expectation for what a thing should cost. It is what it is. Hilariously, I have a friend in the trade who's married to a pricing analyst. He has as much trouble pricing his work as anybody else I know.
- rokhayakebe 5y agoIs software handmade good?
- throwaway889900 5y agoOnly if you meticulously flip the bits on your hard drive with a laser, by hand.
- beloch 5y agoPrices are not determined by cost of production, but by what the market is willing to pay. Figure out what the market is willing to pay and then decide if you can get your production costs far enough below that to justify the enterprise. Yes, being handmade by locals adds to what people will pay, but only so much.
- jay_kyburz 5y agoI agree, I came to the comment section to say I think this article takes the wrong approach entirely. You have to test your market with different products and different price points. If you make three widgets, offer them for $1x, $5x, and $10x. If you sell all three you know you are still too cheap. Make your next batch even more expensive until you find a price that people are not willing to pay. If your products don't sell, you need to either lower all your prices, or improve your marketing.
- cascom 5y agoI’ve seen this in supposedly “sophisticated” businesses as well 1) people misjudge what value others (the market) puts on their goods services and price much lower than value (this is especially true in hobby type activities where if you think about a supply demand curve you don’t need to set price at a point that incents massive demand (1m), but rather at a point that incents demand of 1/10/100) 2) people are horrible at estimating their costs - just ask an Uber driver what he thinks his cost per mile are fully loaded (taking into account depreciation, consumables (tires/oil), fuel, time and mileage when not on a fare, etc)…