Costing one's work is a difficult thing to do....trying to balance what people will pay while trying to make some sort of profit is really a hard call. I've read, heard and listened as other sellers battle with the same problems. I've put my point across on Etsy's blog when people have openly criticised others for the price they charge for handcraft pieces of work. So I thought I'd break it down for you to the best I can....I'm probably going to learn something myself here!! Please also consider when reading this, it is my breakdown of costing....please don't judge any other work by what I do or what I charge....this is entirely my own experience and what I have to do to make it viable...if it is at all.....and remember I do this because I want to and I can. I'm never going to make millions but that's not what it is about for me.
I'm going to use one of my Cashmerino Earflap Hats as an example....This is the completed article and take into consideration these hats come in 4 sizes. Reality is there is really not a huge amount of difference between the knitting of a newborn hat and a 36month old hat....maybe a wee little bit more time and some extra yarn, but they both still need to be knitted, sewn up, buttons purchased, buttons sewn on, straps made and put on, cotton logo sewn on which involves a sewing machine...both hats are put in the same size tuff envelope and both driven to the post office for sending....so I do see why some sellers charge the same price for their hats no matter what size.....I charge different prices for different sizes, if it's bigger you pay more....that's my pricing structure.
The only items I buy wholesale for my business are yarn but that is only some brands which include Debbie Bliss...so for these little hats the yarn is priced wholesale....so I'm basing my costings on a 4M to 10M baby hat.
Yarn alone....even though there are 3 colours of yarn in these hats I add the total quantity of yarn together. So just under one ball.
Wholesale price for yarn used. $6.50, this includes the GST and the postage I am charged for delivery of said yarn, I have to pass that cost on. This cost then goes back into buying more yarn, so I basically I never see that money at all it continually goes back into the buying kitty.
Buttons x 3 @ 90c each. I purchase these retail so total $2.70. I know you can get cheaper buttons, but cheaper buttons look exactly like that....cheap, and as these buttons are a feature they have to look good.
Now you might just be thinking well that's $9.20 and she sells these hats for $29.50 so she's made a $20.30 profit....well here is where the other bits and pieces come out.
Firstly as it's income it has to be declared to the tax dept, so I need to take out around $2 per hat to put aside to pay for any extra tax at the end of the financial year, it's probably a little too much but I like to be prepared...so we're down to $18.30. I then take out another $1.00 per hat to cover heating and lighting whilst working at home... these utilities aren't really tax deductible because the tax department see you as being home so therefore you'd have the lights on anyway....now we're down to $17.30, cellophane bag to pack the hat in 10c, postcard, $1, sew in label in hat 20c, and swing tag 5c each...so that's another $1.35 .... we're now down to $15.95.
To be fair some of these items do get included as tax deductions but take into consideration I have had to outlay the money for these prior, and sometimes big bucks that I never really see any return on but I think they are a necessary part of the business....advertising and marketing in a way....and presentation is paramount in my book. So we're at $15.95 now....I'm not going to include postage as I do charge for that, so that really is the end of my costings.
Well $15.95 profit, that's ok you say....yep not bad, but it leaves me no room at all for wholesale, which is why I don't offer it at all now....if I did offer wholesale this hat would have to be marked up by another $15 or so dollars, making it then retail for around $44.50....out of most peoples price range I believe.
Anyway let's take my $15.95 and then consider the fees I have had to pay to list the item and I also pay the paypal fee, so take out on average another $1.50 then I'm left with $14.45.
Lastly divide it up now into hours worked....knitting, sewing and finishing off this hat comes in at 4.25 hrs and photographing, listing and packing up the hat comes in at around 0.75 so totaling around 5 hours of work for this hat alone so there you have it people I really am working for $2.89 per hour!!! So now you understand my total frustration at people who constantly criticise crafters and state that they could make whatever the item for next to nothing and then also unfairly compare a hand made item to a mass produced item made in Asia and India and the like and say we charge too much. My blood boils!
Look I know this seems quite extreme and my little business is just me, so yes, the $14.45 goes into my pocket but by god I work damn hard for it and it is a lot of work for little return....but I love doing it, I love seeing my hats on little heads and it keeps me occupied...I spend a lot of time at home, so I thank goodness I can do something in front of the telly!
I will also add that some hats, I do make a bit more money from and some I don't, so swings and roundabouts.....blankets are a hell of a lot of work and a lot of hours again for not a huge return, but it's the creativeness I crave more than anything else.
So there you go people just thought you might want to keep this in mind the next time you consider a handmade product. There is a lot of love and (underpaid) time put into it...but it is worth the price.
Post script added 24th July 2012.
I still see a lot of people pop over and read this post....since writing this post I have changed my pricing structure greatly. There has been price rises in wholesale price of yarn, and I've had to value myself a bit more and make sure I pay myself properly.
After much thought I decided that my prices needed to be the same for all hat sizes....the work really is the same so therefore I averaged all the prices of all the sizes in the style and came up with an average....and you know what I feel better about it, and in actual fact it hasn't decreased my business at all and customers tell me it's easier for them as well....so in saying, make sure you still work out a pricing structure for yourself, value you as the maker and make sure you pay yourself something....your work is worth something to everyone. x
Until next time...Craft on!!