Pricing for Slow Crafters

If I could add to this interesting thread...a smart man I once worked for pointed out to me that the best pricing for a given product is whatever the market will bear. If your cost to produce the product is sufficiently lower than what the market will bear, then great...you can make a nice profit. If your cost (material plus how much you value your time) doesn't allow you to make a profit, that would not be a great thing to make (if profit is the goal). That said, I can definitely appreciate the temptation to look for a formula like those shared in this thread to try to estimate what the market will bear. But I suspect there are far too many variables impacting what you could sell your goods for (your photography skills, your social influence, your choice of design aesthetic, etc.) for any formula to be very accurate.

I haven't yet begun selling any of the stuff I make yet, but I'm looking more at the class, quality and (subjective) desirability of products I'm particularly fond of and trying to use more of a competitive analysis like that to help me set pricing.

I thought I'd share my thoughts on this, even though the thread is half a year old :) I've had a wedding photography business with my wife for over 10 years now, mostly doing higher end weddings. We're making a good living out of it together, so maybe my story of how we built our business will help.

We started out having really really low prices, about 13 years ago (about 500 euro's per wedding). We soon found out we couldn't live off of that, but the advantage was that we got a lot of gigs and therefore got a lot of experience and also word of mouth.

We sat down one day and made a calculation not based on per-assignment pricing, but on yearly basis. It was a really big excel-sheet, which was simply:

+ All fixed costs per year

+ Total variable costs per year (for us that's mostly the albums, but for leathercraft that's mostly the leather)

+ Write off of tools per year

+ Desired salary for a year (for a lifestyle which we wanted, taking into account we would like kids someday)

= Total costs

/devided thru the of weddings we could realistically shoot

= price per wedding

The shock was quite big, because we found it we had to raise our prices quite a bit. We didn't do this overnight, but it gave us a good goal to work towards.

If I were to start a serious leathercraft business I would make a yearly calculation as well, because the hard part of any per-product calculation is: How on earth are you going to determine your hourly rate. The pitfall is that you often charge too low, because we don't value ourselves enough. If you calculate on yearly basis, you'll see that the price on your products will probably have to be MUCH higher and that a few thousand dollars for a beautifully made leather bag isn't that outrageous at all!

And to be honest, the only thing that matters is if you get enough salary in the end on monthly/yearly basis. And I know, this will at first be just something to work towards to. :)

And for the people doing it part-time, make the calculations for if you would do it full-time :)

When you determine how many products you can make, take into account that for a successful business a LOT of hours will go into the marketing/business part. If I look at our business, maybe only 25% of our time is actually shooting and editing photos.

Like some people have said before: the most important part is marketing and branding. And not only educating your clients. Because when you think of example of the people buying Hermes. Are they really only paying so much money because they've been so well educated that they know the value of the craftsmanship? I don't think so.

I've been working on perfecting my pricing methods since I started my brand about 4 years ago.

The 2 formulas suggested seem to be a good suggestion of how to do about it.

Philip, thank you for the book recommendation! I just ordered it and will be reading it later next will!

Also the point about avoiding being compared to the "cheaper alternatives" on Etsy is a good one. I'm really thinking or closing down my Etsy shop soon since this is exactly what I feel like is happening.

When I first started out I sold my products fairly cheap. For example; I didn't take the hours I worked on a product in account. With time and experience I started to take those hours in account and slowly raised my prices. Now my prices tend to be a little above what the average customer would want to pay. Those that don't fall in that category seem to appreciate the product and the work you've put into it more.

I follow quite a similar formula like yours too.

I realised through time that you really have to make 'mistakes' (which means pricing too low and too high), loosing some sales here and there, in order to find that right pricing point.

I find that the best way is usually not to feel the customer's p.o.v too much in the sense whether or not they would mind the price. It would drive you nuts sometimes overthinking the price (I did that too) and eventually affecting how you create the project eventually, cause you might not give it your all or skim on certain process to keep the price 'low' enough. Essentially, sticking to your principles on your pricing. Unfortunately, I am not at that mental state of mind yet, which is being zen about it and sticking with the appropriate pricing with every project done.

I agree with Philip on marketing and building a better reputation. Sometimes I even feel like having a personal touch and having good sales service (being friendly too) makes a whole lot of difference, people would come back to you even if the price is on 'higher' side (not always, but it's a good practice).

I don't normally touch pricing strategies with people as I believe there is more to learn from getting it wrong and adjusting.

Too cheap and they assume your work is cheap, too expensive and they can't afford it/don't think it's worth it.

I err on my products being too expensive for the average consumer and working on improving sales/ marketing and building a better reputation through word of mouth.

My non exotic leather watch straps for example start at £150 with exotics considerably more. I'm sure you can find some non exotic straps on Etsy for less, but what you wont find on Etsy more importantly ... is me.

Find your target market (who isn't looking on Etsy) and create products that are unique and not comparable to other peoples work. By being unique they don't have a price in your category to compare you to, because you're the only one creating stingray and alligator wrapped magicians wands..

Explained further in this BOOK

Phil

Another way to address the slowness factor is to craft in batches of 3-5 items. It speeds up the process and allows cut down in time per item.

I use a similar formula which is Materials+Hourly wage( set what you feel is fair) X 2 = Retail Price.

For a wholesale price I would put a 50% markup from my costs.

As for comparing your prices to what other are selling for, I think you will always find someone selling for less. If you feel you offer a quality product then perhaps if you educate potential customers about that quality they will understand why you charge what you do. And at the end of the day, its always ok to say "hey maybe my product is not for everyone"