As a creator, getting paid for your work is great! Getting paid enough to turn a profit can be a little tricky though. I am here to help with that. For my Etsy shop, I use a combination of two pricing methods to price my work. Using a combination of these methods can help you with setting a reasonable price for your work while also getting you PAID.
Rule of Three
The first method that I use is one that I learned in the foodservice industry. You take the material cost of the item you are selling and multiply it by three. This is a quick and easy method that can gross up your costs and, in theory, cover your time and overhead as well.
Example of Rule of Three for Product A:
Total Cost of Materials = $5.00
Multiply by 3
Price to charge for item = $15.00
This is not a perfect science, of course, for artists since, for many works, the primary cost is your time. The material cost for a custom commission may only be $5.00 but maybe it took you 10 hours to make.
That is why I recommend using more than one method for pricing.
Time Plus Materials
The second method that I use involves calculating Time plus Material Cost. In this case, you need to know how much you would like to be compensated for your time. A word of caution here; while it would be wonderful to make $100.00 per hour for the time you put in, using an amount that is too high can inflate your price and potentially price you out of the market.
Once you have decided how much your time is worth, you just need to add your time and material costs together.
Example of Tiem Plus Materials for Product A:
Cost of your time = $10.00 per hour
Hours to make Product A = 3 hours
$10.00 x 3 = $30.00
Add the cost of materials = $5.00
$30.00 + $5.00 = Price of $35.00 per item.
Once this calculation is complete, you can use the figure from either method or a combination of both.
Average of Both Methods
You may notice that, in the examples above, the price drops significantly when I used the average of both methods. Comparing against current market prices is important!
If the “going rate” for products similar to yours is $50.00, then using the combined methods above would put your price too low. You may think, “isn’t it better to be less expensive?” and the answer is “sometimes.” You want to be cautious not to price your work too low. That can lead to an impression that your work is sub-par and actually cost you sales.
If, however, the “going rate” for products similar to yours is $25.00, then the $20.00 price point from the example above could be reasonable and the lower price could set your work apart.
Looking at the market prices can help you make the decision of whether you should use the Rule of Three, Time Plus Materials, or a combination of the two.
When in Doubt, Start High
When deciding what price to use; for example deciding between $35.00 per item or $20.00 per item from the methods shown above, it is better to start with the higher price.
If you start by pricing your work with the higher amount and do not see any sales within your expected time frame, then you can always offer discount codes, have a sale on the item, or throw in free shipping for the product. This is a great marketing opportunity that can drive more traffic to your products.
If you have already priced your work lower and need to increase the price (I have had to do this in the past so I know it is possible, just not preferable), be aware that you need to ensure the perceived value of your work needs to match the price increase. In my case, I could not keep up with demand and the holiday season was in full swing, so the increase was reasonable and customers were willing to pay the increased price.
Pricing your work can be daunting but it does not need to be. I hope that these methods serve you well in calculating what a fair price would be. Remember to compare against the market and make sure that you feel that your price is fair for your work. You are worth it.