Let's talk about money.
*Pause for dramatic effect*
Yeah, I know, it's not really something we do that often, and it can feel such a personal thing, or maybe a bit triggering - so if anything I write here makes you feel icky, then please don't worry about not reading further, I don't want any of you lovely readers upset.
That said, I think some aspects of money could be talked about more openly, and the one I want to discuss today is pricing for a handmade business.
My own money story is not a straightforward one (whose is?!), and I'm not going to share all the ins and outs, but it's something that I've been contemplating more recently as I've transitioned to self-employment and am relying on my own work to bring in a living, and I still need to do plenty of work on coming to terms with certain things.
But the question of assigning a value to something I've made and want to sell is one that I've been mulling over and trying out different things for a little while, so I'm going to try and talk you through a little bit of my thought process, and then I'd love to hear your views too.
Selling handmade items of any kind, in any marketplace, means you need to decide how much you want to charge for them, but where on earth do you start, short of plucking a number out of thin air?!
One approach is to search for similar products to your own and figure out what the going market rate is, and then pitch yourself around that ballpark. This can be easier said than done, because basically if you search for pretty much anything on a site like Etsy, you'll find a huge variation in prices for apparently similar things. Of course, you could delve deeper into the 'shops' selling them, and check if they are actually making regular sales, which might give you a better idea of the kind of money people are willing to pay. Or you could take a closer look at the materials used and decide if they are worth the extra premium, or try and take a guess at how long it takes to make one of whatever it is.
If you use this market rate approach, you then need to choose whether you pitch slightly below - offering your product as better value and hoping to sell more of them; or slightly higher and aim for that premium/luxury/unique bracket where you might sell fewer individual items but could potentially still make as much profit.
What I've tended to find with this view, is that the 'hobby' makers fall into the cheaper price range, because they're mainly in it for the fun and enjoyment of making, and earning a little bit of pocket money; while the 'proper businesses' ask the higher prices because they've been more considered in their strategy, and have calculated all of the associated costs of making, marketing and selling their products.
This brings me to the next pricing strategy, and the one that tends to be the supported wisdom of how to figure out what to charge.
If you search online for 'how to price my handmade products' you'll find all sorts of articles and blogs and resources that offer 'the best way' to calculate your prices. Ultimately, they come down to a variation on a formula that looks something like this:
Materials + Overheads + Time = Cost Price
Cost Price x 2 = Wholesale Price
Wholesale Price x 2 = Selling Price
Add up all the costs of the materials you've used, including packaging, any listing fees, other overheads, and anything else even vaguely used in the making - then add a charge for your time (decide on what hourly rate you want to earn and multiply it by the time taken per item). Then, you should at least double whatever figure you have here - many places I've found would say that this gives you a 'wholesale' price, if you were going to sell your items to a retail shop for them to sell on - and then potentially even double it again to arrive at a selling price.
I've worked out a rough calculation based on this for a couple of the items currently for sale in my shop, and frankly, the number that comes out is a little bit scary.
And that's perhaps the third strategy - less scientific to be sure - an emotionally based one, deciding what feels like the right amount to charge. Even here you'll find advice to set your prices where they feel just slightly uncomfortable, or even to imagine yourself in the shoes of your ideal customer and charge what they would feel the appropriate value. After all, someone like you in your financial situation might not be the kind of person who is going to buy the things you sell anyway.
I honestly don't know what the right answer is, and frankly there's probably a different right answer for everyone selling their handmade things based on their individual circumstances. I've been trying out different prices both online and at craft fairs over the last few months, and there sometimes doesn't seem to be any rhyme or reason to what people are willing to pay. One person will look at the price of something and turn round and say to you - "oh, that's really cheap!", while three people later someone will complain that the same item is far too expensive, out of their price range, and would I offer a discount?!
I do think it is important though, if you're running a business and need to make an income, that you do try as much as possible to price items to make a profit. After all, that's kind of the main point. If you're not making enough money to at least cover your costs, then you don't really have a business. Of course, when you're just starting out this is going to be trickier, you'll probably need to invest quite a bit to build up your stock to get the ball rolling, and you'll have the initial costs of getting other things in place, like a website, getting business cards printed, perhaps buying new equipment...
However, I believe that the toughest part of the pricing conundrum is how you actually feel about the money. Do you think your products are worth that price? Do you think YOUR WORK is worth that? Do you think YOU are worth that?
That, I believe is the crux of the matter. Your own belief in your value.
I'll be totally honest, this is something I really struggle with. Trying to come to terms with why on earth anyone would want to pay me that much for something that I made. How can I feel OK with charging that much for something that I've enjoyed making. And sometimes even wishing I could ask for more, because I don't have enough money to pay my bills this month.
But, what I'm working on is getting towards a place where I'm taking my business seriously enough to appreciate that I have to charge whatever prices I decide because it needs to be a financially viable enterprise, and feeling like what I'm offering is of a value that some people at least will appreciate.
This is not going to be an overnight thing, and it's probably going to be really uncomfortable and frustrating, and may involve some crying, as I begin to write this next chapter of my money story and start shifting my mindset around value, worth, and my business being my sole source of income.
I'll be honest with you, it'll probably mean seeing the prices of the things I put up for sale in my Etsy shop go up to a point where I'm earning myself a modest profit. I know this isn't going to make everyone happy, and a part of me wants to put the calculation in each item description to show what's gone into making it and justify the price tag. Perhaps that is something that needs to happen more widely, to educate customers about the true value of handmade products.
Ultimately, the final value of anything is what someone is willing to pay for it, and all I can do as a handmade business owner is aim to strike the right balance between this, the value of the materials and time put in, and my own feeling about what my work is worth.
If you run a handmade business and have experience of the difficulties of choosing a pricing strategy, I'd love to hear from you about how you set your prices and how you feel about them. Or, if you're a regular or occasional customer of handmade businesses, what sort of sense do you have of the value of the things you buy? Do you consider the work and time of the maker to produce the item, or do you primarily think about your personal definition of value for money?
If you'd like to share your thoughts on these questions, or anything I've written here, please leave me a comment below, or if you'd rather keep things more private, send me a message via my Contact page.
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