How to start pricing your products

How to start pricing your products

By James Pagni

How to start pricing your products
Before we talk about the actual pricing, we need to go over our plan or goal. Do we want to sell products for a higher price? Do we want to move larger quantities of our products? Maybe we want to do a little of both or maybe something in-between. Knowing what approach to take is a primary step to pricing products. Think of it in another way. So if we want to sell products for higher prices, we should be commissioning pieces and selling online or at events. If we want to push lots of products, sell wholesale prices to shops locally and call shops out of state. Deciding what path to take will drastically affect our pricing and approach.
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So, where do we start when it comes to pricing? Well, let's think of how much we want to be paid. It is an opinionated subject that depends on you and what you want. Remember, we do not want to do this and make less than working at a decent call center. Now, this is my suggested way to do this. Start by thinking of our highest paying job and double or even triple how much we were being paid hourly. If we were paid $12 an hour, raise yours to $24, which is a pretty nice starting point. Real quick, if we have a pipe that takes half an hour to make, then we would divide $24 by 60 minutes to equal 40 cents a minute, meaning that every 10 minutes would be $4 (you will need to update the $24 in the coming steps). We can raise the price once we gain more experience and we see a higher demand. It is ok to raise your prices! You are learning and improving constantly!
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The next step will involve pricing out the materials used to make our products. This will apply to you no matter your medium because we all require materials to turn nothing into something. So this is always tricky. Depending on our materials, it might be sold by the pound and that is easy to start with. Because we can weigh the weight of the product we made and price it based on that. However, if we have to batch up clay or make our material, we need to time how long that takes and incorporate that time into the material. 
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We have 10 pounds of material, and it costs $1 a pound, plus it takes 30 minutes ($24/hr) to mix. That would mean that we should price it at $10 plus $12 for the thirty minutes. That would equal $2 per pound, but again, how do we make money if we only incorporate the price it costs to make the item? Double that too. So it would be $4 per pound, and with that, we can buy 2lbs for the price we charged for 1lb.
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We have the two main things down but unfortunately, that only means so much. At the start of the day, we need tools and whatnot to make products. Depending on how independent we want to be, local studios are a cheaper alternative when starting. Otherwise, electricity, water, or maybe a piece of equipment is needed in the future. Starting a studio, we will be spending more than we make to have the necessities to succeed with our work. This is where we need to add profit and overhead expenses to cover what we cannot always predict.
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Overhead is always a weird thing to have to guess what we should be charging. Over time we will know what our expenses are for a website, utilities, rent, and all of those recurring bills. Then we might have a better estimate for what our overhead cost should be to keep things running. Ideally, we would estimate what our bills are for the year and divide it by the hours we work through the year. So if all of our bills came out to be $200 a month, times 12 months would equal $2,400. Assuming we have a part-time job to compensate our lack of pay, we would be working our art the other half, so we will say we work 1,000 hours a year. Now, let's divide the $2,400 by the 1,000 hours, which equals 2.4 dollars added to our hourly rate. Double that, meaning we are now at $28.80 an hour. This is also assuming we work that many hours and regularly sell our products, otherwise we need to do it based on the number of pieces we sell a year instead of hourly (it will be a guess). Now I am no expert, and there are different ways of doing this, so you can always try to learn more, but this is a simple run down for you.
For profit, it is all up to you. It is as is sounds, the extra money that is supposed to be our profit for the business. Now when it all comes out, will we take away that profit? Probably not, yet it is good practice, but we will need that money to grow. A good starting point is adding 20% to our hourly if we work and sell products regularly, or the typical thing to do is add it to the final price of the product. So if we are at $28.80 then we will multiply that by .20, and equal $5.28. So that equals $34.04 an hour. If we have a bunch of products were always doing math on and having different prices per piece, than this is the best method to avoid confusion. 

So we got the price down but is that all there is to it? Unfortunately, we need to circle back to the plan/goal of basically whom we want to sell to. Let us start with selling to shops. With shops, this is where we will be getting into selling at wholesale prices. After you have your hourly, overhead, profit, and material cost worked into your product, you have the price you should be charging wholesale. As you grow, keep in mind distributors who get a 25% discount, they buy larger quantities and sell to the shops. Round up, so it is not some weird penny amount they have to pay.
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From that wholesale price, we can get to our retail price. That is simply 2 or 3 times what the wholesale price is. After we do the math, including overhead and profit, let us say our pipe came to be $10. We will do 10 times 2 to equal $20. We noticed that many shops online and brick and mortar charge three times what the wholesale price is. So decide what you'd like to try and adjust based on your customers and experience.
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That is the general information to get us started on pricing. As you will learn with wholesale, shops might tell you the price they will pay, and honestly it is worth getting into that shop at that price for starters. From there, we might adjust prices to work with that. It is a challenging game to play. Same with online, you might be charging too much at first, and nobody wants to buy until we drop it to something more reasonable for them to try until you have made a name for yourself. At the end of it all, there is no wrong or right way to do this. It comes down to your end game of if you want this art business to grow beyond just you or if a moderate pay is good because you want a lifestyle business to last till you retire. The last thing I will say is that it is much easier to get a good education and job than to start from scratch to work towards being the one who provides jobs. It takes tons of hard work, patience, and motivation not to give up. Stay strong and keep dreaming.


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