How to Set Prices for Handmade Goods

https://www.workshopmag.com/pricing-basics/

by WallyFunk • 4 years ago

93 72 4 years ago

ghaff6• 4 years ago

One of the things the post just touches on glancingly is that many handcrafted items may just not be worth it as a business if you set a reasonable market price. If something takes you a day to make/sell and the biggest profit you can reasonably make is $50, it may just not be worth it. At least, unless it's something you would do for free anyway and just let the pottery or whatever pile up in your house.

I write fairly well and fairly quickly but my ghostwriting price for an article/blog has a definite floor. I might come down a bit if the work is interesting and the client is being professional/easy to work with but I won't come down that much.

detaro2• 4 years ago

Or becomes a businesses targeting a different niche than first intended. It's sad to see how often people get nasty because "XYZ is only making things for rich people" when really if you think about the work involved, XYZ is pricing that way because they'd like to make at least minimum wage. Many couldn't afford their own products.

boppo1• 4 years ago

How does one get into ghostwriting?

ghaff6• 4 years ago

I don't really do much of it. I'm just a known writer (among other things) in tech and know a lot of people so professional friends reach out to me from time to time. Honestly, random companies wouldn't pay what I would consider my base rate which is at least $1.50+/word or so. I'm pretty sure none of the gig-work sites would.

So ~$1500-$2000 for a blog post is pretty much my floor but if I bring some brand to it, it's substantially higher.

exolymph• 4 years ago

Get into freelance writing, the gigs are all over the place. But mostly they're terrible — writing for <$1.00/word is an unsustainable grind unless you live overseas where the dollar goes a lot further. As with consulting, landing the high-ticket contracts is usually more about who you know (and who knows you / knows of you).

jnovek4• 4 years ago

Something that the article glosses over that I often ask about these kinds of businesses is _how exactly_ one finds and documents their costs. The author gives examples —- keep track of your time, keep receipts, etc -- but often a creative process is so organic that it just doesn’t feel as straightforward as that.

In startups it’s popular to use accrual accounting methods and, if you’ve ever had an opportunity to look at a startup’s books, it can get complicated. Several years ago, I worked on an enterprise product that had a bunch of variables and a long sales cycle. Without good accounting practices it would’ve been easy for us to screw up pricing and take a loss.

Maybe it’s just me, but it seems like the variables that go into a creative process are nearly as complex but the scale is smaller and documentation slimmer.

dazc• 4 years ago

Maybe it’s just me, but it seems like the variables that go into a creative process are nearly as complex but the scale is smaller and documentation slimmer.

This may be true but a 'creator' only needs to make enough money to pay him/her self and to buy materials. Once this has been achieved then it's simply a case of increasing the selling price to whatever the market will bear.

mdorazio• 4 years ago

On the financial cost side, use a credit card that is only for the side business. Then you can easily use that card whenever you buy something and look at the end of month totals. For time, I personally divide days into quarters instead of hours and think back to how many quarter days I spent on the activity. “That was two afternoons” = 4-5 hours.

jnovek4• 4 years ago

The credit card is a good idea. Thank you!

Honestly, I think I’m just a bad time estimator. It’s definitely something I miss from working together with people — I know I’m a bad time estimator and I can ask for help. Maybe this is just a “learning to work solo” thing.

atrus• 4 years ago

I make and sell handcrafted goods. I essentially split my costs into two categories, manufacturing and research.

The research budget covers the 'organic creative process' but isn't tied into the manufacturing costs. Once I've got the basic idea down, then I can start to purchase items to build X amount of something, and it's much easier to specify costs of a known item.

jnovek4• 4 years ago

This probably covers most of my time that I put into a thing.

Do you try to budget time for research when you start? E.g. “I want to try to get to my first prototype within 80 hours.”

I think when I went into this I didn’t think it would be very hard. I have experience pricing and selling software and experience pricing and selling my time as a consultant. What I’m finding in reality is that, although aspects of my experience apply, overall it’s a new kind of thing for me.

analog31• 4 years ago

I make a little audio gadget. Something like a guitar pedal.

My first product, I rather arbitrarily priced it at 4x my cost of materials. Then I began keeping records.

I use PayPal for everything. It comes with a Visa card. At the end of the year, I download the entire year's transactions as a CSV and work out my numbers in a spreadsheet. I keep procrastinating on doing it in Python. Money in, minus money out, is my profit. Next, I have a decent estimate of my hours.

I've tried to price my goods, so I can pay myself somewhere between $50 and $100/hour. I try to make very sure that I'm not robbing my family by spending time on a "business" that's not actually a business.

cenazoic2• 4 years ago

Not sure how useful this is for many handmade items; for candles, as they mention, sure.

But - I quilt (not to sell). Quilting is expensive in terms of both supplies (typically 100% cotton fabric, thread, batting, machine, etc.) and especially time.

It's difficult to convince people that the relatively simple (looking) quilt made by a skilled quilter, which 'only' took 20-30 hours to make is worth $500-$1000+.

Couple of interesting articles here:-

- https://sewingreport.com/2016/02/quiltonomics-the-real-cost-...

- https://sewingiscool.com/handmade-quilt-prices/

- https://quiltdom.com/price-handmade-quilts/

ghaff6• 4 years ago

I periodically think of getting a "tshirt quilt" made with a bunch of my tshirts. But whenever I look at the pricing of what look like proper ones, I sit down until the temptation goes away.

cenazoic2• 4 years ago

Ha! Tshirt quilts are a bit more labor intensive then they seem.

Because of the knit fabric most are made from, each shirt has to be a) cut (the graphic you want to use) and then b) that cut piece needs to be stabilized, which typically means using something called 'fusible web' - a material which adheres to the shirting via ironing. Otherwise, you wouldn't be able to sew the pieces together very well.

So in some ways they're simpler, but they can require more initial prep.

detaro2• 4 years ago

Yeah, the time aspect is something people very quickly ignore or underestimate. And in reverse often interesting to see what kind of thing crafters/artists/... offer cheaply, because it is a variant that can be done relatively quickly.

ghaff6• 4 years ago

Of course, valuing your time for something you're doing on the side is not straightforward. Most well-paid people with day jobs can't just work some more hours for the same hourly rate. A lot also depends on whether it's something you actively like doing vs. you find it a real chore you're just doing for the bucks.

jnovek4• 4 years ago

This is the hardest part for me. I undervalue my time and I know that customers do, too.

metamet• 4 years ago

When I was in college, a friend of mine knitted me a scarf as a birthday present. I adored it (and still do).

But the economics of it is interesting to reflect on. We were both poor college students, with no real family support, working 30-40hr weeks at coffee shops in order to pay rent and buy food, pulling $8/hr plus tips.

The cost of yarn was a half an hour's worth of work, and the hours it took her to knit it were done while relaxing and watching shows. So labor was considered a write-off, in terms of labor. To her, the gift only cost was the yarn. Time and opportunity at work for more hours were scarce, so it wasn't like we could just work more instead.

Quantifying the value of the scarf didn't really change in my mind. To me, the fact that she spent all that time on it meant it was special and invaluable to me. Especially since it wouldn't make economic sense for her to try starting a business selling them.

sricks3• 4 years ago

My wife is a quilter and has mentioned the same thing. It's hard to sell a bed-sized quilt for $1200+ when people don't understand the work that goes into it (and even the materials are more expensive than I would have guessed). She's started writing quilt patterns and has a few that will be featured in upcoming publications and subscription boxes. She's about to set up an e-commerce system to sell digital patterns on her website, but she has no interest in selling physical quilts at the prices she'd need to in order to just break even.

massysett• 4 years ago

The only way a quilter in a rich country could sell profitably is to approach it like art. Get the quilt into a gallery and sell it as a wall hanging. The instant you sell a mere bed covering, you’re competing with factory labor in poor countries. Their labor is way too cheap to compete with.

Many sellers of handmade items will have the same problem.

markdown• 4 years ago

There's a thread on the reddit frontpage right now about a guy who sells tie dyed shirts for around $500. They can take around 20hrs to make and are sold via auction on instagram.

https://www.reddit.com/r/toptalent/comments/tfiwqd/this_guy_...

https://www.instagram.com/dyes_n_goodvibes/

newyankee• 4 years ago

These stories are good but I personally always feel that very few outliers really make this kind of money. Much like art, media etc. Most people cannot create a similar brand around their own work and it is possible the market cannot even support plenty of niche producers per se.

yial• 4 years ago

This isn’t related to quilt pricing per se - but perhaps overlapping with some how how high end hand knotted rugs are sold in “selling” and pricing techniques might be useful.

(See Bunyaad rugs )

…

Also quilt sale prices on EBTH are interesting… I’m not educated enough to really understand that market.

The same is true when I see local auctions. (Chance?)

Vixel• 4 years ago

I agree with all of this. I don't think people that sell their own goods realize that every situation has different COGS. So you can't price the product based on the market. Especially considering non-handmade items that can be made for pennies in bulk.

medion4• 4 years ago

The article is a bit thin on two difficult and important factors for makers: How do you decide what your hourly rate is, when it is also unlikely you are making something so unique no one else makes something similar - ie. how do you create compelling arguments for differentiation.

In the first instance, in a first world country, to cover the high cost of living and to also take retirement and other such things into account, I’d estimate $50/hr is the floor. Where I live a plumber will earn $80-120hr so even then it’s on the low side if you are a skilled maker who has had to develop skills over years.

In the compelling differentiation department, I think it comes down to storytelling and materials + workmanship. This trifecta has to be woven into a credible narrative to sell your product.

After all that, you need to market it… and we’ll that’s something else entirely…

medion4• 4 years ago

Also, another factor in pricing is ‘brand power’ or in this case ‘artisan power’ - pricing based on materials and time alone is no different than being a tradesmen. In the luxury goods sector much of the price is based on brand power and are almost in no way related to manufacturing costs (although at the high end the goods being made are also being produced by skilled artisans with expensive materials in the first world, ie. Hermes). So a maker must also consider brand building too, and the value in that over time - again connected to storytelling.

quesera8• 4 years ago

in a first world country ... I’d estimate $50/hr is the floor

That's $100K/yr, well above the median.

My pricing strategy is to start with your needs. $50/hr might be reasonable, but it varies by person and life circumstances.

Figure out how much time it takes to produce the second (or later) work product. Do some hand wavy math over the amortization of research, design, and first product over the quantity you could produce in a few months, if that was your only product. This will be a larger factor in new work than in iterations on previous work.

You now have a selling price, which the market may or may not bear. This can be tested, and you can use the results to inform your decision on whether to continue production. Most of this can be estimated early in the design phase.

My premise is that starting from anywhere else (COGS, market price) and working backwards to compute valuation of your time is .. well .. backwards.

Accepting a temporary, or introductory, devaluation is reasonable.

Just know what your targets are, so you know when things are not working.

rdtwo2• 4 years ago

At 50$ an hour basically nothing is viable especially in the beginning so do you just do nothing?

vharuck• 4 years ago

That's $100K/yr, well above the median.

The median is gross personal income. It doesn't include insurance plans, unemployment insurance, taxes, or any other costs of doing business beyond materials. I haven't done the self-employed thing like others on HN, so I'll leave it to them to say if $100k/year is enough to earn the equivalent of a median salary. But anyone who aims to rake in that median is in for a rude surprise.

Edit: I'm not saying you'll be paying all those costs yourself. You don't have to budget for HR training on not stealing from your own supply cabinet. My point is that companies pay a lot more per employee than just salary.

medion4• 4 years ago

You are multiplying the hourly rate as if it were a fixed salary, while also forgetting about taxes etc. I don't know a single craftsman that works 8-9 hours a day, 5-6 days a week on "chargeable hours" - most craftsman can realistically work perhaps half that on full-concentration crafts, not only because of the attention and detail required, but also because there are so many other things to do in a single day for a solo craftsman in todays craft market - customer enquiries, marketing, shipping, etc. 100 years ago the Japanese swordsman was not inundated with much other than making swords. Today it's much different.

panzagl2• 4 years ago

Generally salary is about a third of billed rate- the plumber billing $120/hr is making $80K, someone billing $50/hr would be in the $30K range.

pessimizer• 4 years ago

> in a first world country ... I’d estimate $50/hr is the floor
That's $100K/yr, well above the median.

That's under the assumption that you're fully booked. The reason plumbers, mechanics, etc. charge so much is because they're not fully booked. They are experts who are available for you to book; you're paying for their availability. If your car breaks down, you want to book an appointment tomorrow if possible, not six months from now.

If you're going to stay in your profession, you have to charge for downtime. It's far better to have 6 mechanics who are available for $90/hr than to have one mechanic that charges $50/hr, but is booked 2000 hours a year - in the latter case, you end up on a long waiting list. If enough overflow business is available that another mechanic puts out a shingle, and now they're both booked for 1250 hours a year, then they're going to have to charge $90 to stay in the profession. That's going to be the equilibrium. And especially when individual jobs are only a handful of hours, people are going to be a little less price sensitive: $500 is not as different from $900 as, let's say, $50K and $90K.

If independently bookable bespoke craftspeople aren't sitting idle a good portion of the time, demand is not being met.

My pricing strategy is to start with your needs.

tl;dr: I agree. But your availability is also an input. You have to charge for downtime.

jimnotgym• 4 years ago

Patrysha is a certified small business coach

Is there a Chartered institute of small business coaches?

OJFord• 4 years ago

Well they claimed 'certified', not chartered; yes I'm sure there are any number of small business coaching certificates available.

renw0rp2• 4 years ago

Can I get certified as a small business coaching certificate authority?

will_walker• 4 years ago

This is such a helpful post, but it also doesn't factor in the cost of R&D to make a new or unusual product. For example, I spent years figuring out how to make a specific kind of porcelain planter for succulents that would be self watering. Nothing else exists like it on the market, and customers like it but there's a ceiling to how high I can price. Now I have a lot of sunk costs that I'll probably never recoup on sales. Also selling isn't trivial in terms of cost - figuring out packaging and shipping loss rate can be a double digit portion of sales for fragile handmade goods.

Of course this is on me as a designer and maker - it's a labor of love - but it keeps my work from becoming a serious business that I might try to go out and count on for income.

bradly5• 4 years ago

I do woodworking and I just use my hourly rate plus materials. There are a surprising number of people who will pay high prices for quality hand-made goods. What I've found works is to create the best product you can and have a story around it.

For example, for my shaker trays I describe the process of picking out the wood, cutting the bands, boiling the wood, bending it around a hand made form, hammering in copper tacks over an anvil, hand finishing, and then applying multiple coats of hand made shellac. For larger furniture or slab work the story of the actual tree can really add to the value as well. People want a story.

To lower the cost you can create router templates, jigs, or even CNC projects to lower the hours spent and reduce the overall cost, but these need to be balanced with the selling of bespoke goods.

jotm• 4 years ago

Do you create content, then? Articles, pictures, videos (especially well produced ones) of the various processes would be very interesting and could supplement your income pretty well (ads, sales/orders, patreon/sponsors, etc).

bradly5• 4 years ago

No content yet from myself except some Twitch streaming. I do have some ideas in the hopper though...

- A small e-book or online course for software engineers to learn woodworking. Working title "Burnout to Burn Box: How to quit tech and start woodworking"

- I'd also like to create a software/hardwood shop where workers can choose to do either software engineering or woodworking any given day, but that will take more than a garage shop. You'd only need experience in one discipline to get started. Working title "Bits to Bits Studio". I'd also like to have a small coffee shop in the front to display finished goods.

- I'd also like to start a community woodshop on Lopez Island to help islanders learn skills and start their own company.

whoisburbansky2• 4 years ago

I'm interested in how you adjust that for expertise; do you bump your hourly rate for items that took you longer to learn to make well? How do you figure out how much to bump by, if you do?

bradly5• 4 years ago

Nope, my hourly rate is my hourly rate. If something takes more time, it simply costs more.

mywacaday• 4 years ago

Some YouTube channels have great breakdown on prices, one of the channels I follow is Blacktail studio, https://youtu.be/bq-8yHgjqv0, this video is for a 13,500$ epoxy table. When you see the cost of the initial slab, 2.5K, they the meticulous attention to detail, the skill involved and other external costs like planing and making the steel frame it starts to seem reasonable.

bradly5• 4 years ago

I love Cam’s videos! His virtual epoxy class is great. Highly recommend.

mauvehaus2• 4 years ago

As someone who builds furniture professionally, this article wasn't as useful as I'd hoped. As other folks have pointed out, one of the hardest things to figure out is what to value your own time at, and the article doesn't really touch that beyond "the customer is paying you to do it because they can't do it themselves".

One of the trade offs I find myself making is when I'm doing something new. There's a certain amount of inefficiency, and sometimes you end up having to pay yourself less hourly to hit a more-or-less established price point for something.

Sometimes that's worth accepting for the sake of doing something new or developing a new set of skills, but you don't want to do too much of that either!

jay_kyburz2• 4 years ago

You could look at it this way - your time is worth what somebody is willing to pay for it.

If you don't have a job and can't get one, your time is worth $0.

If you get a job a MacDonalds you time is worth about $10 an hour.

If you make products, your time is worth what you can sell the product for divided by the amount of time you worked on the product.

There is no upper or lower limit. Some people make $1M a year, some make $0.

Update. The real question is, "Should I keep making furniture given how well it sells, or should I go get a job at MacDonalds?".

There is far more than money to consider in that question.

mauvehaus2• 4 years ago

McDonalds, shit. I used to write software. There's definitely more to it than the hourly rate. Just the same, it's a good thing my wife's job offers good health insurance :-)

Back to pricing though: I shoot for an hourly rate when I quote things knowing full well that sometimes I won't hit it if I run into unanticipated learning opportunities. Sometimes I price myself out of work/the customer doesn't have a realistic expectation for what a thing should cost. It is what it is.

Hilariously, I have a friend in the trade who's married to a pricing analyst. He has as much trouble pricing his work as anybody else I know.

rokhayakebe• 4 years ago

Is software handmade good?

throwaway889900• 4 years ago

Only if you meticulously flip the bits on your hard drive with a laser, by hand.

beloch• 4 years ago

Prices are not determined by cost of production, but by what the market is willing to pay.

Figure out what the market is willing to pay and then decide if you can get your production costs far enough below that to justify the enterprise. Yes, being handmade by locals adds to what people will pay, but only so much.

jay_kyburz2• 4 years ago

I agree, I came to the comment section to say I think this article takes the wrong approach entirely.

You have to test your market with different products and different price points.

If you make three widgets, offer them for $1x, $5x, and $10x.

If you sell all three you know you are still too cheap. Make your next batch even more expensive until you find a price that people are not willing to pay.

If your products don't sell, you need to either lower all your prices, or improve your marketing.

cascom• 4 years ago

I’ve seen this in supposedly “sophisticated” businesses as well 1) people misjudge what value others (the market) puts on their goods services and price much lower than value (this is especially true in hobby type activities where if you think about a supply demand curve you don’t need to set price at a point that incents massive demand (1m), but rather at a point that incents demand of 1/10/100) 2) people are horrible at estimating their costs - just ask an Uber driver what he thinks his cost per mile are fully loaded (taking into account depreciation, consumables (tires/oil), fuel, time and mileage when not on a fare, etc)…

How to Set Prices for Handmade Goods

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