Once I started selling my crocheted items at markets, I had to figure out how much to charge. I certainly Googled it and looked at what people charge for things on Etsy to get an idea of the “going rate.” So I put some price tags on things and felt okay. It is trial and error, anyway.
At my second market, after buying some of my coozies, a new customer asked me if I could also make her a mesh tote bag. I had been wanting to make more accessories, and I really wanted her business. So I told her, of course! And that I could do it for $16.
How did I come up with $16? I literally made up a number in my head that I thought would be low enough for her to just say yes. Because I wanted the sale.
But who cares. My first custom order! It’s happening!
Well, the tote took me about 5-6 hours to make. So $16 / 5 hours = $3.2/hr.
And then I thought, oh sh**, was I doing this with my other products as well?
I think this might be inevitable when starting a business. There are some mistakes we just have to make, because we’re doing lots of things for the first time. And good on us! We’re taking the plunge! We’re getting into the arena!
But you don’t have to make this mistake!
I’m not embarrassed to tell you this story because I don’t want you to go through that, and because I’ve found a better way. I price my items based on labor + ALL materials + other business expenses + profit. And for the labor, I pay myself a really nice hourly rate.
Side note: I am surprised that more people don’t include labor in their costs. Why the heck not?!
This is a lot like Crochetpreneur’s advice (check out her website, super useful stuff there!). And she also says that if the thing takes too long to make and would cost too much following her formula, then she won’t make it to sell, but maybe as a gift or for herself. There are plenty of other things that you can make quickly and don’t have to charge an astronomical price for.
You might be asking yourself, but Jen, what is my labor cost, exactly? I don’t know how long my stuff takes me to make.
Well, you could sit next to a timer and pause it every time you take a break and hope your kids don’t need you and hope no one talks to you or calls you or distracts you so you can get an accurate estimate and price it fairly. Closets are good for this.
Or…
You can just buy this calculator to help you find out how long something takes to make BEFORE you make it. It might be magic. Or math. But it’s really accurate and helps me make good business decisions.
No matter what, DON’T CHEAT YOURSELF on your prices. Your customers respect you when you stand firm, when you display your self-worth. I know this because my customers have said it to me, as they are handing me their credit card. Respect yourself and your time.
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