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Pricing
OK, so now I've been presented with that age old question.
I've been there, worked it and I know how the cookie crumbles :)
When you're ready to price your product (wholesale or retail), you need to approach it in 2 different ways. When you meet in the middle, you know you have the right price.
First off, you'll need a fair idea of what a comparable product is priced at retail. So when you see a doll, made of pretty much the same materials as yours, fairly close to the same quality, etc...check out that retail price. This gives you a fair idea of what the market will bare. bear? haha
Now, you sit down and figure the exact costs of materials. If you paid $3 a yard and you used 1/2 yard then, so far, you've put $1.50 into it. The same with the ribbon, glue,buttons...whatever you put into the product.
Now, if you have to turn on a light to get the work done, then by golly, figure that in. Get an estimate of kilowatt hours and cost and multiply the rate times the hours it takes to get the job done.
What are you going to charge yourself for that corner, you've monopolized for your work? What is that square footage worth? Seriously. If your paying rent of $1000 per month and using up 20 sq.ft out of 1500 total sq.ft, then figure out what that 20 sq. ft is costing you. That's the rent you charge to your product. Then if you can make 200 of that product each month, then divide the rent by 200 and that's what you need to add into your costs.
Once you have all the basic costs figured per product, then you need to think about yourself. Are you working for free? Let's hope not. If you were working for someone else, what do you think you'd be earning per hour? Everybody has to pay the labor. So if you figure you're worth $8 per hour and it takes you 4 hours, then the labor is $32.
Now there's a way to cut down on that labor cost, by making multiple pieces, at a time. In that case, you'd figure how many hours it would take to turn out (say) 10 at a time, then divide that time by 10 and come up with a labor cost figure per piece. It's usually a whole lot less.
Ok so now you have your overhead, the basic material costs and your labor figured in. Now how about profit? An overall 10% profit margin, is usually pretty good, so lets start with that.
Now suppose your costs look like this:
Overhead per piece $2.00
Basic material costs 7.00
Labor per piece 12.00
For a total of $21.00
Add a profit margin of 10% and you have $23.10
So $23.10 is your goal for a wholesale price (not a retail price)
Now let's say that what you've seen on the shelves, comparable to your product, is retail priced at $40. Hmmmm, well that would mean the wholesale price would be $20, $3.10 less than your figures.
Now the decision. Go for your wholesale price, or take a small cut in profit and price it at $20 to compete?
That's up to you. Is your product superior to what you see on the shelves? If so, demand your price.
Let's say that what you've seen on the shelves is retailed at $30! oops....Now what? Well, you have a choice:
Give your labor away for free.
Find cheaper basic materials.
Forget that product, it's a dead subject.
That's all up to you. Sometimes, we just have to bite the bullet and say 'it's a dead product from the get-go' and drop it. In which case, we back up and try for another product that's quicker and cheaper to turn out, saving a profit for ourselves.
That pretty much covers it. A lot of it is what you're willing to give away. Sometimes you simply have to demand your price and go for a higher market. In that case, be ready to prove the higher quality of your product or it's uniqueness.
There are many times, I've witnessed, where a crafter has developed an entire line of unique product, something in a class all its own. In these cases, you can pretty much set your own price, then push until the market accepts it as worthy.
