How To Price Your Handmade Products
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It's a question we all ask ourselves. What the HECK do I charge for that awesome thing I make? I'm going to give you a simple breakdown of how to price your products while you are still a one person show.
The general rule of thumb is:
Cost of Materials + Labor = Cost of Goods x2 = Wholesale Price x2 = Retail Price
But lets face it, it isn't always as simple as that. A lot of setting the price is about a feelings. Do you feel good about selling your product at that price? Does the price reflect well on your brand? Have you positioned your products to garner the price you are requesting? Do the materials you use warrant a more premium price point? Do you plan to wholesale your products? So many questions but don't worry we will work through them.
Lets start with what your desired hourly wage for actually making the product. This is probably the part I struggled with the most. Please take into account your experience, schooling, and anything else that could factor into your hourly wage. It should also be said that the wage you choose should feel right to you.
Ok, now on to materials. This just means you need to track how much you pay for things and how much of it you use in each product. For example if your fabric is $25/metre and you use .5/m in each product then add $12.50 to your cost.
Add those together and you've got your Cost Of Goods. From there is it easy to multiply by two to get your wholesale price. You can stop here if you plan to do direct to consumer sales. If there is even a sliver of wanting to wholesale your products then you need to double it again.
There is one thing you can NEVER compromise on. You cannot sell your products direct to consumer at the wholesale price if you are actually wholesaling products. Your retailers will feel like there is no reason to sell your products if customers can get it for a lower price directly from you.
All that additional "profit" built in by doubling and doubling again can be used for overhead costs, new equipment, packaging, shipping materials and generally reinvesting back in your business. Because you have already covered your hourly wage for product production it means you have allowed yourself to get paid while still in the beginning stages of building your business.
If you are making the same product repeatedly or want to see a general cost breakdown I have created a handy printable template to help you track and generate prices for all your products.