Flower Jade and Mum Macrame Bookmark
Well, ahem, let me just get it out in the open. You may have noticed an increase in my pricing over the last few days. Are you seeing things? Nope. I did it. And it needed to be done. Why, you may ask? Your prices were so affordable!
Affordable for the customer, yes, but not sustainable as a business. And I want to run a business! A business that shares my creativity, attention to detail, and unique perspective on natural history, botanical and nature art, the book arts, and more.
Before I get into the why, I would like to cut to the chase and let you know that I take pricing very seriously. I want to assure you that you can still get any item in my shop for the original price through October 21st:
Use coupon code LOYALTY for 40% off in my Etsy shop
So, what made me rethink my pricing?
Wholesale inquiries. I have had a few people ask me over the last few months if I do wholesale. Expecting that they want great quantities, which I don’t produce, I hadn’t given it much thought.
However, for gift shops and other similar venues, the quantity requested is often quite small to start out. Hmmm…maybe I should look into this. So I did. And I discovered that wholesale prices are typically 50% of retail. Whoa! If sold pieces at 50% off I would be losing money and essentially doing this for free! Who does that? Well, no one, if you are not pricing your goods the right way. Clearly, though, there are people who do wholesale and do it quite effectively as part of their business model.
This started me looking into pricing formulas, and I discovered that although I thought my prices were decently marked up from base costs, they still fell about 40% short of what they should be to get close to a sustainable business.
I found fantastic advice on pricing from a post on artist Jenny Hoople’s blog. Check out Jenny’s work on her site, Authentic Arts, by the way – absolutely gorgeous natural stone jewelry. Well worth your time!
Jenny pointed me towards business expert, Tara Gentile, who has been consulting on the Etsy Success Symposium as well as giving recent advice on her blog about how, “82.2% of Business Owners Should Double Their Prices.”
The advice is terrific and Tara states is much more eloquently than I can, so do yourself a favor and pop over to her post to read the details. In addition to the post, there were comments (including some by Jenny) that led to the following pricing formula recommended by another business blogger, Megan Auman:
(Materials + Labor + Overhead + Profit = Wholesale) X 2 = Retail
Note that “labor” is calculated as the actual time it takes to make a piece of jewelry and you need to have an accurate hourly wage. This needs to include not just making the piece, but designing it, ordering supplies, photographing, writing descriptions, posting online (website, blog, Facebook, Twitter, etc.), packaging up and shipping orders, etc. Tara recommends charging at least $25/hr (and that $50/hr is actually a more accurate number) and when you think of all that goes into the work of a retail business, this is a very reasonable rate.
When I actually did my calculations, accounting for all of the above details, I came to the conclusion that I needed to put up a 40% increase to get into a more sustainable business model for my business.
And so there you have it. If you are a small business owner, read up and make sure you are charging an accurate price for your time, talent, and business. You and your creativity are worth it!
If you are a customer, thank you for your support! I hope this post can help everyone from business owners to customers better understand what goes into pricing the handmade, unique gifts and jewelry that we all enjoy.