The following information was originally developed by the Craft Sector of the provincial Department of Business, Tourism, Culture and Rural Development. We appreciate the support the BTCRD has provided, especially access to their resource material.
You can use this pricing information to help you determine appropriate pricing for your crafts.
This workshop material came from the initial pricing workshop delivered in March 2015 by distance technology to participants from several regions of Labrador.
The Management Committee plans to deliver this pricing workshop in other parts of Labrador in the future. As well, the pricing workshop will be incorporated into other traditional craft training and development workshops delivered by Craft Labrador.
If you price your crafts too low you’ll lose money. If you price too high you’ll lose customers. Pricing takes time and experience to master. We like to think of pricing as a balance between math and marketing. Pricing takes personal judgment and that takes experience. The more you practice the better you will get at finding a price that is right for you. We hope the following information will help you.
Taking the time to figure out just how much it costs to make your work will ensure you are being paid properly. It will also give you the confidence to establish a fair price for your work in the marketplace. Keep in mind that there is no magic formula.
In 2013, The Labrador Craft Marketing Working Group undertook the Labrador Craft Study. Craft producers and businesses from across Labrador participated in the discussions. The study resulted in a craft development strategy that we are now implementing. The document is available on our Documents page.
The first item in the strategy is to develop a Labrador-wide communications network for the craft sector. We have set up a mailing list, Craft News, to communicate with the craft community throughout Labrador, as well as this website. You can also find Craft Labrador on Facebook and X.
Consider these factors when you are pricing your crafts:
Before you start, take some time to conduct some market research to help determine who your customers are and what they are willing to pay for the type of products you are creating. In order to determine your customers, you need to find out who your competitors are and what they charge for similar goods. This information is a good starting point.
A craft pricing formula is a starting point. It’s a great tool that minimizes the guesswork and emotional complications of pricing your work. Many people starting a craft business tend to set their prices too low when they just estimate what they think the retail price should be. Using a craft pricing formula can give you a solid, objective basis for your prices. A good craft pricing formula will take away the guesswork and ensure you have factored in all of your costs. While a craft pricing formula can’t possibly factor in all aspects of your business, it does provide an excellent starting point.
Using a pricing formula will help you remember to include all the costs that go into making and selling your work. Without the formula, you might neglect to pay yourself a fair wage or misjudge the amount of time it takes to create your work. The formula will eliminate the emotions that you feel in the value of your work – emotions that sometimes get in the way of making good business decisions.
The pricing formula gives you an objective estimate of what you need to charge to build a business that is viable and has room to grow. In the meantime, if your product will not sell for the price you have calculated, you do have some choices particularly if you are just starting out. The important thing is not to ignore the high cost value you’ve recognized, but to look for ways to bring the number down (if you have to) and still create valued work.
You may be able to reduce expenses in some areas and still cover costs by considering the following:
You can also consider creating another product line that is quicker to make with less expensive materials. This is known as the ‘bread and butter’ item and would complement your higher-end product line.
You may be able to increase the perceived value of your work without greatly increasing your costs. Often gorgeous packaging and marketing materials will increase perceived value. You can develop and improve your skills so you create work that is unique and has a higher perceived value. Try selling at a gallery or shop that sells higher-end products to a different clientele.
At the end of the day the formula is meant to be a guide to allow you to make smart choices for your business and to help you to avoid under-selling your work.
As with anything, the more experience you have the easier it will get. There may be products that you can only retail yourself (through shows and from your own studio or shop) and other products that you can wholesale and produce in greater quantities. The key to success is finding that balance and not being afraid to ask for help.
In Craft Labrador’s workshops we usually include a pricing discussion. We talk about pricing formulas and ways to include overhead costs in the formula. In a recent product development workshop, we learned that one of our participants uses a simple and effective formula. She doubles the cost of materials and adds labour to get a wholesale price: Materials x 2 + Labour = Wholesale.
We used the pricing formula to price products that we made in the workshop. Here is an example:
Our workshop participants found that this was a simple way to price their work. By doubling the cost of materials we add something to cover overhead, but the wholesale price is kept at a reasonable amount. Remember that if the craft maker is selling directly to the customer, they would sell at the retail price.
List everything you use to make your products; don’t overlook the small things like thread. Even ‘found’ materials have a cost, like your gas, wear and tear on your vehicle and your time to go collecting.
Try to minimize wastage by cutting carefully, and using scraps in other projects. You can even try selling your scraps/waste in small packages for other crafters to use. Search out your raw materials for the best price possible – buy when materials are on special discount prices when you can. Remember that, depending on the type of materials you work with, your materials can have a huge bearing on your price. Some materials fluctuate in price (silver or gold) with market prices and availability.
You should pay yourself a fair wage for labour and be sure to use a fair wage that allows you to grow your business and accounts for the skill required to make your product. Your time and skills are valuable. No matter how much you love making your work, your labour should be neither free nor cheap.
Consider if you only allow $5.00 per hour for labour costs – you would really struggle to pay staff a fair wage and still make a profit if you grow your business to a point where you need to hire a production assistant. Please don’t undervalue your time and remember that labour is not profit. You may be paying yourself for the labour for production time right now, but your business may not always be structured in that way.
Keep track of and include all your production time, including time in front of the TV. when you are in your jammies knitting. Include the time you spend on the computer researching competitors or preparing invoices, on the beach looking for glass and shells, or driving to the post office to deliver packages. Look for ways that you can take shortcuts or speed up production to save time and money.
There’s more to consider than your materials and your labour. Overhead includes expenses like utilities, business insurance, packaging, office supplies, etc. These are the kind of sneaky, sometimes under-estimated business expenses that can really add up. If they are not accounted for in your craft prices, they can eat away at your profits and your ability to grow your craft business.
If you have a studio outside your home, overhead costs will be more easily identified. But even if you work in the house, you should consider the following as overhead costs of operating your craft hobby or business. If you are a registered craft business, these costs can be used as a tax deduction.
Note: Attending wholesale shows is another cost of doing business that should be considered in the pricing formula. For our purposes we are including it in the overhead costs.
A profit is the surplus of funds after all expenses are paid. In small businesses the profit (less any taxes paid on the profit – Uncle Ottawa always gets their cut) is used primarily for reinvestment into the business to help it grow and succeed. It can be used to purchase new equipment/more equipment but can also be used to pay bonuses to employees. In businesses with a share structure (like incorporated companies) profits can also be used to pay dividends to shareholders. In the case of a sole proprietor – as most craftspeople are – some of their profits could be used as a bonus payment to themselves.
Without a profit, you cannot grow your business. Profit is essential to the survival of your business.
Customers perceive value in a number of ways, and this can influence your profits and the prices you charge. Some people want value for money, while others will pay more for quality materials, or natural fibres. Well-designed products that are finished carefully, and those that have cultural significance, can command higher prices and may increase your profits. The addition of hangtags, and stories about you and the product, will also increase the value, as will carefully-designed packaging and display. All of these elements will impact the amount of profit you should include in your wholesale price.
Always determine a wholesale price. This is the price you quote to a retailer who wants to sell your work in their shop, gallery or web site. This is the price that covers all your expenses and includes a profit.
Using the pricing formula example, the wholesale price is $60. The retailer will buy your products from you and own them. The retailer will generally double the wholesale price and charge $120 for your craft. This is called “Keystone pricing”. More and more often, prices are being tripled, to help cover the rising overhead costs of operating a retail business or gallery.
The retailer might ask you for 30 day credit, but if this is a new client, you can ask for payment on delivery (COD) until you build a stronger business relationship.
The retail price is the price the customer pays at the shop or gallery. In our price formula example, the shop is selling your craft at $120. The retail price is determined by doubling the wholesale price. Most retail store owners and buyers expect to be able to purchase your product at half of the retail price if they are interested in placing a wholesale order. (Keep in mind, retailers have expenses as well, in fact the cost of doing business is increasing all the time.) By doubling the wholesale price to determine your retail price, you are ensuring that you can afford to sell your work at standard wholesale prices and still make a profit. You might not be ready to accept wholesale orders, but if you don’t build that factor into the price of your products, you will not be able to grow your business to a point where you do accept wholesale orders without significantly increasing your retail prices.
Maybe you also sell your crafts directly to the public at craft sales and farmers markets, or even over the Internet. Remember that there are extra costs of participating in these venues including booth fees, your time away from production, gas for your vehicle, Paypal fees and shipping fees. By doubling the wholesale price to determine the retail price, you are accounting for any selling costs you encounter such as booth fees at craft shows, web hosting fees or third party website fees. Whenever you sell directly to the public, you should also sell at this retail price of $120. You should never undercut your retailer, or the retailer may stop buying from you.
To Recap:
An alternative to wholesaling is consignment selling. This is an agreement between you and the retailer that establishes price and other terms.
When the store accepts your work on consignment, the item remains your property until sold to a customer. When the item is sold, the customer pays the retailer who then remits your portion of the sale to you. Even though the price the consumer pays is still the retail price of $120, you (the craft producer) will receive a higher % of the retail price. It is a common practice to break down the retail price as 2/3 for the craftsperson and 1/3 for the retailer. In our example, the consignment price that you will receive is $80, based on that 2/3 formula. It is very important to get a written contract that protects both you and the shop owner. We have provided an example here.
There are several benefits to selling on consignment. You have the opportunity to make your product available to a wider range of potential customers, and your profits margins will be higher than if you wholesale. The retailer does not have so much cash tied up in inventory.
There are also disadvantages to consignment selling. Even though the price you get will be higher than wholesale, you may have to wait for a long time for the items to sell and to be paid. Although your craft work remains your property, it will be in someone else’s care. Items might be broken or get dirty from handling and those items will be returned to you with no payment.
When you enter a consignment agreement with a retailer, be sure to specify the following:
Tip: Always stay in touch with your retailer so he/she can let you know if your stock is running low.
If you can’t make the product and be paid properly, then you should ask yourself if you really can afford to make this product. Be aware of who your customer is – do your homework! Never ever undercut your retailer. Don’t undervalue your work: you are a skilled crafts person making wonderful unique craft items that are highly desired. Be proud! Be confident!
In 2013, The Labrador Craft Marketing Working Group undertook the Labrador Craft Study. Craft producers and businesses from across Labrador participated in the discussions. The study resulted in a craft development strategy that we are now implementing. The document is available on our Documents page.
The first item in the strategy is to develop a Labrador-wide communications network for the craft sector. We have set up a mailing list, Craft News, to communicate with the craft community throughout Labrador, as well as this website. You can also find Craft Labrador on Facebook and X.
Note: you may print this page as a hand-out for a workshop.
As we’ve learned from the Craft Pricing Workshop, pricing is a balancing act and different craft makers have different ways of pricing their crafts. Here are the stories of Mary and Jane, two people who approach craft pricing in different ways. They are made-up stories, but are based on real life situations that will be familiar to most craft makers. Their ways of pricing aren’t the only ways, but we hope that these stories can illustrate how individual craft makers who wish to sell crafts could make enough money to pay themselves when selling their crafts.
People make crafts for a variety of reasons: for the joy of making hand made items; to keep traditions alive; to make items for their families; for a creative hobby; and/or to sell crafts to make money. Many creative individuals find that the activity of making art, crafts or music improves their mental health. One person might have several reasons for making crafts.
Every craft person has their own way of pricing crafts, and we can all learn from how others do it, but at the end of the day, each of us has to be comfortable with how we sell our own crafts.
At the end of the stories of Mary and Jane we have added discussion points – some things to talk about if you are reading this in a workshop, or some things to consider if you are reading this on your own.
Mary makes crafts because she loves to. She has always made gifts for her family and friends. Occasionally she sells items to people she knows. She also participates in a local Christmas Craft Fair.
Mary has been knitting almost her whole life. She doesn’t remember a time when she didn’t have a pair of needles in her hands.
In the past, Mary would charge double the cost of the wool for any knitting she sold. The wool, buttons, zippers etc were available in a local shop. She always knew what the prices would be. She used patterns that were shared among her family and friends.
Nowadays, fewer people are knitting in Mary’s home town, and hand-knit items have become very popular. Mary is getting more requests for her work at the same time that it has become more difficult for her to get materials. The local craft shop that sold supplies has closed. Mary has to purchase her wool from out of town. If she can’t pick it up, she gets someone else to do it for her.
The types of wool and wool prices have changed, and Mary is particular about the wool she needs for each pattern. Sometimes she has to order it over the internet, and there is a shipping charge added.
Recently, Mary started getting requests from a local gift shop. She saw the retail prices in the shop, and realized that if she sold there, customers would pay double what she was selling her knitting for now. She is afraid that she would lose her customers if her price doubled.
Gradually, over the past five years, Mary has changed the way she prices her crafts.
She now charges for the cost of materials plus a fee for her work. She has a set price that she charges for her labour – so much for a sweater, so much for a pair of mitts, so much for a pair of socks, etc. It’s an amount that she is content with.
If she has to order in the wool, she adds the shipping costs to the price of materials.
Mary’s pricing formula:
Cost of materials (incl. shipping)
+ Mary’s price for her labour
= Mary’s selling price
If the cost of materials for an item was $15 and the price Mary charges for her labour was $20, Mary would sell the item for $35.
This is a method of pricing that Mary is happy with. She gets the price she wants, and finds it easy to price her crafts.
Mary realizes that she cannot sell her work through craft shops. She knows that it is important that the shop’s selling price is the same as her own selling price, but this does allow for the shop’s operating costs.
Mary will continue to sell directly to people she knows and on Facebook. She is happy with the amount of money she makes and the amount of work it takes to fill the orders she has.
Jane owns a craft business. She started out like Mary, she used to work full-time and make crafts part-time, but for the past five years she has been able to make a living from her craft business. She sells some of her products wholesale to craft stores and gift shops, and she sell some of her products at retail price at craft fairs and on Facebook.
Jane has a jewellery studio attached to her home. She has built up her collection of tools and equipment over the years. Jane plans in advance for her busiest times of the year – Christmas and the tourism season. She orders in a supply of materials several times a year. Since she set up her business, Jane has kept track of all of her expenses to make sure she is covering her costs.
Jane is known for her statement necklaces – elaborate pieces that use semi-precious stones, wire knitting and chain mail. These necklaces are very time consuming to make and the materials are costly. Jane only makes a few of these necklaces each year. Her best-selling items are earrings.
Because so much of her product is sold in shops, Jane has to set wholesale and retail prices for her work. Because the cost of materials is high, and Jane has to maintain a studio, Jane had to set up as a business in order to make sure her overhead costs were considered. (See Discussion Points below for more information about Overhead.)
In order to account for all of her expenses, Jane uses the following pricing formula as a starting point for pricing her crafts.
Jane’s pricing formula that considers all of her costs:
Cost of Materials
+ Labour
= Total CostsTotal Costs x 2 = Wholesale Price
Wholesale Price x 2 = Retail Price
Jane multiplies her costs by 2 to get a wholesale price. This allows for the cost of running her studio and her business, her overhead costs. She sells her crafts to shops at the wholesale price. The shop then doubles the wholesale price to get the retail price, the price they sell the craft for.
So, for an item that cost $5 for materials and $5 for labour, the Total Cost would be $10. The wholesale price would be $20. The retail price would be $40.
Jane quickly realized that this worked well to price her earrings, but by using the formula, her statement necklaces would be too expensive to sell. This is a product she cannot afford to wholesale.
So, Jane works two ways – some items she sells at wholesale prices to shops, and other items she only sells directly to the customer at a craft fair or on Facebook.
Jane’s pricing formula for items she only sells directly to the customer:
Cost of Materials
+ Labour
= Total CostsTotal Costs x 2
= Retail Price for Craft Fair
Jane still needs to be able to pay herself and keep up the costs of her studio, so she has developed a line of decorative hanging objects and Christmas decorations made out of inexpensive materials. These are very popular with cruise ship visitors and bus tours. Because the cost of making them is much lower, she is able to double her costs to cover her overhead and still make a good wholesale price for the shops she sells to. When she sells them in her craft booth at Christmas, she sells them at the retail price so she isn’t competing with the same shops she’s selling to.
By using several pricing strategies, and making specific products for specific markets, Jane is able to make a living as a craft producer. She sells her crafts at wholesale and retail prices, but she sells different lines of work differently.
It’s often a juggling act, but Jane is happier working for herself and making crafts full time. She enjoys the extra work, knowing that it all goes to support her business.
In the stories of Mary and Jane we have seen several different ways to price and sell crafts.
Can you think of other ways that people price their crafts? Some people don’t sell their crafts, though they might make them as gifts or trade their crafts for something else – slippers for sealskin, for example. Some craft producers have always charged double the cost of materials for the crafts they sell.
How do you price your crafts?
Overhead is any cost your craft business has to pay in addition to the cost of materials. It would include the cost of packaging – tissue paper, boxes and bags – the cost of your craft booth and your display and signs, even the cost of a course you take to learn a new skill. It might include transportation – to craft fairs, or to deliver your work to buyers. The cost of your tools and equipment, and necessary replacements of tools and equipment, should be considered – spread out over time. If you have a separate working space, overhead would include operating costs for your studio – rent heat and light. Even if you work from home, you can include a percentage of your costs. It would include any costs associated with running your business including the time you spend taking care of bookkeeping and other administrative tasks. In short, overhead is the cost of doing business.
Sometimes we have to adjust our prices in order to sell our crafts. Maybe we can’t afford to sell an item at a wholesale price and can only sell it at a craft fair. Sometimes, we can’t afford to sell it at all.
Considering all of your costs, if you can’t make your money back, even if you sell the item directly to the customer, you can’t afford to sell it. You’ll be taking a loss.
You might find that there are other ways to sell high priced crafts. If it is a unique, high quality item, you might be able to sell at a higher price in a gallery setting or at a one-of-a-kind show.
What would she have to take into consideration? She would have to set a wholesale price for her products. That might be the price she is now selling at. The retail price of her knitting, the price the shop would put on her knitting would probably be double. In order to not compete with the shop she would have to charge the same price when she sold directly to customers. Could she afford to do that? Would she lose customers? Would the new sales at the shop make up for the customers she loses by raising her retail price? Could she pick a couple of items to test the market? Could she have separate items that she only sells to the shop?
To find out if a product is worth making, Jane compares the price she can get for an item with the cost of producing it. If Jane really wants to know the true cost of running her business she would need to keep track of all her expenses, (her overhead and her labour and all costs associated with running her business) over an entire year. She would have to compare that with all the money she brought in during that year in to see if the way she was doing business generated enough income to pay her labour and expenses.
In Jane’s story we learn that she has several strategies to make and sell different types of products in different ways. If that doesn’t work for her, what else could she do to either cut down on her costs or increase her prices? Perhaps she could get together with other producers to buy raw materials in bulk. Perhaps she could sell one-of-a-kind items in a gallery where she can ask for higher prices. Perhaps she could teach jewellery making as well as selling items she has made. Can you think of other things that Jane could do to increase her income?
