This months Guest Blogger is the wonderful Kathy Ennis. Kathy is a trainer and small business mentor and frankly what she doesn't know about marketing yourself and your business isn't worth bothering with. We asked her for some advice on that age old problem of crafter's pricing their goods and here is what she said:-
As a business consultant and trainer who works with start-up
and need-for-growth businesses I will often ask the question “what is the
difference between a hobby and a business?”
The answer is PROFIT. And it’s from the business-savvy,
don’t-want-to-be-out-of-pocket standpoint I am writing.
When explaining hobby vs. business in greater detail I will
often use the example of the avid card-making crafter who spends hours (because
they love it) creating beautiful works of art that they then struggle to get people
to pay £1.50 for. Or they convince themselves that they are making a profit
because the table at the Craft Fair only cost £20 and they made £70 in sales so
they are £50 in profit. But, hang on, they haven’t calculated the cost of
materials used or their time to create the £70 – probably a serious LOSS in
this scenario. This is absolutely fine if it’s a hobby. You get to do something
you love and you get to see those lovely things you make being purchased by
someone else.
However, if we start thinking about business vs. hobby and profit
how do you, as a crafter, go about pricing your products realistically?
You Determine Your
Own Marketplace
Taking time to do some market research is worth its weight
in gold as it will allow you to determine who you want to sell to.
For example, if you are aiming for a higher cost per item is
a church-hall, table-top, craft fair the best place for you? Would you be
better selling online via a really well-designed e-commerce website with the
addition of face-to-face sales via regular attendance at more exclusive arts
and crafts fairs?
If, on the other hand, you are aiming at greater churn of
goods at a lower price you may need to limit the time you spend on creating
each item, sacrifice a little of your perfectionism, buy less expensive
materials and be prepared to ‘stack it high and sell it cheap’.
You Must Know Your
Numbers
There are lots of methods to calculate the cost of an item. During
my research for this blog, I found this really handy online Craft Calculator http://craftscalculator.com/?rangeName=10
But I have also put together a couple of examples:
Hourly Rate x Number of Hours + Cost of Materials = Price
£45 x 5 + £25 = £250
Materials + Labour Costs (i.e. Hourly Rate x Number of
Hours) + Expenses (sourcing, shipping, warehousing etc.) + Add on % (Your %
profit mark-up)
£75 + £90 (i.e. £45 x2) + £20 = £185 + £18.50 (+10%) =
£203.50
These two examples could be viewed as wholesale prices.
Thinking of retail or supplying retail outlets? You will probably need to
double the final numbers so you end up with £500 and £407.
Both of these key factors, your marketplace and your numbers,
pre-suppose that:
1. You have recognised your personal worth – identified,
calculated and ‘owned’ your labour cost / hourly rate
2. You have a really clear understanding of all of the
overhead costs of making your crafts.
Without these, and without a standard calculation that you
can apply to all of the items you produce, you pricing will be based on
assumption or guesswork – and you could find yourself heavily out-of-pocket.
Kathy Ennis
Hope you have enjoyed reading this and it has given you for food for thought. Why not pop over to Kathy's website to see what else she has to say.
Great advice x
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