Figuring out how much to charge when you’re selling handmade items can be daunting to say the least - you need to consider the cost of materials, the time you spend making each item, and how much profit you would like to earn. You don’t want to undersell your products, but you don’t want to charge more than customers are willing to pay.
The Pricing Wizard can make this task much easier and even help you make a plan to meet monetary goals.
You can access the Price Wizard when adding a new product or editing an existing one. Click on Calculate Price to get started.
In this example, the product is a handmade beaded bracelet. The material cost for each bracelet breaks down to approximately four dollars. If you’re making items like beaded jewelry that use materials sold in bulk, you can figure out this amount by dividing the number of items used in the finished product by the total quantity purchased. For example, let’s say you paid five dollars for a bag of 20 beads, and you use four of these beads in each piece you make. That breaks down to one dollar cost for each item since you can make five with each pack of 20 beads. Do the same with each item used to make your product and add the total together to find the material cost.
Next, add any additional expenses for each product to the overhead cost field. This could be what you spend on boxes or packaging, for example - or even your shipping costs if you offer free shipping. The goal is to reflect as accurately as possible any additional costs that your business incurs on a per-item basis before you consider sales tax or fees. If you don't know, that's okay! Just do your best to complete this field, but remember that there may be additional costs you haven’t accounted for when you're pricing your products.
Indicate whether or not you plan to sell wholesale and enter a percentage for profit margin. If you’re not sure what to choose, we recommend a 50% profit margin if you're not selling wholesale and a 75% profit margin if you are selling wholesale. This is based on a keystone pricing method. The profit margin is higher if you're selling wholesale because the reseller will need to make a profit off your products as well.
This isn't a strict rule on how to price your products and there's definitely a lot to take into account - such as the price of similar items and what your financial goals are - but we think this is a great place to start. Pricing is as much of an art as a science so we encourage you to play around with your margins to see the effect on your profits.
The last step is to enter the amount of time it takes you to make each item. You’ll see the suggested product price adjust on the right side of the screen. Again, you can go back and make changes to any of the fields to get a different result.
You can also add a monetary goal here if you like. The Pricing Wizard will use the suggested retail price and the data you provided to estimate how much time you’d need to invest and how many items you need to sell to meet that goal in one year. This will also help you make sure you're charging the right amount and still paying yourself a reasonable rate for your hard work and time.