Every maker has bitter experience of pricing their work too high or too low. Pricing formulas range from the scientific, to the gut, to sheer guesswork. Put the creative stuff to one side and gather your receipts for this essential exercise.
Find the base price of your work
Calculate the time it takes to make the object. Be generous. Think of this as if you had to replace the object or had a re-order for a similar piece.
Think of this as the price if you had to replace the object.
A 'per hour' average industrial wage is a good starting point for, say, a teacher (currently £100 -150 per day depending on years in service).
Add to this fixed hourly rate the cost for power, heating, insurance and other operating costs. Just get the bills and be realistic, this may be an additional 5 percent. If you are not the bill payer, make your best estimate based on the price that you would pay if you had to run a workshop independently.
Other overheads you will have to consider include expenses that are not a part of making the item you sell. They may include promotion or advertising, the services of a lawyer or accountant, a craft or trade show fee.
Finally add the current market value of your raw material. Consider the cost if you have to replace the piece, therefore, do not charge less if the material was discount or free, use the real trade cost. Estimate shipping, packing materials and packaging.
Now you have the ‘base price’ for your work. This is the price at which your most aggressive competitors will sell. You can increase this price based on your reputation or profile and based on quality of work, design and technical skill.
“How much extra you decide to charge is between you and your ego.” says Richard Raffan, a professional woodturner living in Australia.
Recommended Retail Price (RRP)
The retail price that you have established for your item should be the same for all buyers. This is the price paid by a customer to purchase a single item.
Setting a price for your work and keeping to it through any channel you sell is very important. It means that when you sell to a wholesale customer you are making a very small profit on a large quantity and when you are selling direct to a customer at a craft fair or from your workshop or studio, you are making a better margin.
Undercutting a shop’s price and selling at wholesale prices direct to customers, simply undervalues your own work and can send your wholesale buyer packing.
Proven price points
Talk to your buyers, friends and family and go shopping yourself. There are price points that are universal for certain gifting occasions and you are well advised to think about your products in terms of these prices.
When researching shops, don’t limit yourself to craft shops and galleries. Look in homeware outlets, pharmacies, bookshops, beauticians, good delis and boutiques. £150-200 seems to be the going rate for a wedding present.
There are price points that are universal for certain gifting occasions.
Remember the customer may be considering a choice of items that include restaurant vouchers, a trip to a spa, electronic equipment as well as a handwoven throw, wooden bowl or brooch.
Packaging is vital if you are thinking about the giftware and corporate gift market. Once someone is buying for a thrid party the presentation can seal the deal. Talk to your wholesale customer if you are considering packaging as they will have good advice.
Selling to shops
Some buyers will want to place a wholesale order for your work. This means purchasing more than one item. Wholesale buyers need to buy at less than retail price because they need to cover their selling costs such as rent (normally on a high street), cost of sales personnel, supplies, taxes etc.
The percentage of markup for wholesale is negotiable between you and the buyer but set your price to allow you a profit.
Some outlets have higher mark ups, few have lower. Established retail mark-ups are normally double plus VAT.
- For example you sell your item at a wholesale price of £50, the shop doubles it to £100 then adds on VAT (currently at 20 percent) so the recommended retail price is £120.
- If you choose to make a product that is, for example, £150, this will mean £125 excluding VAT, therefore £62.50 wholesale to you.
- Just under £20 is the magic number for a birthday gift, about £8.33 to you.
This is where you sell directly to the client, perhaps from the workshop or studio, at trade shows where you are personally present or via the Internet.
Use these opportunities to listen and gain valuable feedback on your work and its price.
Sale or return ('on consignment')
Selling through the gallery market is an investment for both parties. The gallery's reputation promotes you and your work stocks their, normally well-located, space. This relationship needs to be worked on by both parties on a regular basis.
If the price to you is £200, their mark up at 30 percent is £260, plus VAT at 20 percent is £312.
Because the gallery does not buy your work – you basically lend it to them – they rarely take the full retail mark up.
Galleries can take anything from 30 percent upwards, depending on their reputation and the price they think their customer will pay.
Remember, when they get paid, you get paid, so work with the gallery to get sales. Give them your best work and send enquires about your work to them.
Pricing for a commission
When a client orders a commission or a prototype, they are asking for something that has not existed to date. You will still need to consider your base price, but there are other factors:
People aren’t just paying for your actual time, they are paying for your experience, expertise, skills and artistic talents.
If there is a similar item in the market, what is its price?
How much is this job worth to you?
If it’s an interesting challenge or an interesting company or group of people are you willing to charge less for the glory?
To be as accurate as possible, ask questions of the client and get a good idea of the real scope of the project. Both need to be specific about what you will provide and how they sign off on the stages - you don’t want to be stuck making changes indefinitely.
Write down the details you agree in your quote and in a brief or letter of agreement. If the project changes, you will have this document to prove what you agreed and you can adjust your rate upwards accordingly. Some people quote an hourly rate for work above and beyond what was initially agreed.
Other considerations, more specific to visual arts and craft-making, include:
Do you or do you not charge a design fee for the proposal? Discuss this with the client – you can waive the fee if the project is confirmed.
Is a maquette, model or sample required?
When you get the job, is there a referral fee that you have to pay to a gallery or agent who brought you the work in the first place?
If this is a first order and it is repeated, agree a unit cost for future orders
If presentation packaging is needed for the work, allow the time to research this early on. You may need special die-cuts and tooling up costs for boxes or special screens for printing logos.
Reinvesting what you have learned into new projects
Can you incorporate elements you have solved on this project into a new part of your range? If so, the time you invest can be ongoing product development.