Pricing is one of the hardest hurdles people that design or craft have to overcome. Pricing something more tangible than a website or logo is easier because you have a baseline with cost of materials and people can physically hold what you’ve created. My favorite business pricing resource comes from the book, Craft, Inc. Seriously, if you don’t own it buy it now.
First, you need to know how much your time is worth. What do you think you should be making an hour (be reasonable and fair with yourself)? Make a chart to break down how much your time is worth per minute, and keep track of how long it takes you to make things. You should try to work fast, too. Multiply your decided hourly wage by production time.
Now add the cost of your time plus cost of materials (break down the cost of that glue you’re using, etc.). Next determine your overhead costs. This includes cost of things like your rent/mortgage, utilities, phone, insurance, postage, packaging, packing materials, promotional materials, etc. Don’t forget to include equipment like a drill, sewing machine or fancy printer. These items have life expectancies; research them and breakdown the depreciation value down to the hour and add that in, as well.
#1. Multiply your hourly wage x production time
#2. Add cost of materials
#3. Add overhead costs
#4. Add the sums of #1-3 and you get your Wholesale Price
#5. Multiply your Wholesale Price by two to get your Retail Price
If you look at the figures you will see the Wholesale Price just reimburses you for your materials and time. The Retail Price gives you a profit. Please get Craft, Inc. for a further breakdown; it’s one of my fave craft business books.
If you are designing logos or building websites you can start with the above steps 1-4 (your “equipment” costs would be for items such as your computer, mouse, design programs you use, etc.) plus factor in your experience. Just Creative Design wrote an article on pricing that lists some other things you could factor in and he included great links you should check out.
As someone that runs a graphic and web design business, I looked into what the going rate was for my area for people in that profession. I started with that rate and then factored in what I wanted to be paid.
I charge a lot less than most people in my profession because my mission is to help people starting out take their dream to the next level at affordable rates. I chose to take a pay cut. When I expanded my business I explained my mission to people interested in working with me and they took a pay cut as well because they believed in and wanted to be a part of my goal.
That said, there are some people out there that charge a fraction of what I do and I cannot wrap my head around what they are making hourly because I know roughly how long it takes to build a site. A client of mine once said she’d seen some super low prices but didn’t want to take her business there because her thought was if they didn’t value their time, they weren’t going to value hers. There is a good lesson to take from that when pricing your products or services. If you charge too little people are going to think your products or services are not worth much. Most people starting out will price their products or services too low. I know I did. When I started out I was scared to raise my prices, but I have found that anytime I have raised my prices my sales have never dropped, and in some cases even increased.
Whether you’re a crafter, designer, vintage or supplies seller, I hope this post will help you with your new (or revamped) business. Check back for more business posts.