40 Questions Blog Series: Question 10 – How do I price my work?
Of all the questions that I am answering in this series, this question isprobably the most asked by artists. You can have the best productor best piece of art for sale at a show, yet if it isn't priced rightyou are shooting yourself in the foot. Even if you thinkyou know the answer to this, humor me and read on as you may find abetter way to price your work, giving you more money down the road.
Question 10: How do I price my work?
There are several ways to answer this question. Each type of art form(due to production time, materials, etc.) is different and should behandled differently when it comes to figuring a price formula thatwill work for you. Some do the “guessing game” method, pick aprice out to thin air and I have even known some artists do a “goingrate” price that changes from show to show. I personally feelchoosing one of these methods never gives the artist a “true”value of the work and your time. I cannot tell you how many times Ihear how people quote a number and do the “three or five times mycost” method. The one method nearly everyone should use is themethod where you add the cost of all your materials to the value oflabor and then add a fixed profit margin to arrive at a sellingprice. The formula looks like: cost of materials + labor + fairprofit percentage = price.
Now let's define cost of materials, labor, fair profit percentage and thedifference between wholesale and retail price.
Cost of Materials. One way to look at cost of materials is bydividing it into direct costs and indirect costs that is best summedup as expenses. Direct costs are your fees for raw materials such asnails, wood, earring backings, thread, clay, etc. Indirect costs areall the subtle fees you never really consider as a cost such asinsurance, canopy, computer and printer expenses, cost of yourworkplace (heat, lighting, machinery, and so on). It is the indirectcosts that folks never seem to factor into their costs.
Labor. This is something that can vary from one medium to another. Thetime to make a quilt verses making a simple pair wire wrapped ofearrings will be drastically different. Don't forget the time ittakes to create your product, time you take to design your work,networking... - all needs to be factored in too. Figuring out yourlabor costs starts with tracking your time. Factor in how much timeit takes to make a prototype as well as allowing time to answer phonecalls/emails, eat, etc. When you have figured the time it takes tomake one piece, figure out how much time it takes to make 10, 100 orhow many you can do in an hour – photography and two 2D art may bedifferent, but the idea can still be applied because we all stillhave to devote time to assemble, paint, frame, make labels, package,and so on. Divide your cost for labor by how many pieces you produceto find your labor cost per unit.
Fair Profit Percentage. Don't confuse labor with determining yourfair profit percentage. Covering your cost of materials and laboris great, but you need to make a profit to keep the bill collectorsaway, this helps in determining your wholesale price. More onwholesale price later... Determining a fair profit percentage canbe determined by doubling your labor and cost of materials (thishelps for those who do fine art) or tacking on a $1 to $5 (lets say)to each unit. This is more or less up to the artist – there is noreal formula for coming up with a profit percentage, especially foreach medium.
Wholesale vs. Retail price. When you use theformula of adding cost of materials with labor and profit percentagesyour ending price is actually your wholesale price, not retail price.To know your retail price, you double or triple it. Now look atwhat fair market prices are by visiting retail shops to see how youfair. If you are on par, congrats. If your cost is too high, startlooking at ways to cut costs such as making multiples at one time tocut labor costs or find better bulk prices for your raw materials.If it is too low, price your work a little higher – nothing wrongwith giving yourself a little more profit.
Lastly, far too often people sell their work at the wholesale price, don'tlet this be you. You're shooting yourself in the foot if you do thisbecause you are not factoring in the cost of selling your work (overwhat you consider labor costs) – paying for your time selling atshows or wherever else you sell your work. Remember, a retailer addsabout 2-3 times on top of the wholesale price to make their profit. If you are at an art fair or craft show you are acting as a retailer.If a retailer comes up to you at an art fair (retail) show and isconvinced they want to sell your work at their shop, they'll ask foryour wholesale price. If you are selling your work at your“wholesale price” at a retail show, game over because you cannotgo any lower. No retailer wants to sell your work at 2-3 times theprice you are selling at a show, there is no incentive for them tomake a profit. See where this becomes a problem? Not only are younot making a profit, but no one will want to sell your work too.Finding the right pricing for your work is more of a science than itis an art form. It is apart of the business side of running your owncraft business. Finding the right price – where you are coveringall of your expenses and making a profit too, will mean thedifference between loosing money or breaking even to becomingindependently wealthy.
Do you agree or disagree with this? Have a question? Post it using thecomment button. Question 11 will cover 18 ways to increase the valueof your work, another blog post you can't afford to miss!
