Yesterday I talked about the number of items in your shop. Today I would like to talk about another magic number, price. One of the more difficult things to do is price your work. If you are selling vintage items it is a bit easier but for those of us who make our products it is a pain coming up with pricing.
First off, let me say your prices are probably too low. You are probably not paying yourself a fair wage. What is a fair wage? Let's look at it as if you were getting paid by someone else. When you first start a job with no experience you usually get paid a minimum wage. Let's say today minimum wage is $8/hr. So, everything you make when you start out, should have a labor price of $8/hr straight across the board. One item takes you an hour to make has an $8 labor price.
After working at a job for 6 months or a year you should be up for a raise. Your raise should be based on how far you have come. Let's say that item that used to take you an hour to create now only takes you 30 minutes. You have doubled your efficiency in a year. Does this mean that your labor for the original items is now $4? Of course not. You are not going to drop your price just because you are better at it now, that would be counter productive! Nope, your new labor cost for an item is $4 but you are still going to pay yourself the original $8 for it. You just got a $4 an hour raise, congrats!
You won't always be able to give yourself a 50% increase in your hourly wage. At some point you will eventually level out on the time you spend on an item. That is why it is important to give yourself a yearly raise and/or a cost of living wage. The cost of living is always going up, always.
What? You say you are not even making minimum wage? What is wrong with you? When you pay yourself less than minimum wage you are saying you are not as good as the kids working a summer job flipping burgers. Give yourself a raise right now! You are worth it! Period. End of discussion! Seriously, if you are not paying yourself a reasonable wage what is the point of doing what you are doing? You can offer a million excuses but the bottom line is you are worth it.
I look forward to the comments on this one so bring them on. Got a question? Email me MarketMyShop@gmail.com
P.S. The Fibonacci Sequence is one of my favorite 'magic numbers' an that is why I put the picture up, it has nothing to do with Etsy and everything to do with me being a nerd.
Wow. This is sooo what I needed to see. A "shot-in-the-arm" so to speak. Thanks for giving us a breakdown of the pricing game. There are so many articles and posts about pricing out here in the online world but it's can be tough trying to figure out the best strategy for the business. This was simple, to the point, and motivating. Now I must look at what I have in the shop and check out my pricing!!
ReplyDeleteGlad I could help!
DeleteI appreciate this. I just wish the buyers would as well. My prices were VERY low -- basically covering my materials cost and a bit extra. I had a wake-up call when I went out to a shop to talk about wholesaling some of my work. I was putting together a retail/wholesale price list & realized that offering some items at wholesale would mean I would lose money. I went right out & raised all my prices. The problem is, a lot of people won't buy for what the item is worth. There's a lot of cheap competition out there. I know there's a market for my purses and accessories. I'm not going to lower the prices. I'll keep at it. The buyers will come. In the mean time, I'm creating more items for my stock.
ReplyDeleteThe fortunate thing is that there are buyers out there that appreciate the time it takes you to create something. The problem is that there are just as many people out there looking for a bargain. I have a rule when it comes to pricing:
DeleteIf I cannot make money on wholesaling the item at 50% of the retail, my retail is too low.
Sometimes that means raising my prices and other times that means having a minimum quantity on certain wholesale items. For me it may take an hour to make one of an item but if I set up to make multiples I can do 10 in 2 hours.
I am not in business to break even, I am in business to make money. So should you!
I just gave the very same pep talk to some ladies who belong to a wholesale-selling group on Facebook. Many of them are new to the world of wholesale, which may explain their ridiculously low prices. But for the last 6 months or so, I've heard many of them say how swamped they are with all the orders they're getting. Sure, when they're selling stuff that takes 2 hours to make for less than ONE hour's minimum wage, you can BET they're going to get orders ... LOTS of orders! I think some of them feel like they need to compete with the import chit (there is a TON of country/primitive import chit available to gift shops). I tell them to remember that they're in the U.S. so it's ok to pay yourself more than 10 cents a day (or whatever!), and that it MAY slow down orders just a bit, but wouldn't they rather work smarter than harder? I think much of my spiel fell on deaf ears, but I feel better for at least trying to explain things to them.
ReplyDelete