Materials + Labour + Expenses + Profit = Wholesale x 2 = Retail
The above seller’s formula is what most craft business owners are told to use when working out how to price their items. It’s what is fair. I mean, let’s face it, as much as we crafters, artists and other creatives do what we do because we love it, if we’ve taken the leap into selling our makes, it’s because we want to see a return for the time, money and passion we’ve invested.
And rightly so.
But, see, there is a fundamental flaw in using the above formula that most, if not all, crafters also have to take into consideration; what consumers will actually pay. Most of the time the two figures don’t even come close to each other.
Don’t believe me? Let’s take a popular item and work it through: The featured image on this post (see above) is a bespoke card I made for a customer whose friend’s last name is Fox. She saw and fell in love with my button fox wall art (see below) and asked if it could be turned into a card. My answer was, and is always, “of course.” Because I love a challenge and I am a people-pleaser to the core.
My framed button fox took me about an hour to make. Let’s say I pay myself the current UK national minimum wage – because this is work – that would be £7.20 for the labour. The materials cost around £5.00, expenses would be around £2.00 and I always try and give myself a profit of around £5.00 on each piece of wall art. That gives me a total wholsesale price of £19.20 and a retail price of £38.40. Would people pay that? I’m still undecided – and at wholesale price, Finn the Fox is still unsold!** – but for a piece of wall art, it’s a possibility.
Now, let’s take the formula apply it to my fox card. As a reference point, the fox is the exact same size in the wall art as it is on the card.
So, again, it took about an hour, perhaps a shade under this time, so I’ll set it as £6.30. Materials varied slightly (no frame, different paper) so they came in at £2.20, expenses stayed at £2.00 and it’s a card, so I usually allow a profit of just £0.50. That gives me a total of £11.00 wholesale and £22.00 retail.
Take a second to digest that.
£22.00 for a greeting card.
OK, so clearly that’s never. going. to. happen. So here’s what I did: I took away my labour costs and sold the card at wholesale price, which brought it down to a much more respectable £4.70.
Can I just say here that this handmade hustle is HARD. Because I can guarantee you that there are hundreds of card makers (and other crafters) out there completely and consistently underselling their work. The main bulk of my business is cards, but there really is no profit in them. When I make and sell a card, I do so purely for the enjoyment, and I’m OK with that. I’ve made peace with that.
What I really want you to take away from this though, whether you’re a creative or not, is that the next time you see something that’s handmade and think HOW MUCH?!?!?! please first consider this formula, consider the maker and consider the time and care they’ve put into creating it. But most importantly consider this:
They are probably STILL selling themselves massively short.
** Somebody very lovely has since bought Finn. I hope he’s enjoying his new home – I certainly miss him!