Sales and Marketing: Calculating Your Creations Costs and Fixing Prices

Most independent artist sellers want to make it and live through and from their art. Whether selling online, in galleries, doing wholesales or consignments, it can only work if you set fair sale prices – fair prices for your buyers and fair prices for your work.

Production Cost
Establishing a price for your items always start by knowing how much it costs making it. This is called “Production Cost” (PC), which can be defined by the combined costs of raw material and labor incurred in producing goods. It includes:
R: cost of raw material
T: cost of time (how much you pay yourself per hour)
W: cost of wasted items (ex: broken beads, pins, fabric...)
O: related costs (electricity, amortization of equipments...)

I suggest you use a “fixed” number for W and O. Try to determine their costs per month then divide them by the number of items you usually produce during a month. It will give you a number that is easy to use (ex: $1 per item or $0.25 per item...)

Example of PC = $25(R) + $15(T) + $0.50(W) + $1(O) = $41.50

Prime Cost
You then have to determine the “Prime Cost” (Prime), meaning you have to add to the PC other charges, like packaging, postal costs, gas (to go to post office or get supplies), etc...

For example, if you determine you use approx. half a tank of gas to buy your supplies and go the post office for your business during a month, divide the cost of it by the average number of items you produce. It will give you a “fixed” cost (ex: $0.25 or $0.50) that will again be easy to use.

Example: Prime = $41.50(PC) + $2(packaging) + $0.50(gas) + $5(shipping) = $49

Profit/Markup

It is then you can determine a “Profit” or markup. If you sell your items at Prime price, you will make the equivalent of how much you determined your time was worth. If you sell your item $49, you will make $15, you hourly wage. That is not profit.

To help you, see how much similar items to the ones you make are sold. Find other nice and good sellers (maybe 5 or 6) and try to determine and average prices for similar items. Can you sell at that average price? Are you competitive? Does that leave you with enough?

Also think about this if you want to do wholesales. Buyers usually pay you 50% of retail price. Do you still make a profit if doing so? If you double your Markup prices, will you still make sells to regular customers?

Remember that buyers will pay for perceived utility, originality, exclusivity, etc... So take good pictures, write good descriptions and sweep your buyers off their feet with great customer service:)

Hope this will help you! Have a wonderful day:)