How to sort out pricing + find your value
As you’ll read in the first blog of this series [here], everything you make has value. I truly believe that. What I can’t tell you is if your product will have enough value to make it worth the price you will need to sell it for. Let’s say you gave me £100 of mahogany wood and 15 hours to make a table, along with expensive machinery and tools to help. The outcome would be a table worth £5 that I could sell for firewood!! Just because it costs a lot to make doesn’t mean it’s worth your time or worth more than the materials costs. Please see the previous blog on finding your confidence to believe in your items true value, and how to ask for advice.
Sorry about the length of this Smart Pricing, but this is the hand holding I needed when setting up my t-shirt printing business!
Now onto the numbers, bear with me – I will take it nice and slow…
The Old Craft Formula
There is a small, simple craft formula which says you times the cost of your raw materials by 2.5. So for example if you want to sell a t-shirt and it costs you £2.50 to buy the blank t-shirt and maybe £1 for the vinyl to go on it – it’s a total cost of £3.50.
£3.5 x 2.5 = £8.75. Simple.
Too simple. I personally don’t like this pricing structure, particularly as it doesn’t take into account skill involved, or high machinery costs. If for example, if you crochet a blanket and only charge double the cost of the wool – it wont account for all the hours you put into making it. If you made a HTV t-shirt you should include the higher value of needing a PC, Cricut, Heat Press etc as opposed to just needed a pair of crochet hooks.
The Right way to Price Your Product
The issue here of course is that you can’t include all these costs in your first ever sale! You would need to charge £800 for a t-shirt!!
So what I recommend before you head off down the small business route is just get one sale. Find the average price of 3 similar items and and sell for a slightly cheaper price. Ask your friends and family and advertise in a Facebook group and see if anyone is interested. Ask for feedback as well as a sale. Can you sell one item? Is it worth your time putting in any more work?
If you then choose to become serious about starting a business, work out the costs for real. Before you start creating your own business branding, and web page etc you must get the pricing right! It’s very difficult to make adjustments once all your information is out there.
How do I know what the costs will be, when I don’t know what the costs will be?!
Some costs are easy to work out per sale. Other costs will need to be created from a yearly amount, and then divided by a best guess on how many products you will sell in a year. Is your head hurting yet? Don’t worry! Mine did too! But I’m explaining it all through this post, I promised a hand hold, remember?
Try and have a very brief guess of how many hours a week you would like to spend on your small business and how many items you think you could make in a week. Then work out the time you think it will take per item. Think about all the extra time you will need to spend on planning, photographing, selling them, time at craft fayres etc. It might take you hours to work on your first piece of clothing but after a few makes your time will level out. Ask advice from other people who create similar products how long each item or batch takes.
Try and consider any spends (outgoings) that might come up in the year as well. Consider asking other people in a Facebook group or chat forum what sort of costs they encountered in your particular craft/product range that they didn’t expect! People running businesses don’t like to shortcut the answers for other people – but they do like to help with tales of caution. Listen to them! Make sure you get, real, specific advice on your craft about what legislation and insurance you need. You add these costs onto the costs of the business.
I don’t know about you but I find it easier to follow someone else and then adjust for my own business so I will lay out simplified steps that I made for my old clothing business Maggie Do.
Running your own T-Shirt Business. Example:
Wages: I would like to spend 10 hours a week on my business, I think I can sell 15 t-shirts a week. I want to take 4 weeks off a year to take it easy with Christmas and summer holidays. (My husband says I’ve really complicated the blog by adding in my 4 weeks holiday by the way BUT WE ALL NEED TIME OFF.)
Wages per t-shirt. 10 hours a week for 48 weeks @ 8.72 an hour = £87.20 per week.
I would like to sell 15 t-shirts a week. So divide 87.20 by 15 and I figure it costs me £5.80 in wages to make one t-shirt.
Business costs: Yearly (Annually)
£40 – test products
£100 refunds + competition prizes
£50 towards a new Cricut
£70 Craft Fayre Fees
£70 business cards + Stationery (1000 business cards at £55, plus misc)
£100 packaging (eg 1000 postage bags at 10p each)
Totals: £430 a year in business expenses
15 t-shirts a week for 48 weeks = 720 t-shirts a year. Divided by business costs (430) equals £1.60 per item business costs.
As of now, although my t-shirt business is temporarily closed – I was selling each t-shirt for £14 including postage. £18 for a highly stylised and custom shirt, and £18 for a Bella Canvas t-shirt. I had more than enough orders to keep me busy! My wage costs were very high because each t-shirt was customised to individual orders and cost me a lot in design time. If it was a simple repetitive design, the prices could have come down.
I’ve decided to create another example for a candle business. Bear in mind I know nothing about selling candles… But I am guessing that wages per candle are low – as you can make them in batches so the time is spread out over a large number of candles. Their business costs will be higher. You need to pass a lot of registration and legislation to sell something that has a flame!! Business insurance will be a must. Do your research and keep you and your customers safe.
If you know more about pricing in your industry, please drop me a comment I would love to update this blog with real life specifics.
You don’t think people will pay the high prices, and pay for your time and all the costs? Who should pay for it? Why should your family suffer for you to make products for other people? Value your time and your effort in the market.
If Stella McCartney can sell a t-shirt for £180 – there is a place for you!
Part Three is information about how to set up your business legally, a bit of information on HMRC and business insurance.
Legal Set Up – available here.
Find me on social media to get a notification when a new blog is ready. I’m over on Facebook at Maggie Do Design and on Instagram at @maggiedodesign 💖
NB: This post is only for micro businesses – that is people thinking about selling a few t-shirts, frames, or crochet blankets etc. Please do take more structured advice for larger craft based businesses. Starting up small and simple doesn’t mean you can’t grow bigger – but different advice will apply when you get there.