Butterfly Chic Boutique Blog

One of the hardest thing for many sellers is pricing. Many things on Etsy are servely under priced in hopes of getting sales. This doesn’t always equal sales, as many shoppers equate a low price with low quality product and will pass your shop on by. If it does sell for the low price, once you add in PayPal and Etsy fees and overhead and supplies, you don’t really make any money.

There is an art to pricing. It’s called a formula.

So many times people ask, “how’s the price on this?” This tells potential customers you aren’t sure of yourself, your product, your skill, your talent, or your price.

Let’s look at an example. You might see that you took $5 worth of supplies, made it into something, list and sale it on Etsy for $10. You think you made a $5 profit, right? Easy math! They math is easy enough, but the formula is flawed. Let’s take a look:

• You list it and Etsy then takes their $0.20 listing fee $9.80
• You sale it for $10 and Etsy takes their 3.5% equaling $0.35 leaving you with $9.45
• PayPal takes their fees equaling $0.59 leaving you with $8.86
• Minus the $5 for supplies you are left with a $3.86 profit, correct?
• You spent $0.04 each on business cards and, like any good seller put 3 in the package totaling $0.12 leaving you with $3.74
• You put your item in $0.10 Organza bag or cello bag leaving you $3.64
• You wrapped your item in $0.05 worth of tissue paper and $0.20 worth of bubble wrap leaving you $3.39
• You then place your product in your $0.10 mailer and tape it up with $0.10 worth of shipping tape leaving you with $3.19
• You then use a $0.08 PayPal Label and say $0.05 worth of ink to print it leaving you with $3.06

So you took $5 worth of supplies, sold it for $10 and spent 30 minutes assembling/creating and 5 minutes to photograph it, 5 minutes to edit photos and 5 minutes to list it. Then you go on the forums and spend 5 minutes promoting it in various threads and another 5 minutes blogging about your new creation.

So for an hour of work you made $3.06…..would you take a job making $3.06/hour???

3 Simple things to consider when formulating your prices:

1. Materials
2. Labor
3. Overhead

Sounds easy enough, right? Think you got it down? Check the detailed list below.

Thing based on each product:

• Supplies/Materials
• Labor
  • Actual production
  • Photographing
  • Listing
  • Promoting
  • Emails/Convos
• Packaging
  • Cello Bags
  • Tissue Paper
  • Bag
  • Tape
  • Business Card
  • Tag/Label
  • Box
  • Ribbon/String/Raffia
  • Card
  • Mailer
  • PayPal Label/Printer Ink/Address Label
• Selling Fees
  • Website Fees
  • Etsy Fees
  • PayPal Fees
  • Market/Fair Entry Fees
• Including Shipping in Price

Yearly overhead costs to be evenly divided between all products you make:

• Tools
  • Computer
  • Camera
  • Craft Specific tools
    • Printer/ink/computer programs
    • stamps/pens/ink
    • brushes/brush cleaner
    • pliers/bead board
    • storage/organization containers
    • Button machines/sewing machine/cutting machines
    • glue/adhesive/tape
• Studio/workspace Rent
• Electric/water bill
• Internet Connection
• Phone Bill
• Office Supplies
• Printing
• Accounting Fees
• Advertising
• Insurance
• Display Costs
• Subscriptions/Dues/Memberships
• Travel Expenses
• Taxes (usually 25-35% for small businesses)

Now that you’ve considered everything, you have to put it together. There are tons of formulas out there you can use, here are just a few….

• (supplies + packaging) x 4 + Labor + 10% = Base Retail Price
  • 10% is for overhead, normal overhead is 10-20%
  • x4 is your value factor, lower for wholesale raise for high end fairs
    
• 2 x (supplies + labor + overhead) = cost of sold goods
  • Wholesale price: 2 x ($2 + $3 + $1) = $12
  • Retail price: 2.5 x $12 = $30

I’m not a big fan of these formulas, but if you don’t want to put a lot of time and effort into it and are not doing your Etsy shop as an income, I and other sellers like me who do this for a living would much rather you use one of these simple formulas than to price $5 worth of supplies at $10! :0)

• Labor + Materials x 3 = wholesale
• Labor + Materials x 4 = retail

Formulas that use percentages are best as they are easily adjusted to fit your venue as some venues will allow a larger mark up than others.

You overhead should be adjusted to fit your needs and your hourly wage should fit your craft, Jewelry makers can easily charge $20/hour while someone who crochets or quilts could not.

My hourly rates are as follows $10 for paper crafts, $15 for graphics and $20 for jewelry.

The above formulas won’t work for everyone in every field, but they are a great place to start. Try them out and compare your prices to fellow Etsians selling the same items and adjust them to suit your needs.

The easiest thing to do is set up a spreadsheet in Excel (or buy one off Etsy) and use it to simply input your data, adjust your overhead, hourly wage and value factor and let the spreadsheet do the work for you!

To calculate Etsy and PayPal Fees http://etsy.ppcalc.com/

To calculate paypal fees without Etsy fees (if selling elsewhere) use http://ppcalc.com/

Have a different formula you use? Email it to me and I might add it to the post. If I do I’ll give you credit!

This entry was posted on Monday, March 31st, 2008 at 21:07 and is filed under Selling tips, Etsy, listing, tips, pricing, Handmade, cost of business, Small Business Problems, Small Business Start-up, tax, business, internet sales, Small Business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.