Thursday, April 5, 2007

Nitty Gritty of Pricing

You cannot price your work without getting down to the nitty gritty of the numbers at some point. You can try and fake it. But without really looking at the numbers, you will probably wonder where all the money is going.

Wendy Rosen’s book, Crafting as a Business, starts the chapter on pricing this way, “ Correct pricing separates the amateur from the professional craftsperson. As an amateur, you may simply hope to make enough to replenish materials and cover costs.” She goes on to say, “pricing like an amateur is a really good way to go broke.” Her formula for pricing is:

Materials Costs + Labor Costs + Overhead Expenses + Selling Expenses + Profit = Wholesale price.

So, let’s take a look at that pear again. Materials costs are relatively low. Polymer clay is an inexpensive medium. The cost of materials is probably around $10 in this piece, including waste.
Labor, however is a big component. This is where some assumptions went awry in the pricing suggestions people sent in. The time it takes me to make each of these vessels varies. It will depend upon the size of the piece, how detailed the drawings are, how involved the top layer is, and how much detail is added in carving and back-filling the piece. Each piece goes in the oven to cure for at least five times, sometimes more. The range of time for a piece this size is approximately 4 to 8 hours of actual time in my hands, not in the oven. This piece was about 5 hours of hands-on time, from forming the basic pear shape, to the finishing details. This time actually transpired over two days. Although I was working on other pieces during that time, the five hours represents time spent just on this piece. I could probably only make 5 or 6 in a week, working full-time plus, and not making jewelry or cranes.

One person was very close in their estimate of how long it took to make this piece.

I'm going to base my price on the assumption that you do these in an assembly line fashion and it probably doesn't take more than 5 hours (10 per week) to do any one piece once you've done a prototype..... So I'm going to say between $180 to $240 depending on the time for the artwork and amount of detail. “

The only problem was that there was no time in her calculation for running the business. Making 10 per week would not leave time to attend to the many other obligations of keeping the business up and running.

Overhead: These are defined as the month in, month out, predictable, flat costs. They include things like rent, phone, web hosting and/or access, credit card processing, utilities, insurance, etc. In my case, these are not too high, since I work at home. Last year, my overhead costs were about 8% of my total sales.

In my next post, we will try to tear apart the hairy beast that is selling expenses. Too scary and too much information for one post. Till then....

1 comment:

Val said...

THank you for sharing your thoughts about this subject. Very interesting.