Sunday, April 8, 2007

Selling Costs and Pricing

So that poor little pear still seems to be lacking a price. We talked about a formula for calculating your price, and started to look at some of the elements. But we left off at the topic of selling expenses.

It costs money to sell your work. This is part of that old axiom, "You've got to spend money to make money." If you do not factor all of these costs into your pricing, you will be like the gerbil on the wheel. Running and running, and never seeming to get anywhere.

So what makes up the selling expenses?

Shows: If you are doing shows, you have an application fee to many shows. Then there is the booth fee, electricity for an indoor show, or even some outdoor shows. There is the cost of displays for your work. And your time. Time spent packing and unpacking for a show. Time away from the studio to do the show. If your show is a distance from home, you have travel expenses.

Marketing Materials: These range from the simple business cards, to the fancy brochures or even DVD's sent out, or handed out to help tell your story or make sure someone knows how to get in touch with you should they want to buy your work. They can be simple. They can be stunning. But you cannot successfully run a business without some investment in this area.

Packaging: If you are selling at shows, or on-line perhaps, you need to package your work in a way that compliments and protects your work.

Photography: Even if you are doing it yourself, you need equipment, skills, and time. Good photographs are essential.

Time: It takes time to create the sales materials. It takes time to maintain your mailling list. It takes time to apply to shows. To package your work if you are selling wholesale and need to ship it out. It takes time to go visit galleries, or shows or explore options on-line to sell your work. Or promote your work. All this time is time out of the studio. Time you are not working on creating new designs. Time you are not refining your skills. But time spent to help grow your business.

So, lets look at some real numbers. Since I was just doing the Craft Boston show, let's look at how much it cost to do that show.

Application fee(s): I apply in two categories,jewelry and mixed media. At $40 each that comes to $80.
Booth fee: 10 x 10 space, including pipe and drape. $950.
Electricity: 500 watts (base level) $100.
Mileage, tolls, parking: $243.
Time: Packing, unpacking, set-up, tear-down: about 11 hours
Show hours: 28 hours
Travel back and forth: about 11 hours
Total: approximately 50 hours, over five days.

So, we are looking at $1373 and about 50 hours. Let's do a minimal $10 per hour for the time, and we are at $1873 in expenses, just to do that show. The time does not include the time to apply to the show, the time to price my work, etc, etc, etc.

Are those "high" prices starting to make sense?

The other expense that needs to be figured into the price calculation is Profit. This is not the money that is left over that you pay yourself. This is the money that is reinvested in the business. The equipment that will help you be more efficient and grow your business. This is the cushion that will get you through the slowdowns in business. A healthy business generates a profit, beyond the salaries or wages of it's owner.

So now we have looked at all the elements of cost that need to be included into the pricing calculation. Next time we will look at it from the other direction. Or what to do if you do not have the history of costs to calculate your overhead or selling expenses. Stay tuned.

1 comment:

Polka Dot Creations said...

This is a fascinating thread. I can hardly wait to see how you priced that pear now... I hope you don't leave us hanging too long!