I want to kick off 2019 with some of my crafting secrets for figuring out your cost of goods and increasing profits. If you are unfamiliar with the term:
Cost of Goods is the costs of the production of the goods sold. It is essential to consider all of the materials and tools needed to create the product and YOUR TIME! You should always take into consideration how long it takes you to produce an item and factor it into the price. Your time isn’t free, so I recommend setting an hourly rate for yourself and using that in the cost of goods totals.
So how do I create my price?
Once you have your cost of goods total for a product, (Your time included!) double the amount, and that should be the starting place for you to set your price. Do your homework though for what other crafters are selling a similar product. You will be able to gauge if you can increase your price to gain more profit or if you can’t sell a product for a profit. There is no shame from walking away from a product you have offered to customers. If the item is taking too much time with minimal gain, then it isn’t worth it. This pricing model might scare you, but you’re in this for the long haul. You are working to build an empire while doing something you love. Right?
Some things to take into consideration with your prices:
- Offering your customers a bulk discount. If they are buying more than 10 shirts, then it makes sense to take 10% to 20% off of the total price. This gives the customer more of a reason to buy from you and creates the opportunity for future orders.
- If you do want to run sales or promotions on your products, this pricing model will allow you to take 25% off of the price while still remaining profitable. You won’t have to wonder if by offering a sale, are you losing money. You can even have clearance items for 50% off and know that you will still be able to recoup all of the costs you incurred making the product. (Pretty cool, huh?)
In my experience of selling products, there are two golden rules I have learned:
- Someone will always be priced lower.
- You get what you pay for.
So if you use these tips in pricing your products, you will be lightyears ahead of other sellers and a step closer to building a successful business! If you have any questions at all, feel free to leave a comment below and I will help in any way I can!