How to Price Your Product
Pricing your product is part art and part science. Price your product too low and you only cover costs. Price it too high and you will never make any sales. It’s not just covering your material costs, your time is worth money too!
Your pricing structure will change as you grow and start getting components or ingredients for cheaper in bulk. Check your price structure at least once a year and adjust as needed.
Research Your Competition
This is the fun part! Do some digging on the internet to see what similar products are priced at. Make sure you are comparing handmade to handmade! Use Etsy, Amazon Handmade, and small crafter’s websites.
Write down all the prices you find and then take the average (add all prices together and then divide by the number of items.) This will give you a rough idea of what to charge.
Use a Pricing Formula
Another way to figure out a price is to use the formula:
materials + time + overhead = base price
Figure out how much the materials for one item cost. Then figure out how much time it takes to make one item. This can be hard as a Mompreneur since we are often fitting creating in around so many other things, but give it your best guess. Give yourself $15-20 a hour, don’t under pay yourself!
Overhead should be about 10-15% of the total of materials + time. When you are starting out your overhead should be pretty low. If you start to add things like rent or production help that will go up.
Your base price is what you need to charge in order to break even. This is not the price you should charge customers or you will never make money. Take the base price and multiply by 3-4, this is your retail price.
Fees and Discounts
When pricing for online sales take into consideration the Etsy, Paypal or Stripe fees that each sale will incur. You might want to add about 5% to your online pricing.
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You can also consider doing bulk discounts. If a customer buys a certain number of items at once they get a discount on all of them or one free, etc. I did this with my granola. At local farmers markets I sold them for $7.50 each or 3 for $21.00 but online they were $8.00 each. This covered my extra costs for the credit card fees and if the shipping was more than expected. People love a deal and this increased my in person sales by quite a bit.
You want to make sure you have built in enough room for wholesale pricing. When you are ready to sell in bulk, or to shops you want to be able to still make money on your product.
Most shops will double the wholesale price to get their retail price. So if you divide your retail price in half that will give you your wholesale price.
Once you have figured out all your pricing make a Price Sheet. Include a description for each item, quantity in a pack (if applicable), retail price, wholesale price (with minimum order number) and contact information.
You will have to check your local laws on how to collect and pay taxes. If you need to collect taxes make sure to include them in your pricing! After every sale or market make sure to set that percentage aside to cover the cost.
Worksheet for Pricing Your Product
I have put together a worksheet to walk you through all these steps and find your retail and wholesale prices. Just enter your name and email below and I will email it to you.
Also, make sure you check out my full ecourse for building a small business from home!
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