Pricing Artisan Jewelry: Part I
inMarch 12, 2008 - 9:42am
We have put together a short list of do’s and don’ts for you to consider when pricing your items to sell in your online shop. In Part 1 we focus on pricing as a professional business entity and the specific costs associated with the manufacture of handcrafted jewelry. Our purpose is to assist you in making sound business decisions by providing you with the information you need with respect to pricing your items, and by doing so, help you to succeed with your online selling venture.
Do think like a professional. When you decided to sell online you made an unspoken to commitment to conduct yourself as a businessperson. This means looking at your work through the eyes of a professional and not a hobbyist, which includes making sound decisions when it comes to pricing your items. You want to be competitive, pay yourself a decent wage and turn a profit, and not just cover your costs to make something for the joy of making it.
Do know your costs. In order to know your costs you must keep good records of your expenses. This includes direct costs, those costs associated with the manufacture of your jewelry, such as raw materials, finishing products, and shipping – a direct related service. In addition, you must include the indirect costs, known as overhead. These costs include rent, even if you work from home, office supplies, utilities and anything else that is not a direct cost. Most small home based businesses use a simple mathematical formula for factoring overhead instead of going to the trouble of conducting an in-depth study of cost per item. Here is only one example of an Overhead Cost formula (there are many to choose from): Consider indirect costs to be equal to one-third of the direct costs – Direct Costs x 33.3% = Overhead.
Don’t forget to pay yourself. The time it took to manufacture a piece of jewelry is worth money; it is also a direct cost and is an important component of your pricing formula. The cost of labor to produce a piece will often depend on the technique used and the level of difficulty. You must also factor in the time spent buying supplies, selling, and performing administrative tasks. If you are uncertain as to what to charge, ask yourself what you would be willing to pay someone else to do the job. This will give you a starting point for determining an appropriate rate to charge for the labor involved.
Don’t forget to make a profit. Profit is not just the money left over after all the expenses are paid; it is a necessary component of pricing, and an important factor in growing your business. For whatever reason, some artisans confuse labor and profit, thinking the two are the same, but they are not. Without profits you cannot re-invest in new materials, tools, education, etc., all of which are necessary to expand and develop your jewelry business. Profits are what make a business successful; it is the payback for all your hard work – your reward for the willingness to take risks, to forge ahead in spite of roadblocks.