There’s this HUGE epidemic with Etsy sellers and underpricing so I’m going to walk you through all the elements you need to account for when pricing your items. It will vary from craft to craft but you must account for these simple basics to pricing so you don’t look at wholesale as “losing 50%.”
1. Cost of Goods Sold
The first thing you need to account for in pricing is the cost of materials. How much did you spend on those beads, wire, solder, etc.? Keep a record of the cost of the supplies you buy. If you bought a bag of 6 gemstone beads for $6 and you use 2 in a project then you know you spent $2 on gemstone beads for that project. Do the same for any other materials you use in each project then add it up.
2. Cost of Overhead
This includes everything from studio rent and cost of gas to get there to invested machinery and office supplies. Here are just a few things that go under your overhead costs; office equipment like that Macbook you bought last year, big machinery you use in your process, for example, the tumbler you use to polish your metal components, the tools you use over and over on multiple pieces, power supplies, that subscription you have with your email service provider, advertising and promotions, etc.
A lot of people get tripped up on this part. They think they don’t have to account for these purchases because they can be used over and over. That’s where you sum it up into a percentage cost. Myself personally, I add 10% to the cost of making a piece to account for my overhead. I don’t have a separate studio to pay for so my percentage would be lower than someone who does have that.
You have to think “what is my computer went out?” You would have to grab from your labor costs in order to get a new one if you weren’t accounting for overhead in your pricing structure. Then you might not be able to get groceries that month. We don’t want to do that if we’re making a living doing this.
This percentage will vary depending on how much stuff you own and investments you made in equipment. Your percentage will grow the more you upgrade and invest in new tools and office equipment.
3. Cost of Labor
This cost will have a bunch of factors you need to think about to determine what that cost should be. This will depend on the cost of living in your area and they type of life you live now and the life you want to live in the future. What are you building toward?
Think about where you want to live, the things you want to own, vacations you want to go on, the groceries you want to buy. There’s so much you need to consider. What is it going to cost you to live the life you want?
After all, we are all selling the things we love to make in order to be our own boss to live the life we want, right? Start with the end goal and figure out how much it’s going to cost to live that life. Then determine the hourly rate you need to make in order to fulfill that dream.
4. Profit
Lastly, but most important, how much profit do you want to make? This is not the same cost of your labor. It begs repeating, labor is not profit! Profit is the money that you get to use on whatever you want outside of business. This is the reward you get for all your hard work, go out for dinner, go to a concert, buy that dress you’ve been wanting.
Profit is extremely important. We all want to be profitable, that’s the whole reason we’re in business, right? Profit is also going to be a percentage cost. I personally give myself 5% profit. As my skill, experience, and “tool shed” grow I will increase that percentage accordingly.
Once you have factored in all these costs, that is your wholesale price. A lot of people, and I do mean A LOT, use this price as their end retail price. Then they complain when when retailers want to sell their products in their boutiques because they think they’re going to “lose 50%.” And yes, technically, if you’re using a wholesale price as retail and then try to sell at wholesale, you will most definitely be losing money.
That’s why it’s so important to double that price to get your retail price. I like to times my wholesale number by 2. Others like to do 2.5. And THAT’S the end number of what you need to be selling your pieces at.
This all might sound like it’s getting to be too expensive but trust me, once you start running the numbers you’ll hopefully see that you can absolutely sell your pieces at the true retail cost. But it takes a lot of work to get your customers to see that that price is worth it. You have to do this through your photography, your copywriting, your branding, your collection and your story.
These are all subjects for another day but hopefully you are able to see how important it is for you to price for profit at wholesale.
Passion Maker Project 
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