PRICING YOUR WORK
by Alan J. Zell, Ambassador of Selling

Note: Although this article is written for artisans, the tenets of this article can be applied to pricing services and other products.

The question is, "How do I price my work?" It is a perplexing problem that does not go away and, therefore, is frustrating.

There are three questions artisans should be asking:

1. "What will retail customers be willing to pay (for what is offered in the manner that it is being offered) that will allow me and my customers to make a profit?"
2. "Can I make it for that price and make a profit?"
3. "Can I get more than that for it? How?"

The questions are in this order because, first off, what retail customers will pay determines if work gets sold. Remember, if retail customers will not pay that amount, wholesale customers cannot sell it, and, hence, they will not buy or continue buying.

Artisans are acting as their own wholesale customer when they are selling to end-users/gift givers. They are doing the functions of retailing. Basically, they are running two businesses. One is the "manufacturing" business -- when at their bench or easel, they can't be out selling. Their other business is retailing -- when they are selling they can't be at the bench or easel. So, both businesses have to show a profit. If the retail price does not allow for both to show a profit, one of the two businesses is going to suffer.

The other two questions are related. It is fine to determine what the retail customers will pay, but how does one know it can be made to retail at that price and still make a profit? I use "a rule of thumb" as a guideline for determining prices. One can use this to determine the minimum retail price or as a guide to work backward from the retail to see if it pays to try to make it.

The guide is: in order to make a profit at both the "manufacturing" level and at retail, the artisan takes their costs of time and raw materials and multiplies that figure by 6 1/2.

It is not accurate to the penny, for sure, but it's a guide (and only a guide) to use. Time and material relates to raw materials and the actual handwork time spent making it. Do not figure in kiln, drying, and other non-handwork functions. The answer will be the minimum retail price that allows both the artisan and the retail business to make a profit. One may be able to get 10, 20 or 30 times raw materials and time. (Note: If one adds purchased parts such as gemstones, these can only take the usual trade markup of 25% to 100%.)

Let's take a closer look at my guideline. For this explanation I am looking at a retail price of $100.00. If one divides this by 6 1/2, the answer is $15.38. That may look like a big jump - from $15.38 to $100.00. It isn't. I'll explain.

$100.00 ...............Suggested retail price
-$50.00 ................Retailer's cost (50% of retail price)*
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$ 50.00 ................Artisan's selling price

-20.00 ..................Cost of doing business - salaries, rent, etc. (40% of wholesale price)
- 5.00 ...................Profit (10% of wholesale price)**
- 7.50 ...................Agent's fees (15% of wholesale price) ***
- 2.50 ...................Printing (5% of wholesale price)****
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$ 15.00 ................Artisan's costs of time and raw materials

To make the arithmetic easy, 6.5 X $15.00 = $97.50 with $2.50 to spare = $100.00

* Many believe this ratio is too large. The retailers' costs include their rent, advertising/promotion, salaries/commissions, heat, lights, etc.

** Profit should be looked upon as a "cost of doing business" rather than a residue left over after costs have been subtracted from sales.

*** Agents' fees may be higher. If so, this has to be figured in by raising the multiple from 6 to 7 or 8. Although you may not now have an agent or representative, if you don't cover those costs up front, when you do get one you will make less money.

**** Because the techniques, materials, and work of many artisans are not well-known to some buyers and many retail customers or gift recipients, it is necessary for the artisan to make this information available. I can't emphasize enough the importance of printing as part of your selling presentation. An artisan should not rely on galleries or stores to do this. It won't happen in 99% of the cases. ALWAYS MAKE GREAT MATERIAL FOR THE END-USER/GIFT RECIPIENT. If you do this, then you will also have great information for the wholesale buyer.

When artisans make a variety of items, they can figure each item separately or they can group them together. What usually happens when using the same multiple for every item is that the price steps do not agree with the visual steps. I would suggest is that prices vary so that they align with the visual differences of artisan's work. This may read like selling "art by the square inch." It is not. However, one must understand that, most often, end users/gift givers relate size to price or value. Some pieces may carry only a 4X ratio, some can carry a 10X ratio. Just remember that the average price for all of them must be at least 6.5 times total handwork time and raw materials.

Craft Artists, are entitled to make a profit. Retailers are entitled to make a profit. Both functions must make a profit, for if either or both cannot make a profit, there will either be no wares to sell, or no where to sell them.

This article was written to help you and your business. If you believe some of these articles will be helpful to your business, please e-mail me your comments on how you will apply them. ajz

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Copyright © 2000-2007 Alan J. Zell, Ambassador of Selling, Portland, OR. All rights reserved.

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