Have you given intentional thought to the way you price your products? How do you know how much (if any) money you’re making on each product you sell? Is your pricing structure worth the time and energy you put into what you create or is it time to raise your prices?
If you haven’t already, it’s time to put give some thought to your pricing structure.
While this task may seem daunting, we have good news! Michelle from @MadeByMichelleCo is an expert in pricing handmade goods and has put together a simple yet informative Mini-Course to teach you how to price your products effectively. So, without further ado, let’s learn from Michelle!
Hello! I’m Michelle of Made by Michelle, a children’s apparel and monogram shop. I’m also a mama to two very little boys who inspired the creation of this little shop (do you know how hard it is to find cute boy clothes??).
We’re all experts in our crafts here. However, if you have opened shop already you know that owning a small business is MUCH more than creating your products. How do you price your items?
Are you actually *making* money? What are all those Etsy “fees?” And what about custom requests? Should you charge more?
These are some of the questions we’re going to look at today, including how to calculate your profit margin-- basically, a percentage that shows how profitable something is compared to how much it sells for. By the end, you’ll be ready to set up a few simple spreadsheets to organize your expenses and calculate your profitability!
Take a deep breath, and open up a good, old-fashioned Excel spreadsheet or use Google Sheets (my preference) to organize all this information.
1. Calculate your expenses
First, you’re going to need to calculate your expenses. Make a list of all the supplies you normally buy in one column (vinyl, t-shirts, fonts, supplies for my Silhouette Cameo, etc.) For each item you’re going to calculate how much it costs you per unit and put that in the next column--either for 1 item, cost per square inch, or “lifetime” costs.
Some of these will be easy to calculate, but then there’s the more discreet supplies that you absolutely use and pay for that are harder to quantify per unit
2. Find your production cost
Now you can easily calculate the cost of producing each item you sell.
If you sell on Etsy, don’t forget to include the fees involved with that! Each listing costs $.20 to publish. If that listing sells, you’ll pay an Etsy transaction fee of 3.5% (5% after July 15) of the sale price and a Payment Processing Fee of 3% (including tax and shipping costs)+ $.25 (in the US).
3. So how profitable am I??
Here’s where it gets fun-- we’re going to find your profit margin! Profit margin is the percentage of your revenue that you get to keep. The formula for this is: (Revenue-Costs) divided by Revenue or (Gross Profit)/Revenue. Huh? Help me out here...
Is your profit margin low? Consider upping your costs. If your margin high but you don’t sell much? Maybe it’s time to lower your price a bit. What if your profit margin is good and you’re making regular sales? Well done—your prices are probably spot on!
Why does this even matter? Great question. To learn how to price your products in even greater detail and to figure out how it applies to your shop, get Michelle’s ENTIRE Mini-Course for FREE!
Simply click the button below to subscribe, free for 30 days (cancel anytime)!
You’ll receive Michelle's mini course, her live Facebook Q&A, and all previous mini-courses as well. Wooohooo!