Another Pricing Formula that I learned in school

[Former_Member]

Hey Everyone,

I just wanted to share the pricing formula that I learned in college for Fashion Design. It's the one that's used in the Fashion Industry, and it's easy to alter to suit Etsy.

First of all, here's Etsy's formula, that I love and wished more people would follow:

Materials + Labor + Expenses + Profit = Wholesale x 2 = Retail

and find the article here:
http://www.etsy.com/blog/en/2012/a-simple-formula-for-pricing-your-work/

Here's the one that's used in the Fashion Industry:

(Materials + Labor + Expenses) x 120% = Wholesale x 120% = Retail

NOW, here's an altered version, so as not to overcharge people the extra 20% twice over:

(Materials + Labor + Expenses) x 2 (or 100%) = Wholesale x 2 = Retail

So there it is--similar to Etsy's--but works especially well for Fashion and Accessories. This wouldn't work well for Fine Art, where it makes more sense to come up with a profit for yourself.

I decided to share this after seeing some curiosity about what to add in as profit. And, I'd love to be able to say that I price all of my products accurately and follow Etsy's formula and my formula--but, in the cloth diapering and nursing pad categories most items are so underpriced that I feel that I have to alter my prices. We'll see--I've just opened my shop and I still have a lot of stocking to do. Once I start seeing sales and getting feedback maybe I'll have another look at my prices.

I hope this helps some people out!

[elainesgems]

Thanks, this is helpful.

[dalystudios]

WHOA - that's an eye opener. I am waaay underpriced. But I can't imagine being competitive if I started doubling my prices.

[GreenFoxFarms]

Wow! Thanks for sharing this! According to any of those formulas I am definitely not paying myself enough... But I think my newness might affect that. Food for thought for creating a better (actual) business plan! :-)

[Former_Member]

I think a lot of us underprice. But, the more we promote Etsy as a whole, and handmade goods in general, I think that it'll be easier to price our work accurately and fair so that we can make a good profit.

[Former_Member]

Thank you for posting this, I have been struggling with the pricing issue.

[ElectronicGirl]

if you start selling stuff consistently with that price formula..let me know. then i will follow suit. ;) and def let me know where you are finding those very wealthy customers..i will promote there. :D

[Former_Member]

That pretty much my formula... I've used

(materials + expenses) x2 = wholesale x2 = retail. And before anyone says I'm not paying myself... Even at my wholesale price I'm earning an hourly wage that's more than most people do at a job when I calculate the time it takes me to make...and I keep getting faster and more efficient at what I do.

[ShopMissElla]

Really useful, thanks! I think it's hard when you're an artist/artisan because on the one hand you want people to buy and see your work but on the other you want to keep your integrity as to how much you value yourself as you are selling a piece of you.

Having said that I feel incredibly lucky and touched when anyone wants any little piece of me!

[Former_Member]

A weaving teacher suggested this.
Materials x3= Price
I dont always use it, I get afraid of over pricing.

[ElectronicGirl]

Deb Eaton from DAYeWeaver says

A weaving teacher suggested this.
Materials x3= Price
I dont always use it, I get afraid of over pricing.
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i like this formula. im not too far off with this one. :)

[Former_Member]

ElectronicGirl:

I'm actually not using that formula yet, I am for my crowns (or almost) because since they're ooak I'm hoping that they'll eventually sell at what they're worth. I'd like to price acurately, but it's hard to do. I'll let you know if I find those wealthy customers though ;)

Ella:

Your stuff is adorable. I think that a lot of people would want a little piece of you. <3

Deb:

That sounds like a nice formula, and I wouldn't think anything sold by that would be overpriced. People would certainly pay that for your beautiful work.

And Lisa:

I love your crocheted crowns and hats!

[SultanasCrochet]

Thank you Melissa and everyone for sharing your pricing knowledge. I always have a problem pricing my items because I'm afraid to overcharge. I will definitely try using some of those formulas to see which one works best for me.

[ShopMissElla]

ahh thanks Melissa!
x

[Former_Member]

My prices are pretty close to the materials x 3 ... some are only materials x 2 .... thanks for listing those formulas!

[OutoftheBeaker]

For me, my materials are very inexpensive. It's giving myself an hourly wage that kills my prices. I'm still priced under minimum wage hourly and skipped the doubling (wholesale to regular priced) but still feel like I'm pricing myself out of buyers' range... I guess it's something I'm just not comfortable with yet!

[Former_Member]

In general, pricing just seems to be such a challenge if you want to make money--especially enough to "quit your day job" (I don't have a day job, besides being a stay-at-home mom with my baby, so I'm hoping that my Etsy business will eventually flourish into my career).

[Former_Member]

I find pricing really difficult as well. I kind of use materials + labor = wholesale x2 = price. But then I usually play around with it from there, usually making it a little less to try to be more competitive with other shops making similar products to mine. I feel like they are kind of underpriced, but if I increase them they'll be way more than everyone else. I'm trying to find that happy medium.

[Former_Member]

I realized that I was very underpriced myself so I am trying out some more reasonable prices according to one of the formulas... let's see where this goes!!

Thanks for having posted these, they're a great tool to have on hand. I've come to realize that using Etsy is almost like getting a degree in marketing... harder to do thought since you're figuring out stuff as you go instead of learning this all in the classroom before implementing it.

[Former_Member]

I use a similar formula. But I always worry about labor and I never added in expenses. So this information is very helpful to me. Some of my jewelry takes of long to make that I would not be able to charge my usual amount per hour for labor. So I price all the other things + the perceive value( which is what a customer would probably pay.

[Former_Member]

Such a challenge! I feel like my "labor" is like $5/hour when I look at my final prices!!!!

One way to look at it is that you have to grow... so instead of a huge startup cost, we have lower initial labor costs as we grow our biz!

[amydavisart]

Very good article! Thanks for posting this. :)

[Former_Member]

Thank you for sharing. I'm really struggling with pricing too. These formulas are an "easier said than done" sort of thing in my experience. I'm still trying to figure out how to accurately calculate materials: for instance, I don't know how many items I get from a package of clay because I use one package to make many different things. I estimate as best as I can and I think my prices are not that off but I'm always doubtful. As far as labor, lets just say that I hope to get more efficient with time.
Someone reccommended an Etsy lab called "Pricing for profit" but I haven't had time to watch it... Better get to it soon!

[Former_Member]

Thanks!

[Former_Member]

Sarah, Your journals are beautiful and look like high-quality. I know what you mean about price adjusting for the field you're in.

My wool soaker diaper covers, among other things, are priced only at wholesale (and with no expences added in, and super cheap labor), because so many people make wool soakers on Etsy and sell them really cheap. I'm just hoping that since I drafted my own patterns for a brand new cloth diapering system, that eventually they're get recognised for their quality and fit. We'll see! :)