What equation and/or tool do you use to price your items?

[Former_Member]

Hi,

If I haven't met you already, my name is Abby and I am another member of our Seller Education team. I focus on insights for our group, using data, research and analysis to ensure that we're creating educational programs and content that best fits your business needs. As I've mentioned in my recent seller handbook articles (https://blog.etsy.com/en/authors/abbyfeuer/), I'm a total math and excel nerd - and particularly love formulas that help our sellers succeed.

We're working on some new content around pricing for your shops. Mind providing your answers to ANY or ALL of the following questions in the thread below?

*** Which pricing equations do you use? Why? If you don't use an equation, why not?
*** What pricing tools or calculators do you use?
*** Once you've made a sale, how do you know how much profit you've made?

I will jump back into this team from time to time to get your input on topics like this one. Thanks for your help - can't wait to get to know y'all better.

Abby

[maydaylabels]

We don't use an equation to set prices. We do calculate whether something is profitable to list/produce based on materials costs, labor costs, taxes, fees, etc.

We've just never needed a price calculator - we make pretty much everything more or less the same way, and most things take more or less the same amount of time, so there's not a huge variance in different materials, for instance. The market bears a price that covers our materials+labor+taxes+fees+profit, so we don't need to worry about setting it higher or lower than what the market will bear.

An individual sale may make more or less profit, depending largely on labor costs - some customers and items take a lot longer to make than others (almost everything we do is customized). We know the average time/cost per average sale, though, so at the end of a day or a week we can tell more or less how much profit we've made.

[Former_Member]

I don't use a calculator either, I'm still really new so I did a math for costs and my time with a bit extramformbuisness costs. I'm still in the just looking for any sale stage.

[PaperAnansi]

I use the BETSI application to calculate my profit margins now. I keep an itemized list of what it costs me to make and sell each item. I try to stay fair to myself and the consumer when deciding on price. I sell high-end greeting cards, I offer to hand stamp a message for free and I use extremely high quality materials. It's more difficult for me to gain visibility here on Etsy than it is in a boutique. I sell out fast in person, at a slightly lower selling price, less overhead. I'm still trying to find something that works for me here.

[HandmadeByEvaRose]

I have set up a calculation in excel. First, I work out how much fabric I used and other materials. Then I add labour at minimum wage in my country. Then I add overheads and packaging costs and etsy fees and paypal fees. Once I have this price, I add about 20% to it to cover income tax.

Then I look for similar items and decided if I am in the range. I adjust the above pice to remain competitive.

If I used the equation of wholesale X 2 = retail, my fabric baskets would cost £38.00 and I have a feeling I would not sell any. Because the goods are handmade, the labour cost per item is huge. But I am not going to get them made in some factory in small batches, because this is not handmade in my mind. So I make them myself and basically pay myself minimum wage, sometimes a bit less for each item, and I sell them at a price customers are willing to pay. In retail stores, there is no exact match, but an alternative which is mass produced costs far less.

[TheScrappyChickCase]

I don't use a calculator form. I calcute the full price that it costs me to make my product, including materials costs, taxes, fees, etc, and then I add some for my work.

Then I compare the price with similar items on sale and decide if it's a fair and reasonable price.

But now that I'm seeing the comments, I think I'll try to organize better and maybe use an excel form, or some kind of caculater, so that it becomes easier.

Thanks for the tips !!

[ArtistiKat]

I currently use the Chris Parry pricing calculator.

Before that I would calculate by hand all the direct and indirect costs of production. This calculator just makes it easier. I just plug in all my numbers.

I also have to take into consideration the market.

[oceansandbeads]

Hmm that gives me some food for thought to try some other methods!

I base my prices on my costs and try to calculate all costs in and add some for my labour, but that does not always work to be profitable, specially with new designs.
Than I try and find what things are out there maybe comparable and try to figure out a fair and sellable price for my items.
I don't have a tool to get my profit but gauche it at the end of the year by adding sales and expenses.

Somehow I have the feel that online sales are much harder than sales in person, people buy my necklaces at markets and just love them and online they seem to be a bit of a hard sell.....

[PaperPlanePrints]

I don't use a pricing calculator. I factor in the materials, Etsy fees, and income taxes to see how much will be actually in the bank when all is said and done. Then I factor in my time, trying to pay myself well. All of that gets figured into what the market will bear.

For materials, 3 times my cost is where I start, but I may go up or down depending on the market and my time.

Since my items are mostly custom, but materials are fairly consistent, items that require more time customizing are priced higher.

[aftertheZ]

I've always struggled with this, and have played around over the years with different ways. Right now, I factor cost of materials for production x 3, I feel pretty comfortable with that right now although profit margin could be tight after paying listing fees, especially since I am offering free shipping at the moment. But I also want to keep it where if I sell in person at an event prices are still reasonable.

[CoolGiraffe]

I created a spreadsheet with all my materials priced per unit and a section with labor time per type and size of work (average times, of course). I calculate materials cost and labor cost separately so that I can give myself an hourly raise every so often, adjust it if I change the way I work. There's also an admin fee to cover listings, photography and packaging. The total of those 3 things multiplied by 4 is my retail price.

I use the same spreadsheet for other purposes (like planning purchases), so it gets a workout.

[GreenMarthaBoutique]

I do it a little backwards. Calculating time is sometimes hard when I can't work for an hour straight because "MomIhavetopee" or "Momreadmeastory" or "MomIwantadoll", so I have set up a spreadsheet.
On one side I add all materials (including paying for shipping/gas). On the other I type in a price I'd like to sell it for based on my estimated labor and my competition. The spreadsheet does the math of fees and taxes, and I look at what's left. Is it a reasonable price for my working time ? If yes, I'm good, if not, either I need to change the price or change the product to make it sustainable.

[BackAtTheOffice]

I'm afraid I don't use a pricing calculator or formula either. I make jewelry and the tiny little pieces I use, some of them are quite inexpensive. The stones and the metals are the biggest expense but I also use beads and crystals. If I calculated the actual price of an item based on the actual cost of each little item it would be quite low. Also, I have been doing this for quite some time and I've become adept at the art and it doesn't always take me much time to make sometihing. Some patterns do take more time and effort than others.

So anyway I look at the finished product and pretty much set the price based on what I think the market will bear. I can always adjust it if it doesn't sell. but I am always looking at others products and know what prices are being charged for like items. So I just try to stay within that price range.

[BlueWorldTreasures]

I actually have all of my inventory in Sage Simply Accounting and as I use it it is deducted at the time. I also enter in my Etsy Fees, Square Fees, Paypal Fees, Booth fees, etc. etc. I then enter my sales. Even though I have only been open since May of this year, I am showing a net profit of over $5000 for the year - most of this at Farmers Markets. Some of the pieces I make have a smaller profit margin than others simply because I personally would not pay any higher for the item. It really depends on what the market will bear. I try to price fairly without ripping people off, but still making it worth my while to be doing this. Just because I love it doesn't mean I will do it for free :)

[WoodNotions]

I use an excel spread sheet that includes price of materials per unit size, labor salary per unit time, and equipment price per unit time. Then for each item I input the size of the item, time it takes to put together and time it takes to cut, print, etc.
From that I calculate cost, but also calculate my selling price which is 2x the materials cost, plus 2x equipment cost, plus 3x labor cost. I also add 10% to the price for rejected materials, parts, etc.
The nice thing about the spread sheet is that in the end you have a price which can then be compared with prices for comparable items. At this point, if the price seems low, I can increase it a bit and know that I have a larger margin on this item. If the price seems too high I can easily see what it would take to lower costs.
To determine profit, I use Quickbooks. I enter everything I buy for my shops, including vendor fees, website cost, shop registration, transportation to pickup supplies, new equipment, materials, office supplies, etc. I input all of my etsy sales, arts/crafts/holiday show sales, wholesale sales, etc. I've got everything itemized so that I can run reports on individual items, customers, profits over a specific time period, etc. It's always nice to have a quick check on expenses vs income and of course to report income for taxes.

[PPennee]

I use the Chris Parry spreadsheet for everything because it allows me to account for the many intangibles many people don't count into their pricing. I do a lot of custom work so time spent in convos, design time etc I can account for as well as material and actual time fabricating. The spreadsheet also allows me to set the amount of profit I want over absolute wholesale. At east according to my accountant I have been profitable 5 out of the 6 years I've been selling on Etsy

[Former_Member]

This is very interesting. I am new in Etsy and am still learning. I am not sure if I price well and would like to use a method but I have no idea which. Hope I will get good ideas to price my products.

[Former_Member]

When I used to work in retail, my boss would price the items at 1.5x the cost.

This number stuck out for me. I don't use that particular number for my shop though because there's also the issue of "what it costs to make" vs. "What someone is willing to pay".

So it's not a set quantifiable number per se, but rather researching the market and trying to find myself somewhere in the middle. I don't want to sell at the bargain basement prices, but I'm not too high that it's not affordable.

Researching what similar items are selling for is my first task, then I factor in my costs and labor time to come up with a price.

[RevelryPartyCompany]

So to come up with the prices of our items, I bucketed them first into handmade items and supplies. From there I use this breakdown to determine the price:

Supplies: Wholesale purchase price + shipping = Landed Cost
Landed Cost + processing/packing time & materials cost
= Total Cost
Total Cost x Margin % = Selling Price

I aim to have a markup on all my supplies so that there is value in my carrying them. I do shop around to competing stores to see if I am on pace. If not, I review my cost breakdown to see if I can reduce a value (like shipping from my vendor or packaging materials for example) and get my price down so that I am still competitive but I have a profit margin.

Handmade - Hours needed to complete item x $ value I have set on my time
= Manufacturing Labour Cost
Wholesale Materials Landed Cost + Manufacturing Labour Cost
= Total Manufacturing Cost
Total Manufacturing Cost + processing/packing time & materials
cost x Margin % = Selling Price

Again I shop around to determine if my price is competitive and then adjust my selling price slightly. I don't add on a different cost breakdown for the time I take to answer messages or emails as I consider that part of my cost of doing business and it is assumed as part of the processing/shipping time value I add. Things like hydro or printer paper are also built into that cost. People I think forget that it costs money to operate a business.

[EAGERforWORD]

Agreeing with Matthew and Sara from ananemone. Positioning oneself in the market is more important, the calculations are for viability.

Pricing vintage is complicated by buying lots which involve having to spend time dealing with plenty of items that are not saleable, many that fall into the category of worth listing elsewhere 40% of which will sell within 4 years and those worth listing on Etsy which have a very high chance of selling quite quickly.

Hand made is just as hard to fit to a formula. Starting a project on paper, making a pattern, then a mould, a prototype, refinements, before creating the working mould. To make a saleable item this mould is then used with materials and time and will it all be worth it?!!!!

Formulae might be fun but in reality all I do is keep a record for every item sold, deduct fees and costs. If it wasn't worth it - learn not to do that again!

[Former_Member]

I use a program called quickbooks, I log in everything I buy, all my postage, supplies, etc. and when I make a sale I log it in also and it gives me all of the statistics! AMAZING PROGRAM!!! I love it!

[CopperLeafStudios]

I price my work by size. That allows me to factor in materials & labor, while giving me a clear way to quote a price for commission pieces, which is the bulk of my work.

[maydaylabels]

Chris, we do the same (we price per sheet of labels, regardless of what is printed on them)

[ilPiccoloGiardino]

I calculate general cost of goods, but not a real cost of goods sold. I need to work on those items which perhaps may not sell and factor those into the equation. Right now, I basically add cost of materials to double or triple (depending on x) for retail.

The goal for 2015.

It should be:
Beginning Inventory + Purchases - Ending Inventory = Cost of Goods Sold

[TaylorArtsandCrafts]

Personally, I take the cost of my materials, shipping, and listing price, and triple that. If it ended up being a more extensive project I might quadruple the price. It sounds like a lot on paper, but it only works out to be a fairly small profit margin, especially if I'm shipping overseas, or I'm having to relist things a couple of times.