How to Set Prices for Handmade Goods

Not sure how useful this is for many handmade items; for candles, as they mention, sure.<p>But - I quilt (not to sell). Quilting is expensive in terms of both supplies (typically 100% cotton fabric, thread, batting, machine, etc.) and especially time.<p>It&#x27;s difficult to convince people that the relatively simple (looking) quilt made by a skilled quilter, which &#x27;only&#x27; took 20-30 hours to make is worth $500-$1000+.<p>Couple of interesting articles here:-<p>- <a href="https:&#x2F;&#x2F;sewingreport.com&#x2F;2016&#x2F;02&#x2F;quiltonomics-the-real-cost-of-quilts&#x2F;" rel="nofollow">https:&#x2F;&#x2F;sewingreport.com&#x2F;2016&#x2F;02&#x2F;quiltonomics-the-real-cost-...</a><p>- <a href="https:&#x2F;&#x2F;sewingiscool.com&#x2F;handmade-quilt-prices&#x2F;" rel="nofollow">https:&#x2F;&#x2F;sewingiscool.com&#x2F;handmade-quilt-prices&#x2F;</a><p>- <a href="https:&#x2F;&#x2F;quiltdom.com&#x2F;price-handmade-quilts&#x2F;" rel="nofollow">https:&#x2F;&#x2F;quiltdom.com&#x2F;price-handmade-quilts&#x2F;</a>

One of the things the post just touches on glancingly is that many handcrafted items may just not be worth it as a business if you set a reasonable market price. If something takes you a day to make&#x2F;sell and the biggest profit you can reasonably make is $50, it may just not be worth it. At least, unless it&#x27;s something you would do for free anyway and just let the pottery or whatever pile up in your house.<p>I write fairly well and fairly quickly but my ghostwriting price for an article&#x2F;blog has a definite floor. I <i>might</i> come down a bit if the work is interesting and the client is being professional&#x2F;easy to work with but I won&#x27;t come down that much.

I do woodworking and I just use my hourly rate plus materials. There are a surprising number of people who will pay high prices for quality hand-made goods. What I&#x27;ve found works is to create the best product you can and have a story around it.<p>For example, for my shaker trays I describe the process of picking out the wood, cutting the bands, boiling the wood, bending it around a hand made form, hammering in copper tacks over an anvil, hand finishing, and then applying multiple coats of hand made shellac. For larger furniture or slab work the story of the actual tree can really add to the value as well. People want a story.<p>To lower the cost you can create router templates, jigs, or even CNC projects to lower the hours spent and reduce the overall cost, but these need to be balanced with the selling of bespoke goods.

The article is a bit thin on two difficult and important factors for makers: How do you decide what your hourly rate is, when it is also unlikely you are making something so unique no one else makes something similar - ie. how do you create compelling arguments for differentiation.<p>In the first instance, in a first world country, to cover the high cost of living and to also take retirement and other such things into account, I’d estimate $50&#x2F;hr is the floor. Where I live a plumber will earn $80-120hr so even then it’s on the low side if you are a skilled maker who has had to develop skills over years.<p>In the compelling differentiation department, I think it comes down to storytelling and materials + workmanship. This trifecta has to be woven into a credible narrative to sell your product.<p>After all that, you need to market it… and we’ll that’s something else entirely…

Something that the article glosses over that I often ask about these kinds of businesses is _how exactly_ one finds and documents their costs. The author gives examples —- keep track of your time, keep receipts, etc -- but often a creative process is so organic that it just doesn’t feel as straightforward as that.<p>In startups it’s popular to use accrual accounting methods and, if you’ve ever had an opportunity to look at a startup’s books, it can get complicated. Several years ago, I worked on an enterprise product that had a bunch of variables and a long sales cycle. Without good accounting practices it would’ve been easy for us to screw up pricing and take a loss.<p>Maybe it’s just me, but it seems like the variables that go into a creative process are nearly as complex but the scale is smaller and documentation slimmer.

This is such a helpful post, but it also doesn&#x27;t factor in the cost of R&amp;D to make a new or unusual product. For example, I spent years figuring out how to make a specific kind of porcelain planter for succulents that would be self watering. Nothing else exists like it on the market, and customers like it but there&#x27;s a ceiling to how high I can price. Now I have a lot of sunk costs that I&#x27;ll probably never recoup on sales. Also selling isn&#x27;t trivial in terms of cost - figuring out packaging and shipping loss rate can be a double digit portion of sales for fragile handmade goods.<p>Of course this is on me as a designer and maker - it&#x27;s a labor of love - but it keeps my work from becoming a serious business that I might try to go out and count on for income.

As someone who builds furniture professionally, this article wasn&#x27;t as useful as I&#x27;d hoped. As other folks have pointed out, one of the hardest things to figure out is what to value your own time at, and the article doesn&#x27;t really touch that beyond &quot;the customer is paying you to do it because they can&#x27;t do it themselves&quot;.<p>One of the trade offs I find myself making is when I&#x27;m doing something new. There&#x27;s a certain amount of inefficiency, and sometimes you end up having to pay yourself less hourly to hit a more-or-less established price point for something.<p>Sometimes that&#x27;s worth accepting for the sake of doing something new or developing a new set of skills, but you don&#x27;t want to do too much of that either!

I’ve seen this in supposedly “sophisticated” businesses as well 1) people misjudge what value others (the market) puts on their goods services and price much lower than value (this is especially true in hobby type activities where if you think about a supply demand curve you don’t need to set price at a point that incents massive demand (1m), but rather at a point that incents demand of 1&#x2F;10&#x2F;100) 2) people are horrible at estimating their costs - just ask an Uber driver what he thinks his cost per mile are fully loaded (taking into account depreciation, consumables (tires&#x2F;oil), fuel, time and mileage when not on a fare, etc)…

Prices are not determined by cost of production, but by what the market is willing to pay.<p>Figure out what the market is willing to pay and <i>then</i> decide if you can get your production costs far enough below that to justify the enterprise. Yes, being handmade by locals adds to what people will pay, but only so much.

&gt; Patrysha is a certified small business coach<p>Is there a Chartered institute of small business coaches?

I agree with all of this. I don&#x27;t think people that sell their own goods realize that every situation has different COGS. So you can&#x27;t price the product based on the market. Especially considering non-handmade items that can be made for pennies in bulk.

Is software handmade good?