A simple formula for Wholesale Pricing of Your Art

Artists and designers share a common sentiment about retailers. Most feel they are being paid lesser for their hard work. Pricing your precious artwork can be tough. Then, how come a lot of people make money selling their handiwork online? The question is not whether or not they can sell. Rather, it is whether or not they really earn online. But some really do.

 

Wholesale versus Retail

Let’s talk about the terms first that make a lot of people cringe: mark up and wholesale. Obviously, wholesale price is way lower than retail prices. With retail, you sell your products directly to customers. As for wholesale, you sell it to middlemen, shopkeepers, etc. who will in turn, sell your products to customers. They make money by marking up the prices.


See Also:

Pricing Essentials: How to price your craft

Top Ways To Earn Money Online – for creative people


Why wholesale?

So why should you sell your craft to these people when you get by selling to customers at a much higher price? If you are serious about your craft business, you always have to take wholesaling into account. That’s because some people may be better at retailing your products than you are. They have the necessary tools, knowledge and experience in doing so.

Moreover, retailing is not easy. It takes time and a lot of effort when you would rather spend more time focusing on your creative process. But do you really need to wholesale when you have already started to sell your work online and it is going pretty well so far, at least you can still make both ends meet?

 

Make money by wholesale

Wholesaling: Selling Less for More

 

Now here’s a tough question. How much are you earning? Is it enough for a living? What if you have the opportunity to sell more? What if you can live comfortably from profits you make online selling your designs? And that opportunity can come from wholesaling. Retailers can help create demand for your products. Would you rather sell to less people but at a higher price or sell to more people at a lower price? Which can really make you more money in the long run?

As Kartikeya Sharma rightly points out that there are advantages to wholesaling if you can set aside your worries about low prices for a second. Although you are paid for less in wholesaling, you sell your products in bulk which can give you the opportunity to make more creative work. You can spend less time on the computer or on the phone answering queries from potential customers, less time traveling back and forth to take care of shipping one or two items at a time. The time consuming responsibilities are taken away from you. That’s the sweet deal of wholesaling.

 

The idea of Wholesale is to reach more potential customers.

The idea of Wholesale is to reach more potential customers.

 

Before you even start up your shop online, you need to figure out both your wholesale and retail price. You always have to start with the wholesale price. Never work backwards from retail to wholesale price. Otherwise, you run the risk of selling yourself short. You would not want to end up selling for less or the same price as it cost you to make your goods unless you don’t want to make money.

 

Simple formula for pricing Handmade Crafts.

Simple formula for pricing Handmade Crafts.

 


 

There are various pricing formulas. You will find different methods of computing for a reasonable price below.

Materials + Labour + Expenses + Profit = Wholesale Price x 2 = Retail Price

(Materials + Labour) x 2 = Wholesale Price x 2 = Retail Price

Materials + Labour = Cost of Item x 2.2 = Wholesale Price x 2.2 = Retail Price

(Materials x 3) + Labour = Wholesale x 2 = Retail


 

Do not eeny, meeny, miny, moe your way into a pricing formula. Your choice should depend on the kind of work you do. For instance, it does not make any sense to use this formula [(Materials x 3) + Labour = Wholesale x 2 = Retail] if you are working with less expensive materials. What if you can make your craft good for $3 or less? It will be unfair to base your profit from the cost of your raw materials even if you multiply it by 3.

These formulas may look different but they do share common items: cost of materials and labour. Let’s get into the common elements of these formula one by one.

Compute the cost of materials.

First off, what are the things you need to make a finished product? List them all from the biggest parts down to the smallest item. If you make hand painted jewellery pieces then your list should include the beads (ceramic, wood or plastic), acrylic paint (specify all the colors you require), strings or jump rings, lock, cotton swabs, etc.

Next you have to determine the cost for making each piece of craft goods. You probably buy your supplies in bulk so let’s say a pack of beads costs $5 from which you can make 100 pieces, your cost per piece will then be $.5. And you can’t possibly use up an entire tube of acrylic paint in one item so you have to estimate how many pieces you can squeeze in for each pack. The same applies to the other raw materials.

 

Earn online

Each piece costs money to make.

 

After listing down your raw materials, you have determined the cost to be at $10. That is not your total cost of materials yet. You have to factor in other expenses that went into obtaining your supplies. Did you have to drive to the store? What is your transportation cost? Did you have to order it overseas? What is your shipping cost? Include them all here. You also need to add your packaging and shipping cost here for delivering the goods to buyers. Let’s say you’ve done the computation and your final cost is at $15 per piece.

Determine the labor cost.

You spent time and effort making each piece so you have to make money out of it. To determine the labour cost, you have to specify your hourly rate and the number of hours it took you to make each piece.

 

Make online

 

Labour Cost = Your Hourly Rate x Number of Hours Spent

This is one of the tricky parts. How do you arrive at your hourly rate? The safest way to go is to base it on how much money you will be making if you were traditionally employed. Let’s set it at $50. If you spend two hours making each piece of jewellery then your total labour cost is at $100 = $50 hourly rate x 2 hours.

So we have now determined your total cost of goods = $115 ($15 cost of raw materials + $100 labour cost). We’ll now move on to the next elements of the equation.

Overhead Cost

In addition to the production cost, there are other expenses that need to be accounted for. This portion includes rent, utilities, marketing, etc. which you pay for on a monthly basis. Add all these items to determine your monthly overhead cost. Let’s say your total is at $1000. Now how many craft goods you can make in a month? Let’s set it at 100. Divide your monthly overhead cost by the number of items you make in a month ($1000 / 100). That will be $10 per piece. You can now add this to your cost of production.

Cost of Materials + Labour Cost = Cost of Production + (overhead cost/ number of produced goods) = Total Cost

Based on our example, this is how the computation looks like.

$15 + $100 = $115 + ($1000/ 100) = $125

To earn online from your craft business, you need to make at least $125 per piece in order to break-even. In other words, your wholesale price per piece must be higher than $125.

 

Compute your prices in a manner that they take you to Breakeven.

Compute your prices in a manner that they take you to Breakeven.

 

Now, let’s go back to the wholesale price. To put it simply, the price is the amount you’ll be happy to trade off with your work considering the time and effort you put into it. Your wholesale price is the minimum amount you’ll be willing to part with your product for. When deciding on your price range, you should also consider the current price customers are willing to pay for a similar handcrafted item. Remember, you are not the only one who needs to pay some bills. Your retailer has overhead cost to cover too. You both should make money.

 

Correct pricing is the key to Profits.

Correct pricing is the key to Profits.

 


 

Let’s go back to the formula presented before and compute according to our sample scenario.

(Materials + Labour) x 2 = Wholesale Price x 2 = Retail Price

         ($15 + $100) x 2 = $230

For wholesale, you will end up with a profit amounting to $105 since you have an overhead cost to cover on top of the materials used and labor cost.

Materials + Labour = Cost of Item x 2.2 = Wholesale Price x 2.2 = Retail Price

$15 + $100 = $115 x 2.2 = $253

At a wholesale price of $253 per piece, you will have extra $128.

(Materials x 3) + Labour = Wholesale x 2 = Retail

($15 x 3) + $100 = $145

Using this formula, you will have $20 worth of profits from wholesale. It can retail for $290.


So which price makes you happy but still can make sense to paying customers? Whether you under or overcharge is up to you. When it comes to your work, “YOU” know best. However, take the time to consider the advantages and disadvantages of under pricing. You may think you can make customers happy by offering them beautifully designed handmade goods but the truth is you are at risk of losing everything.

 

Incorrect pricing will never make you money.

Incorrect pricing will never make you money.

 

The biggest downside is you barely make money. You also make potential customers undervalue your work. Because you make much less than you are happy about, you will have a tendency to cut corners compromising the true value of your work. You risk your health by overworking yourself. On the other hand, if your price just right (even if it seems like a lot) you will be forced to put your best foot forward at all times.

Customers will be happy to pay for your best work. If you are not selling for that price, perhaps you are targeting the wrong market. In which case, you may need to revisit your business plan. For more tips on how to earn online and price your crafts reasonably check out this video,

 

At the end of the day, it’s all about value. Value involves more than the cost of making the product. It’s about quality. Value your work and your customers will learn to value it too.


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