I want to know: how do you calculate the price of your products? Don’t tell me you use the old “multiply by three” technique? Or that you don’t even calculate the price correctly, taking into account all the manufacturing processes? So, it’s time to learn how to calculate correctly and I’m here to help you.
First of all, let me explain: calculating the price that your product will sell is much more than multiplying the amount spent on material by three (who has never done this before throws the first stone). Therefore, we must think about all the variables surrounding the production of your crafts and, of course, your profit margin.
Then you get up, run for a pen and paper and let’s do the right calculation to determine how much your product will cost. Follow the good ones and let’s consider these 5 points:
1) How much did you invest in feedstock?
For that first value, try to approximate the price you paid for your materials as much as possible according to the quantity of products you used in making your product.
While we understand that it is difficult to calculate every piece of material we use in detail, if you get as close as possible to the price you invested in raw materials, the fairer the value of your product will be.
2) Calculate your working hours
Secondly, we must carefully calculate our hours of work, because, in crafts, they are part of the price of the final product. That is, we need to calculate how hard you worked: from the moment you touched the materials to start producing until the moment you finished sewing the last thread.
In order to help you in this calculation, we made a calculator especially for you, which can be accessed here.
3) What are your fixed costs?
Fixed costs are those expenses that will exist regardless of the quantity of products that you produce or sell. Therefore, they include these expenses: electricity, water, gasoline and internet, for example.
It is super important not to forget these costs, that is, as they are fixed, they will always be charged, so you need to include them in your final price.
4) Don’t forget your taxes…
Without a doubt it would be wonderful if we didn’t have to pay taxes, but if you have a studio, you need to pay the property tax, for example. Likewise, if you use your car to take the product to the customer or to the Post Office, you pay your country taxes. Remember all these taxes that are indirectly related to your work and do not forget to add them in the final price.
5) Think about your profit margin
Finally, (but not least) the artisan who spends hours working on an exclusive and special product for his client does not want war with anyone, as long as he is rewarded in two ways: being valued for his work and receiving profits from his production. That is, when setting the price of your product, always think about your profit margin. 50%? 100%? 200%? 300%? It’s up to you, but don’t forget to be honest with you and the customer.
Considering these five points, you will finally be able to put a fair price on your product. Let’s calculate together so you can see an example in practice:
Suppose you have spent $5 on raw materials, $20 reais per hour of work (production and completion) and $7 reais on fixed costs and taxes divided by parts of the month. The sum of all this gives us a result of $32.
With a 100% profit margin, you will sell the piece for $ 64 reais. However, using the famous rule of “multiply the price of the raw material by 3”, you would sell your precious product for $15.
Do you think this price is equivalent to your work? Calculating all these points is very important for you to get the value you deserve. 😉