How to price your craft work correctly Correct pricing is extremely important for your craft business to make a profit. Pricing is one of the most challenging parts of any business and especially in businesses like craft work. In a handmade business you not only have to consider the labor and raw material but also have to give a monetary value to your overhead costs and tools. A simple formula for calculating the price can be as below:PRICE = Raw materials cost + labor cost + overhead expenses + Profit One also has to decide if this is a wholesale or a retail price. Each and every component of the equation has to be considered in detail, to get the right profit while offering a good product to your customer at the right price. Following are a few examples of various costs involved in the craft business:Labor cost Either you are working yourself or you have employees, in either case you need to consider the labor cost very carefully. If you have employees you need to check if you are paying them per item/piece or on hourly basis. If you are paying them hourly, it has to be noted that maximum work is done per hour. Since you are the owner of the business, you have to include your labor cost as well. Your contribution has to be taken in account while calculating this cost. Raw material Cost â€“ This is the cost of materials consumed while making craft items and does not include items which are reused, such as scissors or measuring scales. One of the most important points which have to be considered while calculating this cost is that portions of the same material being used in various items then the cost has to be calculated in that ratio. Example, if a sheet costs $20 and only half of it is used while making an item, the cost to be considered is $10 for that item. Overhead expenses This is the trickiest part of the equation and one has to think about it very cautiously as the probability of missing things here is high. One has to think of all the costs like, electricity, fuel, shipping etc. If multiple packages are sent in one shipment, cost has to be calculated per item. Last and most important part of this cost is wastage cost. This includes spillage and wear-tear which happens while working. Ignoring these costs might present a higher profit than its actual value.
Finally you have to decide the profit margin you want to keep as per the wholesale or retail market and come to the final cost. Considering all these factors is very important to price your craft work correctly. To know more about craft software visit site: http://www.craftmakerpro.com/
Published on Nov 1, 2013
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