Congratulations! Your love of yarn has led you on the journey to become a professional yarnpreneur™.
Making the move from having a hobby to running a business is a gigantic step and will require you to retrain your brain in so many ways – I’ll discuss a couple of the important brain changes.
Before you can price a handcrafted item, you need to determine your fair hourly wage.
Knowing or figuring out what your fair wage is or should be, is one of the most important pieces of information that you need to know – at least in my opinion. You need to know what your fair wage is in order to price your finished handcrafted items or the patterns that you design and sell.
When I started my own yarn related business Fanciful Things, LLC, a couple of years ago now, I was very confused over the different thoughts on how to price your finished handcrafted items. I felt that many of the popular pricing methods were lacking “something” and initially I couldn’t quite put my finger on the missing piece, I thought perhaps I wasn’t using the right combination of keywords in my Google search.
I ended up feeling that many of the articles I read on “how to price handmade items” were geared toward the hobbyist instead of the professional yarnpreneur™.
Sure, come of the articles did mention using hourly rates between $10 and $20 per hour when pricing your handcrafted items – but where the heck did they get those numbers from?
When you run a business, that business has expenses.
One popular pricing method is:
Cost of materials x 3 (materials, time, profit)
This pricing method and many of the articles that I read appeared to not take into consideration the fact that when you run a business:
- That business has expenses that must be paid. Those expenses can include things like:
- Website hosting
- Etsy shop fees
- Business licenses and fees
- You, as the business owner, must pay taxes on the income that you make from the business.
- You need to pay yourself.
- The business needs to make a profit.
Let’s talk about time
Another popular pricing method is:
Time + materials = Cost
Cost x 2 = Wholesale
Wholesale x 2 = Retail
Several of the pricing methods I found seem to base pricing on a single item and the time it takes you to make that item. I think that is a very skewed perception – here’s why…
When you run a business, your time is spent on all sorts of tasks, including:
- Social media
- Photo shoots
- Updating your website/Etsy shop, etc.
- Ordering/buying supplies
- The “dreaded” bookkeeping
- And finally, you get time to do what you love to do!
Basically, what I’m saying is that if you ONLY count the time you spend “crafting”, then essentially all of the other things involved in running your business are done for free – because you aren’t counting that time. And who the heck wants to work for free?????
Re-engineering the popular pricing methods.
It’s taken me awhile to re-engineer the popular pricing methods and take all of the aspects of running a business into consideration – and to come up with something that, while still not perfect, certainly is more on target.
My pricing method takes the following things into consideration:
- How much money you need/want to make per month.
- How many TOTAL hours each week you spend on your business.
- Your annual business expenses.
- How much you’ll need to set aside for taxes.
- How much you’ll need to sell each year to achieve your desired income.
- And finally, YOUR personal fair hourly wage.
Once you know what your personal fair hourly wage really is, then you can apply it to any of the popular pricing methods you find, including this one:
Supplies + Cost of time = Item Cost
Item Cost x Markup (usually 2-2.5%) = Wholesale Price
Wholesale Price x Markup = Retail Cost
Learn more about this pricing method:
I’ve designed a Fair Wage Calculator, that can easily help you to determine what your fair hourly wage should be – based on your own yarn related business. This will be your very own “magic number” that you can then plug into any of the other pricing methods.
I’ve teamed up with Jess, here at The Yarnpreneur™ Society to offer an exclusive live 1 hour Masterclass on Wednesday, March 29 at 7 p.m. EST. Each attendee will receive a copy of my “Fair Wage Calculator” for their own use as well as detailed information on how to use it. This is really a very valuable tool.
The Yarnpreneur™ Society is a monthly membership website – designed for professional yarnpreneurs – offering exclusive training designed for yarn related businesses via live monthly Masterclasses and pre-recorded Studio Hours, Strategy Sessions, Stitch-N-Click tutorials,a private Facebook community and more. The cost is $9.97 per month – click here to join today and attend the Beyond Fair Wage Masterclass later this month!