Many of these figures are easy to determine and manipulate, others are slightly more time-consuming to calculate. Materials are fairly self-explanatory. Weigh your metals, price your beads, stones or cabochons individually, calculate promotional and shipping materials if you don’t utilize a separate shipping and handling fee, and add them together. Why (x2)? The cost of metals and materials fluctuate. When I sell an item, I want to cover the cost of materials used, of course, but also cover the probability of inflation in regards to a fluctuating metal market, for instance. Since you cannot always recover the value of scrap materials, this (x2) also satisfies the unfortunate necessity for waste in a handmade market.
Your overhead is any expense required to run a business independent of direct labor and materials. This may include an hourly rate for research, photography or networking, internet, phone, electricity, mortgage (if you work from home), office supplies, selling fees or advertising, to name a few. If you work from home, you cannot rightfully claim your entire monthly mortgage payment as a business expense, since you live where you work, so it’s important to estimate the amount of space you utilize in the home, and how this relates monetarily. For instance, I utilize a tenth of the space in my home for business. My mortgage is $400. I can claim an estimated $40 a month as a business expense. I have cable and internet at home. I would have these services irregardless of my business, but since I work from home, I can claim a portion of my internet costs as a business expense. Not everyone will consider electricity, cable and mortgage as business expenses when working from home, dependent upon labor wages, so crunch the numbers either way and determine your comfort level. I spend a minimum of 10 hours a week at non-chargeable work, such as networking, advertising, photography and research, or any work not directly related to the production of individual goods. I would consider $10 an hour for this work a reasonable salary. This is $100 a week, or $400 a month. Call into account water, electricity, tools and tool maintenance as well. All expenses considered, in this scenario, my overhead is an estimated $500 a month. If I make, on average, 30 pieces a month, my overhead is $15 per piece.
So, for the piece pictured above, I used 3 grams of silver-filled wire priced $17 an ounce. This equates to about $1.10 in metal used. The 6mm amethyst is $1.25. That leaves me with $2.35 in materials. Total material costs (x2) is $4.70. So far, my equation is ($4.70 + $15 + labor) x 50% profit margin = product price. Minus labor, this equation is also an accurate representation of wholesale value.
Ah, now for the difficult part…. determining the value of your skill. This, for me, was the most difficult to justify and, through the years, has dramatically fluctuated. I used to believe the value of a craft skill set was equatable to the value of, say, a receptionist. I know, right? Completely UNrelatable! Silly me! But, as a result, I was valuing my craft at an hourly rate of $10. It took me years to recognize that a much larger percentage of people are qualified to be a receptionist than those who are qualified to perfect a craft, so my hourly (or labor) rate needs modification to represent the discrepancy in this percentage. If you are still uncomfortable assigning a value to your skill set without accountable justification, you can also calculate hourly rate as:
[desired yearly income / work weeks – vacation] / number of direct-labor hours anticipated per week.
For instance, I would like to earn an annual salary of $25,000, and plan to work 50 weeks, at 25 hours of direct-labor work a week. [$25,000 / 50 weeks] / 25 hours a week = $20 per hour.
Now, for the sake of our model equation above, let’s assume the labor rate is accurately justifiable (which is another post entirely) in relation to the skill involved, and I now value my craft at $20/hr. Assuming the piece above took 30 minutes to make, the equation now reads:
($4.70 + $15 + $10) x 50% profit margin
($29.70) x 50% = $44.55
I recommend rounding up to the nearest dollar, and adding sales tax where applicable.
What you will discover, as well, is that the difference between the cost of materials are small in comparison to this piece in silver-filled, copper or sterling. The final cost in copper, following this equation, is only $2 less and the final cost in sterling silver is only about $3 more! As a precious metal, sterling is often marked higher (sometimes as much as 100%) due to its “perceived value”, but the math, for optimal profit and pay, doesn’t require the inflation.
And there it is… my secret formula… hopefully made easy! Obviously, not all numbers are serviceable. Some figures are loosely applied. Desired yearly salary, estimated hours of direct and indirect labor, and profit margin are per individual standards, based on any number of extenuating circumstances. And there is still one more point of consideration: the market as a whole. Take the time to research the product price of like items and adjust your numbers accordingly. You want to match market value where possible, without devaluing your own investment and skill in the process.
Now you’ve punched in the numbers and you think “Oh my goodness, no one will pay that price!” and there are no examples in your research of market value to justify the final product price. You have one of three choices: (1) determine in what ways you can enhance cost-effectiveness, (2) find another line of work (3) accept that it’s a hobby and create for the sake of creation…. not the expectation of financial gain. Expecting a monetary exchange for a hobby is like saying anyone can be a doctor without paying for an education. Work = gain. Period. The more work, the more gain. It really is as simple as that. If you are a hobbyist, respect that this is a profession to others and price accordingly.
Now that you’re as bored reading this as I was writing it, and I may have raised a few hackles with my hobbyist debate, back to your regularly scheduled programs. Though hardly entertaining, it was, I hope, educational. And, as with anything I say or do, take it with a grain of salt. This is one solution to a complicated set of problems, but there are other, perhaps better, solutions. Product pricing is as personal as the process of creation to some, and as mildly irritating as a gnat to others. Find your place, stand your ground and let the opinions of others flow over you like water.
Good night and happy weaving!
9/15/2015 06:20:27 pm
This was neither boring nor offensive, but an interesting, helpful and considered piece of advice. I really enjoyed reading it, it gave me a lot to think about, and perhaps a teeny kick in the pants for undervaluing myself. Thank you for taking the time to put this together. I also love your work. Your pieces are pure art and eye candy!
9/28/2015 12:31:58 pm
I totally agree with Toni in everything she said, especially the "love your work" part. I know this took some time to put together and I/we all appreciate it very much. Thanks again.
10/30/2015 11:34:12 am
I am very new to jewelry making but I love the whole experience. I found you piece above particularly interesting and helpful. Many thanks
6/29/2016 01:43:59 pm
Thank you for sharing. I love your work and I have learned a lot from you. I admire your writing ability about as much as the wire work. Ha
1/14/2017 02:36:39 am
As a hopeful full time jeweller (prompted by unemployment due to ill health), I can't agree more about the hobbyist potentially placing barriers in the way of those seeking to make a living from it. Much the same as retired genealogy hobby researchers charging £10 an hour for local searches pricing a professional out of the market. I find it very difficult pricing my pieces what I believe they're worth, given the uniqueness and skill/time invested, especially when I know customers will be comparing these prices not only with factory made high street jewellery, but also with Etsy sellers advertising complex wire wrapped items for under £10, when I know I would need to charge 3 or 4 times the amount to make it worthwhile. I suppose I fear that not enough people will value the handmade quality at a high enough level to be willing to pay so much more.
1/14/2017 02:50:11 am
Under-valuing ones art is definitely a problem in any handmade marketplace and something we'll always have to confront when faced with it. I was once selling at a festival, had just started out but was fairly content with the work I was doing. However, it was a "hobby" and I was underpricing by leaps and bounds. Another seller approached me and told me I should charge more and that I was damaging the market. And, while he was not very tactful or polite about it, looking back I was quite thankful for it. Granted, sometimes we can't make assumptions about the amount of time it might take someone to complete things, or whether or not they source their materials extremely affordably. But, these conversations can (hopefully) lead us to take a closer look at how we value ourselves and our own time. Ultimately, we can only price for ourselves and work really hard to market to the audience who will support our art.
2/5/2017 07:41:10 am
Thanks for sharing this Nicole. :)
2/6/2017 03:43:49 am
I'd say the formula probably wouldn't work in every circumstance, and really depends on the materials you use and how time-intensive your work is. There are updated formulas floating around (one which I use) which is basically [materials (x2) + hourly wage + overhead] x % profit which is your wholesale. Then wholesale x 1.5-2 for profit. Again, this might have to be adjusted depending upon the time-intensive nature of the work, as the longer it takes you the exponentially higher these numbers could become. So, while this is a basis from which to start building your own pricing calculator, there's a lot to factor in to determine what will work for you.
2/9/2017 09:24:02 am
Thanks Nicole! :)
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