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The White Whale of Handmade: Pricing

Today I’m going to talk about pricing. I’ve been thinking about it a lot lately. It’s something that is discussed a lot, but really hard to get right. This post is going to have a crochet focus, because that’s what I do.

Pricing handmade, particularly crocheted, is a very tricky thing to do ‘right’. This is because of a few interesting particulars of the handcrafted market:

  • Speed: There could be two people crafting the exact same thing (and quality), and one is just slower at making than the other. So the fast maker would always undercut the slow maker. This becomes especially apparent with more labour intensive items like crochet.
  • Time Intensity: Because some handcrafts are very labour intensive, working out a straight hourly rate for your work; or using the materials+labour+expenses+profit = wholesale (x2 for personal sell price) may not be a viable option. It prices you way out of the market for what you are selling.
  • The Handmade Market: Some handcraft markets, crochet again is a good example, have ‘hobby sellers’. People who are just unloading things they have made for fun. These people sell at low prices because they aren’t interested in earning any kind of living for their work. Some people who do crafts as a supplemental job fall into this trap as well; it depends what the goal of their business is.
  • Comparison with the Whole Market I design and make mostly crochet plush toys. If I charged the ideal price for my stuff, very few people would buy them. Not because they are not worth what I would be charging, but because the mass produced market still sets peoples expectations of what things are worth. They are willing to pay some amount extra for handmade, but there are still limits as to how much higher most of them will go.

But it’s not all doom and gloom. There are some benefits of running your own business, that I certainly think are worth taking a bit of a pay cut for:

  • Flexibility: I have complete power over my schedule. I can be entirely flexible with my time. Old friend in town for one day only? I can meet them and make up the work later. I don’t have any deadlines, constraints on holiday/sick days, or work hours – other than the ones I set myself. I only have myself to answer to.
  • Health: This is not the case for all crafters, but I’m going to include it because it affects me, and a surprising number of people I know in the handmade community. I’m not sure I could hold down a ‘normal’ job without losing it, or destroying myself. It’s a very hard thing to admit. But for some people with mental health issues, disabilities, or chronic health conditions (such as migranes, fibromyalgia etc) this is a very real problem. My ability to create and sell in the handmade market keeps me sane, provides me with some income, and allows me to actually enjoy the other aspects of my life. It means I can be a functioning person, instead of a stressed and miserable ball of panic attacks.

I’ve barely even started and it’s already quite clear that this is much more complicated than a lot of advice posts make out. I’m going to run through an example of how I currently go about pricing, using the example of this crocheted sheep.

bobblesheep_pink
BAAAAAAAAAA

This is going to be quite long. There is going to be some maths (I’ll do my best to keep it clear and simple). See you on the other side!

The Basics

Let me tell you a little about sheep:

  • Sheep is about 10cm big and is a crocheted plushie
  • Sheep takes me 2 hours 45 minutes to make
  • Sheep uses £1.50 of materials

I pick an hourly rate I feel I should be earning. I use the living wage because I think it’s a good thing to aim for. That’s £7.85 per hour at the moment in the UK.

Because crochet is a skill, some will argue this hourly rate should be higher. Not everyone can crochet right now, but I do believe everyone can learn – in most cases quite quickly. You don’t need to be a crochet master to follow the pattern for my sheep, it’s very basic. If I was making fitted clothing, or complex plushies, I’d set my hourly rate higher.

Make sure you are picking an appropriate hourly rate for your craft. Important questions to ask yourself: How much knowledge does it require? How much creativity? How rare is the skill? How hard to learn?

That’s the simple stuff out the way. Fairly painless. Now it gets a bit more complicated.

Expenses

Expenses are tricky. They would include your workspace costs (for me at home it’s a teeny tiny fraction of our monthly utility bill, which I don’t include) and any time you spend doing stuff that isn’t making, but is still work: work emails, social media, ordering supplies, making an online listing etc. I try not to spend more than 1 hour a day on these things.

So you either have to figure out how to adjust your hourly rate to pay for this time, or figure out your expense time ‘per item’.

Because I have quite a range of different things, I add expenses into my hourly rate. It just makes the most sense.

On average I work about a 35 hour week (this is my only job) & spend 5 hours of that time doing ‘expenses’ work. So 30 hours of making needs to pay for 35 hours of work. My hourly rate adjusted to expenses will be:

( 35 x 7.85 ) / 30 = 9.16

A Starting Point For Price

I read this method on a blog once, and it seemed like a good compromise to me. So I use it as a starting point when I am calculating price. I can’t for the life of me find the blog post again, apologies to the blogger for not referencing you!

A = 3 x material cost

Charging 3 times material cost is something that pops up a lot. It’s a pretty random one. Certainly with crochet, it’s a massive, massive undersell. I’d never use it alone, but it turns out it’s kind of a handy number to have around as you’ll see later.

B = materials + expenses + labour (+ profit)

This is the ideal price. I would only consider the profit part of this equation for items that I could potentially hire others to make for me, or that I could produce in wholesale volumes. It’s good to do a basic run through without a profit margin to see if this is something that might be viable before you start considering those things. I’m not going to use profit, or consider wholesale, in my sheep example.

C = ( A + B ) / 2

Then we average those two prices and see what that looks like. Let’s do it for the sheep!

The first step is to convert time to a decimal value. Hours are easy, it’s just 1 for 1. Minutes are (1/60) x minutes. So the decimal time for the sheep is:

2 + ( ( 1 / 60 ) x 45 ) = 2.75

Hooray! Now lets try out the pricing method.

A = 3 x 1.50 = 4.50
B = 1.50 + ( 9.16 x 2.75 ) = 26.69
C = ( 4.50 + 26.69 ) / 2 = 15.60

So the numbers we’re going to focus on are B and C. Lets take them out and compare them to the market. After some rummaging around, crochet sheep of this size average out about £15. I find a lot of the time for crochet that C is fairly close to the average market price.

So if I was to use C as my price, what would my hourly wage be (adjusted for expenses)?

( 15.60 - 1.50 ) / 2.75 = 5.13
( 5.13 x 30 ) / 35 = 4.40

Now the question is, is £4.40 an hour reasonable to me?

Some of you might be thinking I’ve forgotten fees. Don’t worry, I haven’t. Because most fees are percentage based, I look at them later.

Do I crochet fast, or slow?

This is the million dollar question. How does your crochet measure up to others in terms of speed? It’s really hard to tell. Because the C price seems to line up well with the market price I try and use it to estimate. If it’s much higher, I figure maybe I’m slow. If it’s much lower, I think I’m probably a bit fast.

Fun fact time! The speed crochet world record holder can do 28 treble crochet stitches (that’s US trebles) in 1 minute! Why do they measure this in trebles? I have no idea.

I’ve timed myself, and I sit in the 15 single crochet a minute ballpark (or about one stitch every 4 seconds). Given time estimations for patterns I have used (and how long others have taken to make my patterns) I think I’m pretty average. I’d really like to gather some data for this at some point!

Setting the Price and Factoring in Fees

Lets say in the end I decide that you know what, I’ll take £5 an hour for a sheep to try and stay near the market cost. After I’ve adjusted that for expenses a sheep would cost: £17.53

Now I need to think about fees. If my sheep costs £17.53 and I sell it on Etsy, I’m going to end up with some fees! The worst case scenario is Etsy + Paypal fees. Etsy fees are 3.5% + 14p listing fee, and Paypal is 3.4% + 20p.

Keep in mind that because Etsy gives you the full price and then bills you for the fees. You are paying those % fees on the full price both times. That’s a total fee of 6.9% + 34p. For sheep that’s:

(17.53 x 0.069) + 0.34 = 1.55

In the case of the sheep if I deduct those fees from my profit instead of adding them on, I’ll be earning (worst case scenario) £4.44 an hour. Mmm. Not great.

If I add on a bit for fees – not the full amount from the worst case scenario, because not all sales will be with paypal – I’ll be a bit happier with my pay. So I say a sheep costs £18.50

I would also use this price for craft fairs. In most situations you have paid for your table, or are paying % fees to the organisers, and you need to make that money back. If you have a portable card machine, they usually have fees starting at 2.75%.

Will People Pay?

Will someone pay £18.50 for my little sheep? I’m going to say in the case of most people: probably not. I have a few options now:

  • Reduce the price of the sheep further and take a bigger pay cut. Deciding I’d rather sell some sheep, than no sheep.
  • Keep the price as it is, or raise the price, but only make sheep to order. I’ll keep a few knocking around to take with me to craft fairs, but won’t produce a ‘stock’.
  • Decide that the sheep is not a viable option for sale.

I tend to go with the second option, depending on the size and material cost of the crocheted item.

Conclusions

It’s probably become apparent that just selling crocheted plushies doesn’t net you a very good wage! Which is sadly true. All items are not made equal in the eyes of capitalism. I could certainly make a better wage if I crocheted other items; such as clothes and jewelry, that are deemed inherently more ‘valuable’ by the market.

But my passion is stupidly shaped cuddly animals. The fact I design my own patterns, which I sell (on their own, and very soon as kits) is a big part of my business plan.

I hope it’s given you some insight into how to price, and how complex a subject it can be. It’s something I revisit on a regular basis, just to make sure I am still happy.

emma

2 thoughts on “The White Whale of Handmade: Pricing

  1. Fascinating look into the real bottom line of crafting as a job. It’s really sad to think that you’re capped by the market as to how much you earn, purely because the market price bears no relation to the effort input. Selling the designs sounds like a great idea, as each one will have a breakeven point (how long it took you to design times your hourly rate), and after that each one you sell is profit.

    Is there any way to adjust the design to reduce the time it takes to make each item? Are there any complicated parts that could be simplified to make it a 2 hour job rather than 2h45m? This might be preferable to cutting your hourly rate to fit the market price.

    Also, if there are any items you make in bulk (even smallish numbers like 5-10), have you experimented with a sort of factory-line assembly? Crocheting all the heads first might help you speed up on the later ones as you get practised at that part. It doesn’t always work, if you enjoy the variety of switching between what you’re making, but it could be worth a try?

    Anyway, excellent post and best of luck trying to optimise your hourly rate! :-)

    1. You can’t really simplify. You can try to bulk up buy using thicker yarns (less stitches per area) but you’ll loose a lot of shaping if you go very far with that.

      In terms of speed….a stitch is a stitch! I don’t think my crochet speed will get that much faster, I already go at a pretty reasonable pace. I should get a bit quicker at stuffing + assembling as time goes on. But not by that much – we’re probably talking 10-30 minutes depending on the size of the animal.

      We’ll see! I might revisit in a year and see if I have cut down any sheep time 😀

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