Pricing your handmade jewelry in order to make a profit is important whether you run a fully-fledged handmade business or not. Even if jewelry-making is more of a hobby to you than a business, it’s good practice to always price for profit and not just to cover your costs, because one day you might just decide to turn your hobby into a business. Below you’ll find some other great reasons to always price for profit too.
Why you should always charge your worth
If you’re starting out in selling your handmade jewelry, you may not feel confident enough to charge much money for the items you’re making and so covering your costs may be your main priority. But if you don’t price your jewelry to make a profit, what you’re actually doing is subconsciously undervaluing your own work, bearing in mind the amount of time you spend creating a piece of jewelry.
In addition, you could be undercutting other jewelry designers who are already working hard to earn a living. Handmade businesses thrive on the fact that products are unique, with each piece telling its own story after being lovingly created by the designer. That’s why many people choose to buy handmade goods – and why they are prepared to pay a good price.
Let’s think about perceived value for a minute. It’s true to say that sometimes, “cheap” can be perceived as “cheap and nasty”. Whereas a product being sold for a premium price is often perceived as high quality or special.
If you sell your handmade jewelry at low prices just to cover your costs, the type of buyer you’ll be attracting is someone who is looking to get the best deal and may not care about the amount of work that’s gone into making such a piece of jewelry.
On the other hand, the buyers who you really want to be buying your products – those who will truly value your work – may assume that your products aren’t actually handmade if you don’t get your pricing strategy right to begin with.
So pricing your handmade jewelry for profit is important for all of the above reasons. But how should you decide what to charge?
Wholesale prices versus retail prices
When you make a handmade piece of jewelry, you should work out both a wholesale price and retail price for each item. Both of these prices should take into account your expenses and incorporate profit too. Your wholesale price should be the very lowest amount that you can sell your product where you can still make a profit.
You can sell your handmade jewelry directly and indirectly. Selling through other shops or boutiques is a good strategy that many jewelry designers use. The way this normally works is that you’ll sell your jewelry to another shop for the wholesale price and the shop will then sell on your work at a (higher) retail price. Shop owners may decide on a retail price themselves, or they might look to you for suggestions, so it’s good to be prepared.
When you sell your jewelry directly e.g. on Etsy or on a craft stall, you could sell at the retail prices you’ve worked out and every now and then, offer a discount where you’ll still make a profit. This is where your wholesale price – aka your rock bottom price – will come in handy.
Working out how to price your handmade jewelry for profit
There’s an easy formula you can use for working out the right price for your handmade jewelry:
Materials + Overheads + Labor + % Profit = Wholesale Price + % Profit = Retail Price
With any item you make, take into account the cost of the materials used. Don’t forget to include costs like beading thread and findings for each piece you make. These materials can often be overlooked as you might already have a large stock of these items, but it’s important to note that these are still material costs.
Be as specific as possible by finding out the cost per bead used for your jewelry item. For example, if you buy 1 x bag of 50 beads for $2.99 plus postage and packaging, add the cost of the postage and packaging onto the price for the bag of beads and divide this new price by 50 to give you the exact cost per bead. Then you can add up the price of the beads used to make each item of jewelry.
Your overhead costs might be a website, domain name, studio, Etsy fees and more. These are the general running costs for your business that you need to pay for on a regular basis. The labor cost is the amount that you’d like to charge for your time in making your handmade jewelry. The easiest way to work out your labor cost is to decide what your hourly rate will be and then calculate the amount of time it takes you to make a product. Don’t undersell yourself here by working for nothing!
For each piece of jewelry you make, after you’ve factored in the cost for materials, overheads and labor, you’ll then need to add on some profit. How much is up to you, but make sure that you do add some on! For example, you might want to charge 20% or 100% to reach a new figure and this will be your wholesale price – the lowest amount you’ll sell your item for.
Once you’ve set your wholesale price, add on more profit to reach a retail price that you’re happy with (what you think the market will bear). You may want to use the same percentage again to keep things simple, but it’s your choice.
Adjusting your price and still making a profit
Once you start adding on profit when you’re pricing your jewelry to sell, you might start doubting that your jewelry is actually worth the money. Don’t! This is how successful businesses work – they’re all about profit!
If you really do think that you won’t find buyers that are prepared to pay your prices, then revisit the design of the jewelry you’re making. Perhaps by altering the design and using cheaper materials or buying in bulk, you can lower your prices to fit in with demand and still make a profit.
Find out what your customers want. What do they like about your jewelry? Can you deliver the same sort of product at a cheaper cost to yourself or your business?
The right pricing always pays off!
Whether you’re making jewelry as a small business owner or as a hobbyist, getting the pricing right from the very start is important. Not just for your own sake, but also so that you can play your part in helping the handmade business community thrive!
For more business tips, take a look at our recent article on How to Take Product Photos that Sell. Please take just a moment to share this post about how to price your handmade jewelry for profit to your followers on social media!
Image via Flickr (creative commons).