When it comes to pricing, oh my gosh, the struggle is real! Buying all the goodies is what I am good at, but when it comes to playing the price tag game, forget it!
If you quickly research pricing your items for a small handmade business, it gets overwhelming fast. Some advice gets so technical that they are adding every last cent up, even including the costs of items purchased to make your goods. I don’t get that technical when it comes to pricing my items. There are some things that will pay for themselves in the long run, and I don’t really feel like adding 3 cents just because I use an item that helps me make a product.
Stick to these three big categories: ingredients, packaging (including shipping matterials), and shipping. Then you can include, time and extras at the end.
If you are like me and do both in person and online events, your pricing may differ to reflect or not reflect shipping prices.
To estimate shipping, you need to locate your shipping providers cost estimates based on weight. Sometimes depending on where you are shipping to, a flat rate option might be more cost saving. You can also use a shipping calculator that comes with your e-commerce store. I offer free shipping so I don’t use that feature.
First make a list of your goods that you sell. Since I do bath goods, I’ll use a few as examples. So say I make bath bombs, whipped body butter and cuticle oil.
Write down your ingredients for each item. If you have the cost that you paid for your ingredients, you can do some math and figure out how many oz, or another measurable number you use vs how much you bought. This will help you determine the costs to make your item. You can do the same for your shipping and packaging materials. Then once you know how much weight they all add up to, you can locate the weight on the shipping scale and find the average. Add all those numbers up. This is how much it costs you. Then you can pay yourself hourly or however you’d like. Say you’d rather pay yourself $1.00 per bath bomb or $3.00 per butter vs hourly. Then you will have your profit margin, and retail price.
You can also search similar items on ecommerce sites to see if your pricing is too high, too low, or in-between. I like being in the range of lower and in-between, but if you use higher quality ingredients, or offer more of a unique item, it’s ok to be in the in-between and high.
Ultimately your customers will help determine if your pricing is too high, or just right. If you don’t get very many sales, you can always adjust your prices, and experiment.
Here are some ways to keep costs lower:
- Buy in bulk. It makes the prices per oz cheaper, and you run out less.
- Use coupons when you can. If you can get the same item for even a dollar cheaper, it will reduce costs.
- Experiment with sizes. Is there a different size item you can sell that would reduce shipping, packaging or ingredient costs, but still allow your customers to enjoy it?
Pricing is a hard thing to find balance in. You don’t want to change too much, but you also don’t want to under charge and never make a profit either. As long as you add value to your goods, and accompany outstanding customer service, customer satisfaction will remain high, and your prices will be perfect just for you.
How do you price your items? Do you have a formula you follow? Do you base it off of other market prices? Do your prices change seasonally? Let me know below!