Pricing Your Products
Pricing is ready, there's a lot of numbers and stuff. Okay, but I tried to make it really fun. I'm going to start out by telling a story about myself. That's me? I hated math my whole life, I had, like, three tutors just to get a c in algebra. It was miserable. I loved writing in my journal, and I used to write, like, angsty poetry about boys that I liked didn't like me back and, you know, all that kind of stuff. And that was what I wanted to dio, but eventually I started my own business, so I, uh, had to deal with math to figure out taxes and sales tax and paying my taxes. I do accounting and figure out how much did I sell this show so that I could know if I want to apply for that show again, and I don't have the money to hire anybody, and I did not run with a crew of people where I, like, knew somebody that did that are gonna be like, can I give you some shirts in return for doing this? Like, my people did not know numbers, so I had to learn it myself. So I had a friend that gave me ...
a quick lesson in quickbooks, and then I just want I just I went, and then something clicked in my brain, you know, the same thing happened when I was a kid. I was with my tutor. It was like something clicked in my brain and I was like, I understand this something clicked and I, like, really got into it, and I saw that creative side of numbers. Um, yeah, bring it on. When I started really getting into my numbers and understanding it, it was this total sense of freedom. It actually opened up a lot of space because I didn't have to worry or think about it. I was really clear on whether it was a profitable apple product or not, and it was like this huge sense of relief in freedom, more time and space to create exactly that's in that and that's the thing all these things we're talking about like they're not that sexy like being prepared way nobody is like, oh my god, that girl is so sexy issue super prepare and organize like nobody says that about me, you know, that is not what I you know what I would put on, like a dating application interests super prepared and organized come date me, it's going to be awesome, but these are the things that allow you to do the sexy stuff, which is a perfect segue waiting by next slide getting paid for what you make allows you to keep on making and if you don't even know how much you're supposed to make if you have no idea what your numbers are you are going to be really bummed out and your business is not going to sustain yeah even this is this is my opinion all of this stuff is my opinion actually all of this is just my opinion there's always rules it could be broken we're all artists were going to do what we want to do but it's important to be informed um even if you have a business and you have an accountant I think it's important for you to have an understanding of that I mean how many stories have we heard about like somebody who's accountant screw them or something like big people that have like way more money than we do you know so having like a basic understanding to where you can check in and say hey you know let me take a peek at that does that look right is important so question I get I get asked most often at craft cation our conference you guys have been there you probably hear from people there all the time how much should I charge for my product I'm like I don't know I mean can we talk for a second? How long does it take you to make it? What are your material how much your materials cost let's go over I just is not a financial course but finances are a part of craft shows and they're part of your business so if all of this stuff we're talking about is something that you want to get deeper handle on lauren vinnell think has a class here she was a presenter craft cation and she's a friend and I choose so great at making finances come down for people like us that are our brains so but just to go over some brief stuff and expense is the cost of making your product and running your business income is the money that you give me for my weaving so it's the dollar that you'll give me for my leaving and then your profit is the money you get in minus the money that you spent that's your profit so just quick basic in case you know you're you're not there yet wholesale price that's a price you sell your stuff to a shop for so stacy has a shop I have a product she buys it for me for ten dollars she's going to turn around and sell it for at least twenty maybe twenty five sometimes thirty it depends the retail price is what stacy is going to sell it for okay your retail price in your wholesale price are not the same you cannot sell in a retail environment which is a craft show at your wholesale price you cannot do it and I think you might be answering this question, but genesis wondering how how can or do you negotiate percentages with organizers and owners? You shouldn't be negotiating percentages with organizers of craft shows they should have a set percentage if you're negotiating it, it sounds like I don't know, it sounds kind of shady to me, honestly, right? I mean, you guys have all the craft shows, would you like expect that, like, ok, well, I'll give you twenty percent, why want thirty, you know, doesn't that sound kind of this sounds kind of shady, so I would look for shows that have that have a set percentage. It shouldn't really be a negotiation. Okay, so let's, talk about why you shouldn't underprice underpricing devalues your product in your process, okay cannot stress this stuff enough, like, tattoo this stuff somewhere on your body, where it will see it every day and just live it, okay, you also don't want to miss an opportunity to educate your consumers. You know, we talked earlier about people are like, you know, understanding this hand made their understanding what they're paying for, you don't want to miss that opportunity to be that person that educates that educates them, and if you're doing this part time and maybe it's your hobby, it will never, ever become a business if you are underpricing ever. Never, ever, ever um, you never adjust your price to sell something. You find your customer, you adjust your customer the biggest one is that underpricing effects the entire community if you sell your necklace for twenty dollars and it's very similar to mine and I saw mine for five because I'm just doing this part time and it doesn't matter nobody's going to buy your stuff. People are gonna wonder why your stuff is so expensive. People even think like my stuff. Why is that stuff so cheap? Everything I've seen like that was good. Are they really making that you hear that a lot? Price your products for what you're worth for what they're worth, not your worth some warning signs of underpricing similar products are more expensive. Your prices are not covering your costs, you're not making any money, you know you're probably not not charging enough or if when people walk in your boot there like a dollar. Yeah, I'll take twenty of those, you know, and they're probably turning around and selling it at a swap meet. Pricing for profit is what keeps your business alive. You have to remember that you are not your customer, this is something that I struggle with, you know what I'm thinking about? You know something I'm thinking okay, if I were this person, how much would I be able to afford? That is the thing you can't think that is we have to train yourself away from you are not your customers sometimes you are sometimes you are the you are your customer but you have to think about that ideal customer and if you fit into that great has anybody ever told themselves any of these lies? I can't afford that price you know, for your own stuff if you're like thinking, oh, this really should be twenty dollars, but I can't afford that or the real artists are broke you think oh rich people they can't make good art, they don't have any struggle, you know, how can you make good stuff if you're struggling? My just started making this stuff it's like not that great yet, you know, once it gets butter all charge more, no one would pay what I'm charging I don't deserve it I don't deserve to make real money dot something I go through like write the second as I'm standing here feeling like you don't you don't deserve it money is not something that you deserve it's something that is given to you for your services or your goods or that you're not established enough you just started out when I get better I'll charge more for that money is for jerks that might just be me but I don't know it might be left over from my younger days of like rich people stock they don't they're totally awesome and you know, poor people are totally awesome too and so are the middle class there's jerks in every financial bracket we're that having money will ruin your creativity you know that you're not going to be in that spot where it's like you need me need to do this you're not gonna have that pressure so you're not able to produce those are all lies it's time to let go of that let go of that starving artist mentality and price your products for profit because you need to make profit and they call little further on pricing now that we're on that subject I was wondering does having a discounted section detract from selling full priced items or devalue any of your merchandise? I don't think so as long as there's a reason it's discounted and we'll talk about discounts, discount steals and deals and a little bit but there's a reason that it's discounted like it's a second you know, maybe you were making your necklace and like one of the beans has a chip in it or something and you let those customers know like, hey, these were like one offs or this is stuff I made last season and I'm not making this any more as long as there's a reason so you can you guys tell that I'm like really passionate about this and I really want you guys to make money so let's talk about our pricing formula labor plus materials equal your wholesale price your wholesale price times two equals your retail price okay, why do you multiply that by two? Because of that those air general business expenses I just highlighted some that some people sometimes don't think about um these are going to be different for everybody but utilities or portion of your utilities if you work at home office supplies like the paper you prayer and voices on bank service charges your monthly service feek three percent it's where however much they charge savings and retirement how many people have thought of that that are working for themselves? So I'm curious who has retirement set up on their own with their handmade business here great two of us I have I have way dio older you have to think about yeah, I mean nobody in this room and not that you guys are old or anything, but we're not spring chickens like we should be thinking about this. I think if you're twenty five you should start thinking about this I wish I would've thought about it when I was twenty so that's why you consider not just multiplying it by two but doing two point five or three and like I said, not all the costs are going to apply to you you have to figure out what is your cost and what applies to you labour is the money that you pay yourself for an employee for your prop, for making for making your product do not under pay yourself or your employees okay, just don't do it don't undervalue your work, you need to make sure that if you do need to pay somebody else for this, you're going to be able to pay somebody you're paying yourself five dollars an hour, you are never gonna be able to pay somebody else five dollars an hour it's not gonna work and just as a general rule, look at what minimum wages and, like, go two dollars, up, you know, nobody should ever be making less than that, you know, I don't think that that's what you should be making I'm thinking in like twenty to thirty dollars an hour range is what I think, but you need to decide for yourself what you need to make. Yes question is right, but when you talk about labor, is there any guidelines that you have about when you have people helping you kind of like your trade secrets on how you make your product and protecting yourself so they don't go out and copy and start their own business? I tend to want to do everything myself for those reasons and it's some point it's going to be a you know, it's not an extensible model to do that anybody can copy you at any time and I know that it's a bummer I remember I had I had my people that made myself do piecework so I would like cut everything up and everything and then give it to them and then they would sew it and one girl like ran off late with all of my stuff, you know? Not only was I out that stuff, but I'm just wondering to cheese so it and sell that stuff or what did she do? You can't do anything you can have them sign like a confidentiality agreement or something, which is definitely an option indefinitely like, you know will help protect you, but I mean that's that's the best way to protect it, but don't let that stop you from building your business, I mean, everybody you know, I just was thinking about the colonel's secret recipe for fins aren't you fried chicken? And I'm sure that somebody had to know what that recipe wass I think it's really, really worth it tio trademark, you're stuff and also getting design hatton yeah is a lot of money I did, I'm in the process of doing a designed patent for one of my items and it was nine hundred dollars but in the long run I think about if somebody had taken that design and did something with it yeah that's nine hundred dollars I wish that I would've spent yeah if that happened so yeah sometimes have to bite the bullet okay, so let's talk about how to determine your labor costs per item in one hour you could make four shirts you want to make twenty dollars an hour let's say you take your hourly wage divided by how many shirts you make boom five dollars a shirt got it so now let's talk about materials this is how much your classes cost how much my whatever you call this embroidery thread cost you know, whatever it is that went into there um here we're using the example of making a t shirt and I'm very familiar with that so when I first started making t shirt I'm like ok, the t shirt was teacher cost me five bucks and the applicator probably cost me like a dollar so my costs or six dollars okay, what about my name tag my care label my shipping tag my tagging gun attachments you know the little plastic brad's that everything do not forget anything so if we break this down the shirt was five the shirt the was five dollars threat all of these little things so materials or seven dollars now we're going to take our labor plus our materials twelve dollars okay, so that's how much our product is costing us to make and then times two or like you know I'm saying to two point five three whatever works for you that's your wholesale price that's what you would sell it to a store for and then take that times two that's your retail price this is what you would sell your stuff for craft shows not that now if you're looking at that and you're seeing that the price is high you need to think about like oh my gosh nobody is going to pay five hundred dollars for this how can I how can I do it? I really want to sell these um you want to think about how to reduce your costs so labor costs you can streamline our adjuster production so I was making all of these one at a time I was actually making the cardboard loom so maybe there's a way that I know men from bottle of clouds and she has like a wood laser cutting things so maybe I could design a template and she could make me a loom out of you know wood great awesome I could hire out maybe I'm paying myself thirty dollars an hour I can hire somebody for twelve dollars an hour materials cost outsource your parts so um thinking about where else can you get your parts like let's? Say there's one part of it that you do? Maybe somebody else can do that part for you, and then you can put the end part together using less expensive materials. You don't want to cut quality, so if there's a way to not cut quality but cut expenses. Awesome ordering in bulk it's very hard for us when we're starting out very hard to order a case of one hundred forty four white t shirts that are all size small, but if you have a t shirt business and you have a t shirt business and you have a t shirt business, we all put our order in together. So that was like a great way that I solved that because you you're saving so much money, and then if you're getting your stuff locally, maybe it's cheaper, free to pick it up, or maybe it's, she preferred to be delivered. You're never going to sacrifice a profit for a sale you never just goingto wantonly gives. I want a discount if they ask for it, it's our our price is not negotiable here sales tax quickly going over this because varies depending on where you're located, so we're this year's san francisco's an example, so sales tax here um I don't even know if it's that rate right this second but you take your price multiplied by the tax rate you end up with the amount that's supposed to be sales tax add that to the retail price of your shirt then that is what you are charging your customer you must chart collect sales tax and you must give that to the government here in california depends on what state you live in some states don't have it so permits and licenses thes really depend varied varying on city and county but it's really, really important for food stuff here in california you need to get a permit when you're selling something from the state board of equalization you can go to go to their website and check that out I'll probably put some links for people that live in california upon our upon our blogged dear handmade life dot com in the next month or so you don't want to get caught I've never had anybody check me or check any of our vendors you know coming from the state board of equalization be like I need to see all these permits but if they come you have had them do that not me but the organizer event I was bending at and one of their people didn't have a permit wouldn't get a permit and after the fact and it cost the organizer's over three thousand dollars yeah so we are food vendors you know the health inspector comes and checks our food vendors and they always have their proper permits and stuff and we ask our vendors have those from the permits but nobody's ever checks so just do what you're supposed to dio like don't try to slide in under the radar know it really is not that hard and it's free to get that permit too so I mean they make you pay sales they make you pay sales tax but you're supposed to be doing that you reap the benefits you got you got to do it um so different forms of payment cash obviously is the best there's no fees credit cards have fees but you're guaranteed that money where with checks there's a little bit of risk involved and then trade probably the they're kind of an order of my favorites trade is kind of like my least favorite you really want to make sure that that trade is even you know I don't know about you, but I've been like why did I just trade that? You want to make sure you're not going to be bummed out if you don't end up being able to sell that product you know if it's like you're best thing and somebody wants to trade for it at the beginning of these big, you know, like let's talk about this again at the end of the day you want to keep track of all of your sales I love that we've already talked about quickbooks you know there are aps to there are you know we talked about that that's the app there are so many resource is there is no excuse not to be taken care of not to be keeping track of everything of everything you have and then why the heck are you spending all this time keeping track of everything if you're not even gonna look at it, you have to review those review those sales you need to be looking in analyzing them and seeing what show was successful, what show wasn't god I didn't sell any of those hearings last year, but I sold like or you know, maybe five of those hearings but I sold two hundred of the necklaces you know, take that into consideration um that's me I lost money on my first craft show and I didn't even know it so I think I sold like two hundred dollars were the stuff in the booth fee. This is like my first craft show craft show not the flea market and the booth he was like one hundred bucks and I was like I made a hundred dollars I didn't make a hundred dollars because of all those things that we talked about this is a bonus material the totally rocks I love all of our bonus materials for this class but this one is like, very dear to my heart because I really wish that I would have had this. When I started my business, it would have changed a lot and help me do things faster. This has all of your expenses for the for the show and all of your income for the show. One of the things is on here, like tents and stuff like that. So we're going to talk about what advertised expenses. This is like the most like mathey thing. Like financially like this thing we're going to dio but it's important for us to think about so, like any attempt is a very common craft show expense that cost one hundred dollars. How how? And you use it at every show. So this is how you figure figure that cost into your expense sheet so let's just say you figure you're tense going to last you about a year you figure it's not there's, not an exact science but it's very hopeful. Should you knew ten shows a year at in ten dollars per chauffeur? That tent you can also include an expense like this in your general business expenses it's up to you how you want to do it.