How to Build a Business While Learning Your Craft

Lesson 27 of 30

Student Examples: Pricing

 

How to Build a Business While Learning Your Craft

Lesson 27 of 30

Student Examples: Pricing

 

Lesson Info

Student Examples: Pricing

- [Megan] So what's your material cost? - [Female 1] About $7. This is all Canadian prices as well, so should I just do it… - That's fine. If you're in Canadian, well, that's fine. - All right. Yeah, so $7. - We'll do the conversion before we talk purchasing. We'll just do, this is fine. So labor, how long does it take you to make that? - An hour and a half. - Okay. And what are you charging for labor? - Right now, 20, which is really good because I started at 10, which is minimum wage in… - Okay. So you were paying yourself $30 for the labor piece, it's taking you an hour and a half? Okay. Why do you think you really need to be on your labor? - More. Because all the other stuff does take so much time, which people don't always factor in. - So what percentage of your time now would you say is production versus all the marketing stuff because that's a good way to know if you should be more like a double, or more like a triple? - I would say… Well, right now… - Or somewhere in-between th...

ose two. - Yeah. Yeah. I would say double, I guess. It's probably 50/50 at this point. - Okay. So 50/50. So that means you could go 40. So if it's taking you an hour and a half to do that, then you're looking at $60 in labor. There was a face there that I couldn't see, right? Okay. So what were you factoring in for overhead, or were you factoring in for overhead? - In the beginning, I wasn't. For overhead, I really have no idea. So I was like, "Well, should I just add $2 an hour because I'm doing it in my attic," or… - Yeah. And I like to do a little bit more, because if you did have to have a space, it would be a little bit more. But usually, overhead can be a reflection of your production time. I would maybe say let's calculate it $10 an hour, okay? So maybe then, your overhead is about $15, right? - Okay. - Profit. - [Female 2] Hyperventilating right now. - I'm hyperventilating over here. - We're going to come back to this in a hot minute. What are you charging for these guys? What are you charging for (inaudible) right now? - Oh, man. Okay. So this one, I actually haven't released yet. I just designed the smaller size. This guy, I started it $35 Canadian, last spring. And now, it's $45. And the real wake-up call was at a craft show when this girl didn't want to trade with me because I wasn't charging enough. - I love that girl. Whoever she is, I love her. Okay. Oops, it's not $420 so that's wrong. So right now, before we even get profit, and that's only at the wholesale price, we're $82. So just want to give you a tiny little bit of profit, because right now, you're that scared. So let's just say, you're at a wholesale price of 85. So $3 is really not enough profit, but (inaudible), right? So that's wholesale, Canadian. So here's the thing, you're not doubling right now, right? - No. No. At this point, it was, yeah, $30 and then… - And wholesale was not matching? - Yeah. - Okay. So one of the things that's nice, is if you are actually doubling, so a question or a conversation that happened yesterday, that I told Jordan I was going to make her bring up again on stage, was that in Canada, it costs a lot to ship things, right? So you have to charge how much to ship something? - It depends on where in Canada. I'm right on as far west as you can get. So if I want to send it to the East Coast, it's going to cost me almost $30. - Right. So that's really high. But if this is your wholesale price and you're selling this online, you can actually afford to eat that shipping cost in the price of this doll, right? - Okay. Yeah. - Because you've got enough profit now by having to double that. And then that sounds so much nicer to your customer than having to pay. Because the other problem is, when you're charging…what were you charging, 40? - Forty-five. - Forty-five. And then you have to pay $25 to get it shipped to you, and that seems insane, right? That's crazy. And so one of the ways you can handle that problem is to charge more for it and make shipping free or make shipping less. - Okay. Yeah. - So this is obviously a very significantly different number than what you've been charging. - Yes. Yeah. - How does this make you feel? - Stressed out. - Okay. Yes. Does it make you feel like, "I really haven't been making any money"? - A little bit. - A little bit. - Yes. I've been feeling that way for a while, like, "An order." - That is a sure sign that you need to raise your prices when you're like, "Crap, an order came in." - "You really want this? Are you sure you want it?" - Yeah. That's really a sign that you need to raise them. So, obviously, $45, 270 is a huge joke. - Yeah. - And so even though, on one hand, I'm all going for it, I'm actually okay if you work your way up to this price, as long as there's a plan for doing it and you're not selling to stores yet, right? So you do have that little bit of wiggle room in there. I'd like to get you to a point where you could sell to stores, but then again, solve some of that shipping issue of, you can ship a whole batch over to Toronto instead. But if you're not going to go right to the 170, and then at 85, you still have to charge shipping. So that's something to think about as well. But yeah, this is where… - Well, yeah. Because if I was charging for my time, if I was charging the same, 85 would be my retail price because would be getting $30 for my labor instead of $60. - Right. Yeah. So, right. - Still a lot of money, guys. - Yeah. This is at least where I want you to go. - Okay. - But then, what I would do is, I would start spending some time online looking for things that help justify even higher, right? Look for some comps. Look for that. - Okay. - But you definitely…this is a different market than where you were, at that $45. And then this is a different market again. So that's why we really want to make sure that we're getting this pricing right because it is a challenge. - Yes. It's hard to jump up slowly over time, and you're like, "Now, a new market. No, different market. No, different market." - And so with your small and your large, is there really much of a difference in the cost of production? - Not a whole lot. - Yeah. - This one does take a little bit less time. Just the…yeah. - So my recommendation for you going forward was, let's make the little guy $85. - Okay. - And let's make the big guy, say, $100. - Okay. Yeah. - And that gets you a little bit closer, too. So you can also play a little bit with that perceived value thing as well. - Okay. Honestly, my brain just goes into, "Well, it's not a good product then," like, "Just make something else." - And there is a point where you might say there's not a market. But there's more of a market than I think you realize. - Yeah. - You just have to figure out who it is. And then this is where…going back to your previous hot seat, where you start to play around. So if you add in a different product line, how does that impact? And you also have... So what happens, too, is, you have the boast. You have a product at another price point. And so when you raise the price, sales of these are going to go down. But if you're getting that, "Oh, crap, do you really want this feeling anyway?" Then it's not bad if sales go down, right? And so you're just going to have to work on retraining your audience. But what do those American Girl dolls cost? - Eighty or $90. Yeah. - Kath. - [Kath] Give an option for her when she does do the clothing line and everything to bundle things, so that you're selling the doll and the dress, and the bow, as well. - Yeah. - Moms love to buy things that are matchy-matchy. They love it. - [Female 1] This is something that people are going to have a higher perceived value of, because that's a keepsake thing. - It is. - People are going to keep that for 30, 40, 50, 60 years and hand down to their granddaughter. You know what I mean? - Well, I hope so. - Yeah. It absolutely… When I was describing them to someone, that was the language I was using as well. So, yeah. - So you figure people drop $50 for a T-shirt that their kids are going to grow out of in two months. They can drop a $150 on something they're going to keep forever. - Right. - Yeah. - Right. People spend all… - And grandmothers will spend money when their kids are having babies. - And that actually is a really valid point. So I have friends who make heirloom baby spoons, and it's the grandmas that buy those like crazy. When you're at this price point, right? Those grandmas are shopping in person. And when you're at this price point, grandma's going to spend that and… - No question. - Right. And she's going to do it in a store. - Okay. Yeah. - For sure. - And so you have to be high enough to be able to get it in the store for the people who are... - Well, you have to be high enough so that you're making money when you sell at those stores. - Yeah, yeah. - So, yeah. So really, you could be 150 for the big guy, 95 for the little. I like that. That feels good. Let's put you there. I like that. Let's write that down. I like those numbers. Nice. That feels good. - Nice. And the thing is, we're at 0.75. So 95 Canadian is going to be like 75 American. - Even better for me, that's coming home. So, yeah. So that's the other thing, too. It is a different…if you're an American watching this, and you're like, "That's a lot of money." Right, it is different. There is the exchange rate there. And like I said, those American Girl dolls, people drop money on those. - Yeah. - [Female 3] T-shirt and shorts cost $45. And they are this big. - That's a lot of money. - They're more than my daughter's outfit. - Yeah. I had American Girl dolls when I was a kid. I have a nostalgic feeling. And like, "This is way cuter." If I had a kid, I would much rather give them that than have them play with a crappy plastic doll, as much as I like them. This is cuter. So, yeah, I think if you're totally… There's a range for that. There absolutely is. - Okay, cool. - Awesome. - Just making that giant leap. - You're going to do it. - It's not even a step, it's a scramble. - Right. But this is…right. You can go ahead and sit down. Thank you. (inaudible). Do this from the start because everyone in here who did not do this from the start is going to tell you about those growing pains. Man, I see Tania back there nodding her head, you had…that happened to you, too? - [Tania] Yeah. - Sure. - After your Make a Living Selling What You Make, I almost doubled the price of my lowest pieces. And I'm still working on the new audience. - Right. Because now, you really do have to start from scratch. But if your audience that you're building knows from the beginning where your prices are, then you're starting with the right people. So you really want to set yourself up for success. All right. Any other questions from you guys about pricing? I think I know maybe Richelle had one that I was like, "We'll come back to." - [Richelle] You said there was the non-billable stuff, is design billable? Does that come under labor, or? - So it depends. Usually, for multiples, I don't count design time under labor. I just throw that into the non-billable hours. With one-of-a-kinds, you can throw it in there because it's only one. So you're getting paid for it. But at some point, you have to be smart about your design time, right? You can't get paid for 10 hours of staring at the wall. I'm not saying that you're doing that, I just know some people. They're like, "It took me 10 hours to design this." And I was like, "Yeah. But eight of them were procrastinating. One of them was staring at the wall." And then you said, "(inaudible) sketch this out in five minutes." I know that's what happens because I taught at a university. That's exactly what my students did. Like, "Do not tell me you spent 10 hours there." So it's a gray area. And it's a piece-by-piece basis. Kath. - [Kath] If you're doing limited editions, how do you factor in the scarcity? The value of the scarcity? - So that's where I would do my research for the comps. But if it's limited edition, that is some added value. There's no formula, right? There is no formula for like, "It's limited edition." So you can add 10%. But that usually means you can go towards the upper-end of the comps. So if you're finding things in a range, limited edition stuff should be on the upper end of that range because it's not coming back. - Okay. - All right. Any other questions? Sarah. - [Sarah] If you weren't being as conservative with her profit, where would you have put it at? - If she's really serious about a wholesale strategy where she needs to make…really make sure she's making profit at the wholesale level, $15, $20, it's a little hard to say without doing some comp research on my own. But looking at all those other numbers, that's a great question. I would feel closer with the profit around $15 or $20. It's a great question. Jordan's getting scared so I just didn't want to really freak her out, but, yeah, that's where I would probably put that if it was me. And it depends. Some things are going to have a lower profit margin than others, but, yeah, somewhere there. Any other pricing questions? All right. Everyone's feeling a little nervous about the pricing now, I think, but that's okay. We're going to all get through it together, it's fine. Just start out where you need to be. That's the most important thing because, otherwise, it's going to create a lot of challenges for you later on. And if you feel like your prices are too high, do not lower them, develop a product at a lower price point, right? So don't lower your prices. I have plenty of really simple earrings that actually are my highest profit margin pieces. But it's a way to sell things at a lower price point so that I can have things that are under $100, right? So give yourself that challenge. If you're like, "Well, I just redid my prices. Now, everything in my line is $400, Megan, and that seems really scary." You're right, that's scary. Not everyone's going to spend that much money. Don't lower your prices, think of something else that's related, right? Go back to that focus idea, but develop something that hits a different price range. That's how you handle that. The best pricing strategy, and I talk about this in a few other classes but I just want to drive it in there, it's not about lowering, it's about making sure that you're hitting a lot of different price points. That's how you make your work accessible to more people, not by making it so that you're not getting paid for it.

Class Description

Are you a maker in the first phase of starting a business? You have a great business idea or beautiful product to sell, but not enough time to focus on both your craft AND selling your product. Well, this class is for you. 

Considered one of the most respected crafters in the business, Megan Auman will show you how you can concurrently work on your craft, grow sales, and focus on marketing initiatives that will get customers in the door. Megan is a designer, metalsmith, educator, and entrepreneur who has built a multi-faceted business around her passion for great design and sustainable business. Her designs have been featured in Design Sponge, Better Homes and Gardens, Cooking Light, and more. 

In this class, she will show you:
  • The who, where, and when of your business; who you should be selling to, where you should sell, and the right time to launch 
  • How to adapt your business and your product line as your business grows 
  • How to make money in the beginning stages of your business that allows you to justify spending more time on your craft
Learn the essential skills needed for having a successful craft business. There's no better time than now, so reserve your spot and turn your craft into a profitable business.

Reviews

Liana Badea
 

I truly enjoyed this class, as it is very detailed, but straight to the point. 30 modules, more than 10 hours, it is so worth it! I also loved the interactive part of it. Building your business from scratch is not easy, there is so much to do. This class gave me some important pointers and valuable guidance, thank you Megan! I strongly recommend this class to anyone who wants to work smarter, not harder and be successful.

Kristen Girard
 

Fantastic class! If you have never taken a Megan Auman class, this is the perfect one to start with. It filled in some knowledge gaps that I didn't know I had. Lots of great basic knowledge that I haven't been able to find elsewhere. Super helpful!

Maike Armstrong
 

First of all, it's so fun to learn from Megan! She is so motivating and enthusiastic – making you feel great about your business even when you are just starting out. The class is well put together, easy to follow and has simple, actionable steps to follow in order to actually move forward. I definitely recommend you check it out for yourself!