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Step by Step Flowchart for How to Price the Things You Make

In talking with a lot of artists lately about business I’ve realized that there is a staggering disconnect between the two. It makes sense – creative people don’t want their creative game cramped by details, logistics, and plans. It’s beyond not cool. And a lot of artists will tell you that too much prep ruins the entire creative process. And nothing is scarier than having your source of inspiration stifled by over-analysis.

I used to be one of those people. I’d say things like, “I’m not good at the business side of things.” Or, “I’m just doing this because I really enjoy it, I don’t care about making money.” Until I needed my art to pay my rent. At which point it was not longer cool to just charge whatever felt right. I realized that the real reason behind not charging enough for my work was the fear that people wouldn’t think it was worth it > I didn’t actually know what I was doing > I didn’t actually believe I was an artist.

Sure I read some books and had a coming of age moment where I realized my work was good but it took more than just believing in myself to be successful. A simple attitude adjustment was just the beginning. I needed to know what steps to take to get where I wanted to be.

The single most important thing was figuring out what to actually charge. What do artists charge for their work?

I’m going to highlight my friend Ashley’s Etsy business, Rainbow Witch Crafts, where she makes some of the most creative dreamcatchers and bohemian jewelry I’ve ever seen. Like me, Ashley is a self-taught artist with no formal education in the arts. When she first started making catchers it was just a hobby. But when she started getting good, everybody wanted one.

When people want what you’re making that means it’s good enough to charge money.

So, how to price the things you make…

1) Make a list of all the raw materials required to make a particular product.

For Ashley that would include things like a hoop, fabric, feathers, crystals, hemp rope, beads, and driftwood.

*If you’re in a business like I am (photography, consultancy, or anything else that doesn’t necessarily have materials) then I’ll address your ‘raw materials’ at the end of this article.

2) Total up your cost on all the materials.

Don’t short change yourself and go off of what it could cost you, figure out what it actually costs you.

For Ashley:

Hoop – $4.40

Fabric – $1.50. Each dreamcatcher uses 1/2 yard and the cost per yard is $3.

Crystals – $4. Pack of 10 crystals for $40. 1 crystal per catcher.

Hemp twine – $.10. $5.49 for 143 yards and it takes approximately 3 yards to weave 1 dreamcatcher.

Feathers & Driftwood – $10. These are a little more complicated but a good example for needing to price your time. Because Ashley spends an afternoon every couple of weeks foraging for feathers and wood in nature it doesn’t technically cost her bank account anything. This is a place where many artists would place the cost at $0. But whenever you are working on your craft you have to consider the value of your time. Let’s say Ashley charges $25/hour for her labor (which we’ll break down next) and she spends 4 hours foraging for materials that will make her a total of 10 dreamcatchers you have $25/hr x 4 hours = $100 in labor divided over the 10 catchers it will produce gives you $10 of labor/dreamcatcher. Still with me?

Total cost of materials for 1 dreamcatcher = $20.

You might think doubling your material cost would be a good basis for a price point. But after you start producing more than 1 of 2 of your perspective products in a week you’ll realize that you’re setting yourself up to be over-worked and under-satisfied.

3) Pricing your time.

There’s a simple formula for this (an even more simple flowchart linked at the end).

A) Determine the total amount of money you need to make in a month to take care of all your financial obligations and then maybe a little extra to take a trip to Portland and eat at all the food trucks. Consider rent/mortgage, credit card bills, car payment, groceries, entertainment, Hulu, and all the other exciting things you spend money on. This is the most logical figure to set as a goal for income because essentially you have to make it or you’re on the street (motivation). You can also just pick a monthly income goal if your financial situation is more stable or separate.

We’ll say this total is $2500 for Ashley. Could be more or less depending on your situation. Doesn’t matter, just know what it is.

B) Realistically assess how many hours you can work on your craft in a month before you start to burn out. For Ashley it is 5 hours/day x 20 days/month = 100 hours/month.

C) Set your price per hour: $2500 divided by 100 hours = $25/hour. This is your baseline price.

Stay with me.

D) Determine how many hours it takes you to make 1 product. You’re going to have to literally time yourself making something here which might sound tedious but once you’re done you won’t be the amateur anymore. *Side note* These are the kinds of practices that make a professional out of an artist and allow them the mentality to charge meaningful money for their meaningful work.

It takes Ashley 2.5 hours to complete 1 dreamcatcher, meaning she can make 2/day or 40/month.

4) Setting your price.

Cost of time per product: 2.5 hours x $25/hour = $62.50 in labor for 1 product

Cost of materials per product: $20 for 1 dreamcatcher

Price of product: time + materials: $62.50 + $20 = $82.50 for 1 dreamcatcher.

Now it would be my very strong advice to factor in a 10% charge for incidentals (returns, slow days, etc.) which would bring the total price to around $90.

That is where you start. If you feel overwhelmed just call your nerdy friend for help and follow this simple flow chart.

pricing the things you make flowchart

The next step is evaluating your number of sales after a few months and re-adjusting the formula. For example, Ashley might find that she is only selling half the number of dreamcatchers that she is making so she would need to double her hourly rate to compensate for the lost revenue. Give yourself at least 6 months to reach your income goal and factor in all the other aspects of a business like marketing, networking, branding, and customer care.

*For creatives that don’t have typical material costs you just have to understand the value of your time. Two things I do to make money are photography and entrepreneurial consulting. For both, it’s important to determine how much total time I am actually spending on a project.

For a photoshoot I will usually spend 1 hour researching and prepping. Then 3 hours on the shoot itself. And another 3 hours offloading, editing, and uploading the pictures, totally 7 hours for the average shoot. Based on my income requirements, how many shoots I do in a month, and the amount of money it now takes to motivate me, I like to make around $150/hour, which prices my shoots at around $1000. Granted when I’m slow or trying to build my clientele I will offer sales in order to build hustle and momentum but that is my baseline price. In the sake of full disclosure, I get that about half the time.

The same goes with consulting. It’s important to consider the time you spend prepping for clients in addition to the time you’re actually spending with them.

*Tip for someone who is afraid to charge a lot for their time:
Create an outline and agreement for your client. Write out exactly how the process of working with you is going to go and outline how much time you’ll spend on each particular task. Outline the creative process and outline the specific deliverables. Tell them what you’ll give them and by when and how much it is going to cost. Make them sign it. For that alone you’ll get double what you are currently charging.

Example of a content creation agreement I use HERE.

Content Creation Agreement for BlogI really hope this helps more creative entrepreneurs get organized and focused and start making money for the invaluable work that they do.

If you’d like to be productive every day and not sit around and wait for the next wave of inspiration to find you then have a look at my course, Organizing Inspiration. I can promise that you’ll never feel like an amateur again.

Let me know if you have any questions.

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    One Comment

    1. August 5, 2015

      Love this!! This information is invaluable. Take notes people!!

      Reply
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