Pricing: 4 Mistakes to Avoid

Money Growth: Pricing - Build ProfitsPricing is difficult because there is no magical formula. The difficulty comes only because it requires your books to be correct and that you know your actual costs.

There are lots of expenses that are easily overlooked when calculating overhead. In the Foundations for Artful Success program I provide the students with a comprehensive list of accounts they should be tracking/documenting and 8 proven leading art industry formulas to calculate their pricing.

I think it shocks and surprises artists, even those that have been in practice for over 20 years, to see exactly what needs to go into your calculations. Things you have been missing.

Do you know all of your overhead costs, your supply costs, your losses, your exact inventory that goes into every single piece? If not, I can assure you that you are pricing your work incorrectly and most likely not making a profit.

It seems every place I go (forums, websites, facebook) pricing is the hot topic but after my exhaustive search (and having paid for countless classes, books and e-books on the topic) and in-the-trenches experience, I can say none of them properly cover the issue fully.

Like with time (actual labor costs), artists don't always account for their time fully and don't "include" many of their labor tasks as part of doing business. This is the same for the expenses and overhead that goes into selling their work.

Consequently if you sell your work without properly planning to make a profit, after covering *all* of your time and costs that go into the work, you will never sustain a long career or have any sort of way to retire or survive during lean times. This is why many of these pricing formulas, and perhaps yours, is not serving you best.

A basic Profit and Loss Statement, or financial physical of your business, consists of:

Sales – Cost of Goods = Gross Profit – expenses (overhead + labor + supplies) – losses = Net Profit

Net Profit is essential as it allows you to grow your business. It is your savings account for a rainy day or your investment toward your retirement. If you are not showing a profit each year, an accumulation of available funds after all is said and done, you are not making a profit. After 5 years, the IRS legally defines your "business" then as a hobby.

If you have another job or other income supporting you, and you are not making a profit after all calculations, but allowing other income or job to cover those business costs, it's still a hobby.

How important is it to you that your art practice make a profit?

Pricing: 4 Mistake to Avoid

  1. Know Your Overhead and Cost of Goods
    Did you know that you should have roughly 30+ accounts that you are accounting for not including your cost of goods?

    Do you know the exact costs of goods in that piece down to the last crimp bead or ounce of glaze used?

    When you ship out your item did you account for all the packaging costs, to include everything including the tape?

    Does your labor costs include bookkeeping, shipping, emails regarding the order, etc?

    It’s important not to estimate your overhead costs but to know exactly what is included, how to account for it all and then to figure out how much overhead needs to be part of each piece you make.

    How do you divide up that cost? How do you allocate it to the piece?

  2. Don’t Your Price Your Work Too Low
    You assume that because someone sells similar earrings for $15 you should also. So you don’t bother to find out your true costs. Or perhaps you just “want to make back your supplies so you can continue to create.”

    This is surely a fast track to the end of your career as an artist. Plus you are actually making it harder for all other artists to make a living selling their work.

    How much do you value the work you do?

    The price of your work should reflect your skills, your experience, the demand for your work (which results from your branding and marketing efforts), and provide you with profit.

  3. Think Ahead to All the Possibilities and Opportunities
    You decide to price your work for retail because you feel that after your pricing your can’t mark it up keystone to retail. So in effect your wholesale is your retail.

    You work for years to perfect your technique, to build your brand through hours of advertising and marketing and when your big opportunity comes (a gallery wants you, a wholesale art catalog wants you, a big show wants you) you can’t give them 50% of the cost of your work.

    Are you doing yourself a disservice not to be pricing your work to include a markup for true retail from the start?

  4. Plan to Make a Profit
    Planning ahead to include a profit in your work is planning for the future!   Would you take a job anywhere else where you knew it could not possibly meet your expenses of living? What would be the point unless you were going to have several jobs to meet that requirement.

    I think artists need to take a hard look at their pricing. Stop competing with third-world production priced-work and build their businesses so that they are charging enough to make a profit.

    There will be lean times, times that you get sick, that your body and mind needs rejuvenation and time off. You must plan for profit so that you can grow your business and meet those “rainy days”.

Again, there is no real secret but there are formulas based on material cost. It’s all math. However after you have properly calculate the price you will make an adjustment for “what the market will bear.”

Don’t think too negatively about this as you set the tone and demand for your work. There are many artists that can command $1500 for a ring made with next to no precious materials. This is because they have spent time developing and marketing their brand. They make work that is based on scarcity and a psychological strategy of worth.

You must decide where your brand lies. Is it a high-end brand, mid-range or are you going to compete with 2 million plus artists on Etsy and the local big box retailer. It’s completely up to you how you place yourself in the market place.

Just remember as a low-cost provider you will always be struggling unless you can turn your production over to a non-US based supplying situation where you are having your work assembled there and you are simply the designer.

We cover in Foundations for Artful Success many ways to establish multiple streams of income for your business so that you can create work that does allow you to price it to make a profit. It’s about the foundations… clarity, the branding, productivity, and more. It’s also about establishing a more efficient studio, finding better techniques that are efficient, more economized ways of using materials, etc.

These are all things you will need to evaluate when you arrive upon your “real” (fully actualized) pricing. This is what all good businesses find themselves doing after their initial calculations. This is why optimization of factory practices came about. To figure out how to make things efficiently and with the lowest costs to make the most profit.

Artist’s work is no different… you are a business. Perhaps not a factory, but you too must learn the most efficient use of your resources and cash flow. Profit is essential to growing your business.

How’s your rainy day account look?

17 Responses to Pricing: 4 Mistakes to Avoid

  1. You are so right, Tonya. Even when I purchase a hand-made component from another artist to incorporate into one of my pieces, I add to that cost when I sell my piece. I may not have made the component, but there is a "finders fee" afterall. Thanks so much for all the ideas you share. We are worth it!

  2. ok, you want me to always be uncomfortable to grow…. and i am very uncomfortable about pricing. it seems if i add everything into the price of an item, no one would buy it because it will be VERY EXPENSIVE and not at all in the same range as others selling similar items. it's a big "gulp" for me to think this is even possible.

    • Hi Taylor,

      Unfortunately pricing is a multi-faceted subject and for me to properly answer you we'd need days of time together. There is a way to price your work and get what you need to make from it, but it's not a simple formula.

      Otherwise not getting what you need from the sales of your pieces is pointless as you are making and working for free.

      Maybe my students will jump in here and give you some insight.

      I teach through 24 weeks of material, how to brand yourself, your work, become efficient and economize materials and time, boost your mindset, make room for abundance, give you a social media/online presence, and much much more. There isn't a magic wand to make it happen but it is totally possible.

      Artists have proven time and time again that they can charge more, do make a profit, are have more freedom/life all while meeting or exceeding their goals. There is a way. It's not a fluke or someone that got lucky. They were just able to put the parts to the puzzle together either through education, mentorship, or experience.

      Wishing you success and the ability to believe that it's possible!

  3. I struggle with pricing. I have a hard time asking 100 or more for an etched copper pendant on a chain with a few beads. Based on formulas i know that is what i should be charging but it is hard. How can i get it into my head that even though others ate charging 50 i can ask 100? Ugh i hate pricing. Right now it is literally killing my business because i have not updated my etsy page with new items because i dont want to price to high or to low so i am just doing nothing :-/

  4. Thanks so much for the helpful information. Will try to implement this info with future pricing. I started out making jewelry strickly for myself never dreaming that people would remotely be interested in purchasing it. Have been working with the metal clays and find that people are not well informed about the time and effort involved in working with it. Trying to educate the public one person at a time. Really think the info you've given will help me with pricing now that I can better understand how to do it.

  5. Great article, Tonya! Under-valuing my work is one of the problems I've always had. (I'm one of those "as long as I make enough money to cover the cost of my materials" types.) But all of the points you make in your article resonate with me, and your matter-of-fact and enthusiastic approach are very encouraging and inspiring. Thanks so much for sharing your thoughts and experience!

  6. Setting a price is a challenge. I so appreciate everything you share. Your insights always help to focus on areas that need improvement. Selling is a lot of work outside the jewelry bench and this is a great reminder to include that in pricing. Thanks for everything you do!

  7. Tonya's points are right on the money, if you'll pardon the pun. The only point I would add is that of self respect. We choose to work with what we love. We grow in knowledge and experience, becoming technically accomplished and creatively expressive, but how do we feel about the "doing" itself? Do we feel we are guiltily indulging in frivolous activity? Do we apologize to ourselves and others for engaging in valueless playtime? That's the message we send out when we underprice our art!!! If we respect ourselves for the money, time, effort and creative thought that has gone into achieving the level of expertise we now display in our work, we then get the courage to call ourselves "ARTISTS" and our work becomes dignified by extension. If we then undermine that by underpricing ourselves, how can we expect the buyer/appreciator of hand-made works of art to respect our work? Perceived value is an extremely important factor in the buying of art as well as of other merchandise. If the public perceives your work as cheap, "crafty", temporary, then they may buy a piece, but they will not cherish it, they will not value it, they will not wear it with pride and tell others about the incredible artist who created this piece and they won't follow you with interest to see where your creative muse takes you next. Most importantly, they won't buy from you again because they want to own more of your beautiful art – they will only buy from you again when they can get it at a cheap piece. If you don't respect your own work, neither will the public. I wish you all success and the joy that comes from courageously following a creative path. Thanks for all your words or wisdom and encouragement, Tonya.

  8. Very good information. I am finally at a point in my life where I am comfortable putting what locals will view as an "exhorbitant" price on my work. The irony is that I will not likely sell my work locally, nor had I planned to attempt that. The math invoved in the Artfull Success course I am taking, will enable me to price my work correctly and when I start feeling uncomfortable I may even add more to the price after the facts and figures are prevailing on each piece.

  9. Great article full of important information about being an artist and pricing our work. I always recall the story of Picasso. He was dining one evening when a lady came up to him and asked for his autograph. He pinned something for her and as she reached for it, he said, "That will be $84,000 please." She looked at him in dismay and said, "but it only took you 5 minutes to draw." To which he replied, "yes, but it took me 75 years to learn". We all need to become comfortable with ourselves and begin charging what we are worth – our time is money and we ARE worth it!! Now, I need to go re-listen to Tonya's Module 6 again and reinforce everything she taught us as well as print off this article and post it above my workbench – sort of as a reminder that I am worth more than I charge:O) If you are interested in power packed learning, enroll in Tonya's upcoming class, the Artful Success Program. At least check it out, you will be glad you did. She certainly delivers over the top information and the value is unmatched! Thanks, Tonya.

  10. Foremost is that whatever you put your creative hands to is of value, independent of the cost of materials required to create it.

  11. I agree-wonderful article and one every artist should read (and take the Artist Success Mentoring program) Like Tonya said: pricing is an intensely multi facted subject that is unique to each artist.

    I think another component of this is knowing WHAT your value as an artist is. Not to be the devils advocate here, but I see the flip side too. I know a number of people who decide they want to make some $$ making jewelry. They string a cheap pre-made bead on a cheap pre-made chain for example and decide they deserve worth $50 an hour for labor. As with any profession, you have to have a certain level of experience to get $50 or more an hour for your work. Years of learning, working on skills, pounding the pavements to sell your work add up over time. I agree that creative intellectual property IS valuable but you have to be realistic. As your skills and time investment grows, so does/should your salary.

    XO

  12. I'm still at that happy place of making and learning, as I have an entirely different day job. But I am intending to have a collection ready for a sale opportunity in October. I use fine silver, sterling, beads, polymer clay, mixed media in my work, and my beadwork takes many hours. I understand I will make smaller affordable aspects of work as well as showcase pieces I love, and am aware of the differences – but am totally clueless about everything else. This is a fine and timely opportunity to learn how to do all this before I start pricing and getting into all the other aspects that are ,quite frankly, terrifying. After all, what's the point in paying people to have my work? Thank you!

  13. As a CPA, I often find that my clients do not understand that they have to charge enough to cover all of their expenses, plus make a profit, too. Not just a profit on a single item. Enough profit to live on. Yes, there is a correlation to how much you sell, but it is important to consider non-production time, too, when setting your prices.

  14. If I took into account all of this & priced my work for what it actually takes to create it, it would never sell. In fact anything over $150 is sitting-whether it's outdoor big vending events or on ETSY. People are just not spending. Heck I can't even afford to buy my own things. I do however sell things that I price at $30-$80 like crazy. They are worth at least twice that when considering your formula… But they sell, people own my work, and I can continue to do this as a living. I also paint & illustrate & teach which helps pay the bills… I hope things settle back to the days when people just bought without thinking too hard.

    • Hi Jane (and others),

      I couldn't let your comment go without a little inquiry. Are you saying that when you do the simple accounting Profit and Loss "formula" that you come out with a loss?

      So are you giving away your work and materials? Because if there is a negative net profit, then you are a charity and not a business. Unless you love that aspect and you make jewelry to tithe to others, I would recommend that you find a way to :
      -work more efficiently (better tools, techniques, efficiency of materials, etc)
      -lower your overhead
      -shop out your non-genius work tasks so that you can do what you do best
      -find a way to purchase your materials for less and even co-op your studio
      -increase your branding and marketing presence in the marketplace so that you can charge more

      There are many artists charging $1500 for a ring that has the same materials as a $30 ring and they are making sales…..and a Profit! The difference is their branding, their established level in the marketplace, their marketing itself, and the way in which they connect (know, trust, like) to others (creating a community of collectors, patrons, and admirers).

      People are buying! I just attended a trunk show with about 50 jewelry artists this past week and people were definitely buying. I actually bought a powder-coated wire soldered steel ring with a wooden "jewel" for $130. The artist had $35 ones that were smaller, but everyone was buying the $130 ones and I got the last one.

      What do you think is the difference between why he could get $130 versus $30? It wasn't his materials use!

      It was a combination of marketing and selling tactics that he used, but overall it was because he had attracted others to him because of his know, trust, like factor. It's also about self-worth, believing that your prices are fair and that your work commands this value.

      When people tell me they can only sell their work for $xxx amount, which isn't profitable, I have to say it's because they haven't yet perfected their "marketing formula" yet. It's not because people won't pay more.

      I'm sure you have fantastic workmanship, beautiful style, etc. You have the puzzle pieces and now you just need to put them together with branding and marketing to create what I call the Success Sequence.

      I wish that I had 12 weeks space here to go thru the reasoning/teaching behind this so I could fully show you what I am talking about. That would be helpful I'm sure.

      Wishing you the best in selling your work for a profit! Thank you so much for your comment and for being vulnerable. I admire those that step out and get a little uncomfortable to be able to be the best that they can be. Our job is to share our gifts with the world in the biggest way possible.

      Creative Blessings to you!

  15. Aaaaah! This conversation kills me. A piece of handmade jewelry or art for that matter, is NEVER just a bunch of beads and copper. A hamburger from McDonald's is just a hamburger but take that same burger and add the right touches, the right ambiance, the right story and it turns into a meal at Ruths Chris's. Please don't under value your work. People buy the story as much as the peice. I have a pair of earrings that remind me of where I live. I live on the coast and we have tons of shrimpers here. I made a pair of earrings that look like shrimpers netting and the colors of the sea and sand. I made a story to go along with those earring and they are my most popular peice to date. I also have a hard time selling for what my items are worth because selling on etsy is highly competitive. But when I look at what people are selling their jewelry for, I'm wondering why they even bother because there is no way on God's green earth they are making anything at all.
    There is a company called Litter. Nothing but chains and some innovation and a story. :) They said it cost them about $2.00 to $3.00 to make a peice and one of their peices actually cost $700. People pay it. Now what was that about it's just a peice of copper and beads? YOU can do it. Try it. So what if you fail. You can always come back down but I am willing to bet if you raise your prices you will get more traffic.

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