Pricing your work, as a creative, can be confusing if you don't know where to start. I can tell you; it doesn't have to be complicated at all. Once you've got the method out of the way, everything will seem much more transparent and more natural. Not only is pricing your work a simple task, but it's also the one piece of thread that unravels the rest of the business management blanket.
First things, first, you'll have to work backward. Before you can set a price, you'll need to calculate all of the negative costs that'll need to be covered to make your product. Negative values are the product base costs, shipping, and any merchant fees you may incur during the checkout process. If you were managing a retail store selling tee shirts, here's a breakdown of the pricing process for a short sleeve tee. To help me explain this better to you, I'm basing this information on real costs from The BĀCo Store.
Product base and printing - $6.80
Shipping - $4.00
Total Deduction - $10.80
Now that you know your total production cost is going to be $10.80, you can now price your work. I usually multiply my production cost by three and round it to the nearest ten. In this case, the cost of my tee-shirt is $32.50. This price helps me cover the cost of production, make a full profit, and also leaves room for any other manual deductions like checkout fees. I use Stripe Merchant, whose checkout fee is 2.9% + $0.30 per transaction. If my customer were paying for just the one tee I'd be charged $1.24 per that transaction, after deducting the production cost, my profit will be $20.46.
On days when you're offering discounts, the process is similar only this time you're figuring out how low you can go without putting yourself in the red. We all want to entice our customers with the most economical deals, but we all can't be Amazon. Sometimes discounts are doing more damage than good. When discounting your work, make sure you find out how low you can go first. For example, I know that the lowest I can price to make at least a $1 profit is around $13.10 (this is including the fact that my customer is only purchasing one tee shirt, and I include the checkout fee). Now you know you can go as low as 58% on a discount. If you're having a massive sale, it's more likely than none that your customer is going to purchase more than one item, which means instead of charging a 58% discount (which fundamentally doesn't even sound right), you can go as low as 60% off. Your retail cost will now be $12.50, and your profit will be $1.70.
Is my product financially worth it?
After pricing your work, you will want to know a few things like is your product worth the hassle. I had clothing pins on The BĀCo Store that were $3 per pin with a $4 shipping cost; it would cost me $7 in total. I'd have to price at least $10 to make a profit and to cover expenses. No one in their right mind is paying $10 for a small clothing pin, which meant I had to retire it.
Do these prices fall into my target market?
The market I wanted to sell to weren't willing to pay $32.50 for a tee-shirt, which meant I had to gear my marketing strategies to a different demographic that was already paying that much. I didn't completely dismiss the market I originally studied. I took the information I had and became creative with my selling tactics. I learned how to sell to both markets while simultaneously expanding my brand.
Accounting and cost management
The ability to estimate your monthly and annual income is because of your pricing methods. If you have an understanding of what your prices are, you'd have an understanding of who your customer is, your selling points, and your goals. Knowing your goals gives you the best advantage of encouraging your competitive drive.
Even understanding how low you can go with discounts will come in handy, especially in the Holiday season, which is the time of the year that companies go in the red or go in the black. Whichever way you go, decides on how intelligently you price your product. If you're pricing correctly, you will be in the black, which means you're making a profit or just enough to make sure you're not in the red. Going in the red is when you're in debt, and we don't want that.
I hope this article has given you a clearer understanding of how to price your work. If not, you can book one of Brooklyn Artistry's free financial literacy workshops taught by yours truly. You can join the class or go tap into our live feed to learn about pricing, accounting, and start-up costs estimations.
If you have any questions, drop a comment below, and I'll be sure to answer.
Until next time - make smart money.