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How to Price Your Product to Make a Profit!

Wether you are already creating or you are new to making things, follow this simple approach to charge for your project. It is important to know where you break even and how you will make that profit!

I know you're busy (like me) so we are not going to waste time!

There are OBVIOUSLY several ways you can do this but I'm going to stick to the ones that are the most basic and will work for the most people. The key here is to tailor it to YOUR NEEDS because that is how you will be successful and that is the ultimate goal.


First, get some numbers together. You'll need to know how much your supplies COST PER PROJECT or PER PIECE. Most of the time you will buy materials in bulk to cut costs so you need to do the math to see how many projects/items you can get out of the materials. Planning ahead really does make a difference in efficiency. This will be your supply cost per item.

You also need to know how long it takes to make a piece (LABOR COST), again if you work on multiple projects at a time or each item is unique, make a log and write down how many times you touched this item or spent time working on it. I know, i know.... some of you are rolling your eyes right now but if you want to get serious on finding that break even line and push past into PROFIT, you need to do the leg work!

The next thing you will need to know is your MARK UP percentage. This is usually based on your industry standard. For example, retail mark up is generally 100%. So if it costs you $10 to make the item and you sell it for $20 then your mark up and profit is $10. This is a very easy example I know but that is the basic concept. If you are a super niche or exclusive industry then you can charge a higher markup but no matter what your industry you're in keep in mind what price the customer is willing to pay. If your cost of supplies is higher than the price the customer is willing to pay then you will be at a loss for the project therefore no profit.

Last in the most general examples, you will need to know what your overhead expenses are. Overhead is those costs associated with running your business that most do not think about. This can include: Office/studio space, internet, electricity, accountant fees, or any other payment that is associated things you pay for to run the business even if you do not make money. If you decide to include overhead into your equation you can simplify it down to costs per week (or day) and see how many projects you do per day/week to know how much to add to each item you sell. For example, if your yearly fixed expenses is $10,000 then you divide by 12 months (1 year) gives you $833 per month, then divide by 4 weeks in one month and you have your fixed costs at $208 per week. If you sell 15 items per week you would add $13.80 to each item to cover your fixed costs for the entire year.

Now on to the pricing strategies!!


Time (LABOR COST) + Materials (COST PER PROJECT) = Cost. (breakeven)

Cost * 2 = Wholesale price

Wholesale * 2 = retail price

This option is SUPER EASY and I sometimes use it if I need a quick estimate. Lets look at an example. If you sell hand made t-shirts and it takes you 1/2 hour to make the shirt for which you pay yourself $15 per hour and the materials to make the shirt are $5 for the shirt and $3 for the paint/ vinyl. Your Pricing Formula should look like this:

$7.50 + $8 = $15.50 (Cost)

$15.50 * 2 = $31 (wholesale)

$31 * 2 = $62 (retail)

Now, in this example $62 for a handmade t-shirt (to some) will be a lot of money. It depends on where you sell them and if your customer is willing to purchase it at that price-point. This all depends on how cheap you can get your materials and how many you can make for the time you have. If you could make 3 shirts per half hour and buy your t-shirts and materials for $2.50 each (per project) your cost is only $5 per shirt and retail is $20 which makes your retail price more attractive to more people. As mentioned above, if your project is niche or a specialty item then customers may be willing to pay that higher price.




+OVERHEAD per project

= retail price

To work through this one we will use something seasonal like ornaments so that the use of fixed overhead cost per item makes sense. Because you only sell ornaments at mostly one time of year you would need to make sure you can cover your rent and expenses to keep your business up and running. So using the example if your costs are $100,000 per year for overhead we work that out to $10.42 per item if you make 40 items per day. If your ornaments supplies cost $2 per project, and you pay yourself $4 per ornament ($4 x 40 per day is $160 / 8 hours is $20 an hour). For this example lets say you want to use 100% markup.

Supplies $2 * Markup $2= $4

+Labor per item $4

+overhead per piece $10.42

= $18.42 per ornament

So if you sell all of the ornaments you made all year round at your seasonal time then you will have covered your $100,000 fixed costs for the year as well as paid your self $41,600 in salary. (160 per day * 5 days a week =$800 per week) (supplies +labor +overhead = breakeven)


Ok, maybe you don't make t-shirts or ornaments but you do have costs! You have costs and you need to know where your break even line is so you can MAKE A PROFIT. In each of these examples, knowing what you put into the project (supplies and time) is key. By plugging those numbers in and using these simple pricing formulas will ensure that you make a profit with each and every project.

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