How to price handmade goods or art?
Currently I get so often asked how to price handmade goods or art. Back in 2013 I reflected on this questions in an article wich seems still be relevant and therefor I decided to share it again here on my new blog. Hope it helps some of you!
Cheers,
Ariane
The price to pay - a reflection about pricing handmade goods and art
I meet many students and crafters at workshops and exhibitions who dream about turning their passion into a business. I also often come across people, at fairs and on the internet, who are astonished about the prices that I ask for my one-of-a-kind fiber art pieces, handmade in France.
Perhaps used to prices of imported Chinese products, these people are not aware of the “hidden” costs that go into a piece and therefore think that crafters and artists charge too much for their work. I would like to dedicate this post to those who wonder about how prices are made, showing some of the important costs that go into a handmade creation in France in 2013. I hope that my thoughts will help both those who want to embark on this crazy adventure, becoming independent and sell their art work and the potential buyers who might not see the big picture of what independnat artists face in today’s world.
The dream of becoming an independant artist
Like many artists, I started my art business with huge passion but also a hige amount of naivety in 2005. For my first sales I used a simple formula to calculate my prices:
“I want to earn 15 euros an hour so I just have to multiply my time and add the material costs.”
price = creation time x 15 euros + material
Slow awakinging
Soon I realized that I also had to take into account the French social security taxes. In Europe you have to pay these taxes as soon as you earn a penny. They go for health insurance, unemployment (nearly impossible to reclaim as a self-employed but you will pay iy anyway) and retirement (not sure your get this either !!!).
Social Charges
These charges vary between 14% to 40% of the sales, depending in which income structure you fit into (or which you decide to take). If you are “lucky” enough to sell over 19 000 €/ year, then you also have to pay income taxes (12,5 to 54 %) and if your turnover exceeds 32000 euros you have to add VAT (Value Added Taxes. 19.6% goes to the State of all products sold, much like Sales Tax in the US) .
I quickly learnt to add tat least the social security taxes to my formula. As I earn very little, I am currently exempt from income taxes and VAT.
Hidden Charges
It took me much longer to recognize the "hidden" costs !
You may think that I’m talking about supplies and rent for a workshop or the time invested to make the art work. Indeed these are important costs, too, but I was most surprised to see what it costs to sell a work of art! This is what I mean by “hidden” costs. Selling consumes our time. While wainting on a both, you don’t generate any income! Who would do this jobe for free? Well, a lot of artisans and artiste do!
A simple list of “selling” costs
When wholesaling to shops:
When crafters first try to wholesale their work to shops they are often surprised about the margins merchants apply.
Most of the time this margin exceeds 50%:! In France generally a retailer multiplies by 2.5 to 3 the price of his merchandises.
This may seem huge but it’s necessary for them in order to cover their enormous charges: rent, wages, maintenance, cost of electricity, water, taxes, VAT ...). In addition to these charges they have to invest money to buy the merchandises upfront. My parents owned a shop, so I know about the higes charges independnats are facing!
Consignment:
Selling on consignment seems interesting on first sight because many marchants take a smaller margin - about 30% in France. Early on in my career I did a lot of consignment. I never sold much and often had bad surprises when getting my items back: in bad condition... I finally learnt that shops accepting consignment often do to attract customers with out standings goods. Showcasing original and outstanding work. brings in a lot of curious people. But the merchant is often more invested in selling the products that he purchased. And I can’t blame him for! This is the money he invested to make money. Often, these pieces are not handmade ior made in Europe. Therefore prodction cost are much cheaper and offer a higher profit margin. is possible. This is just a logicl behavior! I’m sure shop owners who do consignment really love handmade work and local creators. They do it becauser they would love to support them but it’s impossibleto make enough money with the small margin!
Fairs/art markets:
Finally, many designers prefer to sell the work themselves, thinking that they can charge less when selling direct and therefore the sale should be easier. Or, they simply might not be able to find shops willing to invest in their products because they are high priced items. Because what most merchants have in commun, they are looking for low prices!
Christmas markets
Like many others, I started selling at small venues such as Christmas markets or low-cost of entry exhibitions often organized by municipalities: a both cost in between 20 to 70 euro. Unfortunately, the chances to sell at these shows is quite slim if you have high-end work.
Hard conditions
These shows also immobilize you for several days, often under hard conditions (outside even in bad weather, without toilettes ...).
I quickly switched over to “real” fairs which had a targeted public (people who love handmade work and understand the prices for quality products made locally).
Professional shows
These retail shows have a professional set-up, take place indoors, and work can be displayed nicely. These shows cost about ~1000 euros for 3 days, a significant expense. In addition, there are travel expenses, accommodation, prop costs, and marketing (business cards, fliers, etc.).
These costs ended up eating about 40% of my sales. For example, if I sell € 4,000, then I spent at least € 1600 of that in fees, marketing, etc.
These are important costs to add to social charges, taxes, materials and production time!
Taking in account unsuccessful shows
Increasingly, there have also more and more shows where I don’t sell anything. This is hard when you spend 10 to 12 hours at the booth, plus another two or three for set-up and tear down. It is exhausting physically and disappointing - you have worked for nothing and even lost money!
My choice
Of these three choices (wholesaling, doing consignment or doing shows), I would prefer wholesaling my work to upscale boutiques. A 50% margin is quite justified when I consider my financial expense, the time spent at trade shows and my physical fatigue!! The only thing I would miss is the pleasure of meeting gorgeous clients…
Selling Online:
It may seem a lot more interesting to sell on the internet. There are many platforms where you may sell your work and often they just take a small commission. But, managing an online store requires an enormous time investment (on one point I spend over 20 hours/week on my online shop). In addition, there are some skills that you should have or need to acquire: taking good pictures, writing descriptive and tempting texts, and if you want to sell globally, you need to be fluent in English...
Selling online is a great opportunity but it is another full time job! If you want to sell well, you need to list new items regularly and you need to create a buzz on social media sites, newsletters, and blogs ... If I counted my hours I work to do online sales I wouldn’t do it!!! But weel, it’s still the coziest and “cheapest” way to sell!
Conclusion:
The reflections above are made to point out the “hidden” costs in a product which absolutely should be added to a price’s formula! I now understand that for every one hour of creation, at least two hours need to be added for all of the “stuff around” (ordering materials, accounting, filling out submissions for fairs and exhibitions, responding to emails, making and editing photos, selling (online or directly), packing orders and shipping them, advertising, writing articles, social networking, building websites and/or blogs, etc ...)
So 1 hour of creation translates to at least 3 hours of work. To calculate a selling price the formula should be like this:
The cost of creating = (hourly rate x 3) + material + social charges + selling costs + VAT + Taxes
On the net you’ll find a less complex formula but much easier to use :
Creation price = ((hourly wage rate x 3) + material) x2
In France we have a “minimum wage”. All people working in France should earn at least (for 2013) - € 7.40 / h all charges ( taxes) paid.
If I calculated my formula using this wage, my prices would be much higher. For example, my art vests take me between 8 and 20 hours to create. My material costs vary but let’s take an average of ~ 40 euros. According me the minimum wage, my art vest would be in between 435 and 968 euros! ($565-$1,258 US Dollars)
((22.2 x 8) 40) x 2 = 435.2
((22.2 x 20) 40) x 2 = 968
These prices seemed so exorbitant to me that I often lower what comes out of this calculation adjustment. My art vests for examples are in between 240 € and 600€. Calculating my hourly wage on these pices I earn 4.33 € an hour - BUT only if I sell everything I make, which of I don’t!
((600/2 - 40) / 20)) / 3 = 4.33
Final price of artwork = 600€, as in my formula, I multiplied by two to take into consideration all of the “hidden” costs I devised, so 600€ divided by 2. I subtract my average material costs of 40€. The result is divided by the hours it took to make the piece (20). Actual hours worked are the total divided by three.
Less than 4,33 € per hour!!! - I studied architecture for 6 years, worked for 7 years as a textile designer, speak three languages and am a multitasking entrepreneur (designer, photographer, secretary, model, seller ....) Without wishing to complain - because I love what I do and would never change – I hope that one day everybody will be conscious that handmade and local creators aren’t overcharging for their work!
Creating in France today is a luxury for those who create and for those who buy! An original, unique creation of high quality, made by hand and often repectful to our environment is a rare and prestigious good. Self-employed crafters, artists and designers invent every day and try to make life more beautiful.
Please respect them and don’t compare their prices to the mass produced products made in distant countries with different costs of living.
For those who want to become a self-employed crafter, designer or artist: know that you'll be working 60 hours or more/week while seldom earning enough for making a living! You’ll do what you love so much for only 1/3 of your time (working a 40-hour job and spending 20 hours in your free time creating would be more profitable )!
But if you're addicted like: do it, enjoy i and be proud!