Pricing Equation to Start a Home Based Craft Business

Hello Folks! Here is a little bit of information for those interested in starting a home based craft business.Here is a pricing equation that might help you get started. Materials + Overhead + Labor + Profit = Price Direct Costs: The direct costs associated with the manufacture of any craft include money spent for raw materials and finishing products as well as for any directly related services. Overhead: These costs are rent, utilities, office supplies, depreciation, etc. It is figured as 1/3 of materials or 1/3 of labor whichever is higher. Labor: To figure cost of your labor, find out what it would cost in your locale to hire others to perform identical or similar tasks. For example, when you are working as a manager, then your hourly wage should be manager wage. If you are doing general work like cutting, grinding, etc, your hourly wage should be as non-skilled labor. Profit: Your business profit should be the same as any retail business. Most galleries and stores will mark up your wholesale price by 100%. Therefore, you should mark up your product by 100% before you offer it for wholesale. Example: Materials and Firings: $25.00 Labor: $14.00 Overhead: $ 8.34 (33.3% of $25.00) Cost to Manufacture Product: $47.40 Profit $47.40 (cost to manufacture product x 2) Price of Product: $94.80 The price you come up with for your product is the starting point for actually setting your price. You will now need to consider if the product is something you will be retailing yourself or wholesaling. You must now think about what the market will bear and if you are in the right market for your product and price points. If you have any other questions, let us know! SGE