How much would you charge for this wreath?!
It's a question so many of us have after we have completed an item and are ready to sell it. Below we will run through a few methods that are recommended in the crafting world!
There are 3 categories that should be considered when calculating your pricing - your materials cost, your hourly rate and your mark-ups.
Some key things to note before we dive into the actual formulas
When calculating your materials cost:
- Base it on the retail price of the item (and not the sales price at which you purchased it). This is important because if you are asked to remake the item or use the same material, you may have to buy it at the retail price and that could drastically change your profit margins.
- Be meticulous. Do a count of how many of each type of flower is used for the item. For materials like greenery and paint, figure out a percentage of how much of the greenery bundle or paint bottle was used (I generally stick to 25%, 50% or 75% if the full supply was not used).
- Don't forget to include things like paint, glue, foam, stems, tape, etc. They may seem negligible for small items but over time, they do add up!
When calculating your hourly rate:
- Determine what your hourly rate will be. Many professional crafters choose a rate between $12 to $25. That said, as you build experience, do not be afraid to pay yourself for your worth!
- Keep track of the clock. Know how long you spend on each item.
- Brainstorming ideas, approval photos and ordering/shopping for supplies should be included in the amount of time spent on an item. This is especially prevalent if you are doing a large, custom order like wedding where you can spend hours on the creative and supply ordering process.
When calculating your mark-ups:
- How much you mark up your pricing from your total costs (both materials AND time) will determine your profit margins.
- Wholesale mark-up is usually around 20% while retail mark-up is around 50%.
The Formulas!
Supplies X 2.5+
The easiest way to determine your selling price for an item is with this formula. Simply add up the cost of all of your materials used (retail price, not your actual cost) and multiply that total by 2.5 or more. This method does not include your labor/hourly wage but it is a very quick way to come up with a price.
Let's use our wreath from above to break down our supply costs:
- One 18" grapevine wreath - $4.99
- Two magnolia leaves branches - $16.99 each, $33.98 total
- Two blush eucalyptus bundles - $13.99 each, $27.98 total
- One dusty miller sage bunch - $16.99 each, only used textured tip leaves so 25% of the bunch. $16.99 times 0.25 = $4.25 total
- One summer blooming mix bunch - $9.99
- Three 3" Charlestons - $11.99 for a set of 6 flowers and only used 50%. $11.99 times 0.5 = $6 total
- Six 2.5" La Fleurs - $14.99 for a set of 12 flowers and only used 50%. $14.99 times .5 = $7.50 total
- Three Sola branches - $11.99 for a set of 3 branches. $11.99 total
- Two bottles of craft acrylic paint (yellow and pink) - $0.97 each and only used 25% of each bottle. $0.97 times 0.25 times 2 = $0.49 total
- Four glue sticks - I buy a 5 pound box for $18.82. The box holds around 100 glue sticks which comes out to around $0.20 per stick. $0.20 times 4 - $0.80 total
- TOTAL SUPPLY COST - $107.97
Retail price (Supply cost of $107.97 times 2.5) = $270
Now I understand that listing an 18" wreath for $270 seems incredibly high and your market may not support that. You can always adjust your margins, especially for one-off items. My actual supply cost was $63.38 so there is wiggle room. That said, you do not want to offer your customers the ability to have the item replicated if you have a low profit margin using the retail pricing. You never know when you won't be able to catch a sale or use a discount code.
Price A + Price B divided by 2 = Price C
This formula has a few extra steps but does include your hourly rate and a mark up on supplies. The end result is an average price point between the two.
- Cost of supplies + $XX per hour time spent = Price A
- Cost of supplies x 3 = Price B
- Price A + Price B divided by 2 (to get the average between these two prices) = Price C
We can use the same supply cost as above but now let's work on breaking down our hours involved in creating the wreath.
- Brainstorming the wreath design and gathering supplies (a lot of times I am brainstorming while pulling greenery and flowers) - 0.5 hours
- Dyeing flowers (3 sola branches and 3 charlestons hand painted) - 0.5 hours
- Physically creating the wreath - 0.5 hours
- TOTAL TIME INVESTED - 1.5 hours
Price A: Cost of supplies ($107.97) + $10 per hour spent ($15) = $122.97
Price B: Cost of supplies ($107.97) x 3 = $323.91
Price C: Price A ($122.97) + Price B ($323.91) divided by 2 = $223.44
Using this formula, your retail price should be $223.44.
The Craft Pricing Calculator
This calculator by My Designs in the Chaos is my favorite for 2 reasons.
- It includes your supplies, your hourly rate AND your margins.
- It does the work for you!
Simply enter your numbers (or use the slider) and the calculator will give you your Cost Per Unit, Retail Product Price and your Retail Profit Per Product.
We have our supply costs, our hourly rate and the number of hours the project took. Now it is time to plug in those numbers into the calculator:
The best part of this calculator is being able to adjust your markup to see what your profit will be per product. In all reality, some of the products you sell will have high margins (think quick and easy items that have low supply costs) and others will have smaller margins (wreaths are a great example of this given market saturation as well as mass produced big box store options). You will want to balance your products to try and stay around 50% profit margins for your full collection of sales!
Using these formulas can take the guesswork out of pricing. These may take a few extra steps, but on the flip side they ensure that your pricing model is consistent!