Here's an interesting fact: I originally wrote this as an email a gazillion years ago.
And… it's still something business owners struggle with. ESPECIALLY in the fiber arts industry. I'm giving this email a bit of a face lift but I am still writing about this topic almost the exact same way.
First, I love you for caring about your customers so much that you worry that your prices are too high. I'd like to change this to “First, I'm sorry that you've been taught that undervaluing yourself is both normal and required. You deserve better.” Second, I love you for caring about yourself so much that you worry if you're really honoring your own time/energy with your prices. And this becomes “I want you to START taking care of yourself and your peers in this industry by understanding that you NEED to honor your time and energy through your pricing.”
Let's talk about the most important things to consider when you are setting prices:
1. How much take-home pay do you need?
I want you to start from a place of how much you want to bring home after all is said and done.
This means you need to forget the hourly rate for a second and look at what you need to make to meet your goals.
Your goals are going to vary based on whether you are content keeping this business as a “side piece” or if you're attempting to go full-time. Whatever your goals are, they are valid, but you still need to have them.
For instance, if you are a designer and know that you want to take home $12,000 each year (let's just make it easy), then you'll probably be shooting to earn roughly $1,000 a month - AFTER expenses.
2. What are your expenses?
Next, look at how much it actually costs you to make & deliver your product. Consider your supplies, packaging, postage fees (roughly - though imagine they will always be higher than you expect because shipping costs are always on the rise).
Don't forget to add in other expenses, such as website hosting fees, Etsy fees, paper for your printer, your Fiber Business Collective membership, etc. ALL of this needs to be factored into your pricing.
Back to our Designer (who needs $12,000 annually) Example, we are going to pretend that your expenses equal roughly $200/month. This means that you now need to make $1,200/month in order to take home $12,000 a year.
3. What will the market bear?
This means - what will someone ACTUALLY willingly pay for your product or service?
If you sell knitwear patterns, we typically see most patterns under the $12 mark.
If you sell indie-dyed yarn, a skein is normally gonna run up to $29.
Occasionally, you'll see shepherds selling their undyed skeins for even more than that - and people will pay it because they understand what goes into producing that product.
That last bit there is just a reminder that, theoretically, you can price your products/services at any number that you want as long as you are able to put in the time and energy to effectively communicate WHY it's worth that amount.
For our ongoing Designer Example, we're going to pretend that you price all of your patterns at $8/each because you saw Andrea Mowry pricing hers at that amount so it seems like that's a good number.**
**This is a joke - please don't price your items based on what someone who is VERY POPULAR is charging.
4. How much will I need to sell in order to earn the take home pay I need?
Sometimes, this question can be a bit tricky to answer. Summarizing our example, you want to be able to take home $12,000 a year with $200/month expenses and $8 patterns.
In order to bring home your take home pay, you will need to make a total of $1,200 each month.
If we divide $1,200 by $8 (the price of your patterns), this means that you will need to sell approximately 150 patterns. Monthly.
Does that feel like a lot? If so, you may need to make some changes to your business model.
Are you currently not making enough?
Here is the hierarchy of things I would suggest to you, as a business owner, to go through if your existing products are not bringing in the gross pay (before taxes) that you need:
Increase your marketing & growth efforts to try to meet your income goals. This could look like more frequent content creation, collaborations with better-known brands, features in the spaces of others (such as blogs, podcasts, and magazines).
Raise you prices so you don't have to sell quite as many. Let's say you increase your pattern prices to $10. This means you would have to sell 120 patterns instead of 150 - it's still a lot but not AS much.
Reduce your expenses. If you can go with a cheaper website host, find free software to create your patterns, or share the cost of a photographer with a peer designer, you could end up easily recouping some of those losses and wouldn't have to sell quite as much.
Change what you're selling or offering to try to meet your goals in other ways. For instance, maybe you offer tech editing on the side. If you can charge $40/hour for editing services and you can take on at least 10 clients a month (I know, I know, you guys - these are all hypothetical and round numbers to try to illustrate my point), then you will be able to cover $400 with tech editing services and only need to sell $800 worth of patterns. That means at $8/each, you'd need to sell 100 instead of 150. If you ALSO raised your pattern prices to $10/each, then you'd only need to sell 80.
It's really not the best/most realistic example, but hopefully you get the idea. Either way, here are the takeaways:
Work backwards from the income goal you want to make so that you can determine your pricing from there.
Yes, you'll have to factor in your expenses and your market's willingness to pay, but it will help you tremendously to start from this place.
Understand that your pricing is all about communication.
If you can communicate the value and WHY the numbers are what they are, then it will be infinitely easier to sell what you need to at the price point you need to (and you can avoid having to do bleepity bleep bleep discounts!!).
You may have to get creative.
If you need to make money in other ways to meet your goals or if you need to maybe shift your goals to make them more realistic, this exercise will help you get there.
There's plenty of money out there to be made - you just need to find the perfect outlet for you to go and make it! And, of course, being able to market yourself effectively really helps.
You may not believe this, but in the Fiber Business Collective, we work on marketing ALL THE TIME!!! If you're not ready to commit just yet, try it out for a couple of weeks free first.