Overcome Your Fear of Pricing

[genek]

Overcome Your Fear of Pricing (http://www.artsbusinessinstitute.org/blog/overcome-your-fear-of-pricing/#utm_source=feed&utm_medium=feed&utm_campaign=feed)
Posted: 03 Mar 2014 04:00 AM PST
Do you feel comfortable with your prices and your profit? Use these tips to determine your pricing and capture new customers.





Master the basics. Use this formula when setting your wholesale prices (http://www.artsbusinessinstitute.org/blog/pricing-art-and-craft-properly/#utm_source=feed&utm_medium=feed&utm_campaign=feed), so you know you are making money on everything you make in your studio:

Overhead+Materials+Labor+Profit = Wholesale Price

go to this link to read

http://www.artsbusinessinstitute.org/blog/overcome-your-fear-of-pricing/#utm_source=feed&utm_medium=feed&utm_campaign=feed

[scottp55]

Thanks Eugene, Pertinent for us.

[genek]

Questions one must ask

What is my overhead

1. electricity
2. water and sewage
3. telephone
4. property taxes or rent.
5. up keep

I base my over head on a 20 day work month.. other wise I take my total over head and divide it by 20 which givers me how much Money I have to have per day to pay my over head.

now lets take my shop for example.

electricity runs me 300.00 per month average.
water and sewage is $45.00 per month
Telephone is 185.00
property taxes is 395.00 per year divided by 12 = 33.00 per month
up keep 300 per month set aside for equipment repair and replacement.

my total over head is 863.00 per month divided by 20 days = 43.15 per day. That is what it cost to operate the shop this does not include labor.

I want 60.00 per hour times 8 times 20 = 480.00 per day.
normally I go through 100 dollars of wood per day.
now my cost to operate per day is 613.00 this pays the bills and pay my wages and sets money aside for repair and replacement. I still have not made a true profit.
this is my cost per day.. true profit will be 813.00 per day.. to achieve that I have to produce 326 items per day that wholesales for $ 2.50 each. I do not do this every day, somedays it is less some days I go over. depends on the product. some days I only have to produce 98 items that wholesales at 10.00

now how I determine the wholesale price of a items is by time, material, plus overhead.

how long does it take to produce just one (time)
how much does it cost to produce just one (material)

let use my mayo knife.

I can produce one every 1 minute wood cost 20.60 for 2 inch thick 6 inches wide and 48 inches long out of that board I can get 72 mayo knives
so it puts my cost of wood at .29 cents per knife. I produce 40 per hour.
my labor is 1.00 plus the .29 =1.29 x 2 = 2.58 I round down to 2.50 total production on that product is $800.00 I will also be making something else while I am making the mayo knives.
what I cut out today on the cnc will be sanded and finished tomorrow while the cnc is cutting something else.