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Have you ever been browsing around a store & heard someone say something negative about how much the price on something was? Maybe you’ve even said it yourself. I know I have!

Today I want to talk about the value of your time, but first I want to share a quick story with you that happened to me the other day exactly about this very thing!

You may or may not know this, but I make & sell cakes out of my home. I know I’ve said before that I’m one of those people who has a hard time settling on one creative thing & making it work really well. Well this is one of those areas.

I make cakes more as a hobby than a business because I just love decorating them & doing different kinds of things. I’m addicted to cake shows on tv & I love trying out different things!

Anyway, I recently had a past customer ask me to make a cake for her for her older daughters birthday. She ordered a cake from me last year & loved it, so she was back for another one this year. A bigger one.

Of course I wanted to make it for her, so she sent me a picture of what she wanted & I got to work. I brought the cake to her & she LOVED it. She said it was exactly what she wanted which always makes me feel good… like I nailed it, you know?

So she asked how much the cake was & I told her. Now since I know her really well, I said, “Is that okay?” & her response was, “Well it’s a little high, but it’s okay.”

To be honest I was a tad shocked. I’d worked with her before & she knew how I priced my cakes. I really didn’t know what to do, but one thing I was sure on was that I definitely wasn’t overcharging her.

Making a cake takes a good amount of time. You have to bake it, let it cook, get it perfectly level, ice it, decorate it, & package it… not to mention a bit more time if the cake is larger or if it’s more detailed like a wedding cake would be.

For me, I’d had hours into this cake… hours that I could have been spending with my family on the weekend, but instead I’d spent them making this cake as best I could for someone who knew my work & asked me for it.

I wasn’t mad at the comment… just taken back. I didn’t say anything to her either, I just thought that if she didn’t like the price she wouldn’t ask for another cake next year. No big deal. I do this as a hobby anyway. I’m not depending on it for money, you know?

But if I were… if it were a business… if I needed the money, what would I do? How would I justify my pricing?

If you’ve ever experienced something like this in your business or if you’re afraid you will if you raise your prices, listen up. I want you to be confident in your pricing so I’m gonna share 4 things you need to consider when charging for your time.

1. The amount of time your project takes
2. What you’re trading your time for
3. Your skill & expertise level
4. What the market will pay for

1. How Long Does It Take

Exactly how long does it take you to do what you do? 1 hour. 5 hours. 10 hours. 30 hours. How long?

This is going to be a key factor when it comes to charging for your time. If you make a product that takes you 3 hours to make, you may base your labor rate by the hour, but if you make something that takes 10 hours to make you may base your labor rate at a set fee.

For example, let’s say you make handmade clocks & it takes you 10 hours to make each clock from start to finish. If you base your labor rate by the hour & you charge $20 an hour, your labor rate alone would be $200. Again, that’s your labor rate alone. That’s not counting your materials, overhead, or profit costs. If that sounds unreasonable {your market won’t pay for that}, you have two choices.

1. You may have to reconsider your hourly rate. You may want to charge based on the project as a whole. Can you charge $100 per clock as your labor rate & feel good about what your time is worth?
2. You may need to re-evaluate your target market & your ideal customer. If you need to charge $200 per clock for labor & that’s too high for your ideal customer, you should get a new ideal customer. One who’s willing to pay that much for one of your clocks.

2. What Is Your Time Costing YOU?

If you’re spending 10 hours on something, what are you missing out on?

If you’re single you may be missing out on dinner & a movie with friends or visiting your parents for the weekend, but if you’re married or if you have kids, you may be giving up a family outing or a play-date.

What does that mean to you? Those things determine what your time costs. How much do you need to make in order to miss that family outing? How much is time with your friends worth?

If you’re running a business, there will be times where you’ll have to skip fun things that are going on. You need to decide what’s worth skipping & what isn’t. It will differ for everyone, but you need to know what it is before it arrives & you need to know how much it will cost you to miss out on those things.

3. Are You An Apprentice Or A Master Craftsman?

How good are you at what you do? How many years experience do you have? How many customers have you worked with? Have you taken classes to improve your skills? Are you in high demand?

Consider the above questions when thinking about your labor rate. If you’re a newbie or you have a hobby, you’re definitely not going to charge what someone more experienced will charge.

These are things you can promote to explain your prices so customers, hopefully, never question the price of your product.

4. What’s The Market Value?

One of the biggest things to consider is what the going rate for similar products are.

Going back to our clock example, if the going rate for a handmade clock that’s similar to yours is $400 & you’re only charging $250, you’re way under the market value & you have room to increase your prices & still have people buy your products. Let’s say the going rate is $400 & you’re charging $700, you need to ask yourself why.

If you just pulled that number out of the air & have no way to justify it, you may need to reconsider it based on the other points {1-3} above.

So I’m going to ask you again.

How much is your time worth?

I hope these for things have given you some things to think about when it comes to determining how much you should be charging for your labor or time.

If you need to raise your prices, do it. If you’ve been over-charging & you’re getting no sales, you may need to decrease your prices or do something to justify how much you’re charging.

Customers don’t want to feel ripped off. There’s nothing wrong with explaining why your prices are what they are. I’m not saying you need to apologize for your prices, but people do like to know why your prices are what they are… especially if they’re higher than the going rate.

Think about it this way. You get to brag about yourself a bit here. You get to tell people more about your products & about you as an artist. You get to talk about the value of what you do & that will help your customers see more value in your products.

So what happened with my cake?

My customer later said something along the lines of, “You know, I guess that’s not all that expensive for that cake”, along with some other things about how she’s paid that much for another similar cake & how I should be charging for my time because I need to make money.

That opened the door for me to tell her that I actually charge just under what professional bakery’s charge based on the fact that I’m not a business. It really helped her see that I wasn’t trying to rip her off & I’m sure that it saved me from losing a customer. Either that or it helped her to understand cake pricing if she ever buys from someone else!

Remember, your time is valuable & if you’re running a business, you have to make money. Charge what YOU are worth!

Where do you struggle when it comes to charging for your time?

Pricing products can be a challenge. You’ve got material costs to consider as well as overhead & profit. Not to mention charging for your labor {time} & expertise.

A lot of new businesses tend to skip figuring out exactly what they should be charging & instead pull a random number out of the air that sounds good to them.

The problem with this is that more times than not, that random number is too low. Meaning you don’t make enough money to cover all your costs & that means your business model isn’t going to work properly. If you continue on in this fashion your business isn’t going to grow because it won’t be making money to support itself & more than likely you’ll eventually burn out.

So, today, I’m challenging you to look at one product you offer. Just one at first. Look at that product & figure out what your material costs are, your labor costs, any overhead you need to consider & what percentage you want to charge for profit. Then calculate those costs & come up with a realistic number that you should be charging for your product.

If you need some help, check out the following two posts I wrote on this very topic. One about product pricing & the other about pricing formulas… including the formula I use to price the products in my shop!

Remember, you’re running a business & to do that you MUST make money. Don’t stress about customers not buying from you because of your prices. You may be surprised at how increasing your prices will draw more customers to you!

What’s holding you back from increasing your products prices? Share with me in the comments below! 

It’s Q&A Wednesday! It’s Q&A Wednesday! It’s Q&A Wednesday!

Okay, enough of that mess. You know, this question – How Much Money Should I Reinvest In My Business – is a great question & it will vary for everyone, but it really got me thinking about what I do with my business so stick around because today I’m here to share!

So, how do you keep up with your business’s money & how do you reinvest it?

image courtesy of Ashley Bonney on Etsy

This is the follow up to my last post, Pricing Your Products – The 411.

Today I’m going to share the pricing formula that I’m currently using. Keep in mind this is only one of many. If it doesn’t work for you, go look for another!

Wholesale Pricing

This is where you need to start. You’ll add your materials cost {MC} & your labor cost {LC} then multiply it by your markup.

{MC + LC} x markup = wholesale

Retail Pricing

Here you’ll take your wholesale price {WP} & multiply it by your markup.

WP x markup = retail

Example

You sell fondant cake toppers for cakes & cupcakes. This is pricing for one topper.

Materials:

• Fondant – 1.oo
• Packaging – 1.00

Overhead:

• tools – .25
• marketing materials – .25

$2 {MC} + $10 {LC – 2 hrs.} + $.50 {OC} x 150% {markup} = $18.75 wholesale

$18.75 {WC} x 100% {markup} = $37.50 retail

Evaluation Time

Obviously this is just a suggestion. You have to balance your pricing between what you product actually costs for you to make & what your market is willing to pay. This is where the perceived value of your products comes into play.

Take the example above. That must be some cake topper to pay $37.50 for it, not counting shipping. So you have to evaluate.

You could be charging too much for labor since materials & overhead are pretty much set, or you could make freaking awesome fondant toppers that are well worth that price. You have to decide who you’re selling to. A bride who wants a custom, handmade cake topper for her wedding cake or to a mom who wants a topper for her kids 1st birthday. There’s that perceived value again & the market.

In conclusion…

Remember, if you have a hobby, then you’re just trying to make enough to keep up with your crafting. If you have a business, then you need to be making money. If you aren’t making money, then what’s the point. You’re not doing your business any good!

So tell me…was this helpful to you? What other pricing issues are you unsure about?

Oh yeah! Don’t forget to share this post with the share button below! I’ll love ya!

image courtesy of D Lippens on Etsy

So first off, what does “the 411″ mean? I remember that little saying from middle school & that was like, so 15 years ago! Whoa, that makes me feel old.Weird.

Pricing Woes

Anyway, pricing products is always a struggle. At least for me it is. You have to consider so many different factors & it varies depending upon what your selling & the value associated with your product. Ugghh!

Well, I just found a little pricing formula that helped me recently so I changed all my prices in my shop & honestly I’m still deciding what I think about it. I’m still getting traffic & some sales, but not as many as I was before. I’m in the process of continuing to evaluate my market & my competitors. Eventually I’ll know if it was a good move or not.

The Breakdown

My next post will be actually showing you the pricing formula, but today I wanna talk about the parts of the formula you need to consider. So let’s get started.

Material Costs

This is the cost of each & every material that is directly used to make your product including packaging materials & marketing materials used with the product.

Labor Cost

This is the cost to make the product whether it’s you making the product or an employee making the product. This is usually the trickiest part because we tend to price our time on the high end which in the end can make our products price unrealistic.

Remember when thinking of labor costs, how much do you want to make {or pay} an hour & how long does it take to make the product start to finish.

Overhead Cost

This is everything else other than material & labor costs. I can be rent, marketing expences, tools, equipment, electricity, internet, phone services, etc.

Profit

This is what you make after you’ve paid all your expenses.

Markup

This is a percentage of the materials &/or labor cost that’s added to reach a price.

 2 Prices per Product??

Now some of you may not realize that each of your products actually has 2 prices. There’s a wholesale price & a retail price to consider…that is unless you’re not interested in wholesaling at all…then you’d only have one price.

So, until the next post with the actual formula…tell me…

What pricing issues do you struggle with in your business? Let me know in the comments below!

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