Wednesday, January 30, 2013

Taking Stock

An important first step in figuring out what to charge for your art is to figure out what it costs you to make it.

That seems pretty straightforward, but you'd be surprised how many people don't do it. They price their art arbitrarily, based on what they see selling elsewhere or they just pick a number.

So what goes into making your art?  The first step is to track the supplies you use.

For me, keeping track of my supplies is easy. I just keep a folder and shove receipts in it when I buy fabric, dye, wax, thickener, and so forth. But that doesn't tell you what your real cost per item is. That's what you need to get a handle on.

What I've done over time is create several master spreadsheets that help me keep track of costs and calculate what it costs to make everything I have for sale. If you are just using yarn and a crochet needle, that's pretty simple. My work uses far more supplies than that, but it's still not that complicated. 

This can be an eye-opening experience. You might get a shock when you realize what the real cost is. Think of everything you use. Don't say "oh that's not very expensive, I won't include that in my calculations". You will be surprised how it all adds up!  And of course, your supplies aren't your only business expense. So, tracking supplies is just the first step in the process.

Here's a screenshot of a simple spreadsheet I set up, populated with dummy numbers. 

Sample Costs Spreadsheet

You get the idea.  I know how many grams of dye I use for every yard I make, it's a pretty easy process to figure out its cost. Since dye or paint or yard prices may vary by color, just take an average price per ounce or gram or use a price that reflects the most expensive color you use. This way, you know you are covered. 

When you plug in your numbers, don't forget to include shipping. So, if it cost you $200 plus $35.00 shipping to order 20 yards of fabric, your cost is 11.75 a yard, not $10 a yard. You paid for the item to be sent to you and that cost must be calculated into your analysis. Shipping costs are high these days, especially for heavier items like fabrics. It's best if you figure out what your costs are for a unit that you sell. For me, that's yards of fabric. That will make it easier to figure out what it costs you to make everything you sell, if the items are multiples (or divisibles) of a unit. Next time, I'll show you how I use this per unit price to create another spreadsheet that lists every item in inventory and all costs associated with it, including transaction fees and shipping.

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