Do you actually make profit hidden costs you need to think about!

If you decide to venture into selling your crafts you need to ensure that you are actually making money doing it.  It is surprising how many people are so pleased that they have sold an item but when they review it they realise they sold it at a loss.  I have listed below some of the areas that people forget to calculate in their prices to make profit.

Postage and packaging

No matter which carrier service you use it is going to cost you to post out your products if customers want them.  Some people refuse to post their items as they think it will be too costly.  When you calculate your prices make sure you have had a look to see how much it will actually cost to post your product.  Now I have talked about pricing postage and packaging in a previous post and how to display those fees to the customer. https://www.claireyatfairycrafters.com/price-for-postage-and-packaging/

At the end of the day a customer will pay to have an item posted out to them so this price needs to be added on to the price for your item.  Customers know that items are going to be slightly more expensive as they have to actually be sent out.  You should not be out of pocket for posting an item out.

But make sure you review these prices as postage costs can creep up and you may be unaware of the increase in postage costs.  Do a quick check in to check that you are still charging enough for sending your products out and make profit on your items.

Fees

Depending on where you sell your items there are very few of them that are free.  Now you need to think carefully about how much it is actually costing you to display your items for sale.  Below are a few of the most common fees to be aware of.

Online shop fees

If you are listing your items on an online retailer you are more than likely to have some sort of fee for doing so.  Some sites charge a listing fee and some charge a monthly membership fee.  You need to bare this in mind when you think about how much you actually make when you sell an item.  With online shops the cost of these will need to be spread across any sales that you make that month or over a time period.  January for instance you may not cover your costs but overall through out the year you may even out and be making a profit.

 Event fees

Some crafters love the atmostphere of a craft event and get a real buzz from seeing first hand customers reactions to their items.  As they have experienced it first hand they can become super excited by making sales.  However at the end of the day what you need to realistically assess is when you consider how much you actually took in sales compared to how much it cost you for be there.

Making £100 in sales may be great but if the pitch cost you £50 and you have spent £20 in petrol to get there together with something to eat at lunch time.  When you actually look at the amount you end up with it may not work out profitable.  Just remember you have the materials cost for each item you made to deduct as well.

Saying that the occasional event may be worthwhile in the long run to your business.  If you can experience first hand what customers reactions are to your items you may learn important information on ways to improve your items.  It is a great opportunity to obtain feedback on pricing, packaging, variations and customer reactions.  It is also a great advertising opportunity to make people aware of who you are and what you make.  In this instance it may not be worthwhile looking at the event as profit making but a marketing exercise.

Shelf Rental

In a very similar way to pitch fees at a fair or event in order to display your items in a retail outlet you will often be charged for displaying your items.  Some places have a shelf rental, some have commission and some have a mixture of both.  You need to consider that the volume of items that you are selling will need to ensure that you are making a profit overall.  It is great that your items are selling but if you are not covering the cost of the rental or if the commission amount absorbs all your profit you aren’t going to be making any money for your effort.

Payment processing

Many platforms that sell your items whether they are online or an outlet they will have processing fees for card payments.  In the same way card readers or online payment services like www.paypal.com or www.stripe.com also charge fees for processing your customers payments.  This is yet another fee that you need to think about when pricing your items to ensure you make profit.

Materials

Some hobby knitters are a great example of not being realistic in the cost of their item.  To give you an example a baby blanket may cost £15 to make in the wool that they have chosen.  However they decide to sell the item for £10.  This means they are technically paying a customer £5 to make a blanket.

I know that some people purely make items for pleasure and if they sell the item then they consider this a bonus.  However if you have spent money to get the materials you should at the very least get back what you paid for the raw materials in the first place.  At least then you will have money available to then move on and make another blanket.

In addition you need to make sure that you calculate all materials used.  Yes you may have only used a little bit of ribbon, but it adds up.  It will eventually reach a point when you will have to buy another roll of ribbon.  If you haven’t calculated this in amongst your prices you are going to be out of pocket for the ribbon overall.

As crafters we all love a bargain, and we will often rummage around in a clearance bin for ribbon or buttons.  Or take advantage of a craft room clearance or closing down sale.  However if the item that you are making then becomes popular you will have to source more of that item.  You can guarantee that you will not be able to get more at a discount rate. 

Therefore when you calculate the cost of your materials you need to base the amount as if you had to buy it again at full price.  Obviously if you manage to source some more at a discount price then your profit will work out more but this is a bonus that I would overlook when calculating if you make profit.

Time

Time is a tricky way to make profit and needs to be considered carefully.  Many of our crafts take a considerable amount on time.  However if we were to charge by the hour for making the item many items would simply be unrealistic in their pricing.  Therefore you need to make sure that you aren’t spending weeks crafting a product to only make £1 profit.  In the same way you don’t want to overprice an item as it took you a long time to make.  This is a very delicate line to walk and so you may have to test the water first and see if your prices are realistic for selling first and then adjust depending on the outcome.

Make sure you are completely realistic and honest with how much it is actually costing you to sell an item.  If you are running at a loss in the long run you are not going to be able to continue as it will become too expensive.  However just because one outlet avenue is too expensive doesn’t mean that you will be unable to sell your items.  You will need to hunt around and experiment to find the best platform for selling your items with minimal outlay.

Let me know if there are any other factors that you have to consider when pricing your items.  Also let me know if this post has helped you reassess your prices and what you are actually earning for making your items.