Help with pricing

[keplerts]

@Kolton45  where are you located in PA?  I am in Mifflin County.

[Kolton45]

4 hours ago, keplerts said:

@Kolton45  where are you located in PA?  I am in Mifflin County.

Chester county 

[Kolton45]

And thank you everyone for sharing your advise and knowledge

[TonyRV2]

I just keep raising my prices until somebody faints, and then lower them by 10%.
Seriously though, many people use a simple formula of doubling the cost of materials and then add in your hourly rate. Your hourly rate is not just for your time, but for your shops time as well, to include your overhead. The average wage in the U.S. across all occupations is approximately $25/hour.  So in my opinion, as an experienced craftsperson, there's no way you should be charging less than that. You might then tack on more to your hourly rate depending on your shops expenses...lighting, heating and cooling, insurance, rent, and so on. Just add up all your monthly shop bills, and divide by 200 (or whatever number of hours you spend in your shop per month). So maybe your shop costs are $2000...then based on 200 hours tack on another $10. Some might argue that your shop should also show a profit, just like materials, so you might even double that to $20/hour. Add in $5/hr for miscellaneous expenses and we're at $50/hour total...at a minimum.  So that wallet that you spent 2 solid hours making using $10 in materials (cost) should sell for no less than $120. 

[JLSleather]

22 hours ago, TonyRV2 said:

many people use a simple formula of doubling the cost of materials and then add in your hourly rate.

I don't do formulas, nor do I recommend anybody else use them, nor do I pay anyone according to them.  Don't take this any kind of personal, but I'm going to be a bit silly to make a point here.

Your work is worth what it is worth - simple as that. And it's not worth what it's not worth. The TIME you took to make it, the EXPENSES you had where you make it, what the "average wage" is, what you think is a "fair" profit ... NONE OF THAT has anything to do with what your item is WORTH. 

Let's assume you made a belt.  It works - holds my pants up just fine, so it qualifies as a belt.  But its not really very nice looking - the ones at the box store look much nicer and cleaner.  Some examples of how ridiculous it is to use these "formulas" to price it:

Well, yeah, it doesn't look like much, but it took me 6 hours to make, so that's $150.  And I have lease fees and electricity about $100/day, so 1/4 of that is another $25, and I drove here to sell it, so that's $10.  Add that to the $20 it cost me to make it, and this belt is now $205.  Oh, and I need to make a profit, so the ugly belt is $250.  

Now, you MIGHT find one here and there who will buy that.  Mom will probably take TWO  But as a rule, you'll be done making those shortly.

Did you spend a few hours making videos to "promote" (pronounced BS) your work?  You can add that to the price if you want, but I will NOT be paying more for something because there is a video about it.  And I'm not buying the video, either... if I came to buy a holster, I want a HOLSTER, not a SHOW ABOUT a holster.  Your video did not increase the VALUE of that holster one bit.

MOST of "pricing formulas" is just more BS. You can probably quickly find 100 people to SELL you a formula (probably comes with some videos) for a price.  When I'm BUYING something, I COMPARE THE GOODS.  I want to know what I'm getting and what I'm paying -- the rest is just noise.

Not silly enough?  What if I buy a new truck?  Isn't that an expense?  So, my not-very-well-done belt is now "worth" $500/month more than it was?  What if I move to a bigger, nicer building?  Does that make my belt "better"?   Obviously, that's ridiculous.  Also ridiculous to suggest that someone get $25/hour (or 50, or whatever) based on something OTHER than the quality of what they're selling.

A few years back (or maybe 15) I had a buddy who was doing some renovation work.  Started to make a few $, and bought a new truck - and he was a bit proud of his first ever "brand new" truck.  Fair enough, he can afford it and it's what he wanted.  Course, his "expenses" went up, so his prices went up.  Showed up at the house one day, basically wanting to show off his new truck.  It was nice.  I said so.  And he launched into the "speech" about how customers need to see you in a nice vehicle when they think about hiring work on their home - it shows (according to Richard) "professional" and "responsible".  I told him I'd rather see the truck that looks like the guy in it has done some work, maybe shows some tools with some wear on them (seriously, anybody can go buy a shiny ladder and mount it on a shiny truck).  When I see a shiny truck pull in my drive to discuss the new driveway I'm ordering, I don't see "professional and responsible" - I see a guy who likes shiny trucks and thinks I SHOULD PAY for it 

But, now I'm running behind for this morning.... so maybe somebody will get something out of these old blog posts .... go read em (I think they're both informative and entertaining, but - regardless - there's no charge).  Git lookin'... they'll be moved in the menu by Monday

https://www.jlsleather.com/compare-items/

https://www.jlsleather.com/hand-made-well-made/

 

[TonyRV2]

Well JL...if you cater to the 'ebay and walmart' crowd' then you are absolutely correct. Then you need to compete with the with the prices offered at ebay and walmart. In my opinion, that is also a losing proposition. Part of being in business is knowing your target audience. There's a reason companies like Hermes and Louis Vuitton can sell handbags for literally thousands of dollars apiece. They have created a reputation and a demand and they know how to and to whom they should market it. Of course, I'm not going to compete with either one of those guys either. But I'll say this, when the right customer sees that they can have a hand crafted quality 100% leather handbag for under 500 bucks (some charge more, but this is my 'formula' price) they are happy to get such a deal. Again, the key is to target the right customers, which for a small timer like myself can take many years to cultivate.

[JLSleather]

1 hour ago, TonyRV2 said:

Part of being in business is knowing your target audience. There's a reason companies like Hermes and Louis Vuitton can sell handbags for literally thousands of dollars apiece

Yes, there IS a reason.  Rather like the emperor's new clothes.... find a bunch of people (market) who are ignorant enough (don't know any better) to buy something BECAUSE SOMEBODY ELSE SAID SO, regardless of quality (many of these are bought site unseen) because somebody will be impressed that you have it (insecure). 

I understand Elvis' used underwear sold at an insane amount at auction.  That doesn't make me want one, and I was NOT bidding

 

[chuck123wapati]

Both JL and Tony have good points but I think have very different business models so have taken different approaches. Obviously very few will pay out the nose for crap, some will compare your stuff to box store items that usually aren't even leather. The first step is making the decision of what you are selling, ie stamped belts machine sewn etc, or totally handmade custom ordered belts , for example. Yes they are both belts but take different supplies, construction methods. Time, etc. , they cant be compared simply because they are belts and hold up your pants. Your ability to sell is just like any other commodity, supply and demand. First step make plan, decide on a product, find a market for your product, at that point then your pricing has to be competitive with those in the same market unless you are very famous which you aren't yet. That involves also supplies and your ability to drop your overhead, no new truck, you will be competing against those that have through the years found the cheapest sources for their supplies, quickest ways of construction with less defects and have created a name for themselves.  There will always be those that want your custom handmade belt to be just as cheap as the stamped belts on the rack at Costco but they aren't buying customers plain and simple don't even think about them or vegans as real customers lol, remember you have found your target group, if it isn't big enough then you wont make it no matter how nice your work is or how much competition you have. in my experience those that have bought from me understand full well what they want and what the quality should be and the price of comparable products. If your quality of work isn't up  with the apples to apples competition you wont sell as much and those that do buy wont come back and wont refer you to others at that point you have to change something quality or price.

[JLSleather]

59 minutes ago, chuck123wapati said:

competing against those that have through the years found the cheapest sources for their supplies

You're CLOSE to a good point here.  To drive that home, as they say.. consider --

• One guy buys Hermann Oak leather, uses only top shelf A-grade leather from the tannery.  He pays $8 per sq foot.
• Other guy buys Hermann Oak leather from a popular retail outlet.  It's B-grade, USUALLY (or just CLAIMED "B" sometimes).  He pays $13 per foot.

Both make a belt.  The one from the retail store cost 63% MORE to make.  No rational person would say it is then "worth" 63% more without seeing both.  And upon seeing both, if they were IDENTICAL, would the one that paid more for materials be justified in selling it for more (hint: that's a no).  Even though it's made from a lower "grade" of leather? 

Another tip:  That LV bag only sold for that amount - someone was willing to pay that -- BECAUSE they know there's another person who will take it off their hands.

And I'll say it again.... I don't know if Stohlman was THE best leather carver ever. But he certainly was the BEST KNOWN.  But he was carving 60 years ago.  Is your stuff "worth more" than his work because rent is higher than it was then (I'm being ridiculous again..).

[cdthayer]

1 hour ago, JLSleather said:

And I'll say it again.... I don't know if Stohlman was THE best leather carver ever. But he certainly was the BEST KNOWN.  But he was carving 60 years ago.  Is your stuff "worth more" than his work because rent is higher than it was then (I'm being ridiculous again..).

I think that inflation plays a large part in what carved and/or sewn leather should cost today compared to 60 years ago.  I just don't know the answer to the actual cost comparison, unless you run the numbers through an online inflation calculator.  That would require knowing exactly what an item sold for back then, and that may be hard to determine.  I've not ever done that, but it might be interesting....

CD in Oklahoma