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Posted by Saralan on January 3, 2007, 10:37 am
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ok this is the newbee in business--- I am starting my fledging business
by the seat of my pants. Pricing how do you calculate what to charge.
and anothere ? is how do you inventory for taxs. Do I use the price to
replace my molds or the price I paid for them and all the other
matriels I use.
Thank so much sorry for posting so many of the same thing the last
time
Saralan
--
Saralan
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Posted by Sue Roessel Dura on January 3, 2007, 6:08 pm
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>
>ok this is the newbee in business--- I am starting my fledging business
>by the seat of my pants. Pricing how do you calculate what to charge.
You need to figure your time, your supplies (clay, glazes, etc), your overhead
(kiln, electricity, studio space, etc) and wave a magic wand to apply it to each
piece. I'm retired, so it's not that critical, but I'd hate to have to make a
living at this! I figure about $25 an hour covers everything for me. So that
means if I can build, fire, glaze, fire, do paperwork and pack 3 pieces (and
keep approximate track of each phase for each piece) in an hour, then I charge
$8 for them. But I'd have to double that to make a living at it. That would
really put my pieces out of the picture though as far as selling them goes and
you have to take that into account as you start out. I've been able to raise
prices as I go.
>and anothere ? is how do you inventory for taxs. Do I use the price to
>replace my molds or the price I paid for them and all the other
>matriels I use.
Yes, you need to keep track of all your expenses, repairs, milage for
deliveries, postage. The price you paid, which must be documented with
receipts, will be what you can deduct. Keep a milage log with date, start and
ending milage with the reason for the trip and you can deduct the miles.
Hope this helps! Sue
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Posted by Davis Salks on January 13, 2007, 11:50 am
Please log in for more thread options I have some experience in this area. In my career as a software
designer, I was involved in the development of costing systems for
industry for the past 25 years. As a potter, I have often applied these
same principals to my own craft.
Let me first start my saying that the most important thing you can do
is to get an idea of what successful competition for similar products,
or product of similar value, are charging, if possible.
Method 1 - I know my costs and production capacity
Decide what your annual costs are and the optimum number of units you
can produce in a year. Since crafts are labor intensive, you should
consider "Direct Hours" as your units. In costing, this is referred to
as a Driver, since this is what drives your cost. "Direct Hours" are
only those hours which DIRECTLY ADD VALUE to your finished product.
Example...
Your Fixed Costs: You will need $50,000 to cover your salary, rent,
utilizes, insurance, etc.
Your Variable Costs: You will $10,000 to cover your materials and
supplies needed in your production plan.
Direct Hours available this year: You will be working an average of 30
hrs per week in your business, but only 50% will be direct hours.
52 wks x 30 hrs per wk x 50% = 780 direct hrs
Your price per direct hour will be
($50,000 + $10,000) divby 780 = $76.93 per direct hour.
In this example, we are going to assume that you consume variable costs
such as materials by the hour. If you consume variable cost by the
piece you could substitute this formulae
If it takes you 10 direct hours to make a piece, your price will be 10
x $76.93 = $769.30 per unit.
Proof: Of your 780 available direct hours, you can make 78 identical
items. (780 hrs divby 10 hrs per unit = 78 units). Your total revenue
for the 78 items @ $769.30 each would be $60,006.40
Method 2 - I know my costs and the market price for my product
Decide what your annual costs are and the price of a representative
product of similar quality.
or successful product. As in method 1, since crafts are labor
intensive, you should consider "Direct Hours" as your units.
Example...
Your Fixed Costs: You will need $50,000 to cover your salary, rent,
utilizes, insurance, etc.
Your Variable Costs: You will $10,000 to cover your materials and
supplies needed in your production plan.
Your ideal price for a given product: Say that you've seen a similar
craft to your craft-A is priced at $769.30
The minimum number of craft-A product you must produce in a year is
($50,000 + $10,000) divby $769.30/unit = 78 units.
Of course, if you only plan to make 8 of these, that's okay. Just
evaluate your other crafts craft-B, craft-C, etc. the same way.
Whatever your product mix, your production plan should add up to $60,00
in sales, and 780 hrs in direct labor (in this example)
If it takes you 10 Direct Hours to make each one, your Price per Direct
Hour will be $769.30 per unit divby 10 hrs = $76.93 per hr.
Variation on Method 1
Method 1 assumes that you are going to consume variable costs such as
materials by the hour.
In some cases it may be more realistic to consume these costs by the
item, then...
Your price per direct hour will be
($50,000 total fixed costs) divby 780 direct hours = $64.11 per direct
hour.
($10,000 total variable costs) divby 78 items = $128.21 per item.
So if one item takes 10 direct hours, your price will be
10 dir hrs x $64.11 per dir hr = $641.10
1 item x $128.21 per item = $128.21
$641.00 + $128.21 = $769.31
Hope this helps
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Posted by on January 18, 2007, 1:53 pm
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Pricing is one of the hardest things, and I thought centering was hard
:-). A wise salesman at Laguna Clay Co once said to me, "You know you
aren't in this for the money". And I had to agree, it's not a very
lucrative business, you do it cause you love it, and it make you happy.
I have consternate over what to price my pieces at for a few years now,
I try to not cut myself short, but at the same time I don't want to
price things so high that nobody will actually buy it. I know a few
potters that make me crazy, as their prices are so low, but if it works
for them, who am I to complain?
The "what you want per hour" system is a good place to start, and when
you actually start to calculate one piece, you do find that it does
work out.
I have these sets of very small bowls that I make, I sell them in sets
of 4 for $20.00. I figured that it may take me only and hour to make
all 4, and that counts glazing, etc. I could charge more, but when I
have them at sales, I sell out of them all, they are the bread & butter
of my sales. The good thing that happen is that people feel that they
are getting such a good deal, that they buy more pieces, it works out
pretty well.
I agree with what someone said about selling your pieces as "art"
verses just table wear. It's hand made, by you, and people like buying
art from the artist, at least that has been my experience.
It would take years for me to recoup what I have invested in my studio,
etc, but if I can keep myself in clay, I'm happy, my husband is happy,
it's all good.
Don't forget why you do it, you like to play in the mud.
Sa
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