# Crafts Sellers--Profit Margin to Aim For?



## amelia

This is a great sub-forum. I'm getting a lot of ideas!

I am interested in developing a part-time business from the sale of handmade items. Although I have previous experience running a service-oriented business, the sale of a product would be an entirely new adventure for me. 

As I think through what I could possibly make a "go" of, I realize that I am lacking any benchmark in terms of the profit margin that I should realistically be aiming for. What have all you successfull craftspeople found to be reasonably achieveable? Would anyone be willing to share how their costs break down percentage-wise (i.e., materials, labor, selling costs, etc.)?

Thanks in advance.


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## amelia

Was this a dumb question? Actually, I'd be grateful for ANY advice about how to go about evaluating a crafts-related business idea from a dollar-and-cents standpoint. (Pleeeeze?)


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## bergere

Add what all your costs are..from the stock you used, to the time you spent making the products. Add in PayPal's costs if you offer that.
Add it all up and divide it by how many items you made, this will give you your base cost for each piece. Then add from 10 to 50% over that. Now you have your set price for each of your products.

What I charge varies from product to product and how long it takes me to make my creations. I offer too many things to break each down.

Biggest thing I can say, is don't undervalue yourself. Make sure all your costs are covered or you may end up paying people out of _your _pocket to buy your Art or Crafts and that doesn't help put food on the table.

Good luck!


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## fransean

I have a spreadsheet somewhere with a formula, I will PM it to you if I find it. This is a spreadsheet circulating amoung the soapmaking community a few years.


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## amelia

Thanks, Fran. That would be SO helpful.


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## clovis

We have a local flea market, and some of the crafts do very well if they are very cool, not amateurish in any way, and priced within reason.

The nice antique mall in another town sells lots of craft stuff. It really is quite amazing.


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## mosepijo

Wrong thread


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## MoonRiver

Why are you concerned with profit margin? It seems to me that profit is what I would focus on.

For example, I buy a widget for a penny and sell it for a nickel. Profit margin is 400% - but I sure have to sell a lot of widgets to make $100.

Example 2 - I make a quilt that I sell for $150 that costs me $30 to make. Profit margin is still 400%, but I make $110 for selling just one.

I use profit margin for determining if I should expand. Let's say my profit margin is 30%. I have an opportunity to expand and after I run the numbers, the profit margin on the expansion is only 20%. I would probably not expand if my profit margin was going to drop significantly.


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## Ken Scharabok

This will be a bit rambling:

Retailers have what is known as mark-up. For example, the mark-up a casket might be 1000%. The mark-up on furniture and higher-end clothing 700%. In a hardware store the mark-up might be 160% if volume allows. Added: Even then the mark-up may vary by department. So much for lawnmowers, so much for power tools, so much for nuts and bolts.

Another way to look at it is is ROI - return on investment. Say I have $100 total invested and net out $10 on that. If over a year, that's a 10% return on investment, which is a whole lot better than almost any other investment today.

Say you buy something today for $1 and sell it tomorrow for $2.00. You have the $1 invested for one day and made a 100% ROI. Now say you do that every day for a year. That's something like a 36,500% ROI on that initial dollar. Known as turn-over. You do that on enough items and it adds up.

My personal mark-up is at least 300%. Say I am considering buying an item for resale. If I don't have a pretty good feeling it will sell for 3X cost, then likely won't do it. However on my shop-make items I may go as much by what the market will bear based on sales than my invested costs and time.

I sell about 99.9% through eBay. On a fair number of my items I am the only eBay seller of them. I dominate the market so to speak. (See below.) On other items I provide basically the same function as normal retail sellers, but in a less expensive form. Here I might go for 60% of normal retail for new, factory made.

I avoid selling things a bunch of other sellers are doing. You just get into a price war with them. As an example at one time I had a salvage grocery store and bought at wholesale for resale as well. I was the first on eBay with out of date hearing aid batteries, retractable dog leashes and low-cost flashlight-type batteries (demand surpassed supply). Did extremely well until others saw what I was doing and flooded the market (supply surpassed demand). Ended up selling some at less than cost or donating items to food bank type places just to get rid of them.

On dominating the market, do a Google search on Roasting Spit. I am at the top of a list of three sellers. The second one is about 40% less, but at a one-quarter carcass weight capability. The third has 100% more capability than the second, but still 50% less carcass weight than mine and costs at least five times more. Are buyers willing to pay five times more for a motor over manual turning?

You pretty well have to charge 200% just to breakeven.

And what is your time worth? Some commercial blacksmiths may set their labor hour rate at 100% hour. I'm not of their quality. They are full-time while it isn't much more than a paying hobby to me. They have a lot of overhead I don't. Thus I use $20 hour as I'm doing it more to keep a bit busy than making a living at it.

Also the market plays into it. What is someone else willing to pay for it? I may list an item and when it doesn't sell keep dropping the price until it does. That helps find market value.

Say you are at a craft's fair and are one of six vendors selling essentially the same goat milk-based soap. A lot of competition there. Now say at another you are the only one selling it. Your price might be set higher.

Pricing is far more of an art than a science.


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## sisterpine

I sell jewelry, stone knobs, and coat trees at markets and craft fairs. I also have a program which allows me to punch in the cost of the product to make i.e. parts and pieces, then I add overhead if I want and then it computes the wholesale, net sale and retail sale prices for me based on the multiplier I choose. Generally I am looking at twice my parts price plus overhead plus labor for the wholesale price. So if I have one dollar into parts plus .25 overhead (price of utilities/space etc) and then .50 for 5 minutes labor then the wholesale price would be 2.75 which would basically provide me with 1.00 profit or so. With a retail piece like this I would go 6 times the cost of the parts plus labor and overhead so the same item would cost 6.75. Problem is that I live in a pretty recessed area....so instead of selling for 6.75 with 5.00 profit I sell for 4.75 with a 3.00 profit. does that make sense? just my way of doing it. sisterpine


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## NostalgicGranny

fransean said:


> I have a spreadsheet somewhere with a formula, I will PM it to you if I find it. This is a spreadsheet circulating amoung the soapmaking community a few years.


Would it be a bother for you to send me a copy of your spreadsheet too?


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## DrBraeburn

first off there is no dumb question----- the only dumb question is the one you dont ask-----ones profit is not made off one item sold ----profit is made by volume sales----- in these so called economic times people say their items arent selling----thats true and the reason why is they are pricing themselves out of the market----- you have all seen that at the shows etc. you have went to ----- -I would rather make $ 3.00 each from 20 sales than make $60 off one ----- 20 people telling others I got this item for xxx amount and seen the same thing at other shops etc. for xxx higher ----- where are they going to go buy that item if they want one ? ----- now i dont mean give your item away----- but dont price it so high that it dont sell and gathers dust ----- you cant charge for all your labor you put in an item ----- you might as well not even make it the price for it would be sky high -----I know a quilt maker that has her quilts priced at $800.00 each ----- guess how many she has sold? ----- price your items to sell not to sit on a shelf ----- I agree with Ken above ----- and have been doing what he said since I started making crafts and buying and selling items


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## romysbaskets

I totally agree with Dr Braeburn! Of the sales I have made this year, they were lower priced but the volume is where I made out well enough. I certainly have not sold the volumes others have, I am still diversifying. When you pick up supplies reasonably, your time is something you must gauge on your own. I love making things, I don't worry about the calculation of my time. I will make something to sell while my family watches tv. My seashell ornaments were a wonderful idea...fun to make, have used them on our trees for years and the time was well spent....it was simply time I would have spent doing? I sold seashell ornaments I decorated by hand, most for a buck where I found sites online selling ornaments simply done with a shell and ribbon no decoration for several dollars a piece? Since I find my own shells, they are free on the beaches where I live. For someone else, they have to buy the shells....now that doesn't make much sense to create a profit on them without some effort, that is how they get marked up that high in the first place. Dr. Braeburn sells wonderful treasures, keepsakes and I have seen his listings on HT. Always affordable to most, he offers the ability to buy something very reasonably consistently. In these times, we need to think in those terms. A quilt from the above comment, Rich, says he sells his for $150, costs $30 to make. He didn't specify the time or overhead...well it is in his own home. Dr. Braeburn mentions a quilter he knows who sells hers for $800, which would you most likely be able to afford? If they are comparible quality? If Rich enjoys that time he quilts, it is well spent and the profit is in dollars not so much time. Where did he sell the quilts?...well there may be a small cost for that too. I don't think you can't really figure out your time on homemade works of art to be high earnings......but the hourly pay becomes a more personal and rewarding experience instead of cash. I so enjoyed selling my heirloom garlic bulbils too. I spent considerable time answering questions, counting them, packaging them and then sending them out. Most orders were $5.99 per and the profit is tough to figure when there is the watering time (I hand water) , the planting time, harvesting the heads to separate the bulbils etc....listing them for sale was the easy part. Ebay was not a great spot to sell them, my then new blog wasn't either....HT was the best!!! I am very grateful for all the wonderful people here, they really support each other! That is what this is all about, community. There will be ways to see how much to price things....look things up on ebay, high and low....where is the middle ground? Look at the previous listings here, what are things selling for that are similar? I research how much something is sold for prior to gauging my own price...then I do what makes sense to me. Being that HT does not charge for listing fees....it is great to list here. 

Best of Luck on your endeavors!


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