Profit is NOT a Dirty Word !!

Published On: 11-18-2011 03:11pm

Comments: 3 - Hits: 0

I spend as much time as I can on the forums and I tend to click into shops of people who are also active there and I have seen some things in the last few weeks that have really blown me away. My husband is a retired dentist and I not only ran the business end of his practice, but I consulted and lectured on the business management of dental practices for 20 plus years. Even though selling handmade articles is a different animal than dentistry, the reason for it is somewhat alike - to make a living from your labors.

If you are independently weathy and whatever you are selling on Artfire is to get it out of your house so that you have room to make more, than God Bless, and don't bother reading any further. However, if you want and/or need to not only recoup your investment, but to cover your overhead and to make some sort of a fair hourly wage and to also make a small profit, then some of you really need to hone your business management skills and research how to price handmade goods.

In the last several weeks I have seen two instances from people with shops here that are sad and there is not a better way to discribe it.  The first was a necklace with an incredible, handmade (not by the shop owner), bead and the necklace price was about $180.00 and the artisan apologized for the price, but said she had paid over $100.00 for the bead.  I went to the website and the necklace was phenominal...there was seed bead work...there was a great and expensive thing to string it on...and the finished whole was dynamic.  I think that the artisan said she had over 6 hours invested in creating the necklace and that would be about right. So this person is going to earn a grand total of $80.00 and that is supposed to cover the other materials which I estimate at, at least, $25.00.  This $80.00 is now down to $55.00 to cover, shipping, overhead, labor and profit...and she is only getting the cost of the supplies back, not double her investment which is the industry standard. With 6 hours invested, the artisan can not even make $10.00/hr., and I think that that is a criminally low figure for an artisan to charge for their time.

The second case was an inexpensive, $2.75, little hand made piece. The artisan said that they had 3 hours into it and I fully believe that because it had allot of hand work in it. Shipping was free.  This one is probably worse than the first case - but not so blatant, because we have a small price to start with...but again, how does this person expect to ever make a profit on her efforts if she is asking $2.75 to cover 3 hours of her time, forget about minimum wage, overhead, shipping, and the cost of the supplies.

Both of these artisans would be better off donating their products to a legitimate charity and getting a tax deduction for their efforts than selling at the prices they are asking.  Making a profit is not as bad as most people would have you believe.  It is the basis of the capitalistic system that our country was founded on.  In order to make a profit you must fairly price whatever you are selling, be it goods or services. The price must cover your costs for materials, your overhead, the salaries of yourself and/or your staff, taxes and it has to also deliver a profit to you, or you shouldn't be in business.

Pricing fairly, does not mean, pricing where you think it will sell, nor does it mean pricing at what you yourself would pay for it. Pricing means following a formula, applying it to your product, each and every time that you make something. You must arrive at a wholesale price that covers your salary, twice your supplies, a profit amount, and an overhead amount. This wholesale amount should then be doubled for a retail amount.  I will often fudge this number, but I never fudge my wholesale numbers.

I see so many products here that are selling for less than the cost of the supplies it took to make them that it is depressing. I am only speaking of jewelry here, because I know what those supplies cost.  When people underprice their products, they don't just hurt themselves, but they hurt every other artisan in that field that is charging fairly for their products.

Reader's Comments

By CrystalPearl on 05/30/2012 @ 07:52am

A very interesting post Linda and true.

By mindfuldesign on 04/09/2012 @ 02:51am

Bravo! Thank you for expressing so beautifully what many are unable to articulate. One of the most important sentences I read is the last one, underpricing not only hurts themselves, it hurts every other artisan in that field that is charging fairly. Excellent.

By Guest on 03/27/2012 @ 04:56pm

I liked this post! I hope the word gets out about profit not being a dirty word!!!

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