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When writing nugget-sized bits of information, I often start headline-first, especially when writing online: It’s the thesis statement that sets the tone for my whole writeup. This one could easily skew self-help, but today, I’m taking the practical route.
One of the most common problems I’ve heard entrepreneurs talk about is how achingly hard to put a price on what you do. You don’t want to set the prices too high, scaring people away (and thus giving yourself a not-good-enough complex that’s so, so untrue), and you don’t want to skew too low, making people think you’re cheap (and therefore, low-quality).
One simple equation: Materials + (value of your time x number of hours invested) + at least a 20% profit margin = your price.
If you can take the cost of materials and the cost of your time and double it, even better.
Then, of course, you have to weigh that number against what your competitors charge, and determine whether people would be willing to pay that price for whatever you’re offering. That’s the fine-tuning stage.
The next stage, though, is the real doozie: Raising your prices. After all, you have to keep pace with the ever-rising cost of gas, rent and even cookie-dough-flavored Oreos.
So when should you do it? That’s where our Tuesday Takeaway comes in, from the book Art, Inc.:
The best time to raise your prices is when you’re selling at least half of everything you’re producing over a six-month time period. Your sales should be steady (i.e., if you haven’t sold a thing for five months, then someone swoops in and buys 9 of your 12 “Keep Calm and Mosh On” posters, it’s probably not time to raise prices). If demand remains strong, consider raising your prices 10-25% each year.
We love this slow-and-steady pace for raising prices, but we want to hear from you: What’s your strategy for setting and increasing your rates? What’s one piece of advice you’d give to someone who’s struggling to determine their prices?
Art, Inc. is a complete guide to becoming a professional artist, with chapters on everything from creating a business plan and marketing strategy to licensing your work and getting into galleries. You can pick up a copy here.
Photos: Jeff Sheldon/Unsplash
