I always thought about total cost of the product in terms of how much materials cost me and how much time I spend making it. Of course, I've never taken into consideration time for developing the idea and struggling in finalizing it (would be nice to also include here time and costs for traveling to a beautiful islands looking for an inspiration). Are those the only expenses I have to think about?
Reading more about true costs, I started to think more about hidden costs. We all know that selling on Etsy requires paying a fee, using PayPal requires paying a fee, there are shipping expenses, product packaging, handling and processing… Have you ever calculated all of those costs? Have you ever included it into your final sale price? And I’m not even talking about time required for photography, image editing, advertisement… I’d better stop now and try to calculate hidden costs for a single item - one of my latest items “Saphira”.
Current sale price is $59.99.
Etsy Listing Fee - $0.20 (fixed price)
Etsy Sale Fee - $2.10 (3.5%)
Packaging - $2.00 (it includes middle size box, bubble wrap, post card)
PayPal Fee - $2.04 (2.5% + $.30 per transaction)
Shipping – I charge shipping fee separately, therefore shipping is covered by a customer.
What did I miss? Marketing and advertisement – I’m still struggling to compute it on per item basis. I probably have to include small (proportional) piece of office and web site support, but decided to ignore it for now.
So, even without all those small pieces, I can see that I will have to pay $6.34 in all kinds of fees right away. This is 10.5% of expenses I've never thought about! My conclusion – I have to raise prices.
Lisa in her creative business series explaining the following pricing formula:
Wholesale Price = Cost of Materials + (Labor * 2)
Retails Price = Wholesale Price * 2
Now I really have to raise prices!
Does it really require charging more to become a better business woman?