January 14, 2017

Road to Pricing: The Actual Calculations

SO now to the kitty gritty, sometimes I use CraftyBase to get my prices correct but most of the time I am almost right on the money just using Numbers (Excel) program.

Stitch Markers -- Wage is $8/hr. This isn't as skilled as my yarn dyeing but it calculates my cost if I ever needed to pay someone else to do it for me (read my Husband).

Costs: Rings, beads, superglue, toothpicks, and packaging (tins and labels)
Shipping: 2.75 for shipping small items (I get my materials for free from the USPS).
Overhead: Use of pliers. I have excellent pliers so overhead is very low.
Profit: Normally 100% (times the number by 2).

So Costs+Overhead = Base Cost x 2= Adds Profit for retail + 2.75 = Retail price for Etsy. My prices for Farmer's market do not include shipping, which is why they are cheaper then my Etsy prices.

Hand-Dyed Yarn -- Wage $10/hr. It should really be more like $12 after 6 years but you'll see it really doesn't matter. I don't base my prices on the process but on the bases I buy.

Costs: Yarn Bases, dyes, reactive agents, ties, and packaging (labels and ziplock bags I buy to make sure everything nice and dry).
Shipping: 6.10, I ship priority because I get the shipping materials for free. If I was to buy them and go first class mail it costs more, therefore costing my customers more and they have to wait longer.
Overhead: Steel pots, tongs, my drying rack, my ball winder, my skein winder, and water (which is free for me but the power used to run it is not). These seem like a lot of over head but it isn't. I have been using the same pots for 6 years and tongs for 4 years, my ball winder is 8 years old and my skein winder is the only thing showing wear after 3 years.
Profit: Normally 100% (times the number by 2).

Now, here is my calculations, they don't make sense to anyone but me. Try it on your own stuff and you'll see how nicely prices work out to be market value without going over or under board.

Yarn Base Cost + other costs = Cost to me

((Grams of Yarn base/Yardage of Base)xCost to me)+Overhead + Shipping = Base Cost

(Base Cost x 2 (or 1.75 if its a mini skein)) + Wage for packaging/Listing (that's a flat rate, again if I had to pay someone to do it) = Retail Price for Etsy

Yup, what the what?! I do what, with what and why is shipping before the profit mark up??

So I found that prices went awry when I did a "wage" for my time spent, I use to dye ONE skein in 3 hours now I dye 4 skeins in 30 minutes. So wage per hour is now really not a factor. What is a factor is what I use in the process and its based on weight and yardage to how much materials and really time it takes to produce an item. I am a math wizard, its my secondary passion (I also love science so you can see how really fiber arts makes my brain just happy).

Now let's do an example, because I love made up examples:
Yarn base cost: 4.00 (I wish)
Other costs: 1.00
Grams of Yarn Base: 100g (my normal skein weight)
Yardage of Yarn Base: 400 yards (around my normal skein length)
Overhead: 1.00
Shipping: 6.10, you can look this up on USPS.
Wage for packaging/Listing/Photography: 1.50 (no this isn't the flat rate wage, remember made up numbers)

Okie dokie:
4.00 +1.00 = 5.00
((100/400) x 5.00) + 1.00 + 6.10 = 8.35
(8.35 x 2) + 1.50 = 18.20 round to 19
Wholesale = 18.20/2.5 = 7.28 round to 8

If I added Shipping AFTER I added profit: $12.10 with wholesale being $4.84. Yup it doesn't work, so it may seem ridiculous to do it before hand but its how I get to a fair market value. Most 400yd/100g skeins are $18-$26 on Etsy for most small scale dyers. If I was to add shipping after, I don't make enough wholesale to cover my costs and it puts my yarn WELL under market value.

If you want to try my crazy go ahead. If not look at another blog or other post on how you're "supposed" to do it. As I said my wage has absolutely nothing to do with my pricing. If I do 1 skein in 30 minutes of total work: thats (5.00 for cost + 5.00 for labor) x 2 for profit = 20.00 then flat rate for packing plus shipping that's 27.70 at least. That puts me OVER of the range and thats where you get 400yd skeins at $40+, which while I am all for valuing your time and work, my stuff comes from the materials I use, not the time it takes me to do it. However, self striping and gradient stuff, I price with a bit higher "other cost" and "overhead" because it requires more steps and equipment.

So on the skein above, my profit becomes my wage. So costs on the skein is 13.60 So I make 5.40 on the skein. That looks oddly like the 5.00 quoted above? If I did 100s of skeins then maybe I might change my formula, I rarely do wholesale so I save on "costs" which means you do too.

Hand-Spun Yarn -- Wage $10-12/hr (again it doesn't matter per say)

Costs: Fiber Bases, dyes, reactive agents, ties, and packaging (labels and ziplock bags I buy to make sure everything nice and dry).
Shipping: 2.75
Overhead: Ashford Blending Board, Hansen MiniSpinner, my ball winder, my skein winder, and water.

Price per Yard: (This is where my "wage" comes in)
Single: 0.10
2Ply Bulky: 0.31 (this includes the singles price)
2Ply Sport: 0.33
3Ply Bulky: 0.41
These are normal PPY as I have done by MARKET Value. So there is a THIRD pricing scheme... got to love a multifaceted business. They are based on skill and time and materials used plus normal pricing ranges of SOLD skeins on Etsy, I usually find a business that mostly does hand-spun and go from there. (As PawnStars always says: You can price something at whatever you want but unless it sells at that price it isn't worth that amount).

Yardage Plied x PPY = Cost Price + Overhead + Shipping = Etsy Retail

So there are my pricing schemes for everyone to see. These work in the "real" world of Etsy and Farmer's Market. Have fun!