Pricing

ok this is the newbee in business--- I am starting my fledging business by the seat of my pants. Pricing how do you calculate what to charge.

and anothere ? is how do you inventory for taxs. Do I use the price to replace my molds or the price I paid for them and all the other matriels I use.

Thank so much sorry for posting so many of the same thing the last time

Saralan

On Wed, 3 Jan 2007 15:37:00 +0000, Saralan
wrote:


ok this is the newbee in business--- I am starting my fledging business
by the seat of my pants. Pricing how do you calculate what to charge.
You need to figure your time, your supplies (clay, glazes, etc), your overhead
(kiln, electricity, studio space, etc) and wave a magic wand to apply it to each
piece. I'm retired, so it's not that critical, but I'd hate to have to make a
living at this! I figure about $25 an hour covers everything for me. So that
means if I can build, fire, glaze, fire, do paperwork and pack 3 pieces (and
keep approximate track of each phase for each piece) in an hour, then I charge
$8 for them. But I'd have to double that to make a living at it. That would
really put my pieces out of the picture though as far as selling them goes and
you have to take that into account as you start out. I've been able to raise
prices as I go.
and anothere ? is how do you inventory for taxs. Do I use the price to
replace my molds or the price I paid for them and all the other
matriels I use.
Yes, you need to keep track of all your expenses, repairs, milage for
deliveries, postage. The price you paid, which must be documented with
receipts, will be what you can deduct. Keep a milage log with date, start and
ending milage with the reason for the trip and you can deduct the miles.

Hope this helps! Sue

On Wed, 03 Jan 2007 17:08:37 -0600, Sue Roessel Dura
wrote:

On Wed, 3 Jan 2007 15:37:00 +0000, Saralan
wrote:


ok this is the newbee in business--- I am starting my fledging business
by the seat of my pants. Pricing how do you calculate what to charge.
You need to figure your time, your supplies (clay, glazes, etc), your overhead
(kiln, electricity, studio space, etc) and wave a magic wand to apply it to each
piece. I'm retired, so it's not that critical, but I'd hate to have to make a
living at this! I figure about $25 an hour covers everything for me. So that
means if I can build, fire, glaze, fire, do paperwork and pack 3 pieces (and
keep approximate track of each phase for each piece) in an hour, then I charge
$8 for them. But I'd have to double that to make a living at it. That would
really put my pieces out of the picture though as far as selling them goes and
you have to take that into account as you start out. I've been able to raise
prices as I go.

A lot can depend upon how much people like your wares and how unique
they are. Plain white dinnerware (at one extreme) will put you in
competition with imports on price alone. On the other hand, if your
wares are perceived as "art" or something a cut above the rest, you
should charge more... remember that the value of your work is what
it is worth to others, not what it costs you to produce. You should
have a look at work you think is comparable (whatever that means!)
and price accordingly. You will not be able to command the same
prices as a "big name" potter at first, of course. (Hopefully, that
comes later!)

and anothere ? is how do you inventory for taxs. Do I use the price to
replace my molds or the price I paid for them and all the other
matriels I use.
Yes, you need to keep track of all your expenses, repairs, milage for
deliveries, postage. The price you paid, which must be documented with
receipts, will be what you can deduct. Keep a milage log with date, start and
ending milage with the reason for the trip and you can deduct the miles.


I'm no tax expert, but I have had a (non-pottery) business for
many years.

One thing you may want to keep in mind is that if you are a new
business, the IRS will be scrutinizing you hard in the first few
years. They will be suspicious that you are only trying to
subsidize a hobby, not seriously trying to make a profit.
I have heard that car deductions are one thing they look at quite
closely.

Home offices are an area they are even more paranoid about,
but which you probably will want to claim. Basically, if you are
actually making a profit and paying taxes on it, they will be
happy. If you are generating losses, they will look harder at
you. The rule of thumb is that you are only allowed losses in
3 out of 5 years.

Hope this helps!


Bob Masta
dqatechATdaqartaDOTcom

D A Q A R T A
Data AcQuisition And Real-Time Analysis
www.daqarta.com
Scope, Spectrum, Spectrogram, Signal Generator
Science with your sound card!

This is not something to try explain in a short message but I'll try to tell
you how I do it..

The basics a
Decide how much you need to earn per hour, be realistic.
Time what you do; I mean everything including making a cup of Tea.
You see the only time you earn money is when you make the basic pot, almost
all other actions are only polishing it; they actually add very little value
to it.
You will be amazed at how little time you actually spend earning money!
Cost everything i.e how much slip a mould uses (material cost), how long to
pour, how many per hour, how long to fettle (labour cost), and so on and on.
Try to be as efficient as you can without cutting corners on quality.
Calculate the cost of each type of firing by working out how many of each
item will fill the kiln then divide the firing cost by that number.
Glaze cost is almost impossible to work out; my solution is to add up ALL
the costs up to the Bisque, and then add 10 percent.
Calculate your average workshop running costs per week (water, light, heat,
etc.) express that as a percentage of how much you need to earn per week and
add that percentage to the basic cost (mine is about 16%).
At the end of the process you will know how much each item cost to MAKE.
This is not the selling price.
You take that calculation and double it. THAT is your wholesale price!

The biggest mistake many Craft Makers make is to sell too cheaply; they wind
up working all the hours the Gods sent and not actually making a bean.
Also many customers are suspicious of wares that are too cheap. I have found
that a properly valued piece of well made work will sell.

Go to it

Steve
--

Steve
Bath
UK


"Saralan" wrote in message
...

ok this is the newbee in business--- I am starting my fledging business
by the seat of my pants. Pricing how do you calculate what to charge.

and anothere ? is how do you inventory for taxs. Do I use the price to
replace my molds or the price I paid for them and all the other
matriels I use.

Thank so much sorry for posting so many of the same thing the last
time

Saralan




--
Saralan

On Fri, 05 Jan 2007 19:05:36 GMT, "Steve Mills"
wrote:

This is not something to try explain in a short message but I'll try to tell
you how I do it..
Yes, but you got a great start on it ;-)

The basics a
Decide how much you need to earn per hour, be realistic.
Time what you do; I mean everything including making a cup of Tea.
You see the only time you earn money is when you make the basic pot, almost
all other actions are only polishing it; they actually add very little value
to it.
I also add in the time it takes to load the kiln, mix the glazes, sweep the
studio floor, etc. Those are working hours for me. If I get famous, I'll hire
a $7 an hour helper so it costs less ;-)

You will be amazed at how little time you actually spend earning money!
Cost everything i.e how much slip a mould uses (material cost), how long to
pour, how many per hour, how long to fettle (labour cost), and so on and on.
Try to be as efficient as you can without cutting corners on quality.
Calculate the cost of each type of firing by working out how many of each
item will fill the kiln then divide the firing cost by that number.
Glaze cost is almost impossible to work out; my solution is to add up ALL
the costs up to the Bisque, and then add 10 percent.
Calculate your average workshop running costs per week (water, light, heat,
etc.) express that as a percentage of how much you need to earn per week and
add that percentage to the basic cost (mine is about 16%).
At the end of the process you will know how much each item cost to MAKE.
This is not the selling price.
You take that calculation and double it. THAT is your wholesale price!
Since I'm doing taxes now, I know that all my materials, depreciation, repairs
and overhead average $5 for each hour I worked. I think you can fiddle with the
amount you want per hour and the doubling of the price for wholesale. You do
need to consider what the market will bear. As someone else pointed out, if you
have a hot item, you can raise the price.

I sell on consignment and most of the stores double my wholesale price.
Naturally, I'm selling way better where they mark up less. Is that common to
mark up so much or am I being ripped off? I'll be moving more things to the
lower mark-up stores and raising some of my prices this year.

The biggest mistake many Craft Makers make is to sell too cheaply; they wind
up working all the hours the Gods sent and not actually making a bean.
Also many customers are suspicious of wares that are too cheap. I have found
that a properly valued piece of well made work will sell.
I agree with this - thanks for your take on this! I think we both have
different ways of arriving at the same figure.

All the best, Sue

I have some experience in this area. In my career as a software
designer, I was involved in the development of costing systems for
industry for the past 25 years. As a potter, I have often applied these
same principals to my own craft.

Let me first start my saying that the most important thing you can do
is to get an idea of what successful competition for similar products,
or product of similar value, are charging, if possible.


Method 1 - I know my costs and production capacity

Decide what your annual costs are and the optimum number of units you
can produce in a year. Since crafts are labor intensive, you should
consider "Direct Hours" as your units. In costing, this is referred to
as a Driver, since this is what drives your cost. "Direct Hours" are
only those hours which DIRECTLY ADD VALUE to your finished product.

Example...
Your Fixed Costs: You will need $50,000 to cover your salary, rent,
utilizes, insurance, etc.
Your Variable Costs: You will $10,000 to cover your materials and
supplies needed in your production plan.
Direct Hours available this year: You will be working an average of 30
hrs per week in your business, but only 50% will be direct hours.
52 wks x 30 hrs per wk x 50% = 780 direct hrs

Your price per direct hour will be
($50,000 + $10,000) divby 780 = $76.93 per direct hour.

In this example, we are going to assume that you consume variable costs
such as materials by the hour. If you consume variable cost by the
piece you could substitute this formulae

If it takes you 10 direct hours to make a piece, your price will be 10
x $76.93 = $769.30 per unit.
Proof: Of your 780 available direct hours, you can make 78 identical
items. (780 hrs divby 10 hrs per unit = 78 units). Your total revenue
for the 78 items @ $769.30 each would be $60,006.40




Method 2 - I know my costs and the market price for my product

Decide what your annual costs are and the price of a representative
product of similar quality.
or successful product. As in method 1, since crafts are labor
intensive, you should consider "Direct Hours" as your units.

Example...
Your Fixed Costs: You will need $50,000 to cover your salary, rent,
utilizes, insurance, etc.
Your Variable Costs: You will $10,000 to cover your materials and
supplies needed in your production plan.
Your ideal price for a given product: Say that you've seen a similar
craft to your craft-A is priced at $769.30

The minimum number of craft-A product you must produce in a year is
($50,000 + $10,000) divby $769.30/unit = 78 units.

Of course, if you only plan to make 8 of these, that's okay. Just
evaluate your other crafts craft-B, craft-C, etc. the same way.
Whatever your product mix, your production plan should add up to $60,00
in sales, and 780 hrs in direct labor (in this example)

If it takes you 10 Direct Hours to make each one, your Price per Direct
Hour will be $769.30 per unit divby 10 hrs = $76.93 per hr.


Variation on Method 1

Method 1 assumes that you are going to consume variable costs such as
materials by the hour.
In some cases it may be more realistic to consume these costs by the
item, then...

Your price per direct hour will be
($50,000 total fixed costs) divby 780 direct hours = $64.11 per direct
hour.
($10,000 total variable costs) divby 78 items = $128.21 per item.

So if one item takes 10 direct hours, your price will be
10 dir hrs x $64.11 per dir hr = $641.10
1 item x $128.21 per item = $128.21
$641.00 + $128.21 = $769.31


Hope this helps

Pricing is one of the hardest things, and I thought centering was hard
:-). A wise salesman at Laguna Clay Co once said to me, "You know you
aren't in this for the money". And I had to agree, it's not a very
lucrative business, you do it cause you love it, and it make you happy.

I have consternate over what to price my pieces at for a few years now,
I try to not cut myself short, but at the same time I don't want to
price things so high that nobody will actually buy it. I know a few
potters that make me crazy, as their prices are so low, but if it works
for them, who am I to complain?
The "what you want per hour" system is a good place to start, and when
you actually start to calculate one piece, you do find that it does
work out.

I have these sets of very small bowls that I make, I sell them in sets
of 4 for $20.00. I figured that it may take me only and hour to make
all 4, and that counts glazing, etc. I could charge more, but when I
have them at sales, I sell out of them all, they are the bread & butter
of my sales. The good thing that happen is that people feel that they
are getting such a good deal, that they buy more pieces, it works out
pretty well.
I agree with what someone said about selling your pieces as "art"
verses just table wear. It's hand made, by you, and people like buying
art from the artist, at least that has been my experience.

It would take years for me to recoup what I have invested in my studio,
etc, but if I can keep myself in clay, I'm happy, my husband is happy,
it's all good.

Don't forget why you do it, you like to play in the mud.
Sa