Pricing Handmade Goods: Follow your heart or follow a business formula?

One of the things I continually struggle with is how to price my handmade goods. It is a question that is asked multiple times a day in the Facebook crochet groups that I am a part of. If you read the comments, you will get a variety of answers. Here are just a few of the answers that I commonly see: 

1) Supplies + Hourly Wage x 2 

2) Supplies + Hourly Wage + Business Expenses x Profit Margin x 2 

3) Supplies + Hourly Wage + Business Expenses x 1.75% 

When I first started my Etsy and craft show business, I turned to my husband, Mark, and best friend, Michelle, for help in pricing. The three of us had absolutely no experience in this field, so honestly, we just took our best guess as to what people would pay for my products. Since I lacked some confidence that my products would sell, I tended to suggest prices that were lower than what Michelle and Mark suggested. However, I trusted their instincts and priced my products according to what they thought and, to my surprise and delight, they sold at their listed price! 

As the business continues to grow, I have learned to take a variety of factors into consideration when pricing my products. I have also learned to have a wide variety of products that range in pricing. One of the biggest things I think about is the accessibility of buying my products. My animal hats are my biggest selling items and I have those priced at $35. Depending on the animal, it takes me 2 – 3.5 hours to make. If you look back at the beginning of this post and see the 3 calculations that I have mentioned, you can tell that I don’t follow any of them when it comes to pricing my hats. There is a simple reason for this. I never want a parent to feel that they cannot buy something at my booth for their child, if that is something that they wish to do. I crochet to bring joy to people when they see and buy my products. Yes, this is a business that I am running, but I also want to enjoy what I am doing and creating. If I had to continually see parents not being able to buy my products, it would take away some of the joy that I feel when making a product and seeing one of my hats on a little (or big) one. 

I also think about this: which would I rather? Sell 10 of something because it is reasonably priced? Or sell 2 of something because the price is higher and it excludes a portion of the market that could buy my items? To me, it is a no brainer. I would rather sell more than less for two reasons. 1) Selling more items, even at a lower price, tends to yield more profit and 2) again, a big part of the reason that I crochet is to bring happiness to others. 

So….going back to how I price my items……I guess the simplistic answer is that I tend to follow my instinct and heart versus a specific business formula. I am sure that any business expert reading this right now is yelling at this blog and would strongly disagree. But it is my business and I need to do what feels best to me. Since the business (and my profit) has continued to

grow by leaps and bounds since I started it, I can only come to the conclusion that I must be doing something right when it comes to pricing my handmade goods.