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Reevaluating prices for handmade

If you have any experience in pricing your handmade items, you know it is a very difficult task and most people (yes we were and still are guilty too) underprice their hard work. When we first started, I did a lot of research to try and correctly price my mom’s creations, but the most common formula generated verydaunting prices. In the end, we priced our items according to other ‘similar’ items on Etsy (while only looking at similar-sized plushies and not techniques) and by trying to listen to our gut feeling (people can’t be willing to pay THAT much?!). 

Given the formula (mentioned for example here):

Cost Price (Labor + Materials Cost) x 2 = Wholesale Price
Wholesale Price x 2 = Retail Price

Our initial prices were nowhere near retail price and hardly close to wholesale price, but we felt we wouldn’t sell otherwise. I suspect it is a common fear amongst new small business owners. 

As I already wrote in our previous blog post, we would love to take our creations to the next level. We’ve been selling for little over three months and have had a few sales and many positive reactions. But we did not have anything written down in terms of a business or marketing plan. And without specific goals, you’ll never know when you succeed and we all love to be able to celebrate a success. 
To be able to determine financial goals and how to achieve them, we needed to know our exact profits on our sales. I won’t be sharing the exact calculations of our listings, because there is a very convenient tool to use for this step if you want to find out for your items. :) Let’s just say that for some items my mom was earning approximately €5 an hour. Doesn’t really seem up to par, right? Plus, the tool does not take all overhead expenses into account (things like gas, electra, but also e.g. sewing machine maintenance). So, in fact, my mom wasn’t making any money at all. And we did not take into account all the hours I’ve spent on marketing. In conclusion, we needed to increase our prices (we are still not near retail price, but it’s getting better ;) ).
What I’ve really learnt is that looking at other Etsy shops does not give you a realistic idea of what your items should be priced at. There are many articles on the internet which also state your items are perceived better when prices are increased (albeit sometimes slightly). You would not want the reputation of shop that’s always on sale, right? Or maybe you do, and that’s fine, but you have to work twice as hard to be able to earn a living. An inspirational post on prices was written by Little Hill Jewelry (a pricing experiment), which also sparked some discussion on the Etsy Success forum
What was your experience trying to price your work? 
And how often do you come across items where you feel the creator is underpricing?
Or, the other way around, do you often see handmade work that you feel is overpriced?
I would love to know your opinions on the pricing ordeal! 

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