Creative Money Maker: Profit at What Price?

Do you make something that you love? If so, how much is it worth to you?

Last column I introduced the concept of value when it comes to paying yourself for your time and expertise. In this installment of the Creative Money Maker we are going to continue the conversation about value as it relates to setting prices for the products that you make.

Earning income from selling a product is what we most often thing of as “making money.” Just like the rest of your budget, you want to plan carefully for earned income.

This column will help you avoid two of the biggest pitfalls creative people make when pricing their work: under pricing their work because they under value themselves and over estimating how much they will make from sales because they don’t know their market.

Antonio Ramos from Brooklyn Soda Works explained to me that, “It is difficult to change the price once you start your project. When pricing factor in the following: What does it cost to make? How long does it take to make it?  What profit can you make from your product at a price people will pay without compromising the essential nature of your project?”

Similar to paying yourself for your time, there is no specific formula to determine the price for your work. When you assign a price you assign a value to your work. When you set out to do so, it is important to have a sense of how valuable you want your item to seem to your customers.  Here are a few basic guidelines to help you set a price:

  • Know how much the raw materials to make your item cost. You want to be sure these costs are covered
  • Does your item include rare or expensive materials or a process which demands unique skills to create that would make your price higher?
  • How much time does it take to make your item?  You price should cover this time, including the time it took to create and refine the idea. For example, for a band this would include writing and rehearsal of a song
  • Know the standard price for your object or event – how much do other items like yours sell for?
  • How much are your customers willing to pay? How little would make them think it is too cheap and not worth their time?
  • How valuable is your item? Pricing and money is about assigning a value, so you want to make sure you don’t under value your creation or yourself
  • Refer to pricing guides for your specific disciplines, such as crafts, visual arts, graphic arts, music, and edible goods. There’s rarely a specific formula, but depending on the discipline their may be industry wide standards

For an example of adding value to the product you produce:  In the early 2000s the going rate for a zine was one or two dollars, no matter how many pages it had. When I incorporated art papers, letterpress printing and hand binding into my zines I decided to break from tradition and charge five dollars for them. I was worried I would receive criticism for how “expensive” my zine had become, but the exact opposite happened! Those who picked up my zine valued the time, effort and care I had put into it and people still tell me they have kept them and cherish them as art objects.

Hand printed covers for the last issue of my zine Indulgence

Once you have gotten a sense how much it takes you to make your item and how much you want to charge, it’s time to get out a pencil and paper and determine your total cost to produce one item, the wholesale price and the retail price.

Pricing terminology:

Total cost to produce your item: this is the basic cost of materials, labor and time it takes for you to make one item. This should not be your price, but you should know how much each item takes to produce.

Wholesale price: This is the price to which you offer your product to retailers. You will be offering your items to retailers at a “markup” price on your base cost. The markup should cover your overhead, such as your studio space and your tools. There’s no hard and fast formula for determining the wholesale price, but it can range between 100 and 300 percent of the total cost, depending on the kind of product you are offering.

Retail price: This is the price you suggest to retailers to sell your item. This can be twice or even three times the wholesale price. Remember, retailers take a percentage of the sale of your item to cover their costs. When you are selling your item yourself, such as through a website or in person, you should offer it at the resale price. You don’t want to undersell yourself or the retailers that are carrying your work!

It may surprise you to hear there are no specific formulas for assigning a value to your work, but take your time to research price strategies for your specific field. The most important aspects of pricing are that you need to feel confident in your prices and that your customers need to feel they are receiving something valuable to them at a price that feels good.

The Creative Money Maker was developed in collaboration with the DIY Business Association.

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Creative Money Maker: Value Yourself? Then Pay Yourself!

 Like any creative project, the Creative Money Maker pivoted. I have been incredibly lucky to develop and launch this column with the DIY Business Association. While the DIY BA takes a pause on developing new content, I decided to continue the Creative Money Maker here because got such a great response to it and have so much fun writing it. Join me every other Tuesday right here for more financial advice that feels good! 

You know the old adage “time is money.”  Guess what? It applies to creative people whose work is driven by passion and as well as profit.

When you create a project budget it is important to include a line item for paying yourself, even though you may not anticipate making any money from your project at first. Your budget is a plan for a time when your project is profitable and compensating yourself is a key element. Remember, your budget tells the story of your project in numbers, and you are important part of that story!

Compensation is about the value you put on your time, experience and expertise. “Value” is an intangible concept, but here are factors to consider before determining your fee or hourly rate:

  • Have the confidence to know that your time is worth money
  • Clarify what skills and tasks the project requires
  • Consider your experience and expertise. Do you have a perspective or level of experience that is not common for your field?
  • If creating a budget for a client, consider the value your project brings to your client’s life

Once you have a clear idea about the criteria above consider whether to calculate your fee on a time basis, a project basis, or a package basis.

Time-based is how much you charge per hour for your services. This helpful when you offer services such as consulting, administrative or technical support.

Project-based is a price based for an entire project that has a concrete end point.  When pricing based on a project you want to calculate about how many hours it will take, what the project requires of you, how much the client values the project, and your overhead such as the tools and space you use to create the project.

Package-based is similar to project-based pricing, but it puts more conditions around a project. You offer a certain amount of time or number of consultations for a flat-fee and, if your client demands more changes or wants additional services, you can charge by the hour or an agreed-upon additional fee.

There are no hard and fast formulas for determining how much to charge hourly or for project-based prices. Musician Greta Gertler, who also runs the PR agency Goldfish Prize, shared her simple strategy for pricing her time, which she uses as a baseline to determine her hourly and project-based fees.

Simple pricing strategy:

  • Determine your overhead costs such as tools, software, studio rent, insurance, taxes, as well as living expenses for the year, month and week
  • Determine how many hours a week you want to work
  • Divide to get with your starting number for your hourly rate

Greta Gertler in her band The Universal Thump. Photo by Carol Lipnik.

For example, if my expenses are $2,000 a month and I want to work 30 hours a week I will divide $2000 by 4 (for 4 weeks in the month) and get $500 per week. Then I divide this by 30 to get about $17 an hour. I will have to work at least 30 billable hours each week and charge at least $17 to cover my expenses.

If you are making a budget for a client remember they are only paying you for the time you spend on their project. Thus your “billable” time should cover your expenses incurred during “non-billable” hours. Therefore, I may determine that I will work about 15 hours a week on my clients’ specific projects, so I could raise my rate to $30 an hour to cover those expenses.

Before deciding on your fee find out the going rates for your field. Project fees and hourly rates will be in a range, and you want to know where you stand. Reach out to the professional associations that provide guidelines for pricing your work within your discipline. Talk to other professionals and those who hire creatives about how they determine their fees. For those of you who are selling goods, next time we’ll talk about pricing the creative products you produce.

You have skills, creativity and expertise to offer to your potential clients, your project, and yourself.  You must value yourself first before expecting anyone else to do so and planning to pay yourself fairly sends a message to the world that you are valuable. As a creative person educate yourself and your community members about your worth.

How do you determine your fees?

What challenges do you encounter when it comes to paying yourself?

What does value mean to you?

For the first three installments of the Creative Money Maker please visit the DIY Business Association’s website here.

Introducing the Creative Money Maker

Even if you read this blog regularly you might not know (yet) that I have a secret life as a arts administrator with a love of numbers, finance and fundraising. A girl has to pay for those shoes somehow! Over the years I’ve gained a whole bunch of skills when it comes to combining creativity with logic and strategic planning, especially around money. So, it is with great pleasure that I announce the debut of my bi-monthly column for the DIY Business Association, the Creative Money Maker, which will be full of financial advice that feels good for creative people.

If you are a creative person who wants to make a living at your creation and there’s a part of you that wants to run away screaming as soon as you hear the words “finance” or “money” this column is for you!

Read my first column: Dear creative person: It is time to shift your thinking about money about how financial empowerment is creative empowerment and please join the conversation!

Also, spend some time checking out the rest of the DIY Business Association’s website. It is run by the ever-inspiring Amy Cuevas Schroeder, who was also the mastermind behind Venus Zine, and is full of advice for creative people in all fields interested in (or in the process of) nurturing a micro-business.

South by Southwest Takeaways

These bikes were having fun watching us

Corita performing at Waterloo Cycles during SXSW

Today I have a guest post up on my friend Alejandra O’Leary’s blog about what my big lessons from SXSW. Coming from the perspective of a nonprofit arts administrator and a DIY musician, I wasn’t sure if the SXSW conference would really resonate with me, but it did, and I think I took away some valuable ideas that I hope will be helpful to musicians and all types of creatives. Please check out the entry here and let me know what you think! Also, if you’d like to listen to the insights and ideas shared in the panel I spoke on, Beethoven + Social Media = Crowd Funding Patronage, you can listen to that here!  If you’ve been to South by I’d love to know your big takeaways and if not, I’d love to know what you are working on to take your creative project to the next level!

Corita at Cherrywood Coffee House

Corita performing at Cherrywood Coffee House for the Austin Girls Rock Camp party during SXSW