The most frequent question I receive from my readers is, “How do I price my quilts?” For anyone who makes hand-crafted, one-of-a-kind items for sale, the toughest part of your business isn't creating your masterpieces. The toughest part of the business is coming up with the price. And, with this article, I will try to give you my perspective on how to best price your quilts.
With pricing, there are a ton of different variables that will affect the price of your quilts, including what types of materials you use (the cost of the fabrics, batting, etc.), the economy of your region (is your area expensive or depressed), and the going rate for the types of quilts you are producing (are there already a lot of other quilters selling their quilts in your area).
What I will try to do is give you the basics of pricing, and then you can apply the specifics of your situation – materials, cost of living, and competition – to this pricing model to come up with your own pricing system. And remember: this is just one man's opinion. You can find a lot of different models by doing a little research on the Internet or going to your local bookstore to find some books on pricing.
The Simpler, the Better
My philosophy on pricing is “The Simpler, the Better.” Once you are comfortable with a pricing model, then continue to use it until it no longer suits your situation (for example, if you make a shift from making your quilts by machine to creating art quilts by hand). So, with this in mind, the pricing model that I find easiest involves determining the cost of the materials that go into the quilt and coming up with a fair hourly wage for your labor.
Cost of Materials
With your quilting business, you should keep very careful records of all the materials you purchase. It doesn't matter what it is – fabric, thread, chalk, pins, needles, scissors, rulers, etc. Keep exacting records of all your business-related purchases to help out with your tax situation (all business purchases will reduce your income so you pay less in taxes).Now, in the case of a specific quilt, you will want to record the cost of all the materials that go into that quilt. Make sure you plan your quilt out – whether you are creating a quilt in hopes of selling or you have been commissioned by a customer – so that you have a clear idea of exactly what items you will need to purchase. And, when you make your purchases, put all of the receipts into a separate folder marked with the client's name or a project name you can remember. All of these items will be your costs of materials.
Since you are a professional, you may be able to get your materials at a discount. This is great and can help reduce the price of your quilts, but you should always build in a small charge for purchasing and stocking these items. It takes you time to obtain the materials (either in person or ordering over the phone or Internet) and also to organize and store the materials. You should be able to charge 15-30% markup for your materials to cover these kinds of costs.
Over time, you will get a feel for what a certain type and size of quilt will cost based on the materials needed. You may eventually be able to create a price list for different types of quilts based on your experience. Make sure you always build in a little bit of a “fudge” factor to account for sudden price increases from manufacturers and retailers.
Cost of Labor
Next, you will want to determine what you should charge for your own labor. This can be a bit tricky because most of us tend to undervalue our own worth. We might feel a bit embarrassed to try and charge too much for our own time, and we tend to lowball our hourly rate. This is a big mistake.In the United States, minimum wage averages between $5.00 and $8.00 depending on where you live. This is the minimum wage allowed by law (although there are still a few states with no minimum wage), and it is designed to protect those who are working in jobs that require very few skills. Unless you are a horrible quilter, your skills as a craftsperson are worth considerably more than minimum wage.
So, at a minimum, your time is worth at least twice as much as minimum wage, and my feeling is that you should be charging three times minimum wage. Your skills have been honed over years of practice, and you are a professional quilter. If one of your clients could make the quilt you will be supplying, they would do so. Don't ever undervalue your time.
To come up with the total hours making your quilt, track your time over three or four quilts to get an average amount of time it takes to make a certain style of quilt. Once you've done this with a few different sizes and styles, you will pretty much know the average time it takes to make these quilts (just write it down and keep it in a safe place so you won't forget).
Fixed Costs
Now that you have your material costs, and have a good feel for your hourly rate and the time it takes to complete a quilt, you need to figure in some of the other costs associated with doing business. These include advertising, accounting, bank fees, insurance, transportation charges, and office supplies.Most of these are regular monthly charges, and you will have a good feel for the average per month (bank fees, accounting, insurance, gas, office supplies, etc.), but many people get stuck on the cost of advertising.
If you are just starting out, you may have to take a guess at this figure. In many industries, advertising budgets run from 5-20% of total revenues. Based on your projections from your business plan (you do have a business plan, don't you?), take a look at you projected annual income, multiply by 10%, and then divide that number by 12 to get your monthly advertising budget.
When you add up all of these fixed costs, you will have a pretty solid understanding of what your business will cost you every month whether you sell any quilts or not. But, for your pricing purposes, you want to come up with a rough guess of how many quilts you think you'll make that month, and divide your fixed costs by this number. Depending on how many quilts you make, this figure could be unusually large (if you're making a small number of quilts), or just a small extra charge for your clients.
You'll have to make a determination as to how much of this overhead you will charge your customers, especially when you are just starting out. At this point, you'll either be just building up your client list, or you'll still be working out the kinks in how quickly you can produce your quilts. Over time, you will get better and faster, so you will be able to produce more quilts in the same amount of time.
Pulling It All Together
Now that you have your three components of my pricing model – Material, Labor, and Fixed Costs – it is time to combine them and come up with the price of your quilt.
First, take all of your material costs. Depending on how you work – whether you produce a lot of the same types of quilts or whether you work on a commission basis – this may be an average number (in the case of the former) or a more exact number (in the case of the latter). If your material costs were $100, and you build in a fudge factor of 20%, your material charge will be $120
Next, add up all the hours it took to produce the quilt. Let's say that minimum wage is $5.00 in your area, so you want to make $15 an hour for your quilting. If it took you 20 hours to create your quilt, the labor charge will be $300.
Finally, your fixed costs are roughly $300 a month. If you think you can make 5 quilts a month, your fixed costs per quilt are $60.
The Final Bill
Material Charge: Labor Charge: Fixed Costs: TOTAL COSTS:
In this example, you would charge your customer $480 for the quilt.
Now, in most cases, you will need to do a little bit of research in your market to see what the going rate is for the type and size of quilt you are making is. If the going rate in your area is $300 for this type of quilt, you may have a problem getting $480 for this quilt.
What you need to do, in this case, is either figure out a way to reduce some of your costs – either make the quilt faster, reduce the cost of materials, or cut down some of your fixed costs – or come up with a reason to get a premium price for your quilts.
This can be done by increasing the perceived value of your quilts through the use of creative marketing. By simply being the first to tell the tale of how your quilts are made using traditions handed down from generation to generation, and using only the finest fabrics, you can charge more for a similar quilt than your competition.
I'll go over some of the tactics for getting a higher price for your quilts in another article. Until then…
Happy Quilting!
If you have any questions about your quilting business – whether just starting out or looking for a boost with some solid marketing or business advice – feel free to send me an email at chuck@quiltingbusiness.com.
Chuck Smith is the owner of QuiltingBusiness.com, the web's only site dedicated to helping you make money with your quilting. Visit QuiltingBusiness.com today to sign up for the FREE email mini-course: “7 Unique Ways to Make Money with Your Quilting.”
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