Thoughts on Paying Yourself by the Day

This video showed up on my facebook feed last week, and I shared it on the TDS Facebook page, and I haven’t been able to get it out of my mind since.

How have I never heard this before? Do you know how long I’ve been doing this? Maybe if I’d gone to art school?

I love how simple he makes pricing work for sale. It’s got me rethinking the prices I’d been playing with for the upcoming Tiny Dino Soapworks. Especially since I’ve already been working on how I would batch my oils for soaps and body butters, etc. to save time spent measuring oil for each new product.

Let’s play with some theoretical numbers for a moment, shall we?

If I wanted to figure out how much to charge for a bar of soap, the first thing I do is figure my cost of materials. Say a 10-bar batch costs $15 to make, including packaging. That means cost of materials on each bar is $1.50. If I were paying myself by the day, and could theoretically make 30, 10-bar batches of soap in a 10 hour day, that means I could make 300 bars in a day. That means I would pay myself .$60 per bar, raising total price of the bar to $2.10.

This is far too low. Selling your soap for that little will run you out of business, especially if you’re making closer to 3 batches of soap a day. (If you’re at a point where you’re making all 300 bars, I hope you’ve scaled up from a 10-inch mold!)

If I were to figure the price hourly, still paying myself $50/hour, I still get the cost of $2.10/bar. However, if I figure the pricing model I proposed in Why You Need Wholesale Pricing First, this number would be my starting point, and not my end point. My wholesale price per bar would be (rounding up) $4.25, the retail price $8.50.

Those are numbers I am far more comfortable with for recouping expenses.

If I were still selling handspun yarn, I would never be able to sell it using this method. I could probably spin one, maybe two skeins of yarn in one day, unless I was doing super chunky stuff. That means 1 skein would cost roughly $275. Usually, I was lucky if I could sell the yarn I spun for twice the price of materials at around $50.

For soaping and spinning, I’m not sure this model works, even though I consider those artisan crafts. However, for woodworking, for sewing, I could see how it could work very well.

What do you think? Which pricing model works best for your handmade business?

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