One of the most difficult aspects of selling your own embroidery is knowing how to price it. Determine the cost of your embroidery by adding up all the costs you incur and the profit you want, then re-calculate your embroidery price appropriately to suit market conditions.
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Part 1 of 3: Determining Prices by Calculating Costs Plus Profits
Step 1. Calculate the cost of the materials to make the embroidery
The most important cost you have to calculate is the price of the materials you use. Make a list of all the materials needed to make embroidery and the price for each of these materials.
- The fabric you embroider and the thread you use to embroider are the most obvious materials, but you should also take into account all the beads, patches, and other embellishments.
- If you are framing this embroidery, the cost of making the frame must also be taken into account.
Step 2. Determine the cost of your labor
You will have to pay yourself for your time, especially if you plan to sell embroidery in a legal business.
- Determine the hourly wage rate. If you want a low embroidery price, use the applicable minimum wage rate.
- You will also need to record how much time you spend on each sheet of embroidery or the average time you spend doing the embroidery.
- Multiply the number of hours worked for each embroidery by the wage rate you choose to determine the labor cost of each embroidery.
Step 3. Determine the indirect costs you have incurred
Indirect costs refer to the amount of money you have already spent running your business. The term you can use for these costs is "operating costs."
- Keep a record of all the equipment you use and the annual costs associated with this equipment. This fee includes the cost of buying or renting an embroidery machine.
- Keep a record of all the costs you have incurred to run your business for one year, including business license fees, office space rental fees, or web pages (if any).
- Calculate the number of hours you worked during the past year and divide the costs that have been incurred in the year by the number of hours worked during the year. The result of this division is the operating cost per hour.
- Multiply the hourly effort cost by the number of hours you worked each stitch to determine the cost of each embroidery. The number you get is the operational cost figure you need to calculate the selling price of the embroidery.
Step 4. Enter the associated costs
These costs are costs incurred when you make a plan to sell in a certain place.
- This fee is not always there, especially if you sell your embroidery online.
- If you plan to sell your embroidery at a craft fair, you'll need to add up the cost of renting a tent, travel expenses, and all costs associated with this special event.
- Count the number of items you want to sell at this exhibition.
- Divide the total cost associated with the number of products you want to sell to determine the cost per product. This figure is the one you need to know to calculate the final selling price.
Step 5. Determine the amount of profit
If you want this embroidery business to grow, you have to determine the amount of profit.
- If you want to keep this embroidery business as a small business, your labor costs can be considered as an advantage. So you don't need to calculate profit separately for this option.
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If you want to develop this business as a source of income, you have to calculate the profit that is greater than your labor costs. Add up all your business costs (materials, labor, operating costs, and related costs) and multiply by the percentage of profit you want.
- A 100% profit percentage will break even your business by covering all your expenses.
- If you want to increase your business costs, multiply these costs by a larger percentage. For example, multiply your total costs by 1.25 if you want to earn 125%. In this way, you can get back all the costs you have spent plus a profit of 25%.
Step 6. Add them all together to determine the price
Calculate your total costs by adding up the costs of materials, labor, operating costs and related costs. Add the benefits to these costs too.
The result of the sum of these numbers is the selling price of your embroidered product
Part 2 of 3: Determining the Selling Price Considering Market Conditions
Step 1. Determine the point of sale
You should consider where to sell your embroidery and the clients you want to offer. The price of the item you are selling should reflect the following factors:
- If you want to sell your work at a craft fair, do some research on who the regular visitors are. Visitors to craft fairs held at schools or at churches usually have less budget than customers who come to exhibitions at boutiques or to corporate fundraising events.
- If you only sell online or in-store, consider the type of embroidery product you have and how you market this product. Clothing that is uniquely embroidered and sold in boutiques will sell for a higher price than clothes with a mass-produced logo embroidered sold through relatively small websites.
- You can lower the selling price of your embroidery according to the point of sale and prospective buyers by lowering labor costs, reducing the profit margin percentage, or using less expensive materials. You can increase the selling price by increasing labor costs, increasing profits, or using more expensive materials.
Step 2. Pay attention to competitive conditions
The selling price of your embroidery should be within the same price range as competitors' prices. Adjust the selling price of your embroidery again if needed.
- If you set a selling price that is too high, competitors will make you lose your business.
- If you set a selling price that is too low, potential buyers will not appreciate your product or think your product is of poor quality, and you will still lose your business.
Step 3. Increase the value of customer satisfaction so that you can increase the price
If you want potential buyers to be convinced to buy your product at a slightly higher price than competitors' prices, you must be able to offer an offer that makes them believe that your product is of better quality.
- Make an interesting plan. If your design is more beautiful and more unique, potential buyers will consider your product to be of higher quality.
- Customer service is another aspect that you should consider. If you want to do your best to satisfy customers or provide them with products made to order, they will think that buying your product can provide a more enjoyable experience than shopping for someone else's.
Part 3 of 3: Determining Prices with Other Considerations
Step 1. Put a clear product price tag
Customers usually prefer to buy products at prices that are non-negotiable and easily visible.
- If you are selling products at a craft show or physically stocking your products in stores, you should put a price tag on the front of the product and in a position that is easily visible to customers because they usually won't stop to ask for the price of your product.
- Likewise with every piece of embroidery that you sell online, you must provide clear price information because many customers do not want to contact you to ask for the price of the products you offer.
- If you sell bespoke embroidery, prepare a price list that clearly states prices for standard products, must be ordered specifically, and so on. Put up this price list so it's easy to find, and sell your product at the price listed to maintain your credibility.
Step 2. Provide options
Offer a wide selection of products to prospective customers by listing prices that match their purchasing power.
- For example, you can sell an embroidered sheet of the finest material that is done with great care at the highest price. Also do embroidery with the same design and use slightly lower quality materials so you can sell them at a lower price. Offer these products together so that customers who cannot afford a higher price can choose the same product at a lower price.
- If a customer wants to order embroidery, but the quality they are asking for does not match the price listed in the price list, propose a price reduction by reducing production costs. Tell them the amount of the price reduction if you reduce your choice of colors, stitches, or reduce the embroidery area.
Step 3. Offer incentives and discounts wisely
Special offers can be a great way to attract new customers and keep existing ones interested again, but they are not reliable.
- Special offers should only be used for a short period of time. You can provide special offers by buying one get one and promotions with prizes.
- Incentives for loyal customers must be carried out for the long term. For example, give out cards for loyal customers, discounts for giving referrals, and discounts for regular customers.
- Also offer a fixed discount on the basis of the purchase amount. For example, if the price of an embroidered bag is IDR 250,000,00 and the cost of making these three bags is only IDR 600,000, 00, determine the unit price of this bag after discounting to IDR 225,000, 00 so that you can still make a profit.
Step 4. Be confident
After you determine the selling price, rest assured that you have made the right decision and let potential buyers see your confidence.
- Make eye contact and speak clearly when you are dealing with customers. Do not apologize for the price of the product you have set.
- Showing confidence will foster confidence. If you are confident in the pricing of your product, your customers will judge that the price is reasonable and you understand well the intricacies of your business.
- If you just mumble and look unsure, customers will assume that you're offering embroidery at a higher price than it should be. They might not even buy or try to bargain at a lower price.
