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Originally Posted by
ajda
It's a useful formula, Peter, and for an established professional probably not hard to apply. But for someone who's learning, it may have to be tweaked considerably. First, because a relative amateur with little track record may find it harder to win buyers' confidence, make sales and build that track record if they try to charge the same prices as the pro. Second, because items involving new techniques are likely to take longer and result in more wastage than tried and tested "production work".
OK, so if you have as nominal £10/hr rate, then take twice as long as you think it ought to, you adjust either the time cost or the hourly rate accordingly. Still applies. You can't raise your prices easily if you've done your earlier pieces as loss-leaders (and loss-leaders have no place in luxury goods markets).
BTW - James will tell you the x2 (keystoning) retail cost is low for some places.
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I use a similar kind of formula as a starting point, taking into account materials, time and investment/growth/development, as you suggest, but I often then adjust final prices as I think fit to suit my market. Occasionally, particularly with a new or experimental design, my hourly rate would add up to very small peanuts if calculated strictly according to the formula - on the other hand, if the customer is covering my basic costs and a little more, then I'm effectively getting a load of research and development for free.
If you're not incorporating all your basic costs then you're not getting the R&D FOC, you're paying for it.
Part and parcel of this kind of work is that there is a cost for experience too - the old joke about the guy with the hammer who sorts out a machine with one tap, then charges £500 for it. "But you only hit it once" "£1 for the tap, £499 for knowing *where* to tap it".
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Regarding devaluing work by underpricing, that's a thorny issue. Yes, undervaluing your own work can definitely backfire on you; and being sensitive and respectful to others with whom you are sharing a platform (in all aspects, including pricing) is important; but in an open and free market, if one person wants to value their time at £3 an hour, another at £30 and another at £300, who's to say they can't? Provided you can justify yourself to yourself, your customers and those around you who may be directly affected (not indirectly, simply as competitors in the wider market), then pricing is entirely your own affair.
If you devalue the market as a whole by assisting in creating the impression that handmade work is cheap then you are doing everyone a disservice - and it is extremely short-sighted. You may get sales in the short term, but trying to work with more expensive materials, or more advanced techniques later on and you'll have trouble trying to charge properly then. It's a problem I've seen in the handmade knife market too - hobbyists who charge £50 for a knife because that covers materials costs, yet have spent 10-20 hours on the thing.
Again, in this specific case with the exhibition - I *am* one of the people who is there to say they can't charge £3/hr. There are hobbyist, part-time and full-time jewellers exhibiting - there has to be some cohesion on pricing structures or it becomes a race to the bottom.
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PS - If money were the only object, we might all be flipping burgers or stacking shelves, or training to be lawyers/accountants/etc, but there are all kinds of other reasons why people choose to be self-employed and/or pursue creative work.
Absolutely. I am a case in point on that. But the justification I was given yesterday about "needing cashflow" rather falls foul of that ideal.