Thursday, January 15, 2009

How much do you charge?

I recently came across an article written by Teri of S&T Creations. Teri asks "Are you really adding in ALL of your costs?" The article in it's entirety can be viewed by clicking here. Below is a copy of Teri's article as well as my response. Any thoughts that you have are encouraged to be posted, especially from those artist that do a lot of shows. Please leave your comments on my blog.

Preface: While Teri clearly realizes how expensive it is to actually have a beading business, like so many others in the industry I am not sure that she has completely crossed over from having a "Hobby" to having a full fledged business. As with any business you will incur start up costs such as tools, storage materials, equipment, advertising etc.. It is my feeling that these things should be written off as business expenses when filing your business taxes. Teri is trying to find a way to compensate for these expenses, and rightfully so, but she is thinking of passing along those expenses to her customers rather than writing them off as I believe she should be doing.

Teri Writes:


"I still struggle with pricing my work, something that I think many designers, particularly new ones, have a tendency to do. Until we gain confidence and truly appreciate the value of our work, we can miss some things in our calculations. So, I tried to write a list—WOW, was I surprised. Here are some things you may not consider when you are putting a price tag on a piece of jewelry.


TIME (not the time it took you to actual design and lay out, make and finish the piece but the following)





a. Time in research, writing and entering your blog articles


b. Time preparing your set, taking, editing and uploading pictures of your item


c. Time writing your listing, the description, creating tags, shipping plan


d. Time prepping an item to ship: gather package, wrapping, thank you note, any gift or coupon, postage and return address/mailing address


e. Driving to and from post office to drop off, pick up packages


f. Time maintaining your inventory, if you enter that in a software program, manually in a ledger, if you create labels, etc.


g. Time searching, buying and paying online for your components & supplies


h. Time driving to and from and while you are at bead stores and shows


i. Time filing sales tax, keeping receipts and preparing all that for taxes each year


j. Time preparing and submitting booth entry or jury entry for a show


EXPENSES



a. Domain costs for your webpage, possibly a web hosting cost, maybe you use a web developer too

b. Camera for photos, lights and possibly a light box


c. Storage of your components: cases, files, shelving, boxes, binders, plastic tubs

d. Books, dvds, tutorials, subscriptions to magazines, any websites you subscribe to

e. Equipment and tools you’ve purchased (and what you store them in), your beadboards, props for your photos

f. Your calendar, scheduler

g. Cost of the designs you made for YOU—you are an advertising billboard of your own work

h. Cost of items you do make for gifts

i. Broken beads

j. Your computer, printer, paper, ink, and software

k. Cost of internet connectivity

l. In home office cost: space, utilities, filing cabinets, closets, telephone

m. Business cards, signs, posters

n. Booth costs: table clothes, skirts, displays, price tags, bags

1.Your costs for the show—food, drinks, lodging, travel

o. Mileage to everywhere mentioned above

p. Booth and Show entry fees, jury fees, fees to enter bead shows

q. Cost of all classes you’ve taken

r. Any consignment costs, or hostess arrangements you may also have for shows

“Other, Miscellaneous Things”


a. Those “orphan” beads left over from a design but not enough to make another


b. Beads you purchased, then later realized you didn’t like them and don’t use


c. The small “leftovers” from your supplies—that extra 6 inches of cord, wire, beadalon, tigertail, etc that you can’t do anything with except throw away


d. The items already in your home and garage that also support your business, maybe you use your microwave, or your stove, or tools from the toolbox, toothpicks, clothespins, needles or pins, scissors, twist ties, sealable bags, notepads, fingernail polish, sandpaper or emery boards


e. Cost of any repairs you were asked to make, or adjustments to length, change out clasp or switch from pierced to clip-ons, etc


f. Any thefts you might have had at a show (hopefully not, but things do happen)


g. Any items that become broken when packing and setting up/tearing down from a show


Even with this list, I didn’t count for personal “costs” such as time away from home because you have a show to do, or just how tiring packing, setting up, tearing down and putting away everything can be from doing a show, and those very intangible items that we all make choices about when we book an event.


I hope you found some new things to consider. Feel free to comment on anything else I’ve forgotten!! Teri"



My Response:


This is a very well thought out article, however I think you must consider are that you cannot pass along all of your expenses to your customer. Some of these things are the natural part of having a business such as your web site, storage compartments, tools, software, etc. The reward for having these necessary items is the eventual sale of your product.

Let's just say that you were to pass along these charges. Over what period of time are you factoring in those charges, or for how long? A storage compartment (plastic) can cost $1.00. Over how many pieces of jewelry (or other items) are you factoring in that $1.00? When the $1.00 has been compensated for, do you then lower your price?

In my humble opinion, these are business expenses and should be written off as such when you do your taxes, not passed along to your customers.

One of the first things I did when starting this business was to look on the Internet for the average hourly rate for the profession of a jeweler in my state. Then I factored in my experience and education and selected the rate that I thought was fair for myself and my customers. Over the past 3 years I have given myself a raise :-D

Therefore, the "cost of the classes you've taken" as you mentioned, should already be factored into your established hourly labor rate.

I have a program that allows me to keep inventory, calculates the cost of each bead, design a piece, and then it automatically calculates a proper selling price for that piece (wholesale, direct, and retail). I simply set the parameters for my markup in each category (which in my case is relatively low compared to the market), and my hourly labor rate and the program does the rest.

I see the blog writing and article writing as necessary self promotion and I don't factor charges into my designs for that, because if I were to do "professional" advertising or hire someone to write would cost a lot of money.

Many people also use free web pages available to promote their business such as Myspace, Facebook, and other free blog pages. This eliminates hosting fees. And, while the competition on Etsy is vast, it is definitely the cheapest place to sell your items for those without a shopping cart integrated into their site.

If you truly want to make it a business then you should incorporate, which is also pretty inexpensive. If you do a lot of shows where you feel that theft is a problem you should consider insurance that would cover your losses, and perhaps breakage, etc. I have never done this myself because I don't do shows at this time, but I imagine that this is possible. Some locations may even offer insurance (and if they don't perhaps they should start!)

You wrote: "e. Driving to and from post office to drop off, pick up packages"

Did you know that in most areas, if not all, that USPS will pick up items from your home for free? Their packaging is also free and can be ordered over the Internet and will be delivered to your home or business. (This obviously eliminates your driving time to and from the PO, your mileage, and the use of gas)

"b. Beads you purchased, then later realized you didn’t like them and don’t use"

You cannot charge customers for this. This is was your judgment. I suggest gathering all of your miscellaneous things that you don't want, putting them in a nice container with partitions, and selling it as a starter package (older tools, extra beads and findings, extra cord or wire). You might not recover all of your costs, but it is better than leaving them to rot.

This is EXACTLY how I started my "hobby". I purchased someone's leftovers on Ebay just to see if I would actually like beading and 3 years later I have a beautiful website and really enjoy my small business.

Also, if you don't already, try purchasing from a reputable place like Firemountain Gems, who has a "No Questions Asked" return policy on their items. If you buy something and don't like it, return it. It's that simple.

"Cost of Internet connectivity"

This is something else that you shouldn't charge for, as you would probably have Internet connectivity without your business. However, even if the Internet was strictly being used for your business, all of these things (like the use of your microwave, electric, or certain areas of your home) can be written off as business expenses when you file your taxes. If you dedicate let's say 15% of your home to your business, as long as you can prove this you should write it off. If you are not familiar with how to do this then you can consult an accountant (and probably find FREE information on the Internet).

Therefore, there is no need to pass these charges along to your customers because they are business write offs.

Thank you, and I hope that I have also given you some insight! Best wishes always...

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Started as a hobby, Isabella's Beads is owned and operated by me, Mariealena Calabrese. After realizing that beading was more of a passion rather than just a hobby, I wanted to share my creations with everyone. I recently gave birth to my first child, my daughter Isabella Rose. I started Isabella's Beads with the hope that when she grows older she will have a successful, reputable business for herself. One thing I pride myself on is the fact that I am committed to outstanding customer service. 100% satisfaction is guaranteed! I hope you enjoy your jewelry as much as I enjoy making it.