Friday, March 11, 2016

Pricing Your Work

Figuring out how to price one's work can be a daunting process because of the many, many things to consider. Feelings and philosophy often factor in for many people. For example, some artists feel that the money angle takes away from the artistic integrity of their work. Other artists feel like working unfettered from the trappings of any sort of business work helps their creativity remain free. These philosophies can take many guises: “I just want to make enough money so I can keep buying supplies;” “I could never charge what this is really worth, and expect that someone would buy it at that price;” “I'm just a hobbyist; I don't really need to make money;” “I do this for fun and relaxation, and if I worried about the business angle, all the fun would be sucked right out of it.” But how many times have I also heard someone say they wished they could make a living doing their art? Whenever I hear this statement, I feel a little sad for the person. Are they really doing what they were put on the earth to do? How powerful would we all be collectively if more of us lived our lives using the gifts the creator gave us to our very best ability? Would we treat each other a little nicer because we were happier? Would the cultural “affluenza” so prevalent, so damaging to the planet be alleviated? Would more people feeding their creativity be turned into creative problem solving for the world's increasingly (seemingly!) complex problems? Would the world be a better place, ultimately?

It's important to admit to one's self that if you are saying that the business of art doesn't apply to you because you're only in it for the joy of creating, then why are you selling it? Why not give it away -- that's the most joyful thing you can do! But if you are at any level and selling your work, the fact of the matter is that a pricing formula that works, i.e., that results in profit can be achieved – but this requires that the artist deal with the business of art, and that means figuring out how to set the price for your goods. Each artist decides for herself, but if one chooses to ignore the basics of pricing, it is doubtful that artist is breaking even, and is more likely losing money. I myself ignore a couple of things, and some leeway exists for putting my head in the sand on a couple of items, but it's at the “price” of something else, and I know it. Knowing is important because it allows for flexibility, balance, AND keeping your creative juices flowing in a business. And quite frankly, if you are selling your work at any level, you ARE in business, no matter how you define your position on the artistic spectrum between hobbyist and professional. You ignore the pricing issue at your own peril.

I am first and foremost an artist, and I think I can be most helpful in discussing pricing by doing it from that point-of-view. Entire college degrees in business and pricing exist. I have not had any of that category of formal education, and my pricing process comes from my own research and experience – nomenclature may suffer from this point on if your specialty is business! But if you're an artist, especially a glass bead artist, most of this will be somewhere on your radar.

So, I've heard that a lot of us have an hourly rate – I've heard anywhere from $1 per minute, or $60 per hour down to about $45 per hour. But pricing is a factor of TWO things: direct costs and indirect costs, and it can be difficult to corral those indirect costs and attach that to the price of of bead. Many glass bead artists sell spacers and their lower priced beads at a loss because of this, but then do they make that loss up when they sell other more complex beads? Probably not, because they only charge a flat hourly rate and unfortunately pricing is more complicated than that. Take the example of the lowly spacer bead – you can make sixty of them in an hour, right? If you sell them at $1 each, then you're making your hourly rate, right? Yeah, but you're not making a PROFIT, and we'll get to more on this in a bit. Regardless if you do them 5- or 6-up on a mandrel, you've still got a lot into a single spacer bead before and after you make it. And that is the same approximate amount or percentage whether you are making a spacer or a fancy focal. Every bead you make has a fixed cost attached to it BEFORE your hourly rate kicks in. The hourly rate AND the fixed costs must somehow be calculated and factored in to the price if you want to be “in the black.” And before I go much further I want to clarify what that means to me as a working artist who pays her bills and makes her living from her art.

How to figure out what belongs in the fixed costs category and what belongs in the hourly rate category, and why bother? Well, it's good to bother because it makes the difference between profitable and breaking even, or heaven forbid, operating in the red. And just to define what profitable means to me: it means I've made enough money to pay my salary that pays my personal bills such as the mortgage, the groceries, the maintenance on my car, the doctor bill, new glasses at the optometrist, etc. Profitable does not mean “in the black” by a few bucks – that's closer to “breaking even.” Profitable means you are in the black to the tune of making a living and paying your bills – business bills AND personal bills. Profitable means you have enough to live on. And it doesn't really matter if you are lampworking as a hobby or as a business. Profitable is profitable.

Things to consider when pricing your beads ...

Before you make a bead you have an area where you work, which I call my studio and that takes up the spare room in my house. In my studio, I have furniture dedicated to facilitating my work from tables and chairs, to bookshelves and drawers. I use a portion of my electric bill to run everything from the lights to the kiln to the oxycon to the T.V. Or radio. I pay business property tax on most of this stuff.

I also have the equipment I use to make the beads: torch, kiln and digital controller, oxycon, regulators, propane tanks, hoses, tools, mandrels. I also pay business property tax on this stuff.

I also have the raw materials from which I make the beads, and I have the tools and equipment and materials to finish the beads after I've made them. Business property tax is a factor on some of this.

I have stuff that helps me sell the beads I make and keep track of it all for myself and for the various government entities, such as a computer, digital camera, printer, office supplies, advertising supplies such as business cards, and even more furniture to keep all that stuff in. When I sell at a show I have display material and props, wear and tear on my car, time spent traveling to and from, setting up, tearing down, and selling for the hours the show is open. I have hotel, meals, booth and electric fees, and boarding my dog while I'm away. Business property tax is a factor on some of this.

Furniture, equipment, tools, cars all have a lifespan and need to be maintained and replaced from time-to-time. I need to be profitable enough to buy a new car when the time comes, or replace an out-dated computer that's crashed, or replace the relay in the kiln. On and on. If any one of these things breaks down I am out of business until the situation is rectified. It's also advantageous to be a good citizen – pay the taxes on your profits, like business property taxes, and income taxes, self-employment taxes and so on. Then you can get a car or house loan when you need one, your credit report looks good if you're trying to rent a space, and you contribute to your own social security.

Each studio is unique, but there is commonality: you must calculate your indirect (non-billable) operating costs and then factor those in ON TOP of your hourly studio rate. It's easy to ignore the many, many items within this category in part or in whole when pricing one's work. Too often pricing is based on what the person doing the pricing perceives as “what the market will bear” with the idea that the she will raise her prices once she gets business. My feeling is that you will get exactly what you aim for. People who purchase based on low prices only will NOT become loyal customers when you raise your prices; they will shop around for someone else with prices lower than yours. And if you are one of those folks presenting the argument that business stuff like coming up with prices sucks the life right out of your creative soul, try being unable to sell your work at rock bottom prices because that's the lowest common denominator of what “the market will bear” and see if that gives you a boost in your creativity. Creating is about balance, and in my opinion, if you want to be successful, one foot needs to remain in the real world.
So by now you're wondering why you can't just fold all this into one neat hourly rate, and I return to the lowly spacer as an example. The unbillable cost of making a spacer is exactly (or almost exactly) the same as making a fancy focal. It doesn't matter how many of 'em you can make in an hour if you are selling them for less than their fixed cost. You are then selling your spacers at a loss, which only works if you make ALOT of other fancier beads and sell them at a price that factors in the hundreds of spacers you are selling at a loss. I would point out that you still need to know how much you are losing on the spacers and lower end beads to figure out how much extra to charge on the higher end one. And what about all the other types of beads you make? If you don't factor in your fixed cost for them, your profit margin is thinner than you realize. Maybe another way to put it, and the way I think about it is that before I make any single bead, there is already a minimum price associated with making the bead, spacer or focal. If you want to be a successful, profitable artist, enthusiastic about your artform and your work for years to come, it behooves you to figure out your fixed costs/overhead, your hourly rate, and then price your work using this knowledge. No matter how economically you run your studio, no matter whether you consider your studio paid for (it's never completely paid for), no matter if you're doing it for fun, every bead “costs” you something to make it over and above your hourly rate. Here in the U.S. You cannot make a spacer that costs less than $1 to make and my assertion is that it's closer to $2 these days.

The internet is a great place to find specific information that will help you out – start by searching “overhead vs. hourly costs” and that will get you started.

A final and maybe most important consideration in pricing and cost might fall under the category, “your money or your life.” By this I mean that our bodies, our lives are finite as well, and I'm not getting any younger for sure. For example, lampworkers, especially beadmakers are particularly vulnerable to several repetitive motion injuries, not limited to carpel tunnel. Do you really want to spend the commodity of your finite body and health underselling your beads at a loss because you don't want to deal with the realistic work of figuring out accurate pricing? What is the cost of that on your creative psyche? Do you want to race for the top or race for the bottom? Harder to race for the top, but fewer people there to compete with. Again I say, you get what you aim for. I hope to be beadmaking or making stuff for a couple more decades at least, but I can see that I'm not getting out of this alive so my goal is to be able to keep at it for as long as possible. Being paid fairly for my work, exchanging money for my life fairly goes a long way toward my longevity.