One of the beautiful things about being self employed is that you
make all the decisions, including pricing. Often people think that
they can’t charge more for their work, they have any number of
reasons. When in reality they can. In the rare case where you can’t,
say you’re hand making zinc plated lag bolts, then you may need to
reconsider your product line or change your production methods…
A simple way to calculate your prices is to decide how much you
reasonably wish to make annually and divide that by 2000 (there’s
2000 working hours in ayear if you work full time).
Then total your overhead. Your shop rent, utilities, tooling,
consumables, travel, marketing, phone. everything. Then pad that a
little to cover unknowns. Then divide that by 2000 as well.
Add those two results together and that’s your hourly rate. Keep
track of the total time each piece takes takes you and multiply to
determine the labor portion of your charge.
Then material costs need to be totaled, marked up and added to the
labor charge. Often people use a variable multiple on materials
depending on cost. More for inexpensive materials and then less as
the cost increases. That’s a personal choice.
It’s nice to use this to determine your wholesale pricing, then
choose another multiple for retail. Often that’s double but it’s
often less (but sometimes more).
If you use your formula every time you will always make enough
money. If not, increase your rate and or mark up. Mark