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Pricing for sustainability and resilience

 
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When I started selling handspun yarn on etsy, there were so many million other shops doing the same that it was really hard to get going.  But today when I search "handspun yarn" on Etsy, I only get 12,398 results.  How things have changed.  And it got me thinking about sustainability in small cottage industry.  

This is a bit of something I wrote for a different site.

However, I do take time into account when pricing.  

  • material costs
  • cost to get material to my place
  • time to create (what it would cost to hire someone to do this)
  • packaging (this is things like labelling and measuring - not the shipping packaging, that's separate)
  • time to package

  • Basically, if I can get the materials for cheaper or do the work myself, that's awesome.  But I'm also very concerned about resilience and sustainability in pricing.  If I have a huge custom order and I break my arm or my main supplier runs out, how much would it cost to create the item if I bought the supplies at regular price and hire someone to help?  

    That gets me to my wholesale customer price (which until this year was my bread and butter).

    On Etsy, I put the standard retail markup (which is really important to know for your industry) on my item to bring it inline or a touch higher than the same item in the brick and mortar stores.  I want to encourage customers to support local stores and I'm happy to have fewer Etsy sales if it gets people buying local.  This is a huge part of my branding.

    So time is taken into account, but I haven't paid myself a wage yet.  But since I own the company and I don't need the wage to eat (yet), I like the idea of having more money to grow the range of products I can make.  I have no idea if this is going to be a good business model or not because my understanding of budgeting is excessively basic:

    1. don't spend money you don't have.
    2. the money coming in has to be a bigger number than the money going out.
    3. there will be unexpected expenses, keep a buffer in the account for emergencies.

     
    pollinator
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    Location: New Brunswick, Canada
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    I think you need to factor in labour as much as you can, though I know it can be really hard.  My experience with sales and sales prospecting has led me to believe that you should charge a healthy margin where you can.  As you raise your prices you will have fewer sales, but it can often be more profitable and provide better cash flow.  There's a sweet spot that optimizes profit.  I also firmly believe that you need to factor in lost opportunity costs somehow.  The upshot to me is that you rarely go wrong by picking a high number.  The reality is that it's very hard to capture all the costs, especially with multiple ventures so err on the side of more.

    I'm currently struggling with this with pricing my eggs.  I tried to factor in labour by assigning a cost of $10/hr for things.  My landed feed cost alone per dozen eggs is $2.64, accounting for gas and labour but no wear and tear.  Factoring replacement and infrastructure costs, I'm at $3.10/dozen.  If I sell them for $4, I make about $4 an hour on the weekly care.  At $5 a dozen I can make about $9/hr on the weekly care.  This doesn't take into account what I think I could make on the money I've got invested if I used it somewhere else.  It also doesn't really take into account the risk involved in keeping livestock.  I feel strongly that I should be able to get $5 a dozen, but I live in a rural area and that may not be true.  Many people sell them for $3-3.50 a dozen.  Walmart, though, is $3.69 a dozen.  At the gas station they're $5 and they sell out all the time.  Factory eggs.  

    I think the market supports $5 a dozen for my eggs.  This is what I think matters most.  I think that you should always charge what the market will bear and keep evaluating what enterprises make you the most and least money.  I think, in general, that people are scared to charge too much for their skills, especially in art and farming.  I hope that one thing that comes out of this pandemic is a realisation of the importance of local food sources and food sovereignty, especially in government.

    I think I'm going to sell the eggs for $5 a dozen.  I think they're worth every penny and, right now, I think I would rather give away any extra than take less than $5.  Effective marketting.  

     
    r ranson
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    how much would the eggs cost to produce if you had to hire someone to look after the chooks, collect the eggs, sort and wash them, for a few weeks?

    If you broke an arm or two and needed help about the farm, could the eggs pay for that help and still break even?
     
    Timothy Markus
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    At $5 a dozen I could theoretically pay someone $10 an hour for all the ongoing labour.  Finding someone to do it, though, would be difficult.  As I scale up, if it's profitable, I should be able to cut out some of the labour per dozen, so that would build in profit even if I have to pay someone.  
     
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