PLACING A VALUE ON YOUR BEARS
Placing a dollar amount on your bears can be one of the most difficult aspects of the bear making/selling process. There are many different rules that have been established and, of course, exceptions to those rules. I will try to give you some of the formulas established as "industry standard" and let you pick those which suit you best.
First of all, a word to the beginners who are not trying to make money: If you are going to make bears to give as gifts, by all means do so. If you are going to sell your bears just for fun (in other words, not to make money or support a business) keep your prices within the range of the other artists with comparable merchandise.
If you feel you are ready to sell your bears, get some other opinions. Check with your friends and family and ask for their criticism. Also, ask for the opinion of someone in the business; there are many bear artists out there and most would be happy to look at your bears and let you know what they think. If you'd rather not hear any outside criticism, go to the shows and visit the endless number of artist websites; look at the bears and compare the quality of your work you're your own. Be honest with yourself. If your bears are not put together as well as most of the bears out there, then make some more. Work on making your noses, ears, eyes and muzzles even; comb all the fur out of the seams; don't let the stitches show on your seam closings etc.
Once you have established in your mind that your bears are comparable to what is out there in the bear market, be confident in your work and stand firm. It is common for beginners to under-price their work. Remember, you have already established that your work is worth just as much as the other artists out there. Just like any industry, there is status attached to brand names; the identical bear made by an artist just beginning may not sell for the price that one made by a well established, well known artist. But, on the average, there is a standard price average that even the new artists should keep close to in order to make it worth their while and keep the industry, as well as their own personal business, at a profitable level.
Initially selling at a relatively low price to cover your "mohair habit" is perfectly acceptable. A good starting point for beginning artists is to sell to family and friends via word of mouth at a lower price to build your confidence and get your bears out there. However, if your bears are good quality and you rent a booth at a bear show and are selling your bears for $40 and the artist at the booth next to you is selling comparable bears at the more standard price of $120, you may not make that artist particularly happy. If you choose to under price your bears, remember to respect the artists that are trying to make a profit.
There are several factors to consider when deciding on a price for your bears.
1.Cost of Materials.
2.Overhead costs.
3.Your time.
1.Cost of materials.
Most artists calculate the materials at full retail price even if they get them at a discount. This gives a bit of a cushion and allows for material price increases or if the artist ends up paying retail for something in a pinch. This also covers the situation where the customer wants to request a certain fabric etc. The artist does not have to eat the cost of purchasing something at retail for a special request. Customers appreciate consistency in your prices.
Materials used per bear generally consist of the following:
-fabric used (including paw pads)
- eyes
-embroidery floss & thread
-joint hardware
-stuffing
-clothing & accessories
-tags & labels
-packaging & shipping/delivery costs
The overhead costs are things that you use in connection with your business that many people forget to take into consideration when pricing each bear. The easiest way I can think of to calculate the overhead cost ³per bear² is to calculate the total overhead cost for an average month and divide it by the average number of bears you sell in a month. For example, if you pay $80 for phone & electric, $40 in advertising and $120 in travel expenses in a month, your total monthly cost for overhead is $240. If you sell an average of 5 bears per month, your overhead cost per bear is $48. This is quite a large chunk of money if you forget to calculate it in!
Overhead costs generally consist of the following:
- utilities (internet costs, phone, electricity)
- advertising (magazine ads, brochures, photography, website costs etc.)
- travel (show expenses, hotel, gas, airfare etc.)
- maintenance (computer, sewing machine)
- bookkeeping (accounting, taxes etc.)
Add the time it takes you to create each bear. Begin from the point you start tracing the design onto the fabric to the point you add the last hangtag. You may also want to average in the time you spend designing the bear. Keep in mind that a lot of the final calculations do not take into consideration the full amount of time that it actually takes to create a bear, but calculating the time accurately will give you a much clearer idea of how efficient and cost effective your business is. Also, remember that the time you spend will decrease as you become more efficient; and as a result, your business will become more cost effective. If you pay someone else to do a portion of your bears for you, don't forget to add their time into either time, overhead!
Take into consideration the following when calculating your time:
- designing
- tracing & cutting
- pinning & stitching
- combing out seams
- turning & jointing
- stuffing & closing
- face & finishing
- accessorizing
Selling to Stores or Wholesale Representatives.
Stores generally want to buy your merchandise at the wholesale price of 50% of what they will retail it for. They need to cover the overhead of running the store or in the case of wholesale representatives who may do shows for you, table rent, travel expenses, etc.
Doubling the wholesale price can make artist bears sold in stores or by your representatives pretty expensive. In order to help the sale of these bears, many artists make a separate line of bears that they only sell to their wholesale customers. This way, the bears they sell on their own (which the artist can retail for less) are not competing with the bears their representatives are selling in the stores.
Here are a few formulas used for calculating a retail price for your bears. The credit for these general guidelines goes to a number of different artists.
I will use this simple set of numbers with all the methods of calculation to show the comparison:
Calculated for a 12 inch bear.
Retail Materials Cost: $40
Time: 6 hours @ $8/hour =$48
Overhead: $35/month divided by 5 bears per month = $7 per bear
Formula #1 Double (some say triple) your cost of materials and add your time (hourly rate X hours it took to complete the bear). Add an additional 5% or 10% to this figure to compensate for your overhead. This is the minimum wholesale price you should get for your bear. Most retailers will double this price. Ex. $80 + $48 = $128 + 5% = $134.40 wholesale. $134.40 X2 = $268.80 store retail.
Formula #2 Material cost X5. This is the minimum retail price you should get for your bears sold directly to your customers. Material cost X3. This is the minimum wholesale price you should get for your bears sold to stores. Ex. $40 x5 = $200.00 for your retail customers. $40 x 3 = $120.00 wholesale for your stores who will then double that and retail for $240. store retail to their customers.
Formula #3 $10 per inch. This is a general standard for a minimum wholesale price for your larger undressed bears. (Miniatures cannot be priced this way!) Ex. $10 x 12 inches = $120.00 wholesale minimum charge for stores. $120 X2 = $240.00 retail minimum for customers. If you use this simple pricing formula, don't forget to add for clothing and accessories.
Formula #4 Add material cost + your time + overhead per bear. Add 25% to this figure. This is the wholesale price you charge the stores. Ex. $40 + $48 + $7 = $95 + 25% = $118.75 wholesale for your stores. $118.75 X2 = $237.50 retail for their customers.
As you can see by these four formulas, the end prices using each one are fairly close. When deciding how to price your bears, compare the prices you come up with using each of the above formulas to other comparable bears. None of these are a precise method of pricing, they are just meant as a general guideline. Feel free to make up your own formula! These examples give a guideline for both a wholesale and store retail price; when the artist sells bears directly to the customer, the price generally falls somewhere in between the two. Use your judgment , compare to other bears and take your target market into consideration when deciding exactly where that price should be.