I've never been a financial whiz-kid. I'm hopeless with bills and finances and taxes. Even my last job, where I had to control the project finances, ended in tears. I am financially stupid..
So when I started my second Etsy shop, I was in a quandary as to what to do about prices. So I guessed (!) the cost-per-item of the materials I was using, and then slapped a profit figure together. I figured it would all come out OK in the end. Besides, I was living my dream of making beautiful things that other people appreciated, and that should be worth enough, right?
Well, no. I've already had to adjust my postage costs, mainly due to this post which was eye-opening to say the least. Effectively I was charging buyers for the envelope and the postage, but then giving away the time I spent filling in addresses, verifying Paypal and Etsy addresses, and then standing in line at the post office three times a week. For overseas buyers I was even taking a $1 hit, as I felt $5 was way too much for overseas postage. Nuts.
So this morning I actually sat down and worked out the cost of materials per item and I suddenly could barely breath. When I joke to my friends about me now earning 50 cents per hour, it seems that is in fact what I earn. Let me explain. To make a $15 USD sunnyboy bag, I am actually putting at least $8.20 of materials in each bag, but mostly it comes to about $10. The outer fabric I use is not cheap - it varies between $36 and $44 per metre, but I buy it because it's excellent fabric, unique, screen printed and Australian. So it costs me between $6.70 and $8 for the outer fabric for each bag. The pellon works out at 87 cents a piece. And the zipper ranges in price from $1 to $1.34, depending on where I buy it.
What I haven't included in the price is the cost of thread, the postage charges for the fabric I buy, the exorbitant paypal charges, the Etsy fees, the petrol money in getting to Belconnen for the cheapest zippers, the electricity to run my sewing machine, overlocker and iron, the time it takes to measure and list an item on Etsy, and numerous other things. And obviously, I haven't included the true value of my time. From beginning to end, from ironing the fabric to actually turning it inside-out and zipping it up, each bag takes me a little over an hour.
So here's the problem. I obviously have to put my prices up. But if I do that I risk alienating potential buyers, and then the stuff doesn't well at all. I'm competing with US sellers who can get really cool fabric at dirt cheap prices (for instance, patchwork fabric in the US is about a quarter of the price it costs me in Australia). And a lot of Etsy sellers also under price their own product - for what reason, I don't know - so that it appears they are actually making a loss. That's hard to compete against!
I'm in a quandary and it's way to much to think about on a weekend that I was going to stay away from the sewing machine.
Please don't think this is a big whine. I am just getting my thoughts down in writing, and to also explain to you all that if my prices do go up, you can understand that loving the job you do is not an excuse to pay yourself 50 cents an hour.
Because I've been loving doing this. It's been the perfect antidote for what was ailing me, for addressing my frustration at not being creative enough. I couldn't think of a more perfect job.