The price of your product will define your business, yet one of the most difficult things as a product Designer-Maker is to price our work! We want to find a price that pays us fairly, while competing with the cheap, mass produced, factory made products that surround us. Unfortunately, there is a large proportion of customers that are yet to realise that if a product is cheap, it usually means someone (or something) is being shafted. There is a restless interplay about how our business can be competitive but also survive. I’ve written this blog to share with you the pricing strategy I use and how it’s become my mantra for other parts of Priormade and Prior Shop. This is just based on my own experience and certainly isn't the only way to price your work! Just to say that at the start ☺️
Handmade products
Handmade products are made with more care, consideration, time and higher quality materials. Nowadays many customers appreciate this comes at a cost, but with us scrambling around with different pricing strategies (or no strategies at all) and all using different production methods and techniques, our prices wildly vary.
Every designer/maker’s pricing strategy is their own individual choice and should never be queried or judged - because unless you’re making it yourself, you don’t know how long that item has taken to make, the cost of the materials used or their individual overheads.
The point of this blog is to help those that feel lost with their pricing strategy and also for those who feel bitter when shops take a commission. If you find yourself feeling annoyed that shops are taking a ‘cut’ then you’ve got your prices wrong and you’re not paying yourself for your own selling time!
Covered in this blog:
Your pricing needs to sustain your business and allow it to grow. If you price your products at a loss, over time your business (and you) will crumble and fall. On the flip side, whilst we all want to be paid a fabulous wage, we also have to think about our customers’ expectations and how our work is priced against other products and brands that are similar. It’s about finding that balance.
Patricia from the Design Trust once told me at her ‘How To Create A More Profitable Business’ workshop in 2018 that your time should be a 40:40:20 split. The moment Patricia said this everything changed. It’s one of those moments that I can recall the lighting in the room, what I was wearing and almost every random detail. It was a eureka moment! Up until this point I had really struggled to work out how to price my work and didn’t feel confident when talking to customers about it. I felt nervous to disclose the price because I wasn’t 100% sure if it was ‘correct’. I was nervous because I hadn’t worked it out and had guessed what it should be.
Patricia explained it like this: your time should be divided into equal amounts of making and selling, with a little bit of admin. I thought... this isn't just about my time management; this actually reflects what my products should cost.
I remember Patricia saying that selling is just as important as making your work. If you spend all your time making, then how will you earn any money if you’re not selling it? And when you are selling it, who is paying for your time? This needs to be factored into the price.
If we were looking at a working week that would be 2 days making, 2 days selling, 1 day admin. If this was a month, it would be 12 days making, 12 days selling and 6 days admin (and so on). When your business grows and you take on staff, then you can also think of it like this, 1 full-time person making, 1 full-time person selling and 1 part-time person for the admin.
In other companies, would you expect the receptionist, graphic designer, website developer, marketing manager, sales assistant, administrator, cleaner etc to work for free? This time needs to be calculated and factored into your pricing.
Now this part of your retail price should cover every aspect of making your product. How I work out my 40% is adding together the base cost of manufacturing (time and expenses), a small profit which helps my business grow and a proportion of my fixed overheads.
First of all you need to get your base materials as absolutely low as possible without changing your ethics. Usually this means buying in bulk (perhaps pairing with another business?), minimising waste and being more efficient. If you don’t lower your material costs, your retail price will be much higher, which could outprice a lot of your customers.
Next, you will need to work out your time. I pay myself £10 an hour to make my work. Again, this is individual to you. I know my products will only work within a certain price bracket and I am happy with this amount per hour. The main trick here is to make in batch, and be as efficient as possible, so you can make the most of each hour. I set a timer for when I start making each stage and work it out via a spreadsheet.
So, I’ve made a batch of 50 vessels. I’ve timed each stage and worked out the materials and components for each part (including the packaging and business card). Now I work out 20% and add it to the spreadsheet. This 20% contributes to my fixed overheads (lighting, energy, machine elements, wifi, insurance, damaged products, new tools, waste management, accountant, website fees, memberships, to cover sick days, and all other business-related things).
You can also work this out your proportion of field overheads by adding up all of your overheads per year and dividing it by 365 to get your ‘fixed overheads day cost’. Next you work out how many things you can make in one day and divide the ‘fixed overheads day cost’ with how many products you made that day.
Confused!?..... For me, my fixed overheads will change depending on what product I’m working on and I find it difficult to work out. So, I include 20% which covers all of the above and a little bit of profit. We all need a bit of profit to grow, otherwise we wouldn’t have the money to develop new ideas and spend time on unpaid research and development.
You need to factor in your time selling your work. Whether it’s at markets, trade shows and events, or hours on Instagram, Facebook, Pinterest and Google. The costs associated with your time and expenses building your website, being interviewed, photographing your work and everything else you do to get your products out there! There is a shopping funnel of customers on different stages of their buying journey, and apparently customers need to see your work seven times before they actually purchase! Selling and marketing is so important! If you are not factoring this time into your prices, you need to - because who is paying you for it?
As with all businesses, we are surrounded by paperwork, email chains and to do lists. Admin. Ugh. The word that makes every creative soul squirm. Unfortunately, it’s completely unavoidable and we need to manage our finances, write/chase invoices, answer emails and enquiries, research and order materials, develop ideas and all the other annoying and overwhelming tasks of running a business. This is still in your work day so your product price needs to cover this too.
Here is my example:
Retail price
£4.80 Product cost (40%) / £4.80 Selling cost (40%) / £2.40 Admin (20%) = £12 (100%)
Something else I’ve learned over the 10 years of creating my products is choosing a retail price isn’t permanent. It’s not a decision you have to make once and never again. Prices of material fluctuates and naturally your expenses will rise. As long as you work on the above formula then any changes you have to make will be minimal.
I’m not sure it’s the correct name, but something to also consider is the product teaser. This is a product that might be made at a loss BUT it is that hook that gets people into your brand. Many companies have these types of products. For me it’s my Mini Geo Vessel. I barely break even when I sell these but they are great little gifts and - almost always - those customers return. Some products you might have a higher profit margin on, while others you don’t.
When a shop sells your work, they are taking all the ‘selling cost’ off your hands and even most of the admin. They are doing all of the marketing and promoting, they are managing all of the sales and customer conversations. They are gift wrapping and shipping your work for you, they are paying staff to use social media, write your product descriptions and blogs to advertise your work. They have huge overheads, staff costs and insurance, and are open come rain or shine. They have busy periods and quiet periods but all the while, they are showcasing and selling your work for you. Most of the time customers will find you online after seeing your work in a shop. Also, larger shops are likely paying 20% VAT from every sale and are unable to claim this back from the non-VAT registered Artists/Makers they support. For example if a shop takes 50%, they might only be taking 30% for their overheads because they are not inflating the prices for the customer and are instead absorbing the VAT themselves.
For years I thought shop owners were just plain greedy. I always felt bitter that they were taking such a huge cut of ‘my hard work’. It wasn’t until I started selling in larger shops and attending trade shows I realised what mark-up price shops expect. Over the years I've attended many workshops and then, when opening my own shop PRIOR, I realised how much time and money (literally blood sweat and tears) goes into keeping indie shops open. I am so grateful to every single independent shop that has stocked my work, now, in the past and in the future.
So, price your work properly! Pay yourself to sell your work so you are not bitter when shop owners sell your work for you. Allow your business to GROW!
I’ve taken this mantra into my pricing strategy and also in my appreciation for shop owners 🧡
- Beck
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We have left the EU and we do not have the free movement of goods anymore. This means that every single package that crosses a border will be strictly checked. To continue to ship internationally it is important to have a strong and clear shipping strategy.
This guide will hopefully take you through what you need to do to send your parcels smoothly.
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UPDATED: 30/06/21 includes IOSS
It’s probably really important to mention straight away that I am not a Royal Mail, Government or any other Trade representative. I created this guide with my own research in hope that it helps other people in the maker community. All of my research is based on sending from England, Scotland and Wales; there might be different information for Northern Ireland.
Hello, I am Beck and I am a designer and maker of my own business Priormade and also the owner of a retail shop called Prior Shop. Priormade, is a modern and eco homewares brand and Prior Shop is a creative hub of 45 other modern eco brands. Both my businesses ethos is to sell beautiful, functional products that are made as responsibly and as sustainably as possible.
I send my products to customers all over the world and was really struggling to find information about post Brexit shipping. I have a Royal Mail and UPS business account and between my account managers, online research and spending hours on the phone I pieced all of the information together myself. I shared the information via an info-graphic in February 2021 on Instagram. I couldn’t believe how many people were just as confused as I was…
We have left the EU and we do not have the free movement of goods anymore. This means that every single package that crosses a border will be strictly checked. To continue to ship internationally it is important to have a strong and clear shipping strategy. It is our responsibility to ensure that we have everything in place so our packages go through customs quickly and smoothly. If your parcel hasn’t got the correct documents it can get lost, returned to sender (at a cost) or even destroyed! Having the correct documents means your customer can also challenge the customs charge if they feel it has been incorrectly given. I know it seems really daunting at first but once you have this all set up, it’s actually super easy!
As there is no free movement of goods from the UK to the rest of the world, the customer will have to pay Import Tax. This amount varies from country to country. If you are VAT registered, all online sales and exports between the UK and EU/Rest of the world are now Zero VAT. This means that you do not charge the customer VAT at the point of sale, but they pay a Customs Tax of a similar amount on delivery.
So in theory, if a customer is purchasing from a VAT registered businesses the price increase is only small as they've purchased it 20% cheaper but are paying that 20%* on delivery. However, if you are a smaller business that isn’t VAT registered, unfortunately the customer will still pay your full retail price (which is technically Vat free) and the Import tax on top; making your product at least 20% more expensive.
We have various options to post to the EU.
1. DDU - Delivery Duty Unpaid
We are currently posting Delivered Duties Unpaid. This means that when the customer orders online, they are not charged VAT. When the parcel arrives at the destination county's boarder, the customer is then charged VAT, a customs charge (if over 150€) and a handling fee.
2. PDDP - Postal Delivery Duty Paid
Lots of couriers including Royal Mail are working on a service called Postal Delivery Duty Paid (PDDP) . This is where you (the seller) calculates the EU VAT and custom charges at checkout. The customer doesn't get any extra charges and the parcel is delivered smoothly. You pay Royal Mail the EU VAT and they pay it for your. They hope to launch this in July 2021.
If you need help calculating the VAT, you can integrate a 'cost calculator' such as Aura from Hurricane .
This is great if you small and irregular volumes of sales to the EU, and also great for goods over €150
3. IOSS - Import One Stop Shop
IOSS is like PDDP as the customer will pay the VAT at checkout and the parcel doesn't obtain any customs fees. It is only available for orders under 150 €. It is an EU system and you (the seller) must register for EU VAT via setting up IOSS Identification number.
3. a - Setting IOSS independently: To create an IOSS Identification number, you will need to register for EU VAT using an independent EU-established intermediary. You can then set the tax charges for each country within your online shop (*Shopify allows you to do this). This means that the customer will be charged the rate for their country at checkout. You will collect the payment and then are required to submit monthly EU VAT returns. Within Click and Drop you will save your individual IOSS number alongside your EORI number (more about that below). You cannot do this at the Post Office, it must be electronic via Click and Drop.
*If you have set up an IOSS ID independently please let us know how you did it in the comments below. This option seems like a lot of paperwork for small businesses.
3. b - IOSS through an electronic interface: To make life a little easier, you can sign up via a platform such as Taxamo or Deloitte who manage everything for you and you use their IOSS number in your shipping data field (Click and Drop account).
Costs: Taxamo charges £2 per parcel (great for people sending less Thant 3000 parcels to the EU a year) and Deloitte (for larger businesses) which requires a £2000 yearly fee! Taxamo doesn't currently intergrate with Shopify though but are working on it!
3. c - IOSS through an online marketplace: If you sell via Etsy, NOTH, Amazon, eBay etc, they are your 'interface portal'. They automatically charge the customer the EU VAT and then pay the EU VAT for you. They have their own IOSS number for you to add ti your shipping data field in your Click and Drop account. If you use their postage labels then they include the number for you! If you sell via an online marketplace and your own website, then you need to set up a separate IOSS for that Trading Name on Click and Drop.
Cost: Fees are taken through each sale plus 10%. It is not available for orders over 150€.
If you have charged EU VAT at checkout, you MUST include a correct IOSS number via Click and Drop/ other postal service. If it isn't a registered IOSS ID the customer could be charged VAT again at delivery as customs will not know that the VAT has been paid.
*PLEASE BE AWARE- IOSS is not mandatory! You can continue to sell via DDU and the customer pays the charges on delivery. I am personally continuing to post to the EU and making sure my customers are clearly aware of the pending charges before I post. I think I will then use Taxamo for orders under 150€ and PDDP when Royal Mail launches this in July.
* You do not have to be UK VAT registered to register for EU VAT.
* Orders over 150€ you cannot use IOSS for and the customer is responsible for VAT or you use DPPU when Royal Mail launches that in July.
Larger parcels: For larger orders, sign up to CSM logistics. They work with UPS and Parcelforce to ship larger parcels. I posted a large 10kg parcel to the EU, it took 4 days to arrive and I (the sender) was sent the invoice for the Duty and Customs charges. The booking form isn't particularly user friendly but the CSM team are available to help via email/phone.
For more information on the Royal Mail website click here and for Royal Mail IOSS click here.
Parcels under £270 need a CN22 and over £270 a CN23 form. These can be filled out manually at a post office or automatically via Click & Drop.
It's a legal requirement and essential that you truthfully and accurately declare the items being sent.
It’s all very well having the CN22/CN23 but if it isn’t correctly submitted electronically, there will be issues at the boarder. We all want to support our local Post Offices but unfortunately some Post Office staff are not filling out the electronic customs data correctly and parcels are being detained, returned or lost.
I personally recommend using Shopify and sign up to Click & Drop. By using Click and Drop, your CN22 form is submitted electronically. If shipping regularly to the EU, I would recommend using both of these platforms to make your life so much easier!
SHOPIFY
On Shopify you can save the HS code and Country of Origin within each product.
CLICK & DROP
In Click and Drop you can save your business name and address, your EORI number and Country of Origin in 'Settings - Customs information'. This will be imported to your CN22 along with the product name.
UPDATED: 15/06/21
When creating the postage you then have two options:
1. Add a further description (something you can't do on a manual CN22), the individual weight of each product in the package and the HS/Tariff code (copy and paste from Shopify/record).
OR
2. If you click on the PRODUCT tab in Click & Drop, you will see a list of your products if you have integrated your website. If you haven't integrated, here you can add each product with all the relevant customs information. This means every single time you have an order, all the information will be exported into your CN22 automatically.
As with all post there might be delays and things lost. I choose to send orders tracked (including international) to make sure I can find where a missing parcel is in the system. You can also see if it has made it to the destination country and if it’s delayed because the customer hasn’t yet paid the custom charges. Also there are benefits like sending items that are otherwise restricted (see below)
Right now, all items under 22€ are exempt. However this will change on the 1st July 2021 and all items will be subjects to Import Tax.
Orders between 22€ – 150€
Orders over 150€
There is the Import Tax 17 – 21% and courier handling fee, plus a Customs Charge. I believe the average customs charge is around 5% but this varies depending on the country and the product.
It’s always a great idea to email your International customer to make sure they have read your shipping policy. Make sure you have a clear shipping policy on your website!
Each country has their own restrictions and some will only let certain products over the border.
France for example are very strict. You can’t send perfumes, aerosols and liquids over 1L. It also seems there is a limit on jewellery, glass and glassware, and wooden articles too. Yes Sweden has hardly any restrictions at all! If you have a business account and send the parcel ‘International Tracked’ you can bypass some of the restrictions. Germany for example you can send aerosols with a business account.
To check if your goods can enter the destination country, see the Royal Mail guide here .
If you are shipping to a business to resell like a shop or gallery it is called EXPORTING, you must also include in an envelope or clear wallet on the outside of the parcel:
PREFERENTIAL TREATMENT: Something people are not often aware of is that goods with a UK and EU origin have a zero tariff for customs duty. VAT still applies but clear documentation will mean the importer will not have to pay the extra Customs Duty on orders over 150€
If work is being used for a temporary event and ALL of the work will be returned, you can fill out a form to declare it as a temporary export. This means you do not have to pay import fees when it is returned back to the UK. You can fill out the form here.
I’m not sure how this works with SoR because if some of the work is sold, parts of the original order will be missing so the temporary export might not be valid. I’ve tried to research this but haven’t been able to find the answer.
As long as goods are in the same condition and not altered in anyway, the customer should clearly write RETURN TO SENDER on the package and pop it back in the post. You can decide whether you send them a prepaid label or if they are liable for the return postage cost. When the parcel is re-imported, the business (you) can apply for Import Duty Relief. You have three years from export to import to apply. Images, proof of postage and proof of sale will be needed.
You can fill out the form here
There is some government funding to support businesses through this transition. To find out if you are eligible click here
Business west run various courses to help people in more depth. View what they have available here.
I hope this information has been helpful. As I mentioned to start with I am not a Royal Mail representative and I do not have all the answers. All of this information is online in various places but I've just pieced it all together. Everything I've written above might change so please always check with the courier you are using and the gov.uk website to find out more information.
If there are any edits or information that needs changing, please leave a comment below! I appreciate the feedback.
I created this blog in my spare time in hope it helps my fellow small business owners. I would be so grateful if you could head over to Priormade and Prior Shop on Instagram and give them a follow. Perhaps have www.priorshop.uk in mind for your next gift purchase? I would be so chuffed!
Happy shipping!
- Beck Prior x
I spoke about this LIVE with Nicki from Pedddle & Tresstle - watch it here
If you are a member of the Craft Festival's 'Find A Maker', you can watch a full presentation with Q&A’s over in their Business School.
Helpful links
IOSS:
Country Guidelines:
Other links:
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