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May 2010

Pricing Your Work - More Variables that Count but Don't Include Math

This ASK Harriete post is part of an ongoing series of posts about pricing your work.

The final price for selling your work needs to take into account several intangible variables. 

A few variables that come to mind include:

  • Reputation of the artist (covered in the previous post)
  • Perceived value
  • Media bias
  • What the market will bear.

They are all inter-connected but I will try to offer you some examples below and in the next post.

Harriete Estel Berman April Flower Brooch is purple, pink and blue.
PURPLE blues Flower with lute center
April Flower Pin © 2010
recycled tin cans, sterling silver
Artist: Harriete Estel Berman
Photo Credit: emiko oye
Own one of my flower pins.

Perceived Value   Have you listened to the podcast from the Professional Development Seminar program titled, Not Just Another Pricing Lecture: A Dialog About Pricing Your Work? The subject of Perceived Value came up when Andy Cooperman was talking about a pair of earrings. He said that in the end, despite calculating a price he should charge to cover his expenses, when he took the pair of earrings to a gallery, the gallery would decide whether the earrings would sell at that price.

Bruce Baker continued the thread of the conversation with the illustration that it didn't matter how long a student spent on a certain pair of earrings....that a pair of earrings with "so and so styling" and in a specified metal will only sell within a particular price range. It didn't matter how long it took to make this pair of earrings.  Figuring out the Perceived Value is mainly experience, ongoing market research, or sometimes intuition.

Unless you are truly breaking the boundaries of materials, techniques or reputation, you will be subject to comparisons with similar work in a similar material and in the price range of a particular market.

Harriete Estel Berman Flower pin in brillian yellow orange with black says Grand Slam in the center.
Brilliant April Flower Pin © 2010
recycled tin cans, sterling silver
Artist:
Harriete Estel Berman
Photo Credit: emiko oye

Media Bias
Media Bias is what I call the fact that people will pay more for gold vermeil (a fancy name for gold plate) than sterling silver, as one example, or favor gold and diamonds over jewelry made of non-precious materials. This has nothing to do with your pricing formula.  It is more a Perception of Value (see above) by the consumer.

Media bias occurs in more traditional fine art mediums also. For example, oil paintings usually command higher prices than acrylic.Taking this one step further, fine art media such as painting commands an irrationally higher price than craft. Glass often sells higher than other craft media.

Artists and crafts people can decide to ignore this Media Bias and work in their choice of materials.  Or perhaps we need a movement for change, but this media bias has a long way to go before it disappears.

HBerman_redorangeWheat_flowerW
Red April Flower Pin Wheat © 2010
recycled tin cans, sterling silver
Artist: Harriete Estel Berman
Photo Credit: emiko oye

IN SUMMARY: In my experience as an artist for over thirty years, the variables of reputation, perceived value, media bias, and what the market will bear affect the actual selling price of your work whether that price covers all your expenses or not.

Francesca Vitali wrote a paragraph about her experience speaking at the Professional Development Seminar. She titled her speech, "The non-exact science of pricing", and said, "I’ve been a scientist for the most part of my adult life and as such I believed there is a formula for everything. WRONG! Being an emerging artist proved to me that pricing my work is indeed a non-exact science. There is no unequivocal formula, but there are important guidelines that can help."

The next post continues this discussion about pricing variables and the marketplace. Does the location affect the perception of value in the marketplace?
Harriete

P.S.In case you missed it over the past few weeks ASK Harriete has covered several issues involved in pricing your work. We have discussed Overhead, Overhead Labor, Mistakes Made by Artists in Pricing Their Work, along with a Pricing Formula Based on Your Tax Return and much more. You can find all this information in the left hand column on ASK Harriete. Look for the category titled: Pricing Your Work.

You can listen to the podcast recording of our speakers Question and Answers with the audience from the Professional Development Seminar, Not Just Another Pricing Lecture: A Dialog About Pricing Your Work


Pricing Your Work - Variables that count but don't include math (a serious pun)

This ASK Harriete post is part of an ongoing series of posts about pricing your work.

Understanding how to price work based on your expenses and the hours invested in your work is essential, but the reality is the final price for selling your work needs to take into account several intangible variables. Many of them were mentioned in the recorded discussion with the audience during the Professional Development Seminar, Not Just Another Pricing Lecture: A Dialog About Pricing Your Work . You can listen to the podcast recording of our speakers Question and Answers with the audience.

What I am saying is that, despite all your calculations to figure a price that includes all your expenses, you may be able to charge more or less than the calculated price!

Today we will talk about one variable - reputation of the artist, maker or company.

Harriete Estel Berman April Flower in mulitple colors says: Past Present Future is the size of a real flfower.
Mulit-color April Flower Pin © 2010
recycled tin cans, sterling silver,
Artist:
Harriete Estel Berman
Photo Credit: emiko oye

Reputation
The reputation of the artist/maker/company may impact pricing significantly. Perhaps this is the most important variable. We see this all the time and accept it to some degree. We know a designer fashion will cost more. Or a super famous artist commands higher prices.

Reputation can be based on the number of shows or museums that own the artist's work. A well regarded gallery can also help establish the reputation of the artist and support higher prices. Perhaps an exhibition that shows the artist's work or books and publications can help establish a reputation.

ChuckCLOSE. I just saw a Chuck Close painting on Antiques Roadshow (right image) that Chuck Close sold for $8 to cover his rent in junior college. Now it is worth an estimated $100,000 - $150,000! That is what reputation will do for you.

Reputation is not just established by the gallery or museum world. Consider Thomas Kinkade, "the world's most collected living artist."  Essentially the work is mass produced commercial images, but Thomas Kinkade has an established following. He has taken his artwork and turned it into merchandising note cards, collectible plates, to Thomas Kinkade housing developments. People love Thomas Kinkade. 

Or how about David Yurman as a jewelry example. Mass produced, conservative jewelry with amazing marketing that now includes fragrance and eye wear.  In my opinion, many more jewelers make far more interesting work at a fraction of the price, but David Yurman is very successful at promoting a reputation for his work and the retail prices it commands.

The prices of all these examples are based on reputation. It is up to you to establish and develop a reputation for your work. Your reputation can be local, statewide, national or international but it will help support and eventually develop a higher pricing structure.

Harriete
View my Judaica


Pricing Work by Anne Havel - Applying Your Tax Return Information to Pricing Your Work

Anne Havel, a former accountant and Chief Financial Officer, is writing as a Guest Author for ASK Harriete. In this third post she continues to apply her financial experience to help artists and makers price their work. Read the previous two posts as prerequisites for this post. 

Pricing Your Work - The Three Most Common Mistakes Made by Artists When Pricing Their Work

Pricing Your Work - Use Last Year's Tax Return to Figure Out the Money You Need to Earn From Your Business

2009 jas pin the road more traveledgr
The Road Less Traveled
enamel, sterling silver
Artist: Anne Havel.

Note: The opinions expressed by the author,Anne Havel in this post are hers and hers alone, and do not necessarily reflect the opinions of ASK Harriete or Harriete Estel Berman. No endorsement or refutation is intended or implied.  

After reviewing the previous post, use the same example numbers to make a couple of simple calculations. 

First, let's calculate two percentages and then apply these to pricing work. Take note that we are calculating percentages of target revenue:
 
Direct Materials ($10,000/$80,000) is 12.5% of the revenue target.

Indirect costs (indirect materials at $5,000 + overhead at $15,000) is $20,000.
And indirect costs ($20,000/$80,000) are 25% of the revenue target.
 
That's it.  Now, let's apply this information.

PRICING EXAMPLE
If we are making a piece and the direct materials cost $50, what should the selling price be?

Many people think it costs them $50 to make it, so anything slightly over $50 would make a profit -- but that is a huge fallacy.  As calculated above, direct materials are only 12.5% of the revenue target.  Over the course of a year, indirect costs accumulate and must be covered in the selling price.  And your personal expenses need to be factored in, as well.  So let's use a little of the algebra we learned in high school.    

Direct materials are 12.5% (calculated above) of the revenue target.  Use the equation: 12.5% of X = $50 and solve for the selling price "X."  So, the piece needs to sell for $400 wholesale. 

Wow! The math is simple, we just need the right numbers.  

Make the formula work for you.
Use your tax return to obtain your personal numbers and calculate your own percentages and use the formula. 

Anne Havel

HEB2.72gr FROM THE PEN OF Harriete:
Thank you Anne for your insights.  This certainly highlights how underpricing can be avoided with some simple math. It is very important to understand how to arrive at a realistic pricing structure so you know if you are making money.

While, the example is illustrative don't forget that Anne Havel arrived at the wholesale price which now needs to be doubled (or more) for a retail price.

It also assumes that everything made during the year is sold during the year to generate sufficient income. Unfortunately, most of us are not selling everything we make in the current economy. We might have to increase the amount of time in promotion and marketing (which increases our Overhead Labor), and making more work or making work faster is not going to give us revenue if it doesn't sell.

Harriete
www.harriete-estel-berman.info


Pricing Work by Anne Havel - "Use Last Year's Tax Return to Determine What You Need to Earn From Your Business

Anne Havel, a former accountant and Chief Financial Officer, is writing as a Guest Author for ASK Harriete. In this second of three posts, Ms. Havel applies her accountant experience using last year's tax return to calculate how much money you need to earn for calculating the price of your work. The first post with Anne Havel is Pricing Your Work - The Three Most Common Mistakes Made by Artists When Pricing Their Work.

 

2010 rings prison cell series
Rings from the Prison Cell Series
Sterling Silver, enamel,
Artist: Anne Havel

Note: The opinions expressed by the author, Anne Havel in this post are hers and hers alone, and do not necessarily reflect the opinions of ASKHarriete or Harriete Estel Berman. No endorsement or refutation is intended or implied.  

FROM THE ACCOUNTANT PENCIL OF ANNE HAVEL:

Here's the nutshell education of how to look at pricing your work.  Use last year's tax return as a guide because it summarizes an entire year's expenses.  If prepared properly your Schedule C provides a wealth of information.

Artists and Makers are always thinking "time and materials" since it may seem that's all we've got.  The time we invest in producing everything in the studio may be the primary driver, but there are many more considerations.

STEP 1.  Track direct materials cost.  Take your total for the year and divide by the total number of pieces to get an average cost per piece.  [Note from Harriete: This method works if you make relatively similar items throughout the year.]

STEP 2.  Keep track of your hours of direct labor in each piece.

STEP 3.  Account for your Overhead. This has several components.
    a. Indirect Materials.  These are materials used by most projects-- drill bits, burrs, files, small tools, wax, blades, paints, canvas, paper, solvents, brushes, tape, wood, nails, screws, chemicals, etc.
    b. Overhead Labor.  How much time do you spend on your business but not producing any specific piece/artwork?  (Most people way underestimate this number. Be honest with yourself. Even if you can't pay yourself for every hour, at least, understand how much time you are investing in your Overhead Labor.)
    c. Overhead Expenses.   This includes other business expenses such as telephone, Internet service, studio rent, office supplies, photography, mailings, travel, etc. 

STEP 4.  Know your personal life expenses.  This is what you need to live on. It is the sum of all your personal expenses not related to your art business.  This is also the amount that you must cover after you pay all your business expenses. Please remember that taxes, if you owe any, must be in this number each year.

HavelEarringshalf full
Half Full Half Empty Earrings
Sterling Silver, Enamel
Artist: Anne Havel 

NOW THAT WE HAVE OUR NUMBERS...
Start with the number in STEP 4, your personal life expenses, as the beginning.  Let's say it is $50,000.
This is what you must make in addition to all your business expenses.

Then add total material costs in the pieces sold last year.
Let's say that's $10,000.

Now, the tax return (from last year) should also give us the total indirect materials and overhead expenses. And let's say that's $5,000 for indirect materials and $15,000 for overhead expenses.
That is another $20,000.


Add them all together and you have $80,000. This is the full amount of revenue that we need to generate to stay afloat.

Let's re-examine this more closely to make a critical point.  The sum of all our business expenses ($10,000 + $5,000 + $15,000) equals only $30,000.  But you need to generate $80,000 to stay afloat! 

It is now obvious that a pricing formula that only includes "time and materials" will fall short. So how do we factor that other $50,000 into our pricing?  That will be the subject of the next post.
Anne
 

BermaidLady72gr
Bermaid Pin © 2010
Recycled Pin stem, sterling silver
Artist: Harriete Estel Berman

To the readers of ASK Harriete: I know Anne Havel thinks this is all quite straight forward, and an easy, simple description for how to price your work, but I am feeling overwhelmed already. No wonder accountants spend years learning accounting. The next post will start with our annual expenses for " pricing our work" by Anne Havel. 
Harriete  

 


Pricing Work - "The Three Most Common Mistakes Made by Artists" by Anne Havel

Anne Havel, an accountant and Chief Financial Officer in her past life, is writing as a Guest Author for ASK Harriete in this and the following two posts about pricing your work.  Ms. Havel gives her accountant perspective beginning with the three most common mistakes that artists make when pricing their work.

AnneHavelPerspective
It's All Perspective -Prison Cell Series
Sterling silver, enamel
Artist: Anne Havel

Note: The opinions expressed by the author, Anne Havel in this post are hers and hers alone, and do not necessarily reflect the opinions of ASK Harriete or Harriete Estel Berman. No endorsement or refutation is intended or implied.


THE THREE MOST COMMON MISTAKES made by artists when pricing their work by Anne Havel.

MISTAKE 1.
Artists rarely remember to consider all the time they cannot work on their art or craft because they are working at shows, applying to shows, traveling here and there, buying and/or scavenging materials, etc.  They only consider their direct labor in the piece/artwork.  If you work in gold and multiply your material costs, that can be a little forgiving, but many of us do not.

MISTAKE 2.
Artists are not keeping track of what they spend.  Artists tend to be very carefree type people so they don't pay much attention to these things. Perhaps yesteryear when art sold and one could make a good living, it didn't matter so much. Not true for many of us any longer.

MISTAKE 3.
Artists in all media are not talking to each other about pricing.  It seems taboo because people think it's all personal stuff when this is part of our business education. When we under price, we hurt each other and the arts community as a whole. We need to educate each other about the value of our work, despite imports.  We also need to get on the "buy local" bandwagon.
Anne

FROM THE PEN OF Harriete: In the next two posts, Anne Havel will offer a method for establishing a price for your work based on her financial experience. Ms. Havel recommends a pricing formula based on your last year's financial records. In the next 24 hours, dig out your accounting records for 2009 or your 2009 Tax Return, Schedule C, so that you are ready to follow along. Stay tuned!

It is important to know all your expenses when you decide on your pricing formula. On the other hand in the world of art and craft, there are several factors which a person can not calculate with a formula. These will be discussed next week after the pricing formula posts:

  • Perceived value
  • Factors such as reputation of the artist, media bias, the marketplace.  
  • What the market will bear.

Harriete


Pricing Your Work - Should I Re-Price My Work?

In response to the previous post titled, "Pricing Your Work - Without Ripping Yourself Off?" Kathryn Faulker wrote in a comment: "Thanks Harriete for all this great information. I realize that I've never even considered overhead when pricing my work. A question: Once the new pricing is figured out, should I re-price the work that's already in galleries?"

Good question Kathryn, but I don't think there are any easy answers and a ton more questions.

What to do?

Unless you are really in hot demand,  I can't recommend changing your prices overnight.  It wouldn't be prudent. 

But now that your consciousness has been raised, you should begin to adjust your future pricing formula to include overhead expenses and overhead labor.  Perhaps you can't leap into the new pricing, but you can start shifting in that direction.

In the next five days,

1) Can you add up your overhead expenses for the past year or some time period?

2) Likewise, add up your overhead labor.  How many hours you spend each week, cleaning your studio, preparing materials, working at your desk, selling at a show? Start coming up with a estimate for how much overhead labor is involved in studio maintenance. How much time is spent selling your work whether online, at a show, or managing your inventory and shipping to a gallery.

3) Then, can you rationally allocate the overhead to specific artworks? An example might be the time it takes to photograph each piece, including PhotoShop the image. If you have your work professionally photographed, then you have an out of pocket overhead expense when paying your photographer for his/her time.

Next week, I am going to suggest a couple of ways to divide up your overhead so you can add this to either each piece/item/artwork or your hourly wage.

Including the full overhead costs presents a real dilemma.  In my opinion, most of the work out there in the marketplace, whether online or at stores/galleries, is under priced....especially in comparison to a business-like pricing formula.  However, the current economy makes raising our prices rather difficult. Pricing art and craft is also dependent on perceived value and reputation, both nebulous factors.

One other major factor is that too many artists and crafts are confusing "cash flow" or "gross revenue" with "net profit."   Listen to the PowerPoint presentation and the podcast. Francesca Vitali says she arrives at a show (with no money) and leaves with cash in her pocket. The fact was that her work was seriously under priced because she included no overhead expenses in her formula.  The error was compounded because her pricing formula  did not pay her a high enough hourly wage.

Stay tuned for further explanation.

Harriete
My Etsy shop

HBerman_redorangeCheezWhiz_flowerW
Red, Orange  April Flower with red/hot pink and green dots Center has multiple layers of red, yellow, green Cheez tin, red with white lettering from cookie tin, poppy orange tin with purple kanji from Japanese cookie tin;
BACK of this pin is from Love letters cookie tin in red ,  3 5/8” ciameter
HBerman_redorangeCheezWhizBACK_flowerW



Pricing Your Work - Without Ripping Yourself Off?

Pricing remains one of the most thorny aspects for any artist or crafts person. This is why the recent Professional Development Seminar spent over two hours discussing just this issue. It was a "jam packed room" of over 350 people. The energy was high! The conversation moved quickly. 

If you are seeking a pricing strategy, listen to the SlideShare presentation with audio from our four speakers' presentations titled, "Not Just Another Pricing Presentation: A Dialog About Pricing Your Work." Then listen to the 55 minute Q & A with our speakers and the audience. The discussion was lively and informative. Find all of this information for free on the  Professional Development Seminar page on the SNAG website or the Professional Development Seminar page on my web site.

Francesca Vitali Yellow Scheller Bracelet
YELLOW SHELLER BANGLE
Recycled Paper, sterling silver
Artist: Francesca Vitali

Did you notice that "overhead" was a confusing topic? I tried to cover "Overhead expenses" and Overhead labor in previous posts.

The first revelation with bold honesty came from Francesca Vitali (one of our speakers). She realized that she was pricing her work incorrectly! She had not grasped that she needed to include overhead in her pricing formula.

Francesca VITALI Mura Trio rings on Etsy
MURA TRIO RINGS by Frucci Design
recycled paper
Artist: Francesca Vitali
Photo Credit: Philip Cohen

Francesca Vitali was making  the most frequent mistake of all emerging artists. They are not including their overhead expenses and overhead labor. Consequently, most of the work is grossly under-priced. I would boldly say that these new makers are ripping themselves off!!!

In the previous post, Pricing Your Work - Overhead Labor and Manufacturing Labor and Pricing Your Work - What is Overhead?, I discussed two umbrella categories of Overhead expenses.

In the next posts, I plan to show how you can estimate your Overhead Expenses and integrate it into your pricing strategy. Yes, I said estimate. Including your overhead within your pricing formula is always a "guess-estimate", but the BIGGEST MISTAKE is to ignore it or forget to include overhead.

Outside-studio200872
Harriete overwhelmed with overhead.

Overhead includes every expense in operating your business that can't be attributed to making one specific piece or artwork. Start today while you work in your studio and in your office. Think about how many hours you spend cleaning, organizing, preparing your materials, purchasing parts, planning your booth, packing your work, managing your inventory records, writing your artist statement, posting your work on line, or standing at a show selling your work. How many of these hours have you forgotten to include in your pricing? Are you ripping yourself off?    

Harriete
www.harriete-estel-berman.info      
April Flower by Harriete Estel Berman in yummy sherbert colors with a bold dot of coke red.
MULTI-COLOR April Flower with Soft Yellow to Aqua Greens and Red Coke


Pricing Your Work - Overhead Labor and Manufacturing Labor.

There is a difference between Overhead Labor and Manufacturing Labor.

It's really pretty simple, but knowing the difference can affect how you price your work and whether all your expenses are covered. All too often, artists and makers account for the time devoted to making the work, but fail to include their overhead labor. When you forget to include your overhead labor you have seriously under-priced your work!  

In simplest terms, Overhead Labor includes all the tasks it takes to maintain your studio and business.  In comparison, Manufacturing Labor (sometimes called, "Direct Labor") is the work that goes directly into each piece.

Harriete Estel Berman working in her office. Examples of OVERHEAD LABOR

  • Cleaning your studio (whether it is daily, weekly or yearly, it counts!)
  • Organizing or preparing your materials
  • Bookkeeping
  • Managing your inventory
  • Packing your work for shipping
  • Photography
  • Photoshop correction of photographic images
  • Filling out show applications
  • Sending out images
  • Preparing your display
  • Standing at your booth
  • Driving back and forth
  • Posting images online.
  • (This is not a comprehensive list.)

Harriete Estel Berman Shears and IRON in her studio. Examples of Manufacturing LABOR

Manufacturing labor is the time and effort that goes into each specific piece, item, artwork, sculpture, ceramic vase, painting, etc.  This is the time that you sweat or actually knit, saw, rivet, hammer, paint or design.

There may be some gray areas but you have to account for the labor somehow...unless you really don't care about being paid.

For example, if you mix a big batch of glaze, you know how long it takes to mix the glaze and how much the chemicals cost (more or less), but you probably don't know how much glaze goes on each item.  So, in this example you can estimate how much should be allocated to each piece.

Or you could add the time and material expenses into your Overhead Labor and Overhead Materials. But one way or another, you should account for all your expenses. Adding the glaze to your manufacturing cost is probably the most accurate, but sometimes it is too difficult to figure out that way.

The most important part is that you account for the full costs (including all the time and materials) that went into the making the work, including the overhead.

Harriete Estel Berman flattening TINS in her studio.
Harriete working in the studio flattening
tin cans. We all have tons of preparation before
we are ready to create.
Photo Credit: Aryn Shelander


The key point is that ALL ARTISTS AND MAKERS HAVE OVERHEAD LABOR and too many are NOT adding their real costs into their prices (e.g. costs like your time standing at a show selling work, posting work online, or packing work for shipping).  Your TIME is not free, at least it isn't free if you're in business.

Harriete EStel BErman with her Living Room filled with 39 boxes.

For a more personal example, I just spent the last two weeks unpacking 39 boxes, checking and cleaning work. I paid four part-time employees to help, plus all the hours I worked by myself. The employees are real expenses. I paid them an hourly wage, Workman's Comp, Medicare, Social Security, FUTA and more.  Even if I don't pay myself, they received checks.  That is real expense and all of it is Overhead Labor.

My goal is to pay myself...but usually, I don't sell enough.  Consequently, I use my technical skills with my silver repair business to provide more income. I dream of being rich and famous but earn money with every hour of sweat.

Harriete

PS     If you haven't listened to the PowerPoint Presentation and Podcast yet from the Professional Development Seminar this should be your next step. Not Just Another Pricing Lecture: A Dialog About Pricing Your Work is available at two locations online for free at:

It's time artists and makers understand the full cost of producing their work.  Prices should reflect all of the investment in your work.

HBerman_orangeBlue50Year_flowerW
Orange and blue Flower with Anti-aging watch.

Consider that every item you make has both overhead and manufacturing expenses.


OPPORTUNITY for SNAG MEMBERS

HBerman_rainbowPastPresent_flowerW
April Flower Brooch in multiple colors fills our artist's passion for color. The perfect gift of timeless sentiment the center says: "Past, Present, Future". This flower will never wilt.

ARE YOU A SNAG MEMBER? Don't miss this opportunity! SNAG is seeking high-quality images of jewelry and metalsmithing from current SNAG members, to consider for use on its new website.  A range of work will be selected, and we’re looking for pieces not seen in Metalsmith.   Resolution: 150 dpi at 8” x 10” is ideal.  72 dpi at 5” x 7” will also be considered. Deadline to receive images: Friday May 7.  Send to dsinger [ at] snagmetalsmith.org."

Can I make a suggestion? Subscribe to this blogs feed (in the left column). I recently added this option. It is the only way you can be sure not to miss last minute opportunities that are sent my way for readers of ASK Harriete.
HBerman_rainbowPastPresentBACK_flowerW



Pricing Your Work - What is Overhead?

During the Professional Development Seminar program titled, Not Just Another Pricing Lecture: A Dialog About Pricing Your Work, the subject of overhead came up, over and over when discussing how to price your work. 

During the discussion with the audience, there seemed to be some confusion about what is included as an expense under the term "overhead". Since most pricing calculations need to include "overhead" along with labor and materials to figure out the wholesale price, this is a significant factor.

Harriete Estel Berman flattening tins in her studio. Most artists and makers understand that their wholesale price needs to include overhead but seem to "forget" all the overhead costs that are less obvious. This is especially true if they are still working in their kitchen, extra bedroom, garage or basement. Yes, in that case, their overhead is less than if they rented a studio or storefront, but they should still include something in their pricing structure for future rent, utilities, etc. to create a realistic pricing structure. If you don't do this, your prices will be artificially low and you will never be able to put money aside so someday they can move out of the kitchen into a more business-like setting.

Harriete Estel Berman looking through her wall of tins. Here is a suggested list of expense items that are often overlooked but should be included in Overhead.  It is not meant to be comprehensive, but to help artists and makers realize that "yes", they do have overhead expenses.

Rent for your studio (if you don't have a studio, save money for your future studio.)

Office expenses: printer, printer cartridge, paper, computer, software, pens, magic markers, tape, boxes, stamps, mailing envelopes, CD, CD mailing envelopes, stationary.

Utilities: electricity, water, heat, telephone (business line,) internet access, trash, recycling.

Harriete Estel Berman working in the studio in front of her wall of tins. Insurance: business insurance, Workman's Compensation (if you have employees.)

Depreciation on equipment either for your studio, shop, or office. (This may include your camera, photography equipment, or computer.)

Shop/studio supplies  - Generally these are items that you need to fabricate your work such as brushes, drill bits, or gloves that do not go directly into a finished piece of art or craft, but are necessary expenses to keep your shop/studio running to produce new work.

Advertising: Photography, postcards, business cards, advertising,  fees for online social networking sites.

Studio benches in the studio of Harriete Estel Berman. Travel expenses: Keep track of your mileage, hotel, airfare, conference registration, and food.  (The I.R.S. allows a fixed amount per mile that changes every year. Look on line for an update.)

Exhibition and Shows: Application fees, booth fees, salary for an assistant, lights, shipping (work to shows.)

Professional Expenses: Dues, Membership, classes, magazines, books, accountant, lawyer.

Taxes: Social Security and Medicare for your employees, Sales taxes, etc.

Share some of your overhead expenses with others and list them as comments.

Next post: Pricing Your Work - Overhead Labor and Manufacturing Labor.

"....there is a difference.