Ask Harriete

Prepare for Success - Workshop for Your Quest

Looking for your path to success?

What direction do you want your work to go? What insights would you like to gain from someone with 30+ years of experience? Is your work consistent with your marketing?

 

In April, I will be teaching a professional development workshop at Revere Academy as part of their Masters
Symposium in San Francisco, CA.

Prepare for Success

April 28 - 29, 2012

 

Internet Option
If you can't travel to San Francisco, Revere Academy is offering on line participation at a reduced cost! It would be nice to see you in person, but if you need to stay at home while juggling the rest of your life, this is a way to listen in on your computer.

Webinar participants will be able to view the instructor and Powerpoint presentations in real time via their computer, as will as submit their own questions and images for review by the instructor, much like the students who attend the class in San Francisco. Because this is the first time Revere has offered a webinar class,there is a special, one-time introductory price for the class of just $79!Download Prep for SuccessPR

Webinar participants are required to have a computer with a high-speed internet connection. To register for the webinar, call 415-391-4179.

Appropriate for all media, this two day intensive workshop with Harriete Estel Berman will provide tons of information to super charge your professional development and gain from my 30 years of experience.

Learn how to use the power of social networking, blogs, and web sites to develop visibility and get your work noticed. Other topics will include maintaining proper records for the IRS, managing inventory, how to update your resume, and evaluate and upgrade your photos.

We can cover anything you want.  Your questions can guide the topics to be covered. 


Here are some suggestions for topics:

Professional Development resources

Your 20 second commercial

Guidelines for a critique group

Identify your business model.

Establish Your Professional Goals
   Define Objective
   Define Success
   Are your objectives and definition of success            consistent?
   How do you expect to achieve your objectives?
   Define your market.

Pricing and fabrication methods.
   Pricing Structure
   Falcher Fusager’s Pricing Formula
   Guestimation
   Comparative Pricing
   Include your Overhead
   Cost of goods sold
   Pricing Concepts.

Inventory Record Form
   Inventory Records:  Documentation and Provenance
   Hallmark or sign your work

Digital Image Package
   Label examples
   Image description sheet
   All prints and digital files information.
   CONTACT SHEET SAMPLE

Resume vs. CV
   Resume categories
   CV
   BIO

Artist Statement Recommendations
   Artist Statement Tips
   Artist Statement with description
   Envelope for your package

PUBLICITY EXAMPLE
   PUBLICITY  IMAGE
   SELF PORTRAIT
   WORKING IN THE STUDIO
   PHOTOGRAPH EVENTS

Emails and social networking

Strategies for juried opportunities

Publicity and Marketing 100+ ideas
   Book recommendation
   Pitch letter
   Mailing List strategy
   Thank you
   STATIONARY

Wholesale/Retail
   Minimum order for wholesale
   Return Policy

Delivery of work in person
   Shipping – One of a kind work
   Unpacking & Display instructions
     To Display
     Packing and Shipping
     Maintenance Instructions
     Shipping
     CONDITION REPORT
     SIMPLE PACKING LIST 

Profit or Loss?
     What are your options?
     Do you act like a business?
     Expense record examples.
     3 rules to test deductibility
     Expertise?
     Time & Effort?
     Track record
     Record of sales
     Do you act like a business?  I.R.S.

COPYRIGHT & Fair use

www.you
        Website resources
        Web what you need to do and why
        Blogs - blogosphere
        Basic SEO to implement

Any Questions: Contact me directly
bermaid [at] harriete-estel-berman.info
(area code 650) - then 571-7726
http://www.harriete-estel-berman.info

HANDOUTS from the Professional Development Seminar include tons of information

Survey results from the Professional Development Seminar attendees indicates interest in topics that have been covered in past years. This reminded me of the information and HANDOUTS already available.

Below are links to all the handouts from the
SNAG Professional Development Seminar starting with the oldest at the top. 

COMMISSIONS from PDS 2007
                    
ARTISTS OPENING GALLERIES from PDS 2008

WEB 2.0 TECHNOLOGY PDS 2008

NEW MARKETING TRENDS PDS 2008

SUBMITTING WORK to GALLERIES and RETAIL ESTABLISHMENTS - A four part series.

Galleries: Are They Right for You?
by Don Friedlich

Introducing Your Work to a Gallery
by Harriete Estel Berman

The Nuts & Bolts of the Gallery.Artist Relationship
by Andy Cooperman

Galleries: Issues to Consider After Your Work Has Been Accepted  by Andy Cooperman

The Art of Selling and Pricing Your Work PDS 2010

NICHE MARKETING AND PHOTOGRAPHY PDS 2011




Digital File Extension Tip Sheet PDS 2011 (above)

Surviving an I.R.S. audit - Withdrawing Inventory Items for Personal Use? Very scary!

I have been audited twice by the I.R.S. during the past 5 years. During both of these audits the I.R.S. agent asked how many "inventory items did I withhdraw for personal use?"  This is a potential trap, so avoid this practice if you can!

A letter from the I.R.S. Information Document required:
"Documentation and computation of the cost of inventory items withdrawn for personal use. Include gifts to family members and friends, items for personal consumption, etc. A logbook, written record, or any documentation you have that shows what you used for business and what was given as gifts to family, friends or personal consumption. We need to see how you separated what was used for business and what was used for personal consumption."

This could lead to an eternal trial by fire!!!  The best answer is that you do NOT give away or trade your work from business inventory.

Just to clarify here, I am not talking about taking an item from your inventory to display in your studio or wearing a pair of earrings to an opening for promotion.  These are two examples of a legitimate way to promote your work. You still own the item and you are actively offering them for sale. What should be a concern is the common practice of "trading work with other artists."

Recently I read an online art/craft busines newsletter discussing how much fun it is to trade work!  Trading work is NOT a business like behavior. Sorry if I sound like a fuss budget, but there are many facets of behaving "like a business." If you want to deduct your legitimate art or craft business expenses (whether you make money or not), you need to be able to prove that you are "acting like a business."

The whole point is that the I.R.S. wants to determine if you fit their definition of a "hobby" or a "business."  If you want the I.R.S. to perceive your entrepreneurial efforts as a business, then you must show them that you act like a business.  A business needs to account for every item in their inventory.

The I.R.S. has rules regarding giving your work away or trading from business inventory. It is called "barter." If you want more information on barter, see the information below my signature (copied directly from the I.R.S. web site).

On the other hand, if you are happy being deemed a "hobby" by the IRS, then no inventory management is required. You may give away or trade your work as an informal exchange anytime on a noncommercial basis.

What disturbs me is to see public discussion about bartering work on an art business web site, at craft shows, or other requests to trade work with so little awareness of the consequences.  If you feel you must give gifts or barter, you could make such work on your own personal time not using your business inventory or materials or employees. That is what gifts are for.

Harriete

Topic 420 - Bartering Income (from the I.R.S. web site)
Bartering occurs when you exchange goods or services without exchanging money. An example of bartering is a plumber doing repair
work for a dentist in exchange for dental services. The fair market value of goods and services received in exchange for goods or services you provide must be included in income in the year received.

Generally, you report this income on Form 1040, Schedule C (PDF), Profit or Loss from Business. If you failed to report this income, correct your return by filing a Form 1040X. Refer to Topic 308 for Amended Return information.

  The Internet has provided a medium for new growth in the bartering exchange industry. This growth prompts the following reminder: Barter exchanges are required to file Form 1099-B for all transactions unless certain exceptions are met. Refer to Barter Exchanges for additional information on this subject. If you are in a business or trade, you may be able to deduct certain costs you incurred to perform the work that was bartered. If you exchanged property or services through a barter exchange, you should receive a Form 1099-B (PDF), Proceeds From Broker and Barter Exchange Transactions. The IRS also will receive the same information.

Please refer to the I.R.S. Bartering page for more information on bartering income and bartering exchanges.

Direct Barter Transactions (from the I.R.S. web site.)
If you engage in the direct barter of products or services with an individual or a business you will generally not receive a Form 1099-B, but the transaction must be accounted for in your books and records just the same. Think of a barter transaction as just another sales transaction of your business goods or services you must include in your income at the time received. Accurate accounting and record keeping can help you manage barter transactions.

For example, if a doctor agrees to give an accountant a personal medical exam in exchange for personal tax return preparation, the fair market value of the medical exam is taxable to the accountant, and the fair market value of the tax return preparation is taxable to the doctor.

For simplicity sake, let’s assume the fair market value of both services is equal to say, $200. Note that all pieces of the transaction should be clearly marked as a bartering transaction in the books and records of both the doctor and the accountant. With the fair market value of both services being equal, both the doctor and the accountant must include $200 in their income as a result of the bartering transaction.

 

 

Surviving an I.R.S. audit - Cost of Goods SOLD and Jail House Orange - A Fashion Accessory Nightmare

If the I.R.S. asks you to bring your Cost of Goods Sold from two years ago. Are you ready?  An I.R.S. audit causes lots of anxiety. They earn their reputation. My vivid imagination, normally a fantastic creative asset, revved into the red zone as I imagined myself in jail house orange - a fashion accessory nightmare.  

  Altoids Earrings © 2010
  Recycled tin cans, sterling silver wire,
  jump rings, and posts.
  Artist: Harriete Estel Berman

Double and triple checking my Cost of Goods Sold took hours of work and lots of help to get ready. Sure, I had good Inventory Records, but they were encrypted in "Harriete lingo"  (i.e. no shape to hand over to the I.R.S.).  While I could interpret what and where everything was, auditors prefer to see rows and columns in spread sheets that clearly add up to the numbers on your tax return. 

   RECYCLED Two Orange Bracelet
   © 2010 Harriete Estel Berman
   Post consumer recycled plastic
   Photo Credit: emiko oye

And here is what I learned this year.  Your Finished Goods (discussed in the previous post) becomes Cost of Goods Sold (COGS) only after it is sold. Duhhhhhhhh......

Most artists just move an item from their Inventory to SOLD. Done. Calculating Inventory is magic or subject to their creative imagination.

NOW THINK LIKE THE I.R.S.:
The IRS only wants to see clear and accurate records and neat rows and columns of numbers.

The I.R.S. wants to see how you calculated your Cost of Goods Sold. 

The I.R.S. wants  to see unmistakable evidence that you are acting in a business like manner.

Scribbles and arrows are NOT good enough. You need to know how much each item/artwork cost to make. Each finished piece adds to your Finished Goods Inventory. 

So, month after month, year after year, the cost of your Finished Goods for each finished piece keeps adding to your Inventory.  By keeping an ongoing Inventory Record for each artwork or piece, the rest of this accounting becomes a lot easier.

Finally, when you sell a finished piece/artwork, you know exactly how much it cost you, right? The Finished Goods number becomes the Cost of Goods Sold for that piece. You already wrote the amount down in your Inventory Record.

Repeat, the dollar amount for Finished Goods now becomes the "Cost of Goods Sold" for the piece.  You subtract the amount from Inventory and add it to the end of year total for Cost of Goods SOLD. Voila! you've calculated your Cost of Goods Sold for the year.

Ideally, as the year progresses, your list of SOLD work gets longer and your inventory decreases.

Harriete

AOL Earrings by Harriete Estel Berman are available for purchase on Etsy. Retail Price $145.

Surviving an I.R.S. audit - What Is Included in the Cost of Finished Good besides your best guess?

In the previous post we focused on using your inventory record to document your cost of Finished Goods for the IRS.  So what can be included in the cost of Finished Goods and what can't?

To keep this really simple, Finished Goods = cost of materials and employee labor that go DIRECTLY into the work.

If you use jump rings, a tube of paint, a roll of canvas, pounds of clay, or sheets of metal, anything that you use DIRECTLY in your work, is included in your Finished Goods. 

To figure out how much your raw materials cost, you can look at your receipts for purchases or write it on  the materials themselves.  For example,when I buy metal, I write the total cost on the sheet of metal with a magic marker. Buy some clay? Write how much it cost per pound on the outside of the package. Canvas? Write down the price per yard.

   A sheet of sterling silver. I wrote the
   price of the sterling sheet metal when
   I bought it.

Write it down when you buy your materials so you won't have to look it up later.  If the jump rings cost you $3 for 20, then they cost you 15 cents each.

There are lots of ways to track your materials. Keep it simple and use the same method all the time. Write your cost of materials in your Inventory Record for each piece.

Employee labor is also part of your finished goods. Just keep a index card on your bench or in your studio for each work in progress. Write down the employee's labor and your labor separately.The index card on the left shows my labor ("HB") and 2 employees for a work in progress.

The IRS requires that the artist's labor (as a sole proprietor) does NOT go into Finished Goods, but I keep a record anyway.  I want to know how many hours I have invested in each piece. Don't you? How else can you plan new work or figure out if you are charging a reasonable retail price?

Your Inventory Record SHOULD INCLUDE the cost of materials and employee labor in each artwork. You need this information at the end of the year.  By the end of the year, the sum of Finished Goods for all finished work adds to your inventory.   

NOW IT IS TIME TO SELL! This will be the post for next time when we change FINISHED GOODS into Cost of Goods Sold (without magic).   

Stay tuned! to ASK Harriete Learn  the standards you need to survive an I.R.S. audit.

Harriete

 
     Campbell's Soup Multi-Can Earrings
     © 2001 Harriete Estel Berman
     What are my materials costs?
     Materials: 2 sterling silver posts,
     2 sterling silver jump rings, sterling
     silver wire, recycled tin cans.
   

PS  If you don't have Inventory Records or if you don't consider your art or craft a business, then the IRS will not allow you to deduct your expenses.

If you intend to deduct expenses, then some how, some way, you really need to track the cost of materials and employee labor in your FINISHED GOODS to meet the expectations of the I.R.S.

This information is essential every year when you file your taxes. 

 

Surviving the I.R.S. - Cost of Goods Sold, Are you ready? Watch my head explode!

My appointment with the IRS required that I bring my Cost of Goods Sold and Inventory records.

Visualize this written on I.R.S. stationary...

Cost of Goods Sold (and I quote directly from the Information Document Request)
"Physical inventory sheets for both beginning and ending inventory for the year. Copies of the Federal Income tax returns for the year before and the year after the return being examined (copy of your inventory list, log book, invoices, or any documentation you have that records your inventory.)

Canceled checks, receipts, journal or summaries of goods purchased for resale and all other records for labor, materials and supplies, and any other cost incurred to raise or produce goods for sale."

Does that sound scary? There was more....but we will discuss this in another post... the point is:
Are your Inventory Records good enough for the I.R.S.?

IF the I.R.S. wants it, you've got to have it!

To be honest, I am permanently confused about Cost of Goods Sold and Finished Goods...I feel like one of those bobble head dolls. Yeah, I understand this for about a minute, then get confused again.  But I do know how to keep records, simple records, but records of everything. The IRS requires records and that's what you need to survive an IRS audit.

THE QUESTION IS: "How do you figure your Cost of Goods Sold?"

First you need your Inventory Record of everything you made. This has been discussed in many posts on ASK Harriete.

Use your Inventory Records to figure a value for FINISHED GOODS.
FINISHED GOODS is accountant speak. (All accountants live on a different planet than artists.)

Finished Goods equals the cost of any materials that goes directly into your completed work plus the cost of your employee's manufacturing labor (but not your own labor).

FINISHED GOODS is the dollar cost of the work that you finish and the amount that you add to your Inventory for each finished piece. 

GET IN A GOOD HABIT.
As soon as you finish an artwork or item, add the costs to your Inventory Record.

FIGURE OUT YOUR MATERIALS COST (and employee labor). Write down every jump ring, bead or sheet of paper. Estimate (as best you can) the cost for the clay, paint or metal. It might be by the pound, by the ounce, by the inch or by the yard.

WRITE IT DOWN
Write down the cost of your materials and employee labor in your Inventory Record. This is the monetary value of Finished Goods for each piece.

AT THE END OF THE YEAR, the sum of all the Finished Goods is how much you have increased your Inventory during the year.

Finished Goods is not your retail price. Repeat this mantra.
Finished Goods is not your retail price.  NOD YOUR HEAD, like a bobble head doll.
Finished Goods is not your retail price. It is your materials cost (plus your employee labor.)

Finished Goods DOES NOT INCLUDE your overhead labor or overhead expenses.
Finished Goods DOES NOT INCLUDE your profit.
Finished Goods DOES NOT INCLUDE your labor.

This is my head exploding.  Ask Harriete

 

 

She Sells Wholesale. She Sells Retail. Is She Selling Wholesale at Retail?

Recent correspondence with Suzanne Sippel, the Asher Gallery Retail Manager at the Houston Center for Contemporary Craft, raised an important issue.  Many artists and craftspeople too often make a huge mistake. I have witnessed this phenomenon myself for years especially when I go to the smaller shows, exhibitions and online.

Suzanne Sippel said, “It’s the craft shows and fairs where I find more artists who don’t understand the business aspect of what they do. They are so excited to be selling their work that they ignore or forget the “sales” portion of the transaction. They miss the distinction between wholesale and retail, and absolutely forget overhead. I was very excited to read your column on including overhead, as I had not found a way to explain this to my “younger” artists.

As the Asher has grown we are representing more mature artists, and these issues arise less and less as a consequence. But it’s still a problem. I will find fantastic work by a new artist, but they would want to double their prices for me (wholesale/retail mix-up again).  Naturally this keeps them out of my gallery, but they are still out there. It devalues all of our businesses and their own professional growth.”

 64 Crayola Crayons Flower pin  © 2010
 Post Consumer Recycled tin cans
 Artist: Harriete Estel Berman
 Available at Julie: Artisans Gallery

So what is the impact of selling your work at wholesale prices at a street fair, open studio, online, or exhibition?  If you sell work in retail venues (such as the above) and charge only wholesale prices, then you aren't covering your retail expenses.  But even more important, no gallery or store will take your work. They don't want to compete with YOU selling at your wholesale price.

 64 Crayola Crayons Flower pin  © 2010
 (Back View)
 Post Consumer Recycled tin cans
 Artist: Harriete Estel Berman
  Available at Julie: Artisans Gallery

A gallery or store can't sell your work when they know that their customers might buy something similar from you at at half the price.  It makes their retail price look like they are ripping off their customers. Of course, that isn't true, but the customer might not understand that the artist is the one making a big mistake.

   Consuming Conversation
   Conversation M © 2004
   Post Consumer recycled tin cans.
   Artist: Harriete Estel Berman
   Photo Credit: Philip Cohen

You heard the gallery perspective in the quote from Suzanne Sippel, but the message concerns your survival as an artist or maker. Your wholesale prices should cover your investment in fabricating the work including  hours, materials, and overhead (including overhead labor and overhead materials.)

Your retail prices should cover your retailing expenses. In the example of a street fair, you have the booth fee, travel, hotel, food, time for sitting at the booth, expenses involved in creating your booth (such as tent, cases, tables, fabric for your drape, and display expenses such as lights, fixtures, and more.) These expenses are not covered in your wholesale price. Retailing has its own set of expenses which is why there is a retail price. 

Harriete

 

Old Time Quality Flower Pin by Harriete Estel Berman is constructed from post consumer recycled tin cans. Retail Price for this pin is $380. One of a kind and hallmarked with my iron hallmark to establish the provenance. This flower will never fade.

 

Pricing Your Work - the series

Are You Wondering How to Price Your Work?

ASK Harrite has a whole series of posts about Pricing Your Art or Craft Work

Listen to the SlideShare PowerPoint Presentation "Not Just Another Pricing Lecture" and a podcast discussion with the audience and speakers.
Find both now available on line for free at:
•     Professional Development Seminar page on the SNAG website:
•     Professional Development Seminar page on Harriete Estel Berman’s web site.

Commission Structures with Galleries - Are they negotiable?

In response to the recent posts about Delinquent Payment Issues there were numerous comments about consignment agreements, several implying that the consignment percentage between the artist and the gallery is negotiable.

It has been my experience that most retail galleries will NOT negotiate their consignment commission structure below 50 percent (unless you are super famous or your work is in the high end range of $40,000 or higher).  Most galleries expect a 50/50 split with the artist, while some galleries are moving toward 60 /40 or that range (with the 40 going to the artist).

While I don’t approve of 60 /40 (with 40 going to the artist) and won’t agree to it….sometimes this stance puts me in a difficult situation.

Most of all, it is important to keep your prices as close to the same across the U.S. as best as possible. If the prices are higher at one gallery compared to another retail location for the same or similar items, the entire inventory comes into question.  Collectors/buyers DO notice the difference.  I have actually had a collector ask me why the prices were higher at "so & so's" gallery. (Clear evidence that they do compare prices.)

Some galleries suggest to the artist, "just tell me your wholesale price....then we will add our percentage." The gallery may sincerely intend that the artist receives the requested wholesale price.  However, the artist is still responsible for retail price consistency in various venues. 

Some galleries try to justify a higher commission (more than 50%) because their "expenses have increased."  While I am sympathetic that costs continue to rise, I just don't buy the suggestion that artists' expenses have not increased as well. 

As operating businesses, galleries tend to be much more aware of their expenses such as rent, insurance, staff salaries, employment taxes, utilities and advertising.  They KNOW how much it costs per month to stay open.  

Artists also have overhead expenses but tend to price their work in proportion to their direct labor and materials only.  Most artists are not pricing their work high enough to actually cover their overhead expenses such as rent, utilities, photography, bookkeeping labor, office supplies, tool purchases, equipment, etc.   Artists frequently don't realize they didn't make money until the end of the year when they fill out their tax return.   

It seems to me that the difference between galleries and artists is that galleries are fully conscious of ALL their expenses (direct and overhead) and their monthly bottom line.

The 50/50 split reflects a partnership between the artist and the gallery.  Each supports the other.

Harriete

The Value of Your Work is NOT the Price of Your Work

After almost six weeks of posts about Pricing Your Work, there is still an important issue to discuss.  The VALUE of your work is not determined solely by the price of your work, or by the work that sells the best.  In other words, do not confuse your best selling item with your best work.

  Pure Pin © 2008
  Recycled tin cans, sterling silver rivets,
  Artist: Harriete Estel Berman

Your best selling item may be because of a modest price, appeal to a large market, great color combination, current  fashion trend, or numerous other reasons irrelevant to artistic depth or quality.

   Three Golden Girl Bracelets: Mrs. Fields,
   Jazzercise, and Barbie © 2009
   Recycled tin cans, sterlingsilver, brass,
   Artist: Harriete Estel Berman
   Photo Credit: Philip Cohen

Price, in my mind, is NOT a demarcation of value. As an artist and maker, developing a distinctive personal voice, signature style, or repertoire of technical skills is so much more important.

Your best selling item rarely leads to better work.  It only places the pressures of the marketplace foremost in your thoughts. With the Internet, there is a huge rush to sell everything we make.  The numerous online markets drive everything to have a retail price attached. This could be a big mistake.

  Golden Girl Fruit Crate with 3 bracelets
  © 2009
 Recycled tin cans, wood, brass,
 sterling silver, handmade paper,
 Artist:Harriete Estel Berman
 Photo Credit: Philip Cohen

One of the readers of ASK Harriete recently commented how she used to keep her work in the studio and study it for a while. She found it helpful to live with her paintings in her studio to help her appraise the artistic value of the work. With time she could appraise its value more effectively.

Sari Grove said, "I had the luxury of hanging my works all around & I could look at them for a long time before I had to price them...The looking increased my sense of perceived self-worth so when I had to price I was very confident asking for a thousand dollars, even right at the beginning of my professional career."

  Black and Gold Identity Necklace © 2006
  Recycled tin cans, Plexiglas, 10k. gold,
  electrical cord, polymer clay,
  Artist: Harriete Estel Berman
  Photo Credit: Philip Cohen

To really hit home, let me say that just because no one buys your work doesn't mean it isn't any good. The history of art and craft media demonstrates hundreds of times over and over that work with no market when first created, is now highly valued. This has happened in all mediums.

  Detail of Black and Gold Identity Necklace
  Recycled tin cans, Plexiglas, 10k. gold,
  electrical cord, polymer clay,
  Artist: Harriete Estel Berman © 2006
  Photo Credit: Philip Cohen

In recent years, there seems to be a frenzy of making lower priced work, cheap and fast, anything that will sell in this terrible economy.  Yet I still believe that it is better to invest in quality, careful design, and thoughtful consideration.

   Judith Pin made as a present
   Recycled tin cans, sterling silver,
   Artist: Harriete Estel Berman

Is it possible that your work may have greater value as a gift? How do you feel if you make something for a friend or relative and give your work away? Are you ever able to make exactly what you want with no compromise? Can you ever take your time to do the best job without the clock ticking? Why is it bad to have one job to generate income (or even a couple of jobs to earn our living), and then take time for our creative efforts, free of the demands of cheaper is better?

Can creme rise to the top, or is everything just bland in this "sell it now" homogenized environment?  I'm even wondering if there is any value in making work when it does not reflect the best we can be, do or make? What do you think?

Harriete

P.S. If you missed the Professional Development Seminar Powerpoint, here it is for your convenience.

Professional Development Seminar NOT JUST ANOTHER PRICING LECTURE

View more webinars from Harriete Estel Berman.

Pricing Your Work - The Ultimate Variable in SELLING YOUR WORK has no numbers! What the Market Will Bear

This is the last post (at least for now) about variables in pricing your work.  In previous posts we discussed how to calculate your expenses and a profitable price based on concrete facts. Find this information in the left hand column on ASK Harriete. Look for the category titled: Pricing Your Work.

The last two posts discussed Reputation, and  Perceived Value/ Media Bias. This final post about pricing will discuss "What the Market Will Bear."

Multi-colored April Flower Brooch ©2010
recycled tin cans, sterling silver,
Artist: Harriete Estel Berman
Photo Credit: emiko oye

What the Market Will Bear is an old refrain but is interconnected to Perceived Value, Media Bias, and Reputation. If you are selling your work in a high end, exclusive store where the clients are expecting to pay higher prices for prestige, exclusivity, superior service, etc, then this clientele will support a higher price. Yet the same items in a lower end store would be perceived as over priced or inflated due to customer expectations.

Many times I've heard artists and makers complain that their local small town gallery or store will not support the higher prices they need to charge for their work.  That may be true, so perhaps you shouldn't be selling at that location. The other option is to work with local clients so they understand why your work costs so much. (A topic for another time so ASK Harriete.)

Tiffany is a familiar example of an established market. Tiffany the famous jewelry store, sells very expensive  jewelry. They have developed a reputation that is so exclusive that the hallmark, the identity of the manufactured (not even hand made) jewelry, is marked on the exterior (instead of inside) as on the bracelets (below). People buy the exclusive brand identified with Tiffany's little blue box.
Every artist and maker regardless of their medium has something to learn here - the value of the maker's signature or hallmark in selling your work. This means signing all your work, every time, and placing your work in the appropriate marketplace. Establishing a reputation takes years.This is a marathon not a sprint.

Keep in mind that all work should be sold at the same price all over the United States. Artists and makers need to find a location, gallery, store, or online marketplace that sells work in the price range they need to charge and keep that same price all over the United States.  This is one of the strongest factors in supporting your prices.

The Q & A podcast during the Professional Development Seminar Houston SNAG Conference touched on these issues.

What do you think? Your comments are most appreciated...I will try to respond to all the pricing comments in one post soon.

Harriete
I hallmark all my work. You can see this on the back of this pin very clearly. Your hallmark or signature assures the collector that they bought your work, not an impostor, look alike or copy. Learn why I use a hallmark that looks like a domestic iron on my web site.

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.

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.

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.

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.

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.

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

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

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.

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.

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
 

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.

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 discussed next week after the pricing formula posts:

• Perceived value (mentioned in the Professional Development Seminar podcast.)
• Factors such as reputation of the artist, media bias, the marketplace.  
• What the market will bear.

Harriete
www.harriete-estel-berman.info

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.

• Was your work selling well at its current price?
• Was it within a price range at the gallery/store such that raising the price will still fit the marketplace?
• How much were you considering raising your price?
• What is the perceived value of your work? (Listen to the podcast for a discussion on perceived value.) 

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

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

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.

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.

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.

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      

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.

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
• Working on your 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.)
  

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 case 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 working in the studio flattening
tin cans. We all have tons of prepara-
tion 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 on line, or packing work for shipping).  Your TIME is not free, at least it isn't free if you're in business.

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 big goal is to pay myself...but usually I don't sell enough.  Consequently, I work to cover my expenses.  Still, I dream . . . of being rich and famous and earning money for 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:

• Professional Development Seminar page on the SNAG web site.
  

•  Professional Development Seminar page on my web site.

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

Orange and blue Flower with Anti-aging watch.
Consider that every item you make has both overhead and manufacturing expenses.

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. (You can listen to the PowerPoint Presentations and a podcast of the program by clicking on these links:

• The Professional Development Seminar on the SNAG web site  or
• The Professional Development Seminar on my web site.

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.

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 realisic 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.

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 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.

Insurance: business insurance, Workman's Compensation (if you have employees.)

Depreciation on equipment either for you 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.

Travel expenses: keep track of your mileage (the I.R.S. will allow .50 per mile), hotel, airfare, conference registration, food.

Exhibition and Shows: application fees, booth fees, salary for 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: "Overhead Labor" or "Manufacturing Labor"....there is a difference.

If you missed the online radio interview with me and Mona Hair on the "Jewelry Connection" it is archived. My interview videos will remain on top for the next two weeks! Also if you are in the broadcast room and visit the archives you should be able to download the interview for the next seven days!

Pricing Your Work - Not Just Another Pricing Lecture: A Dialog About Pricing Your Work

Not Just Another Pricing Lecture: A Dialog About Pricing Your Work was the featured program at the 2010 Professional Development Seminar held recently at the SNAG Conference in Houston.

The PowerPoint Presentations by our speakers and the Question and Answer Discussion with the audience were recorded. The first half hour of the audio recordings were combined with the SlideShare Presentation so you can experience the same PowerPoint presentations that our audience saw in Houston. 

The Podcast is an audio only recording of the discussion with our speakers and the audience.

This is the Professional Development Seminar’s inaugural attempt to record the program and share this valuable information with a larger audience. The audio has been carefully edited (by me).  We sincerely hope that this information will prove useful to any artists who access either  the Podcast or the SlideShare Presentation . Both are now available online for free at:

• Professional Development Seminar page on the SNAG web site.
  

•  Professional Development Seminar page on my web site.

BELOW on ASK Harriete find BACKGROUND INFORMATION pertaining to these particular recorded programs and speakers.The handouts for the PDS can be found on either site or CLICK HERE to Download PDS2010HANDOUT.

In a following posts, I will discuss some of the issues raised during the discussion to offer further information and clarification.

BELOW IS THE LIST OF SPEAKERS for the PowerPoint SlideShare presentation of Not Just Another Pricing Lecture: A Dialog About Pricing Your Work . They are listed in the order of their presentations. Click on their name to go to their web site for further information:

• Melissa Borrell
• Guido Schindler
• Francesca Vitali
• Bruce Baker

QUESTION AND ANSWER DISCUSSION for Not Just Another Pricing Lecture: A Dialog About Pricing Your Work was recorded as a podcast. The program with our speakers and the audience was moderated by Andy Cooperman, Don Friedlich and myself, Harriete Estel Berman.

During the discussion the following resources were mentioned:

Professional Guidelines on my web site and the SNAG web site.  

ASK Harriete

Nolo Press Book Hiring Your First Employee: A Step-by-step Guide.  There are also two blog posts about hiring employees on ASK Harriete listed below:

• Hiring Your First Employee - a book review
• Employee versus Contractor

The next Professional Development Seminar will be held in Seattle May 2011 (tentatively scheduled for  Saturday, May 28, 2011). Would you like to help us organize the program, publicize our event and edit future audio recordings? Andy Cooperman and Harriete Estel Berman are looking for people with the following skills, talents or qualities to participate on the PDS "Implementation Committee".  
Are you a:

• a metalsmith, jeweler, craftsperson or artist working outside of the academic setting?
• a production, gallery, one-of-a-kind maker, at the bench or in the trade?
• a current or future SNAG member?

Do you have:

• Illustrator skills?
• Social networking skills?
• Pod cast, audio editing skills?
• Interest in assuming a leadership role in future years?

Well, if so, we need you!  Please contact me at:
bermaid [at] harriete-estel-berman [dot] info

Effective Pricing for Multiple Marketplaces

Hello Harriete,
I just read your post "Should I link to my Etsy shop on my web site?" and I have a follow up question about one specific point you made. You stressed the importance of keeping the online prices consistent with prices in the galleries. I am always concerned about consistency in pricing from one retail venue to the next, but am having trouble because different places that sell my work have different mark ups. The highest mark up of my work is 250% (which seems excessively high). The buyer who marks up that much claims that this is a "standard jewelry mark up." This buyer recently saw on my Etsy shop that an item she carries is priced less on my shop because my mark up was a simple 200% mark up. I don't want to ruin the relationship with the buyer by undercutting her prices, but I am concerned that the average shopper through my online shop will be turned off my such an increase in price. Do you have any suggestions? I would very much appreciate hearing your advice.

Your website is a wealth of information. I have enjoyed looking through it and will consult it often.

Thank you in advance for your time and thoughts. Signed, Mark-up Challenged

Great Question! I think prices should be the same everywhere if possible… but I realize this is a really thorny issue.

Many stores and galleries do mark up more than 200%.  Some want a 60 /40 ratio (or 60% for the store and 40% for the maker).  Others usually work on a 50/50 ratio.  It all presents a problem.  How to keep your prices consistent?

What is true is that galleries/stores are run as businesses to make profits. They expect to make money! They have planned on their commission ratio and will also try to maintain consistency in their commissions to their artists and makers; but, everything is negotiable. 

Business Relationship  You have a business relationship and it is perfectly acceptable to tell your retail locations your "suggested retail price."  This is the price that you should try to maintain consistently from venue to venue.  The plan is that you are trying to keep your prices the same all over the U.S. to avoid pricing competition or pricing inconsistencies. Explain this to the galleries or stores that sell your work.  However, it is up to the store/gallery to mark it up as they see fit.  If they charge more, it is their responsibility. 

With the Internet it is very easy for the consumer to compare prices.  In addition, people travel quite a bit. The client/collector is likely to notice when one store or gallery charges more than other locations for the same items. 

Other options  As a compromise, you might consider raising your retail prices a speck on Etsy to about 225%.  Another option, is to make a somewhat different version or line of work for the brick and mortar locations so that they feel they have a unique body of work to sell.

Personally, I looked at your work on Etsy and I think is it very well priced.  What you and the galleries are experiencing is the power and impact of the Internet. Galleries and stores used to be only way to market art and craft.  Now that artists and makers have alternatives for showing work to consumers, i.e. the web, price shopping is as easy as a push of a mouse button. 

One more point.  You should not feel guilty or feel like it is your fault if a store rejects your "suggested retail price."  This could be the gallery's problem, not yours…but too often artists are asked to make the concessions.  This is why I started the Professional Guidelines to established professional standards, so that everyone knows what is reasonable and professional.

Establish what you think is a fair retail price. You can even discuss this with your galleries and stores that carry your work. They know their consumers, but ultimately this is your decision!  If the readers of ASK Harriete have another solution, please let me know or leave your suggestion as a comment.

The Professional Development Seminar in Houston, Texas, is planning  three hours of concrete information from 9:00am-12:00pm on Friday, March 12, 2010, that will change the way you approach your work and the way you do business. At 9:00am. Bruce Baker will present ‘The Art of Selling.’  Then at 11:00 am the lecture will shift to ‘Not Just Another Pricing Lecture: A Dialogue about Pricing Your Work.’  We will continue the conversation during lunch 12:00-1:30. Bring your lunch so you don't miss a moment. Learn strategies for success. I will be there, I hope to meet you then.

Harriete Estel Berman
www.harriete-estel-berman.info

Pricing and the Dilemna of discounts, coupons, or reduced prices?

Chairity © 2006
steel
Artist: Timothy Adam

Recently I listened to a program by Timothy Adam of Handmadeology about using the Internet and social networking to give more visibility to your art and craft. He has lots of great ideas and really knows about working the system of online social networking sites. On the other hand, a recent post at Timothy Adam Designs about "Search trends during the holiday shopping season" is very disconcerting as he focuses on discounts, coupons, and free shipping as promotional strategies.

Living Steel Jewelry Display
steel
Artist: Timothy Adam

I think discounts, sale coupons, holiday sales, etc. have little effect in stimulating a sale of art or craft and instead have a negative impact that adversely erodes your retail prices permanently.  I believe it is a fallacy to think that a buyer who is already considering a purchase of your work will change their mind just because of a small discount or not.  And anyone who wasn't interested in the first place won't care about discount offers whatsoever.  Furthermore, lowering your effective price with discounts or coupons sends a signal that all your work can be discounted and that this lower price is the true market value of your work.  In effect you are saying that the original retail price was inflated to begin with.[For more information about Discounts read the Professional Guidelines document.]  

It is vitally important that we should not fall into the trap of appearing to be just another mass produced commodity. The arts and crafts market can not afford and should not adopt discounting and similar pricing strategies that are frequently used in the general consumer market like K-Mart and Macy's.  First of all, don't kid yourself, all of these giant chains double or triple the wholesale price to absorb these discounts.  They have designed their products to be easily mass produced and cheap.  It may be a great value for the consumer, but it lacks any differentiation from what thousands or millions of other people buy.   

Pink Dot Pin
Recycled tin cans
Harriete Estel Berman

Instead, the handmade object should be promoted for its unique attributes or value.  By its very nature, a handmade object is a limited edition or one of a kind object. Ideally, art and craft exhibit skilled craftsmanship, personal attention to details, and distinctive creativity.  A buyer is attracted to the work because it reflects and reinforces the buyer's desires, self-identity, and expression of character that they wish to show to the world.  It is unlikely that a small shift in price will alter these perceptions.

Stimulus Plan Pins © 2009
Recycled tin Cans
Harriete Estel Berman

People who buy from the local artist (whether on Etsy or The Artful Home or at the local crafts festival) are making a decision by their very action. Their purchase creates an identity for themselves.  They may want to know the artist or know the inspiration behind the work.  They may admire this alternative lifestyle and want to participate, even vicariously, just for the afternoon. Every time they wear or use their handmade item, they feel richer for the experience.

Forest Spirit Bracelet © 2009
polymer clay
2 Roses

John Rose from 2 Roses offered this observation:
"We did indeed see a lot of discounting this year. Much of it panic motivated. Anecdotal surveys reinforced that buying volume was equal or above last year's for most artists we spoke to. However arbitrary discounting reduced profits. 

This really points to a fundamental lack of product offering flexibility by the artists we spoke to. Instead of adjusting their product offering to offer lower priced lines and protecting their margins, most simply discounted their regular lines. This is one of those textbook "business 101" mistakes. 

Our reaction to the shift in the economy was to analyze buyer behavior relating to luxury goods and discretionary purchasing. What we found was that there was plenty of buying going on, but shoppers were placing much higher emphasis on "value". By augmenting our regular priced lines with items manufactured to specifically offer a high value at a lower price point AND maintain normal margins, our sales exceeded last years in both volume and profit. The introduction of lower priced lines allowed us to pick up market share and maintain the value perception of our regular priced lines.
BTW this is a classic Fabrege tactic.

A lot of artists just don't understand how badly they hurt themselves and the entire industry when they resort to arbitrary discounting." END QUOTE

Green Leaves © 2004
Recycled vintage doll house
Harriete Estel Berman

Sell the appeal of your work at its full value.  The mass market chains really can't compete at this level.  

Harriete Estel Berman
Riding the Long Tail on a grand adventure (without discounts.)

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