The question of how to price handspun yarn is coming up again on the various spinning mailing lists, so I’m taking an opportunity to repost my standard thoughts on pricing methodologies here.

The question of pricing, and discussing it, is a challenging one in some respects. There are numerous philosophies, and there are people who want to talk about them and people who don’t. With handcrafted goods, professionals sometimes find themselves competing with hobbyists, who have other means of support and aren’t looking to earn a living from selling their wares, enabling them to charge lower prices. This sometimes means the bottom falls out of a certain market, removing a professional’s livelihood, and a hobbyist’s lack of sensitivity to this can make professionals less willing to discuss the subject publicly.

Most hobbyists, and some professionals who are just starting out, are not setting out callously and with evil intent to undercut people who are looking to make a living; but they don’t know how to price things yet, they don’t know what the market will bear, and they often undervalue their work… or sometimes, overvalue it, though this is less common and tends to be limited to specific, trendy products.

Professionals, too, sometimes find themselves unenthused about helping hobbyists bring products to market because of the question of quality. In some — though categorically not all — cases, hobbyist wares are not as well-made as professional wares, and some professionals worry that simply having them on the market as hand-produced goods may have an overall negative effect on public perception of how good those products are on the whole. With the fiber arts this can be a particular sticking point, because it may require a trained eye in order to detect the difference.

Still more professionals flatly feel that they’ve spent years working on coming up with ways to turn a profit doing what they do, and put lots of work into it, and that’s not information they’re going to give away just because someone thinks they might be interested in it.

So, when asking for advice on pricing handspun yarn or handwoven, handknit, hand-crocheted items, be aware that you may be jumping into heated debate, whatever your scenario, whatever your expertise level, and whatever your goals.

For me it is essential to have and use a firm model, and to track what I do. I am also philosophically opposed — very opposed — to underpricing handmade fiber goods, as I feel that contributes to an overall cultural devaluation of textiles. So, I urge anybody getting into the selling game to talk not only to folks selling yarn or fiber, but folks selling handmade goods of all varieties, like furniture, pottery, wrought iron, you name it. Although the market has the final say, suppliers of goods on the market set the starting point.

People new to selling their wares would be well advised to look closely at the specific market which they’re entering, and consider where they’ll fit in it and how they’ll affect it, as there is a strong likelihood that this will have a great impact on their relationships with their peers and colleagues.

Abby’s Pricing Theory

There are two different questions here for me: how I put it up if I’m going to sell it, and how I price it. My pricing is based on cost of materials, time to produce, and “operating overhead” so to speak. By and large this is a pricing methodology that I learned as a child, with my friends selling woven items to tourists in Peru. There’s another angle on it, which involves figuring out what the market is, what’s selling at what price, and producing to meet that demand, but that’s a separate question.

It’s my belief that people need to price to pay textile producers a living wage, end of story. If I determine the market won’t pay what I’d need to make on a given object to earn a living wage for producing it, I don’t sell it. In my opinion, no independent producer of goods can really afford to price himself or herself out of a living wage.

Purely hypothetical scenario:

First, I want to stress that these scenarios use fictional numbers, and are intended to help you think about your baseline cost for producing a yarn; this does not include your cost for selling that yarn. I don’t want to tell you how to price your yarn, give the exact dollar amounts that I use, or tell you how to run a business; but I do want to provide you with food for thought about the cost of production alone. These examples also do not include more complicated overhead costs such as the cost of space in which to produce the goods; these are simply starting point examples. Also not included in the model described here are: how to handle unexpected losses from theft or damage, insurance, bookkeeping time, consulting time, project management costs, development costs, market research, and many more things that are very important for a businessperson to think about.

What I’m trying to get at here is this: Don’t sell your handspun yarn for less than it costs you to produce it. Even if you don’t make a business of this in earnest, if you do make a habit of selling your goods for below cost, you’re likely to have a negative effect on the market for such goods on the whole.

Anyway, you can use this formula to determine your baseline cost and break-even point for production, regardless of what you’re producing. It doesn’t matter what the numbers are in the example; substitute your own, to determine your cost, then base your pricing on your cost.

Let’s say I have a fiber that costs $10 a pound. I have equipment that would cost $1000 to replace. I want to pay my spinner (me) $10 an hour. I can produce 400 yards of single-ply yarn from 6 ounces of fiber, in an average hour. I expect the lifespan of my equipment to be 4000 hours until service or replacement is required. In addition, it takes up to 10 minutes per skein of 100 yards to measure, wash, label, etc, so let’s factor that in, but leave it as a separate item in case someday down the road we’re employing a put-up person who doesn’t have to be a skilled spinner, who makes a different wage.

Round numbers (everything up to the nearest 10 cents)

• Materials cost for a 100-yard/1.5 oz skein: $1
• Labor cost for spinning: 15 minutes at $10/hr = $2.50
• Labor cost for finish and put-up: 10 minutes at $10/hr = $1.80
• Equipment cost: $0.10

My break-even is $5.40 a 100-yard skein, in this case.

Second Purely Fictional Scenario

In this case, my raw material costs $20 a pound and I can produce 200 yards of it in an hour, not including put-up and packaging. Skeining, measuring, washing, and labeling will be done by a different employee earning $8 an hour. Everything else stays the same.

• Materials cost for a 100-yard/1.5 oz skein: $2
• Labor cost for spinning: 30 minutes at $10/hour = $5.00
• Labor cost for put-up: 10 minutes at $8/hour = $1.35
• Equipment cost: $0.15

Break-even here is $8.50.

If I want to give away the labor, or the materials, I can adjust accordingly. The same goes for pricing a job where I don’t have to pay for the fiber, but I do require time, and will put wear and tear on my equipment.

Please note that this is the break-even point; the point at which I am not operating at a loss on simply producing the yarn. This is the point below which I’m actually paying money to sell the yarn, if I sell it at such a price. This is not my final sales price if I’m bringing the product to market, storing it, advertising it, shipping it, and so forth; this is the point below which, if someone else is going to absorb all those costs, I cannot afford to sell the product. It’s a rock bottom wholesale price.

I think I’m somewhat unusual in my pricing because I do include equipment maintenance or replacement cost, something I generally don’t see people do. But you’re out of business without the gear and it does take a beating if you do production work! I also think that generally, folks don’t view it as “I have to pay my spinner (me)” — but I was raised by often self-employed parents and have had it drilled into me to consider my time payable by the operation, whatever it is. 😉

As far as put-up: by default, I pull things off the bobbin and skein them with my counting skeiner, so I know how many yards there are. If something is for general sale, I will leave it in a skein; if it’s part of a special order or something where someone requests, I can put it up in center-pull balls (but I don’t do that in general). For my own storage purposes, I skein, wash, dry, then either store if I don’t have a likely immediate (in a couple of months) use in sight, or put it in balls if I do. Size of skeins: I have found that in general, 100-yard skeins, measured by yards, of varying weight, are more popular than by-weight skeins. Think about it: as a yarn user, you are more likely to care how many yards than how many ounces.

So, I put up by the yardage, and charge based on production cost given materials, time, and equipment. Then, as a retailer, I have to figure my retail costs into the equation as well, in order to calculate my markup, profit margin, and so forth — which I figure separately from the baseline production costs.