This article is part of my “How to Make Planner Stickers to Sell on Etsy” guide.
When selling physical goods on Etsy such as planner stickers, it is important to do a full cost analysis on your products to ensure that you are actually making money. Although this concept seems very trivial at first, there are actually quite a few hidden costs that are not as straightforward or evident upon first glance.
In this article, I will be discussing the many different factors that can have an effect on your total cost, so that you can be better informed when pricing your products.
1) Cost of Raw Materials
The cost of raw materials is the most obvious set of costs associated with your product. Calculating this cost for each of your items should be the first step in the overall process of determining your final prices. You should write a list of all the physical, consumable materials that are used in your production process, as well as their overall costs. Remember, you should consider the total cost of receiving/restocking these supplies in the calculation, such as taxes and shipping. For example, if sticker paper costs $30 for 100 sheets, but taxes and shipping to receive those sheets adds another $15, then the cost per sheet should be calculated to be $0.45, not $0.30.
Examples of Raw Materials:
2) Cost of Wear and Tear
Similar to raw supplies, some materials used in the production process are not directly consumed, but rather experience wear and tear that ultimately causes the need for them to be replaced. For example, let’s assume the blade in your cutting machine can only withstand cutting 200 full sheets before the blade becomes dull and is no longer usable. At that point, you will need to buy a new blade. The idea of accounting for wear and tear is to ensure that you earn enough money from your products over the lifespan of your equipment such that you can afford both the replacement equipment and still retain a profit. This means that you would need to price your products such that you earn at least $8 (cost of a new blade) per 200 sheets. This calculates out to be $0.04 per sheet.
It can sometimes be difficult to estimate the cost associated with wear and tear if you do not know how long you expect your equipment to last. However, it is better to overestimate than to not account for anything at all, so I recommend you attempt to make a reasonable guess.
Examples of Wear and Tear:
3) Production Errors
Once you have your ideal raw cost per product, you should consider the fact that you will sometimes encounter errors in the production process. These include issues such as the printer producing streaks, the cutting machine not accurately cutting on the marks, or even human errors such as accidentally bending the papers. All of these errors ultimately force you into wasting product and needing to reproduce goods to meet your quality standards. Thus, it is important to determine your typical rate of success/failure in production and ensure that your final cost covers the costs of failure.
For the first few months of opening my shop, I was still struggling with understanding how to get consistent cuts. As a result, my rate of failure was pretty close to 50%. Sometimes, my machine would work great and everything would go smoothly. However, I can distinctly remember needing to print one sheet 12 different times before both my printer and cutting machine produced a successful, quality product to send to the customer. It wasn’t uncommon for me to need to reprint most sheets more than once. Therefore, with a failure rate of 50%, I needed to ensure that my prices covered two times the cost of supplies.
As I have gained more experience with my cutting machine and printer, I now find my rate of failure is much, much lower (phew!). If you are just starting out, I think 50% is a reasonable failure rate to use in your calculations.
4) Etsy Fees and Taxes
Another important cost to consider is Etsy seller fees and national taxes. Etsy charges 20 cents per item listed, plus an additional 10% of all purchases. Because these costs are not automatically taken out at the time of the transaction, it sometimes can sometimes be easy to forget that your revenue displayed in your Etsy dashboard is not equal to your profits. You should always remember that you will need to use your revenue to pay the Etsy bill due at the end of each month.
Likewise, there are several national taxes you need to consider. Sales tax is usually calculated by Etsy and paid for by the customer. However, you will need to remember to set this up on Etsy using your state’s local requirements. If you do not, you will end up needing to keep track of these taxes yourself and subtract them from your revenue to pay back to the state.
Another consideration is income tax. Remember, the tax rate on business income is a fair bit higher than standard employee income tax. Thus, you will be paying a higher percentage than if you earned income working a standard job. If you will be relying on your Etsy shop to pay bills or net profit a certain amount of money for the year, then you probably should probably increase your desired amount by the tax percentage. Otherwise, you might find that your net profit was actually a lot lower than expected come tax season.
5) Time Investment
Now that you have a good idea of your profit per sheet, you should try and calculate your earnings per hour. Producing products takes time, which means your profits are limited partially by how much you are able to produce in a day. If your shop eventually got popular enough to where you could fill a full 8 hours worth of solid work, this number would tell you your maximum equivalent hourly wage. If you have a set hourly wage in mind that you would like to earn, you should price your products in accordance with this value. Generally speaking, you should always strive for at least minimum wage.
6) Market Price
The final consideration when it comes to pricing your stickers is observing market prices. If you discover that your desired listing price is much lower than what most people charge on Etsy, then you may want to consider raising it to be closer in value, while still maintaining your ability to offer a competitive advantage in pricing. Likewise, if your prices turn out to be much higher than standard market price, you may need to find ways to cut back on costs in order become more appealing to customers.
Clearly, there’s a lot that goes into deciding the listing price of your Etsy planner stickers. The good news is that if you open your shop and find out that your prices are not quite perfect, you can always raise or lower them to adjust with demand.
Did I miss anything? Let me know!