Everyone has their way of pricing quilts and if you’re following a formula that works for you, keep using it. This quilting price formula is customizable to your business so you can change the profit and markup numbers based on your business and the goals you have for it.

 

 

 

HOW TO PRICE A HANDMADE QUILT

I don’t like to suggest numbers to plug into a formula, as each business is unique.

 

Using a basic formula (Time + Materials = Production Costs x 2 = Wholesale Price x 2 = Retail Price) doesn’t work well in the best of times, let alone when you’re creating labor-intensive products such as quilts.

 

Instead, let’s take 3 steps, which you can adjust based on your business:

 

STEP 1: COVER QUILT & BUSINESS COSTS

First and foremost, your prices must start with a number that covers all of your costs. Not just the cost to make the quilt, but also the costs to market and sell that quilt, and in general, run your business. (Details below)

 

STEP 2: ADD PROFIT

Every business must have profits in order to stay in business. How much profit you add to your quilts will depend on your business and the goals you have for it. Multiplying a number by 2 is not an ideal way to build profits into your prices. (Details below)

 

STEP 3: ADD MARKUP

Markup adds a little bit of cushioning to your prices so you can offer discounts. This markup will vary based on your business. If you don’t plan to sell wholesale to retailers, you don’t need as big of a markup as many pricing formulas suggest (e.g. multiplying a price by 2 to allow for wholesale discounting). (Details below)

 

 

That’s a quick overview of my quilt price formula. Let’s take a closer look at each step to help you understand it and calculate the numbers for your quilt business.

 

 

STEP 1: COVER QUILT & BUSINESS COSTS

To run a successful business, the money you make from sales must cover all costs associated with running your business.

 

There are many ways to define costs and categorize them for filling taxes (which you must do if you’re truly running a business, more on the laws for running a handmade business here). But to keep things simple for this article, we’re just going to divide your costs into:

1 – Production Costs

2 – Overhead Costs

 

Think of Production Costs as money you must spend to make one quilt, and that includes your hourly wage. Fabric, thread, batting, binding, hours to sew one quilt, etc.

 

Think of Overhead Costs as anything you spend money on outside of Production Costs. That might be hours spent photographing quilts and listing them on Etsy, Etsy listing fees, shipping supplies, driving to and from the post office, cost of sewing machine, sewing machine maintenance, etc.

 

 

PRODUCTION COSTS

Calculating the production cost of a quilt is pretty straightforward. Add up the hours it takes to make one quilt and multiply those hours by the hourly wage you’d like to be paid. Then add up material costs for one quilt and add it to your wages.

 

If you buy your materials in bulk (which you should, to lower costs), take the total cost for all material purchased and divide that total by how many quilts you can make with the materials.

 

For example, let’s say my material for one quilt cost $150 and it takes me 10 hours to sew a quilt from start to finish (10 x $20 = $200).

 

My Production Costs would be $350.

 

 

OVERHEAD COSTS

It’s easiest to look at your overhead costs per month.

 

You may add up all your Etsy fees for the month, shipping materials for the month, advertising costs for the month, as well as the hours it takes you to photograph, list, market, ship, etc. all quilts for the month.

 

For bigger items, such as the purchase of a new sewing machine, you may plan to pay it off in a year. So you would take the total cost of the sewing machine (e.g. $500), divide it by 12 (12 months to pay it off), to get the its cost per month you must cover. ($500 divided by 12 = $41.66/month).

 

Once you have your Overhead Costs for the month, you can divide those costs among the quilts you’ll make that month.

 

For example, if I have $250 in Overhead Costs, and I plan to make 10 quilts per month, I would divide $250 by 10 (250 divided by 10 = 25). I would add $25 to the price of a quilt.

 

For example:

Production Costs for 1 quilt = $350

Overhead Costs for 1 quilt = $25

Production Costs + Overhead Costs = $375

 

$375 would be my Base Price. I need to be paid at least $375 for a quilt to cover all my costs.

 

 

But of course, we don’t just want to cover costs, we want to make money! So now we’ll move on to Step 2 and add Profit.

 

 

IF EACH QUILT HAS A DIFFERENT PRODUCTION COST

If you make quilts in different sizes or materials, or offer other products, you’ll have different Production Costs for each and may want to distribute Overhead Costs a little differently.

 

For example, if I make burp cloths, small baby quilts, and large baby quilts, they may have the following Production Costs:

Burp cloth: $10

Small Quilt: $250

Large Quilt: $350

 

If I’m able to make 10 quilts and 10 burp cloths in a month, and I have $250 in Overhead Costs, using the simple divide method would mean I must add $12.50 to the price of each product.

 

That would make my burp cloths seem overpriced.

 

Instead, you can distribute overhead costs by finding the percent each item’s production cost is of the total production cost for all items. This requires a bit more math but is really easy if you follow these steps.

 

To find the percent for each product:

>> Add all of your product’s production costs together to find the total production costs.

>> Use that total to find the percentage of each item’s production cost by cross multiplying and dividing.

 

For example:

$10 (burp cloth) + $250 (small quilt) + $350 (large quilt) = $610 (Total Production Costs)

Now I want to know what percent $10 is (burp cloth’s production cost) of $610 (total production costs), so I would cross multiply and divide.

 

$10         (I want to know this %) 

$610                 100%

 

Cross multiply and divide:

10 x 100 = 1000

1000 divided by 610 = 1.64%

 

I would do this for the rest of my products.

 

Burp Cloth = 1.64% ($10 x 100 divided by 610)

Small Quilt = 40.98% ($250 x 100 divided by 610)

Large Quilt = 57.38% ($350 x 100 divided by 610)

 

Now when I’m trying to determine how much an item should absorb of my total Overhead Costs, I can simply multiply my Overhead Costs by a product’s Production Cost Percent, to find that amount.

 

For example, if my Overhead Costs are $250/month, I would multiply $250 by each product’s Production Costs Percent to find the portion of Overhead Costs a certain type of product should absorb.

 

Burp Cloth: 250 x 1.64% = $4.10

Small Quilt: 250 x 40.98% = $102.45

Large Quilt: 250 x 57.38% = $143.45

 

Now I must divide each of those portions evenly among how many of each item I’ll make and sell.

 

Burp Cloth: I make 10/month

$4.10 divided by 10 = $0.41

I would add $0.41 to the price of my Burp Cloth to cover a portion of my monthly Overhead Costs.

 

Small Quilt: I make 5/month

$102.45 divided by 5 = $20.49

I would add $20.49 to the price of my Small Quilt to cover a portion of my monthly Overhead Costs.

 

Large Quilt: I make 5/month

$143.45 divided by 5 = $28.69

I would add $28.69 to the price of my Large Quilt to cover a portion of my monthly Overhead Costs.

When I sell those 10 Burp Cloths and 10 quilts, I cover that month’s Overhead Costs.

 

 

Now we must add Profit to our price.

 

 

 

STEP 2: PROFIT

Profit is the money that’s left after you deduct all of your business’s costs from the revenue it earned.

 

For example:

If I sold 10 quilts in a month at $457, my Revenue for the month would be $4570.

 

Production Costs = $3500 ($350 per quilt x 10 quilts)

Overhead Costs = $250

Total Costs = $3750

 

Revenue – Costs = Profits

 

$4570 – $3750 = $820 Profits

 

Profits may be used for a variety of things, but in a small handmade business, they’re generally put back into the business to grow it, or to pay yourself above an hourly wage…since you are the boss and all.

 

To calculate profits, we’ll go by profit margins.

 

Profit margins are basically just profits expressed as a percent.

 

You calculate them by dividing your profits by your revenue, then multiplying by 100 to get the percent.

 

For example:

Revenue = $4570

Profits = $820

820 divided by 4570 = 0.18 x 100 = 18%

Profit Margin = 18%

 

Since we don’t want to charge a price and hope we’re left with profits, we’re going to add profits to our prices.

 

We’ll simply determine how big of a profit margin we want, then add that to our price.

 

 

HOW MUCH PROFIT TO ADD

Profit margins vary by industry, but a good range to fit in is 5% – 20% profit margins.

 

>> 5% profit margin is considered low

>> 10% profit margin is considered average

>> 20% profit margin is considered high

(source)

 

Decide on your profit margin based on the goals you have for your business and how your business operates.

 

If you only make one or two quilts per month, you may want a higher profit margin.

 

If you’re able to create several quilts per month, you may opt for a lower profit margin to keep your prices lower and increase profits through volume.

 

For example, if I make and sell one quilt per month, I may add a 20% margin.

$375 (Production & Overhead Costs) x 20% = $75

I would add $75 to my quilt price (quilt price is now $450) and would make $75 profit each month.

 

On the other hand, if I make and sell 10 quilts per month, I may add a 5% profit margin.

$375 (Production & Overhead Costs) x 5% = $18.75

I would add $18.75 to my quilt price (quilt price is now $393.75) and make $187.50 profit each month.

 

Once you decide on a profit margin, multiply your Base Price (Production Costs + Overhead Costs) by your Profit Margin and add that number to your Base Price to get your Wholesale Price.

 

*Even if you don’t plan to sell your quilts wholesale, we’re going to call this your Wholesale Price as it’s your product’s price before you add markup and the lowest price you should ever sell your quilts for.

 

 

 

STEP 3: ADD MARKUP

In this pricing strategy, I define/use “markup” a little differently than the traditional pricing formula that uses a standard markup (Productions Costs x 2) to get Wholesale Price and then another standard markup (Wholesale price x 2) to get Retail Price.

 

In most cases, quilts aren’t a suitable handmade product to sell wholesale to retailers, because it means you must double your price.

 

For example, if my quilts are $393.75 after covering my costs and adding profits, I would then multiply that number by 2 to get my retail price, which would be $787.50.

 

 

If I were selling a lower-priced item such as earrings, that price jump would be so big (e.g. earrings are $15 wholesale price, x2 = $30 retail price; still a reasonable price for earrings).

 

But the labor costs of quilts are much higher, so multiplying a wholesale price by 2 makes the price jump much higher. And it’s unnecessary if you don’t plan to sell to retail stores or you sell very few through retail stores (you may want to stop selling wholesale if that’s the case) .

 

However, even if you don’t plan to sell your quilts wholesale to retailers, you should still add a markup to your prices.

 

Markup will allow you to offer discounts to your customers without eating into your profits.

 

When you sell wholesale, you must be able to offer a 50% discount to retailers. But that type of discount is not necessary when selling directly to consumers.

 

If you run a sale one month or offer a discount to VIP customers, a 5% – 20% discount is plenty.

 

You may also use your markup to cover shipping costs and offer “free” shipping, or provide a service such as free repairs.

 

A markup will also give your business a little extra padding for those unexpected costs that come up. Markup will help cover them without you having to dip into your profits. For example, if you want to take vacation time or need to take several weeks off. Or if your sewing machine needs a repair one month that will cost several hundred dollars.

 

To add markup, determine how much of a discount you would like to be able to occasionally offer to your customers. That is your markup percent (e.g. 15%)

 

Subtract your markup percent from 100%, which tells you the percent your Wholesale Price is of your Retail Price.

 

For example:

If I want to be able to offer 15% discounts.

 

100% – 15% = 85%

Wholesale Price is 85% of my Retail Price.

 

 

Now you can take your Wholesale Price, and your Wholesale Price percent, and cross multiply and divide to find your Retail Price.

 

 

For example:

Wholesale Price = $393.75

Wholesale Percent = 85%

Retail Percent = 100%

Retail Price = ?

 

$393.75 (Wholesale Price)                                           85%

? I want to know this number (Retail Price)             100%

 

393.75 x 100 = 39375

39375 divided by 85 = 463.24

 

Retail Price = $463.24

 

If I offer a 15% discount on $463.25, that would be a $69.49 discount.

 

The customer would pay $393.76, which ensures I’m still covering all my costs and making a profit, even when I offer a 15% discount.

 

 

After you add your markup, you have your final price (Retail Price).

 

 

 

HOW TO KEEP YOUR PRICES DOWN & BUILD A SUCCESSFUL QUILT BUSINESS

If you’re building a business selling quilts, know that it can be done, but requires some strategy. You can’t go from sewing quilts for friends and family and applying the same practices to sell to consumers.

 

A quilt business must be even more strategic than other handmade businesses because of how labor-intensive quilts are (which require prices to be higher). It’s really easy for a quilting business to price itself out of the market, which decreases how many quilts you can sell in a year, and makes it hard to make a living from making and selling quilts.

 

Here are a few don’ts to consider if you’re starting a business selling quilts.

 

 

DON’T SELL WHOLESALE

As flattering as it is when a retailer asks to carry your quilts in their store, you don’t have to say yes. Selling through retail stores does allow you to reach more customers and make more sales with less effort (i.e. you’re selling multiple quilts to one store vs. selling to multiple customers).

 

However, selling to retailers means you must give them a significant discount. Retailers need that discount so they can then mark the price of your quilt back up to its retail price to cover their costs and make a profit when they sell it.

 

That being said, you may be able to negotiate with the retailer and let them know you’re only able to offer a ___ discount on your quilts, which would be your markup percent. If they understand the labor that goes into making a quilt, they’ll understand the smaller discount to keep retail prices reasonable. If they don’t understand, you can explain it to them.

 

If you forgo selling your quilts wholesale to retailers, you don’t have to raise your prices as much to account for the 50% discount they’ll expect. Then, you can keep your prices lower to make them more appealing to consumers.

 

 

DON’T OFFER CUSTOM

Well…you can offer custom, but you must increase your prices significantly. To make a custom quilt you’ll spend much more time communicating with the customer to understand their vision, more time finding materials, and more time creating a pattern/design you’re not familiar with.

 

You’re also often left with materials that don’t fit within your product line or brand. For example, if I make quilts and focus on soft pastels and floral prints and someone requests a custom quilt using bold primary colors, making burp cloths from the leftover material from that quilt will throw off the look of my shop.

 

What I often found was, when you gave customers and inch, they’d take a mile. So custom orders weren’t just a matter of a couple more emails and buying different fabric, there was a lot more back and forth and adjustments along the way that made them not worth it (i.e. I didn’t profit and sometimes lost money on them).

 

A business can be built on custom orders, but you must educate your customers on why the prices are higher.

 

You may even set some restrictions such as: custom orders include 1 hour of consultation time and customers will be given 3 fabric options to choose from. Overtime and additional options will increase the price of the quilt.

 

 

DON’T GET TOO DETAILED

As amazing as intricate quilts are, they’re just not ideal to build a business on. The amount of time it takes to cut all the pieces, line them up perfectly, and sew them, bumps the price up higher than most people are willing to pay.

 

That’s not to say it can’t be done. If you find the right target market, they may be willing to pay higher prices for a specific type of quilt.

 

As a general rule when it comes to handmade businesses, the simpler you keep things, the more successful you’re likely to be.

 

The same idea applies to the types of quilts or products you offer. Many makers want to offer everything they can make because they love being creative and think variety increases their chances of selling more.

 

But it actually does the opposite. It sucks up your time and increases costs so you’re profiting less, and it confuses customers.

 

If you’re a quilt business that makes feminine baby quilts (e.g. pastel colors and feminine prints), adding burp cloths, bibs, and change pads makes sense. On the other hand, if you add table runners, coasters, and tea cozies in there, the business no longer feels like it’s suited for new moms.

 

Or, if you offer a wide variety of prints and colors to try and appeal to more people, the same thing happens; you confuse all your customers.

 

You want your entire business to feel like it’s built for one type of customer (e.g. moms of baby girls). When you do that, your target market can easily see your vision, they feel like they’re a match for your products, and they become a loyal customer.

 

Know your target market and stick to only making products for them. HOW TO FIND A GOLDMINE OF CUSTOMERS will help you find a profitable target market.

 

 

DON’T SELL QUILTS ONLY

Although you don’t want to go overboard with the products you make (i.e. too many types of products or too many variations of quilts), a few products outside of quilts may be beneficial.

 

Here’s how to know if you’re offering too many products or product options.

 

You may consider adding a few lower-priced products to your lineup.

 

You, of course, want to stick to the same target market with these other products, otherwise, you create a lot more work and increase costs by marketing and selling to a different customer.

 

For example, if I’m targeting new moms with my baby quilts, I would stick to other products new moms will be interested in (e.g. burp cloths, bibs, change pads, etc.)

 

These lower-priced products will help me increase my value per transaction and make a sale when a customer isn’t quite ready to invest in a quilt.

 

Check out HOW TO CREATE AN ENTRY-LEVEL PRODUCT for more information on this pricing/product strategy.

 

For example, let’s say Grandma is buying a gift for their new grandbaby. They may discover my quilts and then decide to add the matching burp cloths and change pads to their order.

 

On the other hand, if a work colleague goes shopping for a quilt, discovers one of mine but doesn’t want to spend hundreds of dollars on the gift, they may purchase the burp cloth set and bib as a gift instead. Perhaps if/when they have a baby, or a family member has a baby, they’d be willing to spend more money on a handmade quilt and will come back to purchase one from me.

 

 

 

I hope this article and quilting price formula has helped you price your quilts 🙂

 

 



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