Are you making money with your art? Or could you be losing out?
I recently spoke with a fine artist who indicated that he wasn't going to sell his art through galleries any more, and so he planned to reduce the retail price of his work by fifty percent. He wanted to sell his art directly to the customer, online and also at art fairs and festivals – but he had made a crucial mistake.
Clearly, he had failed to consider that he now must step into the shoes of the gallery, and take over the activities that are necessary to making sales. If a gallery acts as your representative, they provide the physical and/or online space to show your work, promotion and marketing activities, follow up and more. How did he plan to pay for his booth fees and travel to art fairs if he cut his prices in half?
Many artists have problems pricing their work, and are not quite sure whether they are actually making money. Whether you are splitting the retail price with a gallery or not, you must understand your costs to come up with a base price that assures you are profitable. Then, you can move on to actually setting a retail price.
Let's take a look at a basic pricing formula that any artist can use to be sure they are actually making money:
Overhead. Your overhead can be defined as the regular costs of your business. These may include studio rent, your power bill, phone bill, any fees connected with your art website, etc., and are generally considered a "monthly expense" item. When you come up with that figure, you can determine approximately how many pieces of art you make per month, and divide by that number. If you make different types of work, some of which are more time consuming than others, you can assign a larger portion of overhead costs to them.
If your overhead is $400 per month, and you normally make 40 pieces of art which are similar, you can apply $10 overhead cost to each piece. But if half your art is larger and takes more time, you might calculate that those should have $15 of overhead in the price, while smaller pieces have $5, for example. As you take a close look at your expenses, and what you make, it may become apparent that your overhead is a clear percentage of each work of art. I have heard of artists who calculate 15% overhead in the price of each piece of art they make, but that may not be the right percentage for you. Do the math and arrive at the number that fits.
Materials. These costs are just what they appear to be. Canvas, paint, stone, paper, clay, or whatever you use to construct your artwork. Analyze materials costs for typical pieces that you create and see if you can come up with an average cost to assign to a size or type of art – this will make it easier to calculate.
Labor. This refers to what you are earning per hour, and you will determine this number. What would you earn if you had a "regular" job? What do you feel your time is worth? Add this number into your formula. If your calculated price ends up way too high, you may have to adjust your hourly labor cost downwards – but it will give you an idea of what you are earning.
Profit. Profit is what helps your business to run, and is not what you put into your pocket after a sale or at the end of the show day. It is money that enables your business to stay afloat, and keeps your cash flow going even through slow periods. You may use profit to take a workshop or course, buy a piece of equipment, or invest in products and services that will help you grow your small business. I suggest artists use a figure between 20% to 30% profit in their pricing formula.
Add these numbers for any given piece of art, and you will arrive at what I have termed the Bottom Line Price for that piece. This reflects the "artist's share" or amount you would receive after the 50% gallery commission is taken. If you are selling your art directly, think of this price as the 50% of the retail price you earn for making the art; the other 50% is what you pay yourself for taking over the gallery role yourself – because you must also get paid for marketing and selling your art, and cover all related expenses, such as booth fees, advertising, etc. Plus, when you are out selling your art to the public, you lose studio time, and that also has a cost.
Does this mean that the retail price of your artwork should be double the Bottom Line Price that you calculated? Not necessarily. The prices that you charge for your artwork will be determined not only by what the market will bear, but where you fit into the market, including your experience and your sales history. When you make this adjustment, you may find that your labor is worth considerably more than you think, or it may be less.
The importance of doing this exercise is to let you know where you stand with regards to the costs of making art, and what you need to charge to stay in business. If it turns out that the price you come up with is higher than what the market will bear, you may want to consider how you can reduce your costs to bring prices more in line with what you are able to charge.
One of the benefits of knowing your Bottom Line Price is that you can come to understand your costs well, and be able to set a price for your work by the square inch or square foot. This enables you to price your work quickly and accurately, or quote a commission while you are speaking with a client, knowing that you are making money and not making a wild guess.
Pricing your work for the retail marketplace at twice the Bottom Line Price means that if you do decide to work with a gallery, then your prices will remain consistent, which is important.
Once you know what it costs you to make art by using the results of this formula and your research, then you can move forward confidently knowing that you are profitable, and not losing money when you sell your artwork.