We love our hobby and want to earn a little money doing what we love in our free time. How do we price our work so our time is properly compensated and it stays fun? Before we get to discussing price. We need to visit about ways we can sell items related to our hobbies.
In any hobby dealing in physical items from China to Dolls and Sports Cards to Diecast Collectibles, buying collectibles at a wholesale or dealer cost and reselling them is how many people monetize their hobby.
Some collectors love their hobby so much, they are able to collect more and have insider knowledge by buying from manufacturers at a discount. By doing this they get better priced items for their own collection, then sell remaining items at retail to continue funding their hobby and make a side income as well.
Manufacturers will have a suggested retail price for each item that is sold to a dealer. While the retail price will vary a bit, a good rule of thumb is 30% above the wholesale cost. This makes pricing super easy as a seller.
An advantage to straight retail is simplicity. Buy stock, mark it up, sell sell sell. If a person is a collector as well as seller, a retail seller will get insider information from manufacturers about new offerings and products that regular collectors do not have access to. Not to mention, they get new products first.
The field can be crowded and competition can be cut throat. If we sell at hobby shows, there will be 3-4-5 different people selling the same packaged items. The danger when there is more than one vendor selling the same things is to cut prices to get more sales. Rather than make the typical 30% markup, vendors may discount items and only make 20% as a way of being more competitive. After paying taxes and other expenses, this does not leave much profit.
Entry can be expensive. Some manufacturers require minimum orders of items to get a dealer rate. In my hobby, one company requires a minimum purchase of $2,000 of new and old stock to get the dealer rate as one example. This can be a limiting factor for new dealers to enter.
Carrying inventory also ties up money we may want to use for other purposes if the items do not sell well. Added to that, it is possible to take a loss on items that are not popular or in demand.
Selling Custom Pieces
There are two ways of selling custom pieces in our hobby. This will depend on the hobby of course. For a good many of us, the concepts below will apply.
A very common way to sell in most hobbies is to make modified or custom pieces and resell them somewhere very much like the retail model above. This can be online or in person. Pricing our custom pieces is fairly straightforward, add the cost of materials to our hourly rate and that is what we charge.
Less stress as we simply make a number of modified or custom items we think people will buy. This can all be done in time we devote to our hobby. This fits around our day jobs and life very nicely. Another nice feature of this kind of selling is we can achieve some economies of scale. This means we may be able to get quantity discounts on supplies. We may even gain efficiencies of time as we may be making 10, 20 or 100 of the same thing.
We have to spend money on inventory that may or may not move timely. The second is price. This is not a scientific observation but it seems like retail items like this do not sell for the same money as one of one pieces. As with any retail, we are king of guessing what people will want to buy too.
When pricing these kinds of custom made pieces it is common for sellers to look around to see what comparable items are selling for and find a price near that. Especially if there are several others making essentially the same thing. This method may not give us the same price as the equation above, often the prices are reduced to be closer to competitors.
If buyers are price motivated, they will often choose the best price when there are several similar items in search results online or at a craft fair or show of some kind. Our pieces will need to be very unique compared to others to realize a return on labor.
Selling One of One Customs
This kind of selling results when we make things on demand for a buyer.
The best part of this method is we never have to guess what people want to buy. Simply make what a client asks for. Due to scarcity and the personalized nature of the items we make, we can begin to charge a higher rate for our time plus the cost of materials.
This is a “crock pot” method of selling as we have to do a lot of work to be noticed by potential clients. The internet has made this much easier but we will still have to put in the work for buyers to understand what we are offering. We will also get requests for items we do not have interest in making or lack the skill set which means we have to turn down potential work.
If we are making one item, a replica car for example. It can be difficult to receive any discount on materials as each item will require specific pieces for that item we are making.
The Formula to Compute a Custom Price
When making custom pieces or one of one pieces, here is a simple formula to use.
Parts/supplies x 30% + labor.
Why add 30% to parts? This is not mandatory but we have to spend our time shopping, that should be compensated. Remember, a custom piece could be a DIY project, but lack of time and skill drive buyers to have a custom piece made. We are offering convenience in addition to skill and labor. Also, recall the last time your car was worked on, didn’t the parts seem a bit high compared to what we can go buy them over the counter? That is because the dealership bought a retail priced part and marked it up and installed it on your car.
Labor, what is our time worth? This is where a lot of people in a hobby shortcut themselves. We do not value our time. Why? Because we love this stuff! Our hobbies take us away from the million things going on in the world around us. We escape hunting for the new collectible or making a new piece for a collection.
Because we love it, we could never charge “that much”, whatever that much means in your hobby.
A good place to start with what to charge for labor is to consider what our daily wage is at a dayjob. If we happen to make $25/hr, that can be our labor rate in our hobby.
“I can’t charge what I make at my dayjob!! It’s a hobby”. Why not charge that rate? Our expertise has value. And, we are providing a service people can choose not to buy.
“Noone will buy from me at those prices!!” Find people that will. Remember, when we are making a one of a kind piece that cannot be found anywhere else, the price will always be higher due to scarcity. Using the price argument may also be a reflection of our values versus our clients. Just because we may not pay a premium for something does not mean others will not as well.
Choosing the Right Fit
Everything we have discussed to this point are rules of thumb in some regard with the exception of straight retail. Manufactures can be restrictive when it comes to retail pricing as a means of keeping the playing field level for all sellers.
When it comes to custom pricing, except for hard costs of supplies, the rest can be very subjective and flexible as we see fit. While our standard labor rate may be $25/hr, we can be flexible when we want to be. It is our sidehustle after all.
The questions to answer when deciding on which method to begin selling in our hobby is to ask, “what kind of start up costs do I want” and “how long do I want to tie up money in inventory”.
One final thought, we can have a blend of custom and straight retail if that suits our goals. Whichever method(s) we choose, it is important to price our work well to keep our hobby fun and fit our needs. Plus, serve people that love what we do.