Tuesday, April 15, 2014

Pots By the Pound

One of the things I spend a lot of time thinking about is business practices for artists. To my mind these are necessarily different from other sorts of businesses; every seminar and lecture on the topic I've attended - admittedly not that many - has started with the Make What People Want to Buy approach. That ain't gonna work for me, but I still look to conventional models for other aspects of my business. Pricing, for example, and the related and very important Getting Paid part of working.

I've mentioned before in this space my friend, Mr Business Guy. With regard to pricing and salary, Mr. Business Guy recommends a backing-in approach: decide how much money you want to make, figure out how much pottery you can make, and price accordingly. While I was trying to think of a way to translate that into a practical approach, another friend mentioned wanting to work out by-the-pound pricing, to solve the pricing problem once and for all. Two great thoughts that taste great together! (Metaphor fail. WHATEVER, don't judge.)

So an equation to figure out part A - how much money do I want? might look like this:

Total of all household expenses per year: utilities, mortgage, groceries, insurance, taxes, all those. Let's call that BM, for Bare Minimum.

We are going to add 15% of BM, for unforeseen expenses (UFE). This is largely arbitrary, because unforeseen expenses are, well...unforeseen. But I had to put something in for them, and if I think back on past UFE, I think 15% is reasonable.

Now for savings(S). This is hard for me, because I have a history of lowballing this number; my current savings, for example, are in the high single digits. Most of the reading I have done says between 10 and 20%, but of course there are multiple factors influencing the number, such as how old one is, and the absolute number we are taking a percent of. I'm going on the high end, because I'll be 50 this year, and because I suspect my income will always be on the low end, even if it's plenty for me.

So now we have:

UFE = BM x 0.15
S = BM x 0.20

BM, coincidentally, can also stand for Bowel Movement; and life at the bare minimum can be pretty shitty. I need, and you probably need, to add something on top of this to have a little fun, buy a new shirt, contribute to causes you care about, maybe get the name-brand ketchup once in a while. Here's the sticky part: how much disposable income do you want? In some ways that's an easy question: as much as you can get, right? But remember every upward tick of the final number makes the people who will both want and be able to buy your work harder to find, so there's a trade-off. My BM number is relatively low, by design: no kids, a relatively small mortgage, no car note, no cable package or cell phone plan. I'm going to do my initial calculation by doubling BM, to account for disposable income. I feel nervous just saying that, but what the hell, it's an exercise. Let's find out what it would take to get there.  So now we've got:

2BM + UFE + S

That's how much my salary would be. That, of course, doesn't account for how much it costs me to make the pots; fortunately I have this number readily available, as my schedule-C deductions. Let's call Business Expense "BE."

(2BM + UFE + S) + BE = the total amount of gross income I would need to bring in from all sources to make this equation work.

Now that I have a number, I need a way to connect what I actually make to that number. That's where pots by the pound comes in. I know how much clay I buy each year. Well, actually, I don't. But Karen at Portland Pottery can probably look into my account history there and tell me. If I divide the number of dollars I need to make by the number of pounds of clay, I then can take that number, and arrive at a price point for any given piece: if it takes six pounds to make a bowl, and the per-pound number is $10 (just pulling that one out of my butt - haven't done the math yet), then the bowl is $60. That's would have to be the wholesale price.

But now it's time to pack up and head for Portland to teach my class. No time for math! Will follow this up later, gator.

UPDATE: I've added some features to the equation, after talking with people who know more about these things than I do. 


Tracey Broome said...

This is a great exercise, I just need to make 10,000 bowls this year, haha! Thank God my husband works hard for a living, I got a long way to go.....

Lori Watts said...

Heh. Yeah, I haven't plugged in real numbers yet; I'm scared it's going to come out that I need to charge a thousand dollars a mug! :/

Sheri Bare said...
This comment has been removed by the author.
Sue Pariseau Pottery said...

always the perpetual questions isn't it - what to charge for our work. I'll be interested to hear how it works out.