<p>When I peruse Etsy, I'm always saddened to see people selling themselves ridiculously short. I see full-sized baby blankets on sale for $40.00 and owl hats for $12.99 and I cringe. Do you know what I think? That person does not value her time and talent. </p><p>It's easy to think you need to use low prices to draw people in to your shop. It's tempting to try to set your prices a little bit lower than your "competition" so you can snatch the sales. DON'T DO IT! There are several problems with underpricing your items. First, you could potentially hurt other shops who are pricing their items correctly. I've been asked why I charge "so much" for certain items when similar things are available in such- and-such shop for so much less. I then have to explain to the potential customer that I have to consider how much time I put into making items and price my work based on that. Another issue is this: if you're pricing your items low, you could burn out. You won't see a huge profit so you'll lose interest and not find it worth your time to spend hours upon hours creating beautiful items. </p><p>Let's take a look at six things you should consider when coming up with prices for your Etsy shop. Calculate all materials and expenses accurately. These things should include prices for things like yarn, buttons, and crochet hooks. Also, be sure to properly add up all Etsy and PayPal fees. Are you using a loom? Did you need to purchase Photoshop for editing product photos? You need to calculate those things, as well.</p><p>Pay yourself for your time. Come up with a price that you want to make per hour. Time yourself as you make each item. Then pay yourself for each hour you spend. </p><p>Decide on a pricing formula. Etsy has a suggested formula for coming up with a price. You can read all about it here. Their formula is as follows:</p><p> materials + labor + expenses + profit = wholesale wholesale x 2 = retail</p><p>To be honest with you, I love this formula. I think it would be wonderful if it worked for everyone, but I simply don't think it can. If you take this formula and plug in the numbers for a relatively small crocheted blanket, here's what the price could potentially be: $203. I'm not sure that your customers or mine would be willing to pay that. So, I had to come up with a formula that worked better for me. </p><p> materials + labor + expenses = retail</p><p>If you plan to sell wholesale, you would need to double the above number for retail (I don't sell wholesale because I simply don't have time). Using this formula, the same crocheted blanket would be priced at $76.50. That's quite a difference and will allow far more blankets to be sold in your shop. </p><p>Lower prices do not mean more sales. When I first started selling on Etsy, I sold my owl hats for under $20. After I started making some sales, I decided to up my price to $25. I sold the same number of hats. After reading about pricing, I upped my price to $30. I didn't think I would sell any. I was shocked to see my sales increase tremendously. Yes, you read that right. I made far more owl hat sales at $30.00 than I did at $20.00. </p><p>Be willing to experiment to find a sweet spot. After you've figured out a price that you're comfortable with, be willing to go up or down a couple of dollars. You might be surprised to see that you'll sell more items just by changing the price from $30.00 to $29.50. Test the waters and do what works best for you.</p><p>Decide if shipping will be included or separate. I've decided to keep all my shipping fees separate. These include packaging materials, postage, labels, and the like. I know some people like to include these in their item fees and offer free shipping, but this isn't the route I've decided to take.</p>