Wednesday, February 14, 2007

Break Even Analysis For Etsy Sellers

This is a little off my usual track and something I would rather avoid as an artisan but if we want to be successful must take a look at so I did a bit of searching for an easy way to calculate my break even point. Here is what you need to know to figure it out and how to do it, I am going to use my round cast resin frame as an example which I sell for $16/ea:

The Formula:

Break-Even Point Q = Fixed Cost / (Unit Price - Variable Unit Cost)

The Elements:
1. Selling Price Per Unit = $16
2. Total Fixed Costs (all of the fixed costs to produce your first item) =
$48 (full bottle of resin) + $6 (glass for frame) = $54
3. Variable Unit Cost (amount that it will cost to produce a 2nd item) = $6 (I just need glass now that I still have resin)

The Results:
So if I put my results in the formula 54/(16-6)=5.4...which if I round up would mean I need to sell 6 round cast resin frames before I break even. (please note, to be more exact I could add in the cost of creating the silicone mold (expensive), cardboard and hanging supplies but I just wanted to get an idea).

Yes, this kind of depresses me but we all know it's not entirely all about the sales. We get a lot out of the art/learning process however, if we are going to be serious about our art, it is worth taking a hard look at your pieces in this way to be fair to yourself as a seller and your clients. If you don't want to do the math by hand you can use this Break-Even Analysis Calculator online. Good luck and I wish you all great success and sales! ...So am I going to keep selling the frames? I haven't decided yet, but sometimes when you are in to a certain point I feel like you should go all the way...plus, they look really nice and modern. :)

2 comments:

tina said...

hey, you're mr. helperpants! (really.) thanks!

i love those frames! a whole wall of them would be so nice!

savymanda said...

Well, I adore your resin frames...but understand the need to be fair to ourselves. i hope that they start selling like hotcakes and because of demand you are forced to raise the price and begin making a tidy profit on each.

Either way, thenks for the great info...

Be Well..