The Commission We Take

As a maker that sells my own work in independent shops, I understand how mean it feels when a shop/gallery takes their 'cut' of the sale. In fact, there have been times in my career (before owning a shop) where I have openly criticised shops for being so greedy. The memory of that moments makes me cringe and I feel so guilty about the shop I was degrading.

We take 50% of each sale at PRIOR and whilst that may seem high, I would like to share with other makers what I have learnt and why it is so important that your prices are calculated to allow this commission. 

SELLING TIME

Every shop you have your work in is taking all of the selling, promoting and marketing time off your hands. They are managing the transaction, the postage, the website listing, the gift wrapping, the social media posts and everything else in between. 

If you're RRP does not cover the shop to sell your work for you, it's evident that you are not paying yourself either to do this work. Your price needs to factor in your own selling time at a market and on your own e-commerce and social media platforms.

OVERHEADS

A shop has high expenses all year round. On good days and bad days, through rain storms and heat waves, shops continue to pay staff, energy and rent. These overheads are continuing to rise. Small independent shops often have 1 member of staff and zero Business Rates, whereas others - like PRIOR  - have a huge increase in overheads as they will be liable for Business Rates, larger staff teams including staff insurance, pensions and HR, and bigger liabilities.

VAT

Another thing to consider is VAT. Larger and more successful independent shops are often VAT registered.

VAT is a confusing subject and often really confuses makers, so I will try to explain:

If a shop is VAT registered it has to pay HMRC 20% of all sales. Normally a shop will buy buying from VAT registered companies, so every 3 months, the shop will claim back from HMRC the VAT they have spent on the products. However, if a shop - like PRIOR - is supporting small brands who are not VAT registered, it means they have to pay the VAT to HMRC but cannot claim it back because none of the small brands are registered. 

This means that they keep the prices the same as your website (so that customers trust the pricing of handmade goods) but because you aren't VAT registered, shops like PRIOR pay 20% of each sale to HMRC. 

HOW TO PRICE YOUR WORK

To price your work it should consist of: 40% making (time, materials etc) 40% selling (markets, website and promotion) and 20% admin. As larger shops are taking all of the selling time off your hands, half of the admin and have to pay 20% to HMRC - this is why they take 50% (they only keep 30%).

For a full step-by-step method of how to price your work - see my PRIORMADE blog here : https://www.priormade.store/blogs/small-business-help/how-to-price-your-work-and-why-you-need-to-factor-in-your-selling-time