Art Business 101: All About Price

I cannot count the number of times I have discussed the question of price with other artists. What is a fair price for my work? Is there standard pricing for pieces according to their size or medium? Should the buyer have to pay more for work that took longer to make?

The confusing truth is that price is highly variable. There is a definite range for the kind of work you are making, but the range itself will differ from city to city, or even from one show to the next. Buyers in a big city or at an upscale gallery will expect and support higher pricing than buyers in a small town or at a DIY show. Buyers are also more likely to perceive higher value in a piece by a well-established artist, one whose work will resell for more than the purchase price, than in a piece by an emerging artist.

Be a Copycat

AOS 2The simplest way to get an idea for how to price your work is the “copycat method”. This involves going to art shows, fairs, and festivals, and seeing how other artists are pricing their work. It is important to seek out artists who are making similar work to yours, and who are at the same place in their career. In other words, don’t zero in on a famous, multi-millionaire painter if you are a sculptor that is just getting her feet wet. Even an artist that has been in the business for an extra 5 years is not a good gauge for your pricing.

Gross vs. Net

One of the most important distinctions for a business person is gross vs. net. “Gross” refers to the total money buyers paid for your work. For example, a painting with a $100 price tag would gross $100. “Net”, however, refers to the money you actually make after you factor in costs. That painting might have cost you $25 to make in supplies, so your net is $75.

In the same way, an art show that grosses $700 will require that you pay for certain costs, including supplies, entry fees, delivery costs, etc. If your costs total $300, then you will net $400. Another word for net is profit. If you divide profit by revenue, in this case 400 by 700, you will arrive at a profit margin of 57%.

Cover Your Costs

No matter what your costs will be, make sure you build these into your prices. Let’s say you want to make a 60% profit on a piece, and you know you spent $30 making it. In order to make your margin, you would need to charge $75 for the piece. (If you struggle with theDean at work on commissions math, here is a link to a handy margin calculator.)

There are additional costs that can come up if you are working with a third party, such as an art festival staff, a gallery owner, or an online store, and you will need to increase your prices to cover these costs. For example, a gallery will typically take a 50% commission on all sales of your work. In order to cover this cost and still make your profit margin, you should increase your prices by 100%. Even an online store platform will charge a transaction fee, usually 3 – 5%, and you will have to add this cost to your prices. If you will be shipping your work to buyers, calculate an average cost of shipping and add this cost as well.

If you have to pay a flat cost, like a $100 entry fee for an art festival, you can minimize the impact on your consumers by spreading the cost across your inventory. Let’s say you are selling 10 pieces. You can add $10 to the price for each piece.

Where is Your Support?

salon profile picAs you increase prices, there is always the chance that you will price yourself out of your market. Rest assured, the market is willing to support you at a certain price point. The difficult thing is determining at what price you will find that support.

Honestly, the only way to discover your market support is to choose a price and see if anyone buys. If you have difficulty selling at your desired price point, there are a few solutions you can try to make your business more profitable:

  • Expand your visibility, thus creating additional opportunities for revenue
  • Produce work that is less costly to make, thus making room for a wider profit margin
  • Connect with new, more upscale markets that are willing to pay a higher price

With the last solution, it will take time for you to earn the exposure and credibility you will need to succeed in exclusive markets. You may need to settle for lower revenue as you build your brand. Always take the long view and appreciate the small victories along the way.

Review the Steps

  1. Find artists like yourself; use the “copycat method” to determine your price range
  2. Choose an acceptable but realistic profit margin, and include all costs in your calculations
  3. Make adjustments to your prices based on market support

Art Business 101: Success in the Market

New Profile PicWhat is the Market?

When you hear the word “market”, maybe you think of a physical place where people buy things, like a supermarket or a farmers’ market. In the parlance of economists, however, the term “market” describes something broader. It encompasses all of the buying and selling of goods and services.

The term “art market” refers specifically to the buying and selling activity in the art world, but there are also smaller niche markets within the larger art market. For example, there is a distinct market that is dedicated to pop art.

How to Create Success

The key to success in the art market is, very simply, to connect your work with your specific market, the one that is devoted to the exact kind of products that you are selling. When you meet consumer demand with the supply of relevant products, you will achieve sales.

How do you connect with your market? The first and most fundamental step is to put your work for sale online or in a brick-and-mortar space. The second step is to let people know that your art is for sale with targeted promotion, i.e. marketing. When you are first getting started, your list of marketing contacts will be small, but as people continue to discover your work online or in person, your list will grow.

I will write more about art shows and promotion in a future post. For now, let us focus our attention on responding effectively to market indicators.

Interpreting Market Data

Humans are emotional creatures. It is very easy to take your experiences in the market personally, reacting to every sale with celebration, and to every non-sale with despair. This see-saw of emotions is part of the human condition, but it will not help you learn anything substantial about the market.

A more helpful way to react is with scientific detachment, understanding that the market is composed of impersonal forces. Economists are basically market scientists, and theycandles-and-holy-cards-at-aos work to uncover and chart these impersonal forces. You can become a market scientist too, analyzing your results with cold detachment.

An example of an impersonal force is a bullish market phase, when consumers are more likely to buy art. Another force is a bearish market phase, when consumers are more likely to pass on buying art. These phases are influenced by consumer confidence in the value of art and in the strength of the economy in general, and they are beyond the control of art-makers. If your art isn’t selling, it is possible that the market is simply “hibernating” like a bear, waiting for more favorable conditions.

Another impersonal force is market saturation. The market can be under-saturated (or “open”), saturated, or over-saturated with product, and the saturation level will have an impact on your sales. Produce too little supply to meet consumer demand, and you will lose potential income. Produce too much supply, and you will be burdened with excess inventory. Produce just the right amount of new and innovative product, and people will buy it as quickly as you can make it. This was the case during my long-running Chicago Art show, when I was making and selling 3 – 5 pieces per week.

The market was very different in late 2016, when a small preview show had better attendance and stronger sales than the larger show that followed it. I realized after the fact that we had perfectly saturated our market with the preview show, and there was no more significant business to be made.

You’re Not Psychic

Market analysts, like meteorologists, are notoriously better at commenting on the past than predicting the future. It will be the same for you. While the scientific approach will help you to understand and accept your results after the fact, it will be more difficult to anticipate results before they happen. There will always be a degree of uncertainty and risk in everything you do. Remember the adage, “Nothing ventured, nothing gained”. Also learn to value non-monetary gains, like knowledge and experience.

One way to mitigate risk is to pay attention to larger market trends. During bearish market phases, take a more conservative approach in your production numbers and sales exposure. The stock market is a good indicator of consumer confidence, as people tend to Dean cutting out Navy Pier 2pull their money out of stocks during times of uncertainty. You can also learn about trends within the art market by setting up an account on Artsy and subscribing to its e-magazine.

If you keep your eye on the market, gather data from direct experience, and work to build a following over time, you will eventually have the information you need to create success. Rome wasn’t built in a day, and neither will your career.