The Artist’s Business Bible -- Chapter II
by Richard Gipe

How Do I Price My Art?
One of the most Frequently Asked Questions we receive at art-exchange is, "How should I price my art?" We will discuss several approaches to this important topic. Regardless which method you choose to price your own art, keep in mind, art is more often sold than bought.

There is a reason why the universal sharing arrangement on most art sales is 50% to the artist and 50% to the dealer. Art is sold more often than art is bought. A great deal of thought and effort goes into an effective sales effort. Successful galleries are frequently in high traffic areas where visitors have discretionary income with which to purchase art. Rent or lease costs are typically higher in high traffic areas.

A gallery located in Beverly Hills, California may pay $50,000 per month for gallery space. If the art product moving through this gallery location is not significant the gallery will not lease space for long. For the gallery to make a profit the gallery must first recoup lease costs, utility costs, advertising and marketing costs, merchant account fees, salaries and sales commissions.

There are approximately 20,000 galleries across the United States, many in high traffic areas and competition is fierce. A good art consultant can literally sell anything at nearly any price. For this reason artists must spend part of their time seeking gallery representation. If you have gallery representation you should work out pricing with a seasoned art dealer who knows the typical art budgets of their demographics.

Here are three additional methods of pricing your art.

The Cost of Goods Approach
The cost of goods approach requires some work on your part but it won't take you long and is an important discipline for you so take the time and do it right. You need to know where your break-even point is in order to insure a profit.

What is the annual cost of the studio you work out in? This cost may range from $0 to several thousand dollars per year. Be sure to include utilities. If you work out of your home you may allocate part of the total cost as one would a home office.

Next, calculate how many works you could create in a year. Break the inventory out into small, medium, large or oversized. Account for multiples if multiples are part of your product offering.

What is the total cost of goods for materials including framing if you intend to frame your works?

If you continue to study your craft and there is a cost for your continuing education, add the cost of classes. If you subscribe to trade journals, add your subscription costs. Don't forget telephone, postage and online fees.

Finally you should add an hourly wage, may range from $5 per hour to $50 per hour or more. You should then calculate a profit margin, 10% is a good number. All of these costs add up to wholesale. A retail price should be 100% higher than wholesale, in other words, double wholesale. A designer would expect to purchase at a 25% discount off of retail.

The following example should demonstrate the Cost of Goods approach:

Annual Studio Cost including utilities is $6,000
You create six new works per month (2-small; 2-medium; 2-large); 72 per year
Material and frame costs average $100 per piece, thus $7,200 annually
Education and subscriptions, $500 annually
Telephone, postage, and online charges, $960 annually

Adding all annual costs brings annual expenses to $14,660. You complete 72 works, thus your average cost per work is $203. You may price your large works at $300, your medium works at $200 and your small works at $100.

Here is the cautionary tale. You would break-even if you sold every work at true Cost of Goods. You haven't eaten yet. If you are not intending to become yet another "starving artist" you must eat along with the many other things making up a quality life.

Add a reasonable "per hour" wage and finally add a profit margin. If you are beginning your art career you may wish to start with a minimum wage adding a 10% profit margin. See how sales go.

Your small works with a wage and profit margin may be priced for wholesale at $150; your medium works at $275; and your large works at $400. This means retail on a small work needs to be $300; on medium works $550; and on large works $800.

Ultimately all product in a free market moves according to the laws of supply and demand. Short supply, big demand, equals high prices. Much supply, no demand, low prices. You create the supply and therefore you are in control of the supply side.

Creating demand for your art deserves equal time. This is where many talented artists fall down. Remember, without demand, price is meaningless. Van Gough never sold a piece while he was alive, while arguably one of the greatest artists who ever lived, marketing was not Vincent's forte.

The Price Per Square Inch Approach
Many artists choose to charge by the square inch. A 40"X40" painting, for example, has a surface area which can be determined by multiplying the height by the width, thus 40"X40"= 1600"X$.50 per square inch=$800; wholesale pricing is, therefore, $.25 per square inch. This method for pricing is simple and effective; however, you should understand your true cost of doing business as a counterbalance.

The Current Market Value Approach
All methods of pricing are futile if your work does not sell. I know an artist, highly educated and consummately skilled who prices his works at $5,000 to $25,000. This artist waits tables in a buffet restaurant rather than price his works to sell.

There are an estimated 500,000 working artists in the United States so all artists are part of a highly competitive environment. It is often not the best art that sells but rather the best sold art that sells. Being a great artist with great art is not enough.

Generally speaking poster art sells for $5-$25; limited editions sell for $50-$800; and original works sell for $500-$5,000.

A recommended discipline for every artist seeking to price his or her works correctly is to do a comprehensive search for comparable works online, in galleries, and at shows in your area. Your goal in pricing your works should be to provide better art at better prices. Compare apples to apples. Oil paintings are priced differently than pastels or watercolors. Search for works like yours on www.art-exchange.com. Approximately 10,000 artists have listed and priced their works there.

When an artist becomes known, first locally, then regionally, then nationally or internationally the all important "demand factor" begins to move pricing up. Ultimately there are 5-factors determining the value of art.

The 5-Factors Determining Value
When you hear about new art price records in the spring and fall art auctions at Christies and Sotheby's have you ever wondered what factors cause record prices? There are reasons an old canvas may fetch a million dollars or more.

In fact, there are 5-Factors determining the ultimate value of art. Those factors are:

When museums begin collecting the works of an artist.
When the works of an artist begin finding their way into important private collections.
What is the educational background of the artist (more important in Europe than in the United States, still a factor)?
Is there strong gallery support, more demand than supply?
Has the artist received positive critical review?

When these 5-Factors are in place, all of the pricing models go out of the window. Think of these 5-Factors as hurdles you must get over. An artist's reputation begins locally, and then grows regionally, then, perhaps, nationally and ultimately internationally. Galleries and dealers are in business to make money by selling art. Some art is easier to sell than other art. If you can get strong gallery support, chances are some of your works will find their way into important private collections. Important private collectors influence museums. The critics write about artists who are climbing that ladder.

Summary
If you are starting out, or if you have been around for awhile but don't seem to have traction when it comes to selling your works, we recommend you get in the game. Perhaps you need to pay more dues. What we mean by this is, if you have a large supply and no demand, you need to get some money moving. Be aggressive, set your pride and ego aside and sell some of your works. If you recover your material costs only for awhile, then you live to fight another day.

You can always raise your prices when you have a few sales behind you. Seek to balance supply with demand. Without demand there is no value. With enough demand and a short supply the price could be sky high and still be reasonable.

Coming in future issues:
Organize For Success
The Business Plan
Hope Is Not A Strategy-The Strategic Plan