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Message: 'Formulae for calculating commi...' with Replies

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  • Formulae for calculating commission

    Does anyone know if there is a formula for calculating the cost you would need to charge for an item if selling through a gallery so that you make something like the gallery commision in return? I've just realised, a little late I'll admit, that items I'm selling net the gallery far more money than I'm making in profit. Whilst I appreciate that they have overheads, it makes some of my products unviable for selling through a gallery for the tiny return. In fact, if I have to post or deliver I would not make anything if they only sold a few items.
    I suppose this is the age old question of how do I price my work so I see a reasonable return. Has anyone a magic calculation they use?
    SB
    6 July '07 - 4.28pm
  • I can only tell you what I have gleaned from dealing with galleries. To be honest, I know I'll struggle explaining it to you though. However, I'll have a go. It is simple really��honestly.

    If you want to know wholesale price (net) multiply retail price (e.g. £10) with gallery commission e.g.(40%). Formulae 10 x 0.6 (100-40=60) = £6. The W/S or net price would be £6
    E.g. Retail Price is £115 and commission is 35%.
    Formulae 115 x 0.65 = 74.75. The W/S price would be £74.75

    To reverse it for the retail or selling price, start with the W/S price (£12) and divide the commission (30%). Formulae 12 divided by 0.7 = 17.14. The retail price would be £17.14
    E.g. Wholesale or trade price is £209 and gallery commission is 45%.
    Formulae 209 divided by 0.55 = 380. The gallery retail price is £380.

    However, do make sure that your costing reflect the time, materials, and promotion of your product before you calculate the price. I've found this way of calculating invaluable and use it a lot in my business. Hope it makes sense.

    PS. I didn't realise that computers have no symbol for division!LH
    6 July '07 - 10.42pm
  • Oh dear, but as I say every time I write anything here, artists mustn't let galleries get away with not making things clear to you!

    As a gallery we 'sell at 50% commission' inclusive of vat.

    ie if an artist wants £10 for their piece, we put a £20 tag on it, & when it sells they get £10 & we get £10, of which we then pay 17.5% to the vat man, so we end up with £10 - £1.75 = £8.25

    If a gallery sold at 50% ex vat, the piece would be tagged £22.12. That's because the aim is for you both to end up with the same amount, & from their share of £12.12 they pay 17.5% vat, ie £2.12.

    The sums get a bit more complicated looking but same principle whatever the commission. If the gall sells at 40% commission inc vat, & you want £10, the tag will be £16.66. You get £10, they get £6.66 - 17.5% of that, ie £5.49

    If you're in a situation where the gallery fixes the wall price, it's the same principle to work things out.

    The contract...you do have a contract?? must state the commission, & if you're too frightened of the gallery to ask for an explanation of anything, change galleries!

    Claire
    21 July '07 - 2.14pm
  • Sorry, I'm probably not explaining myself too well. I have a contract with my galleries, I know their commission rates. I have no problem with either of these. The problem I have is that, for example, I sell an item for £19 that has cost me £8 to make. They take 40% - £7.60 [A], I receive £11.40 of which only £3.40 [B] is profit.

    Is there a formula that works out what I have to sell something at (whether it would sell at that price is another thing) so that my profit [B] is the same as the galleries commission [A]. I don't want to start comments on the rights and wrongs of commission rates I just want to find a formula that would give me a better starting point for my pricing and the validity of some of the products I make. I suspect it needs someone good at maths, so that's me out. If I can find a formula I can put it in MS Excel and that can do the hard work for me. Thanks. SB
    22 July '07 - 2.39pm
  • If you match the profit of the gallery on each item, then in the galleries with a low profit margin you make your items even cheaper, and in the galleries charging a high profit margin your items will be even more expensive. Why not just set a wholesale price for each item that allows you to make a reasonable profit regardless of what percentage each gallery adds?

    However, if you are set on using the formula that you asked for, bear in mind that it is only valid when the gallery's profit constitutes less than 50% of the total sale price. Assuming that in Excel you put the cost in cell A1 and the gallery profit as a percentage of total sale price (ex VAT) in cell B1, then enter the following in cell C1 to show the price that you have to sell the product at to make the same amount of profit as the gallery:
    = A1+A1*B1/(100-2*B1)

    and for the total sale price (ex VAT) enter:
    = A1+2*A1*B1/(100-2*B1)
    24 July '07 - 1.57am
  • Thanks, this is just what I was looking for. It's just to give me some idea what's practical for sale through galleries and what I should probably market directly. SB.
    24 July '07 - 7.29pm
  • Ah! Sorry I was jumping to conclusions.
    However I'm interested to see that you still take your costs off your share to determine your profit, but not the galleries? (And I'm not starting a commission discussion either) But if the product is to have a viable retail price then this perhaps must be part of the equation. Your price to the gallery should be your costs + your hourly 'value' & that's something only you can decide. Sometimes that might make an item un-saleable with gallery commission added, as you say.
    Claire
    25 July '07 - 10.52am
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