Your reasons for wanting to open a home studio may be quite different from those of someone else; a person gets bitten by the "ceramics bug" and wants to share the hobby with friends in many ways. Whether your motivation is to spread the enjoyment of your hobby or to create a nice little business (that may someday grow into a bigger business), making money eases the way and adds to the reward!

Overhead

It is easy to forget some of the ingredients that go into deciding what your prices should be. Beginners tend to think of the price they pay for supplies, add a little markup, and set their prices with no thought to the "hidden" things; even if your studio is part of your home, consider these costs as part of your overhead:

1. Rent or house payment - If a portion of your home is occupied by a studio business, it is a very real expense to you. The IRS even agrees at income-tax time. (Ask your tax adviser about this.)

2. Utilities - The electricity used by the kiln, extra lights, heating and air conditioning the space where you hold classes... all generate costs to you that need to be covered.

3. Telephone - You may use your phone a great deal for answering questions, making contacts for new classes or publicity, and calling suppliers.

4. Transportation and shipping - Don't forget what it costs you to get the supplies from your distributor to your studio.

5. Labor - Because they enjoy it, many ceramists all but forget to include a cost for their time and expertise. Set a reasonable valuation on your time and include it.

All these things we loosely group together under "overhead" are real expenses. They vary widely with each person's situation and can even change from month to month. You will have to develop your own feel for how high your overhead costs are in relation to the prices you charge. Just be aware that they are important and don't feel guilty about marking prices to include a little extra to cover them. Remember, your business must be profitable to be a success.

Setting prices

It may seem obvious, but your business income minus the cost of doing business equals the profit you make. By keeping the costs as low as possible and the income as high as possible, you increase the profit. Some of the factors affecting profit are beyond your control, but others can be adjusted to your advantage.
The price you charge for a product or a service is largely controlled by the area where you live, the kinds of people you sell to, and economic conditions. The same item might sell for vastly different prices in two parts of the country where costs of living vary. Even within geographical areas, prices differ widely between urban and rural locations. If an intricately detailed finished piece sells for $20 in a small Midwestern town, it might bring $50 in the gift shop of an exclusive big-city hotel 30 miles away.
Know what others charge in your area and keep your prices in line with the market. There is always a happy medium between charging too much (fewer people will buy) and charging too little (you lose money). Shop around and find out what finished ceramic items sell for in gift shops, department stores, and furniture stores. Check out sellers of greenware and supplies.
A first rule for writers, comedians, and public speakers is "Know your audience." That is a good rule for home ceramics studio owners, too. You must know your customers' tastes, their lifestyles, and what they are willing to spend. Overestimating any of these things can leave you with a shelf of unsold (and unsellable) merchandise.
There are several different kinds of products and services you may encounter in your studio; each has its own set of pricing factors. To simplify it a bit, let's take a look at five main areas:

1. Greenware and bisque - If you buy your greenware and bisque from a supplier, chances are it was sold to you at a discount from a suggested retail price. If the retail price seems fair and the discount you received was acceptable, simply charge the supplier's retail price as yours.
If you purchase molds and do your own casting, be aware that many dealers determine a retail price by taking a percentage of the suggested retail price of the mold plus freight. The most common percentages are from 10% to 15%. For example, if the suggested retail price of the mold was $10.00 and you paid $2.00 for   
freight, then the retail price of your greenware would be 10% to 15% of $12.00, or $1.20 to $1.80, If the mold has add-ons or is difficult to cast, you should charge more to make up for the increased labor.
There are two very important points to remember if you use the percent-of-retail method to price greenware. First, keep in mind that the company that made the mold priced it so they could make a profit, not as a pricing tool to help you sell greenware. Many dealers who use this method tend to underprice. Second, since pricing can vary from one mold company to another, your customers could find two similarly sized pieces with very different prices. This type of inconsistency could cause you problems. If you use this common method of pricing, then be sure to check the price against other pieces of approximately the same size. If the higher-priced piece is selling, then price your greenware at the higher price.
Resist the temptation to be the lowest-priced dealer. Your customers are not as aware of individual prices as you are, and they expect you to give them the best quality. There will always be someone who can sell for lower prices and all you'll end up doing is giving away your profits. Look around and you'll see that the most successful retailers are usually not the ones with the lowest prices. People are willing to pay a fair price for a quality product.
Selling bisque should not be overlooked. Many students do not want to risk the expense of greenware breakage or will want to work at home. Generally, bisque is not yet as readily available as greenware, so if you do not cast your own you may have a hard time finding it. As a result, whether you cast or buy, firing the greenware to bisque is something you'll have to do.
Bisque is growing in popularity and, with the recent introduction of underglazes designed to work on bisque, almost any popular technique can be done easily.
Pricing bisque is a little more involved than pricing greenware. This is because you now have a firing cost plus some labor to include. If the piece is easy to clean and is fired as part of a price. A very effective technique is to announce to your class that they will get an extra 10% (or whatever you choose) off on any greenware purchased "tonight only." Not only will they buy some extra greenware, but you can be sure they'll be back to finish their new pieces. If you are planning to have a sale, be sure to follow these guidelines:

1. Never announce the sale in advance. Announcing a special before it happens is the best way to kill current sales.

2. Always have an ending date. Unless people know that it will end, they be less anxious to "buy now."

3. Resist the temptation to put seasonal items on sale during their season. You'll sell Christmas items in October whether they are on sale or not, so why give away your profits? Having a preseason sale or a postseason sale is much more effective. 

Striking a balance

Finding the pricing range appropriate to your community is first and foremost, because you will ultimately lose out if your prices are significantly out of line - high or low. Assuming your price schedule is reasonable, you can increase your overall gain by providing a consistently better product than the competition (finished ware, lessons, firing services, greenware selection). You may not be able to charge as much as you would like for some things, but you can buy supplies wisely and work to reduce your own costs.
Don't get into the habit of giving many regular discounts to other shops or groups. Unless you can lower your costs, all you are doing is giving away your hard-earned profits.