The formula for selling a million-dollar work of art

Artwork, specifically paintings, seems like it should be moderately cheap. To make a profit, you only have to think about the price of the canvas, paintbrush, and paint. Right? Many websites I found during my research into art pricing coached new artists to think of time spent on the paintings like any part-time job, counting by the hour. But how do you know if your time is worth $20, $2,000, or even $20,000?

In the book The $12 Million Stuffed Shark, Don Thompson writes:

In a market where information is scarce and not trustworthy, the first rule is the price level signals the reputation of the artist, the status of the dealer, and the status of the intended purchaser. Prices reflect a size of a work, not its quality or artistic merit.

What it means is that a lot of it has to do with branding. It's like when we pay a few more bucks to get a certain brand of shampoo even though it probably has the same formula as the cheaper generic version. But when a new artist steps into the art market, he or she has no branding.

That's where art dealers come in. They promote, educate, and help artists to gain fame and success. On top of that, having the backing of an art industry giant like Charles Saatchi or Larry Gagosian boosts your value almost instantaneously.

Watch the video above to learn more about how art pricing really works.

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