Craft Pricing: How to Track Expenses and Price Handmade Products for Profit

Craft pricing starts with knowing your numbers, and that means understanding every expense involved in running your handmade business.

Do you know exactly how much it costs to make your products?

Whether you use a formal pricing formula or a more intuitive method, It's essential to have a solid grasp of your business expenses in order to set profitable prices.

Carefully recording your expenses also ensures you're maximizing any tax deductions allowed in your area - an important benefit for every small business owner.

Why Tracking Expenses Is Crucial for Craft Pricing

Before you can start pricing handmade crafts for profit, you need a clear picture of what it costs to run your craft business.

That's where expense tracking comes in.

If you understand the total cost of creating and selling your work, you'll be prepared to price products profitably. If you overlook hidden or indirect costs, your margins will be slim at best.

Without this knowledge, pricing handmade goods is just guesswork, and guesswork can cost you money. When you build your pricing around real data, you can confidently set prices that support your income goals while remaining fair and competitive.

Recording your costs also plays a vital role in tax preparation. Keeping thorough and accurate financial records ensures you can claim any allowable deductions and avoid unpleasant surprises at tax time.

Remember: Craft pricing isn't just about covering costs, it's about building a sustainable, profitable business.

Types of Craft Business Expenses

Each type of craft business is unique and will have a different set of expenses as well as different product pricing strategies.

The list of expenses below is quite comprehensive. Some items will not apply to your business, and you may have additional expenses that are not on the list.

Materials Cost

Materials cost refers to the consumable, physical supplies and components that go directly into creating your handmade products.

These expenses are the materials that are used up or included in the final product and must be factored into your pricing to ensure you cover your production costs and make a profit.

Even if each item seems small or inexpensive, it all adds up, so you should make sure you account for expenses.

Types of Materials to Include

Here are the main categories of materials you may need to track.

Raw Materials

These are the primary components of your product.

Examples Include:

• Beads, thread, wire, or yarn
• Paint, canvas, or paper
• Clay, wood, fabric, or metal sheets
• Fasteners, or glue

Some materials are used across multiple products.

For example: If you buy 50 feet of sterling silver wire, but only use a small amount of wire in each necklace, you'll need to figure out how much wire goes into one necklace and divide the total cost accordingly to find the material cost per item.

Packaging Materials

If your product includes packaging as part of its presentation, that cost should be included in the materials calculation.

Examples Include:

• Gift boxes or jewelry pouches
• Wrapping paper or tissue
• Product tags, labels, ribbon, or stickers

If the packaging is part of the product (e.g., gift-ready presentation), it should be included in the item's material cost. Shipping supplies like mailers or tape belong under selling or shipping expenses, not here.

Custom or Specialty Components

These are extra or unique elements that enhance the product's appearance or function.

Examples Include:

• Engraved charms
• Decorative clasps or closures
• Specialty findings or fasteners

Some materials are used in just one item.

For example, if you use one decorative clasp per bracelet, the cost per item is easy to calculate. You simply use the price of that single clasp as the material cost for each item - no extra tracking or math required!

Examples: Calculating Material Cost Per Item

Simple Product Example:

You make felt flower brooches and use one sheet of felt, one pin back, and a dab of glue for each. If those materials cost you $0.80 total per brooch, that's your material cost per item.

Complex Product Example:

You make necklaces using a 25-foot spool of silver wire ($30) and premium beads ($20 for 100). If one necklace uses 2.5 feet of wire and 10 beads:

• Wire cost: $30 ÷ 10 = $3.00
• Bead cost: $20 ÷ 10 = $2.00
• Total material cost per necklace = $5.00

Breaking down your materials in this way ensures you're not just guessing. You're using cost-based pricing with precision.

Labor Costs

Labor costs account for the amount of time spent making each item.

Your time has value. It should be factored into your pricing just like materials. 

How to Calculate Labor Cost Per Item

Repeat this process for each type of product you sell. If a product takes longer, the labor cost will be higher and your pricing should reflect that.

When you pay yourself fairly, you build a more sustainable and profitable business.

Overhead Expenses

Overhead expenses are the ongoing business costs that aren't tied to a specific product but are essential to running your craft business.

They don't show up directly in your materials or labor, but they do affect your bottom line.

Estimating Overhead in Handmade Product Pricing

It's usually not practical to calculate every overhead cost item individually. That's why most handmade sellers estimate overhead as a percentage of their material and labor costs.

Typically, craft sellers will add 10-15% of the cost of materials plus labor to cover overhead.

If your overhead is high, you may need to use a higher percentage.

This method helps you easily spread overhead costs across all products.

List of Common Overhead Expenses

To help you work through all of your own business expenses, here's a list of expenses many small business owners incur.

How to Use This Information to Price Your Crafts

Now that you understand the key types of expenses - materials, labor, and overhead - you're ready to put that knowledge to work in your craft pricing strategy.

Tracking all of your business expenses ensures that you're not guessing. Instead, you're making smart, data-driven decisions that support a sustainable and profitable business.

Tools: Printable Expense Checklist & Online Pricing Calculators

Expense Checklist

If you'd like a worksheet to track your expenses, download our printable Craft Business Expense Checklist to help you think through all of your costs.

Online Pricing Calculators

Once you have a complete list of your expenses, you're ready to calculate your break-even point, as well as possible wholesale and retail prices.

Try our online craft pricing calculators. There are 6 different formulas to make the task of pricing your handmade items easy.

Final Tips & Next Steps

Accurately tracking your expenses is one of the most important steps in building a profitable business. Fortunately, there are simple tools that can help.

Whether you prefer a basic spreadsheet or accounting software, choose a method that makes it easy to track and review your expenses regularly.

Consistency matters more than complexity. The best system is the one you'll actually use.

Talk to a Professional

While this guide helps you understand which expenses to track for craft pricing, remember, it does not take the place of advice from a professional accountant.

Frequently Asked Questions (FAQ)