How to Price Handmade Items for Beginners

How to price handmade items: A simple guide for new craft sellers who need to know how to price products strategically and profitably.

When I was selling handmade jewelry, I quickly learned that pricing crafts was more complicated than I realized.

It was tough to take the emotion out of pricing decisions.

I was still working on building confidence as a new business owner. That uncertainty made it surprisingly hard to set prices that would reflect the value of my work and allow room to build a profitable, sustainable business.

That's why it's so important, especially for beginner craft sellers, to learn how to price handmade items using a strategic approach to pricing based on logical business decisions, not emotion and guesswork.

There are several approaches you can take to calculate your prices, but they all depend on you understanding your costs and your market. This guide breaks it all down and makes it simple to price your handmade items for profit.

1. Know Your Business Goals

Choose the right craft pricing strategy to meet your most important business objectives.

Big-picture, if you're starting a craft business, you want to make a profit selling your handmade items.

If you dig a bit deeper into your motivations, you'll uncover more specific goals that will impact how you approach setting prices for your handmade crafts. Understanding those motivations will help you choose the right pricing strategy for your business.

Read more about each craft pricing formula to learn which strategy is best for your business.

2. Calculate Your Costs

Add up all of your expenses, and account for all of them when you price handmade products.

No matter what pricing strategy you use, you need to know all of the costs that go into making and selling your handmade items.

If you don't know your costs, there's no way of knowing if you're charging enough to build a profitable, sustainable business.

In fact, failing to account for all costs is a very common handmade product pricing mistake, especially among new craft sellers.

Bonus: Calculating your costs can reveal new opportunities to boost profits. If you know your materials costs are quite high, you can look for ways to buy the same quality of raw materials at a lower price. If your labor costs are high, you can look for ways to be more efficient with your time.

If you need some help thinking through all of the expenses related to running your business, check this list of common business expenses for craft sellers. It includes raw materials costs, labor, and overhead expenses that commonly go into selling handmade items.

Materials Costs

Make a list of all of the materials that go into making your product.

Your list should include everything from the main material you product is made of - wood, yarn, or felt, for example - to the smaller items used to assemble or put finishing details on your items, such as glue, buttons, or paint.

If a supply is consumed while making your product, it should be included in your list of materials.

As you list your materials, write down the cost of each item.

Next, you'll need to know the cost of materials for an individual finished item. This step may be a fairly simple one-time calculation, or a more complex ongoing calculation depending on the nature of your product.

If you make a line of similar products that use the same raw materials over and over, you'll be able to calculate your materials cost per item once and use that amount for every product you sell.

On the other hand, if you make unique, custom-made products, and each product uses different amounts and types of raw materials, you'll need to calculate your materials cost per item separately for every product you sell.

Pro Tip: If you use packaging for each item, don't forget to include that in your material costs!

Labor Costs

Hourly Rate of Pay

Determine a rate of pay that reflects the skill that goes into making your product.

Don't short-change yourself here. At the very least, your rate of pay should be above minimum wage in your region.

Imagine your business has grown, and you want to hire someone to help create your products. What hourly rate would you have to offer to hire a skilled, reliable person to make your products? The answer to that question will help you determine a fair hourly rate of pay.

Time Required to Make Each Item

Again, this calculation may be a simple, one-time calculation, or an ongoing calculation you'll need to make each time you create a new item.

If you make similar products, and it takes roughly that same amount of time to make each item, your calculation will be simple. Time yourself making your product a few times, and take the average as the time required to make your product.

If you make unique items, you'll need to time yourself each time you make something. As you gain experience, you'll get better at knowing how long certain processes take.

Calculate Labor Costs

Overhead Expenses

Overhead expenses are any costs that don't fall into materials costs but are incurred in the process of making and selling your crafts.

Overhead expenses may or may not be significant depending on the nature of your business.

Simplify Your Overhead Expense Calculation

Factoring overhead expenses into your price can get complicated and tedious. You can make overhead expenses easy by using a percentage of your Materials Cost plus Labor Cost to account for overhead. Usually people use 10-15%.

This calculation provides an estimate that factors in the additional costs of making and selling your products and saves you from adding up all of your miscellaneous expenses every time you need to price a new item.

Calculate Your Overhead Expenses at Least Once

It's smart to simplify your overhead expenses into a percentage of materials plus labor. However, you may want to calculate all of your overhead expenses at least once, particularly if you suspect your overhead expenses are high.

That calculation will give you a clear picture of how much overhead expenses contribute to the cost of running your business.

If the overhead costs are minor, you won't have to be as concerned with them. If overhead costs are high, you'll need to be more mindful of how those expenses play into the profitability of your business.

Selling Fees

Some craft sellers include selling fees in their overhead. For example, if you sell primarily at craft shows, calculating selling fees per item can be tough. Sometimes it's easier to include those fees in your overhead.

If that makes sense for you, skip this section.

Other sellers, such as those who sell on Etsy or similar marketplaces, can easily calculate the selling fees associated with each item sold. In that case, you may want to use a pricing strategy specifically designed for Etsy pricing which includes selling fees directly in the calculation.

3. Add in Profit

Build profit into your prices to grow a sustainable business.

If you don't include profit into your price you're only working for an hourly wage. Adding profit gives your business room to grow.

The amount of profit you add will depend on your business goals and the pricing formula you choose based on those goals.

You may multiply all of your expenses times 2 to build in profit, or you may add a specific dollar amount to account for profit. It all depends on the pricing strategy that fits best with your business and your goals.

Pro Tip: If you're planning to scale your business by  selling wholesale to boutiques, check out the more detailed information about how to price handmade goods for wholesale.

Consider Using a Profit Goal

Some craft sellers use a profit goal as the basis for pricing.

They establish a monthly profit they's like to make, factor in the average number of items they expect to sell each month, and use those numbers to work out the price they need to charge to reach the profit goal.

Experiment with Different Formulas to Establish Profit Amounts

Instead of choosing a profit amount here, analyze your numbers through each formula to see how different pricing strategies impact your prices and profit.

All of the pricing formula calculators are linked from the Craft Pricing Formula page linked at the top of this article.

Alternatively, if you prefer working with pencil and paper, print the free Craft Pricing Formula Guide, and use the pricing formula worksheets in that guide to see how each formula impacts your prices.

Note: The hourly rate pricing strategy is the only formula that doesn't include profit. That formula may be used by artists who focus on high skill, time intensive, custom work. Income comes from the hourly rate if you use this pricing strategy.

4. Compare Prices with Similar Products

Understand your market to make sure your prices are sending the right message to customers.

You need to know how your prices compare with your competitors' prices.

First, find products similar to your own that are sold in the types of venues where you will be selling.

If you plan to sell on Etsy, look up similar products on Etsy. If you plan to sell at local craft shows, find companies with similar products who already sell at those shows.

These similar items at venues where you plan to sell are the products customers will be comparing against yours. They set shoppers' expectations.

Ask yourself what message your pricing sends when compared with that competition.

Adjust your prices only if needed. Don't undersell yourself!

A much lower price isn't always a selling point, particularly in handmade markets. In fact, a price that's much lower than similar products can cause shoppers to wonder what's wrong with your products.

Under the right conditions, a slightly higher price can encourage sales because it signals luxury and high quality.

The book, How to Price Crafts and Things You Make to Sell does an excellent job of explaining how to show customers your products are well-worth the price you charge.

Case Study 1: Pricing a Handmade Leather Wallet

Product: Handmade leather wallet

Materials Costs:

• Leather: $10
• Thread: $0.50
• Button snap: $1
• Edge finishing supplies: $0.50

Total Materials Cost: $12

Labor:

• Time to make: 2 hours
• Hourly wage target: $20/hour

Labor Cost: 2 hours × $20 = $40

Overhead Expenses:

• Estimate 15% of (Materials + Labor)
• ( $12 + $40 ) × 0.15

Overhead Expenses: $7.80

Selling Fees & Shipping (if applicable):

• Selling fees & shipping = estimated $4

Profit Goals (if applicable):

• Monthly profit goal: $1000
• Estimated units sold per month: 10

Pricing Examples Using Different Formulas

1. Basic Markup Formula: materials + labor × 2

• ($12 + $40) × 2 = $104

2. Wholesale to Retail Formula: materials + labor  × 2 for wholesale, × 2 again for retail

• ($12 + $40) × 2 = $104 wholesale → ×2 = $208 retail price

3. Hourly Rate Formula: (time × hourly rate) + materials

• (2 × $20) + $12 = $52

(Materials + Labor) + Overhead + Profit 

4. Overhead-Adjusted Formula: materials + labor + overhead + profit

• $12 + $40 + $7.80 + $10 (profit) = $69.80

((Materials + Labor) × Markup) + Etsy Fees + Packaging

5. Etsy Pricing Formula: ((materials + labor) × markup) + selling fees & shipping

• (($12 + $40) X 2) + $4 = $108

6. Profit Goal Formula: (materials + labor + overhead) + (profit goal ÷ units sold) = retail price

• ($12 + $40 + $7.80) + ($1000 ÷ 10) = $120.47

Case Study 2: Pricing a Handmade Soy Candle

Product: Handmade soy candle (8 oz)

Materials Costs:

• Soy wax: $1
• Wick: $0.25
• Jar: $1
• Scent oil: $0.50
• Label: $0.25

Total Materials Cost: $3

Labor Costs:

• Time to make: 15 minutes (0.25 hour)
• Hourly wage target: $20/hour

Labor Cost: 0.25 × $20 = $5

Overhead Expenses:

• Estimate 10% of (Materials + Labor)
• ($3 + $5 ) × 0.10

Overhead Expenses: $.08

Selling Fees & Shipping (if applicable):

• Selling fees & shipping = estimated $4

Profit Goals (if applicable):

• Monthly profit goal: $1000
• Estimated units sold per month: 100

Pricing Examples Using Different Formulas

1. Basic Markup Formula: materials + labor × 2

• ($3 + $5) × 2 = $16

2. Wholesale to Retail Formula: materials + labor  × 2 for wholesale, × 2 again for retail

• ($3 + $5) × 2 = $16 wholesale → ×2 = $32 retail price

3. Hourly Rate Formula: (time × hourly rate) + materials

• (.25 × $20) + $3 = $8

4. Overhead-Adjusted Formula: materials + labor + overhead + profit

• $3 + $5 + $.80 + $8 (profit) = $16.80

((Materials + Labor) × Markup) + Etsy Fees + Packaging

5. Etsy Pricing Formula: ((materials + labor) × markup) + selling fees & shipping

• (($3 + $5) X 2) + $4 = $20

6. Profit Goal Formula: (materials + labor + overhead) + (profit goal ÷ units sold) = retail price

• ($3 + $5 + $.80) + ($1000 ÷ 100) = $18.80

You Can Do This!

Things can feel a bit overwhelming when you're first learning how to price handmade items. There's a lot to learn and consider.

Don't worry. It all gets easier and more clear as you get experience selling your crafts. As you work through all of these question and formulas, be assured that you're setting the groundwork to build a rewarding, sustainable business.

If you'd like more insights on pricing strategies for crafters, the Etsy Seller Handbook provides excellent foundational advice on how to price handmade items.