How to price your handmade products
When I started my first business I had no idea how to calculate the cost of my products. I wasn’t even keeping track of how long it took me to make my goods or the cost of my supplies. I just made some stuff and slapped an arbitrary price tag on it. This is a horrible way to price products but in all fairness I started that first business (selling handmade ‘stationary’ that I created from scrap paper and collaging junk mail) when I was eight so I try not to beat myself up too much about it. By the time I started my second business (selling homemade candy outside my dad’s barbershop) I was a little bit older. With all the wisdom of a whole 12 years on this planet and the realization that instead of using ‘trash’ to make my products I actually had to purchase candy molds and ingredients I knew that I had to figure out a way to price my candy so that I covered not only my costs and labor but also made a profit. My candy business was fairly successful in that I ended up covering all my expenses and even managed to deposit my $100 profit (which seemed like an insane amount of money back then) into my savings account.
Every year at our Craftcation: Business + Makers Conference I host a roundtable where attendees can ask me questions about pricing and every single year there’s a least one person at the table who uses the same pricing tactics as I did with my stationary business, in other words they guess what their products should cost or try to figure out how much they think someone would pay for it. It’s all I can do to not jump on the table and shout, “Pricing is not a guessing game! It’s a simple mathematic formula.” Pricing is so important that I dedicated an entire chapter (in which I go into great detail and have several downloadable worksheets) to it in my online workshop Craft Show Success. If you’re just starting out or feel like you could use some pricing and financial know-how I urge you to check out the workshop.
Figuring out what to charge for your product is not a guessing game. It’s not about what you think someone may pay for your product or how much you feel it’s worth. Determining your pricing is about numbers, not feelings. There’s a pretty simple pricing formula that you plug your specific costs into to figure out what to charge for what you make.
PRICING FORMULA:
Labor + Materials x 2 = wholesale price
Wholesale price x 2 (for overhead and surplus) = retail price
Seems pretty basic, right? It is and it isn’t. Finding and sticking to the cost of your labor and materials is what tends to be problematic for makers. Please note that this is the pricing formula that I use and other makers may have slight variations like multiplying the wholesale price by 2.5 or 3 instead of 2.
As I mentioned I have an entire chapter on this so I’m just going to cover a small portion of it here: materials.
Makers often overlook hidden costs when determining what they pay for materials. Using shirts as our product example, you can’t just say a shirt costs you $5 to buy so your materials cost $5. You have to consider EVERYTHING you need to make that shirt, like screen printing ink, screen printing screens, care label, your label, hangtag, thread to sew labels, etc. There may be other hidden costs for your product as well. Examine every item you use to make the finished product and don’t leave ANYTHING out! Don’t fall prey to the notion that you only use a tiny bit of thread for each shirt and not add thread to the materials list. Don’t fail to add in shipping costs of getting the shirts to you, or your time, gas and mileage to pick up materials. It all adds up!
For example:
Materials cost for one shirt:
-Shirt $5
-Thread .10
-Care label .25
-Hangtag .30
-Ink .35
-Shipping costs .60
-Gas, mileage and time picking up materials .40
Materials cost = $7
Once you determine your REAL materials cost you may be a bit shocked at how fast the tiny things add up. The good news is that there are ways to cut your materials costs. Cutting materials costs is sometimes easier than cutting labor costs but requires some research.
If you create your hangtags or labels yourself, it might be cheaper to outsource them to a company that creates custom labels or hangtags. Get creative and think of alternative options for hangtags like making your hangtags out of business cards and having them printed in bulk. Just be sure that these changes fit within your branding.
Buying your materials wholesale is absolutely essential to keep your prices competitive. Buying wholesale isn’t as difficult as it might seem. Yes you’ll need to get a resale permit and set up accounts with the wholesale company but in the end you’ll be saving money. Using a large distributor like Darice (if you were at Craftcation 2016 you may remember them since they supplied almost all the materials for our craft classes) helps save time because they offer so many different types of craft supplies. Instead of setting up multiple accounts with several different manufacturers you can set up one account with them and buy your supplies all at once. This doesn’t just save time but also saves money on shipping costs.
Many wholesale companies have minimums (one of the things I love about Darice is that their minimums are low). If you can’t meet a company’s minimums, consider reaching out to your network and combining your order with theirs. If the company you order your materials from is near you, it may be cheaper to pick up your order instead of having it shipped. Some companies offer alternative shipping programs. Darice has a freight-included program that they designed specifically for small businesses and independent crafters, which is a great to eliminate unexpected shipping costs. If you’re resourceful and research diligently, you’ll likely be able to cut your materials costs. For more on pricing check out these blog posts: Four benchmarks for wholesaling and How to asses and pitch the value of your creative products or my online workshop Craft Show Success.
TO ENTER THE GIVEAWAY:
The contest is now closed. Congrats to our winner Samantha!
To enter to win a $100 Michaels gift card courtesy of our friends at Darice just leave a comment on this blog post below by August 11th letting us know about one of your biggest struggles when it comes to pricing your products, sourcing materials or running your business. We’ll pick one lucky winner to a $100 gift card to Michaels.
I’m a home baker/pastry chef I’m L.A., it’s hard for me as a small business to buy my supplies at a decent price. I’m paying full retail.
Ronnie, you may want to consider setting up a wholesale account with a food distributor. If their minimums are high, maybe you can get together with other small food artisans and buy in bulk. 🙂
I sell items from San Francisco to LA at pop up shops artwalks and events. How does region and atmosphere affect my pricing. Should pricing be different on the internet than in person.
I don’t think your pricing should be different in different regions. Since everything is pretty much global at this point (with the internet) your pricing should be consistent everywhere.
My biggest struggle is that when i price this way prices seem so high. I know this is partly lack of confidence and i just need to get over it.
Most makers go through this at some point. It’s hard to get over the emotional side of pricing but it’s essential. You and your products are worth it! 🙂
What great advice, Nicole! I struggle with my labor cost – I have a “day job” that commands a very high hourly rate, and I go back and forth between thinking “my time is my time, so no matter what I do I should get paid the same hourly rate” and “what’s my minimum labor cost to cover the cost of my life and is that enough/too much when I do pricing math?”
You can also think of it in the realm of – if you had to hire someone to do what you’re doing, what would you need to pay them? I go into detail on lowering labor costs in the workshop as well. 🙂
My name is Marie Fields I’ve started said Candy Business or trying to get started but I’m having problems with pricing. Example I bought $134.00 for candy molds different kinds, $100.00 in products so far, I make my own wrappers but the paper cost $10.00 per pack not to mention ink for printer how do I charge some are break apart bars which has 20 pcs. Some are in boxes from 8 to 16 pcs.can you help?
My biggest issue running my business is time management! Sometimes I get so overwhelmed by all the things I want to do that I just end up staring into space. That never got anyone anywhere!
Rosalie! Awww yes… more time. I wish there was a blog giveaway for that! Ha Ha. You seem to do pretty well managing a lot though. 🙂
His is really helpful to me because I have a show coming up in Sepember. Thank you!
Glad it helped! 🙂
Pricing is the bane of my existence in making. I finally drafted an Excel spreadsheet that lists every single thing I touch when I make something. If I add to my product line, I copy the existing sheet to a new tab & add whatever new I touch when making the new thing. Where I have trouble is if someone sends/hires me a lot of work. Do I adjust my labor charge on a $150 project because they’ve send me a few hundred dollars worth of other clients? Plus I am as cheap as they come, so I find myself thinking “I couldn’t pay that for this”. ?
Hi Jenny! One thing you could do is offer a referral discount and give the clients that refer you a custom link to refer their friends to so you know when they refer you and are able to compensate them. 🙂
Thank you for the great pricing advice; it’s sometime difficult to remember that ALL the little things that go into your product – like thread, buttons, etc – add up. Because I use fabric in my products, I also add 20% to the cost of the fabric for the pieces that I can’t use.
That’s super smart to add in that extra! 🙂
I am struggling with a few. I work full time for another career and my maker career doesn’t get as many hours from me at all. I also have not built an audience. I have less than 50 transactions from Etsy.
It takes time to build a business + an audience and that’s hard when you have another full-time job. It’s totally an option to be a part-time maker and keep your full-time job as well. We all have to figure out what’s best for us. 🙂
Thank you for the breakdown of formulas. This is a great starting point to really get me thinking about the costs of materials and time. It’s so hard for some of us to put a price on what we’re making especially if we’re starting small and just doing it as a side project or job outside of a full time job. There’s a conflict internally where you feel you need to put a monetary value on your hourly time and it’s easy to just jump to whatever your hourly rate is at another job because you just don’t know any better.
I TOTALLY agree! I mentioned in another comment – one way to look at it is to figure out how much you would pay someone to do what you’re doing for your business. Also, even if it’s not your full-time job it’s so important not to underprice as it affects makers who have making as their full-time job. 🙂
One of my biggest struggles with pricing is just taking the time to figure out how much of each material I’m using, how much time it takes me to make a product, and all of the other things that need to be accounted for in the pricing formula. It’s easier to just make guesses at those things rather than actually sitting down and doing the math, but it has to be done. I definitely need to go back and do that for my products!
YES! It takes time but in the end it’s SO worth it! 🙂
I find that sometimes I price my goods too high at first, then later in the craft show or event I sometimes lower the price so that I can sell them. It is hard to gauge what the consumer feels is a good price. I find it hard to know what will sell. Sometime I have a lot of fun coming up with a concept, but then no one is interested.
I know where you’re coming from but it is super important to stick to a pricing formula and not guess what a customer would pay for your products. Also, everything we create is not going to be a big seller. Craft shows are a great place to experiment as see what kind of response you get from people. 🙂
Thanks for the breakdown! I always struggle with pricing, especially being a business focused on organic clothing, my wholesale price point is much higher than none organic clothing. I keep searching for wholesalers that adhere to my values yet are a bit more affordable, I will keep at it! Thanks for the valuable article!!
I can imagine how hard it is with organic materials. One thing to remember is that you make a specialty item and the customers that hold those same values usually understand that the price point is higher when it comes to responsibly made and sourced products. 🙂
I struggle with factoring in my time and experience into my price.
Ruthie – I totally understand how tough it can be to consider your time and experience but it really is essential to factor it in if you’re going to have a sustainable business. 🙂
I really appreciate this information. Some e told me take what it cost and multiply by 11/2, but they didn’t break down the things like thread, glues, my gas or time, etc. but that makes sense. I’m just getting started on selling my crafts and being asked quite often how much I charge, sothis information is very helpful. Thank you
So happy I could help! 🙂
Very helpful article! Thank you for posting and describing your pricing formula. I struggle with pricing because my purses have a certain raw, homemade look to them that is part of my hippie/boho style design. I’m concerned that buyers will not pay as much for my bags as they would for something factory made with a clean look.
My biggest issue with pricing my items is how to price my labor. I knit when I can, so I really don’t know how long it takes me to start—>complete my market bags; this usually depends on my mood (I knit faster and longer when I’m in a good mood; and sometimes I can only knit for 10-mins). I also have several “work in progress” projects so that I don’t too bored with a pattern. Before I priced my bag listings, I checked what other Etsy sellers were pricing theirs and came up with my current price as I didn’t want to go too low or too high. I really value my craft and can often be a perfectionist, thus some items may take me longer to complete than others.
Additionally, I purchase my yarn from Michaels’ when they have sales or online distributors when I get a chance. I’ve heard that I should purchase my supplies without paying sales tax because I have to charge that tax onto the purchaser — I forget what the term is, but does Michaels’ off that? If not, what other yarn distributors can I turn to?
Thanks for the insight I always have trouble pricing my work. 1) I am so picky that I take a lot of time on a project to get it just right, so I sure can’t price by the hour. 2) I charged more for products when I lived in the San Francisco area then I do in central California. 3) because I have been crafty for all of my life I forget that people who aren’t are willing to pay more for something than I would myself!!
I have participated in a couple craft shows so far and I struggle a little with how to incorporate the table fee into my pricing. One particular craft show I have participated in has a particularly high fee because it also serves as a fundraiser for the center that produces/hosts the show. I am unsure if it is fair for me to pass that cost on to my customers or whether I should treat it more as a donation that my business is making to the center.
The prices of your products should remain the same no matter where you’re selling them. The cost of your product is based on your labor and materials not the cost of each individual fair. The cost of the fairs should be covered when you multiply your price by 2. 🙂
Selling part time and finding materials that are don’t add to much to cost. Also marketing products and ideas on where to find more buyers.
For many makers marketing is the least fun part of the business side. If you’re doing craft fairs be sure to have people sign up for your mailing list, you could also offer entry into a giveaway for them following you on social media. 🙂
I make handmade greeting cards. It started as a hobby, but now I’m trying to sell them. I will NEVER recoup my materials cost because over the years I have spent many thousands of dollars on supplies, both consumable and durable (paper, cardstock, stamps, die cuts, embossing folders, ink pads, embellishments, glue, glue dots, tape glider and refill tape, storage containers, shelves, cutting board and replacement blades, embossing powders, envelopes, plastic sleeves, Big Shot, pens, Exacto knife, punches, brayer, sticker machine, etc etc etc). I have over 100 Darice embossing folders. My time designing the cards vary, but can take several hours to get it right and looking nice. On top of ALL that, some manufacturers angel policies and copyright laws prevent me from selling online, and I can only sell at local boutiques. The vendor fees can cost more than it’s worth. People think that Papyrus cards are expensive, and are NOT willing to pay those high prices for a card. They don’t realize the time, and costs of producing handmade and one-of-a-kind cards. A $100 gift certificate wold be nice, since I spend at least that much every time I go to Michael’s.
Short of going door to door in L.A., I’m having a hard time figuring out how to find a fabric wholesaler for my specific fabric. Also: Might be nice if tutorials on pricing factored in determining where the market is at a given price point!
i just started creating a few things just to help out with extra income since i stay at home. i have no experience in this, so i mainly just have to look around for similar things and price a little lower because i don’t ever think my stuff is as good as other people’s. i’m not naturally creative, so i definitely lack the confidence to price mine.
When I calculate the cost of materials and multiply it by 2, the wholesale cost is about what people are selling similar items at retail. This is a struggle. Should I lower my price or risk not selling anything because it’s too expensive?
If your competitors are able to produce something similar for less then it may be time to begin looking at ways to lower your materials or labor costs.
Your post, plus the comments from others were very informative. How do I get a retail license in order to buy wholesale? That’s a great idea.
glad to help! here you go: https://www.boe.ca.gov/info/reg.htm
Thanks so much! Thrilled to win:)
Phenomenal advice. I too had issues with trying to determine the best practice in pricing our products, first on Etsy and that we just opened our own site. I found that some items just has to be price a little differently. Sometimes just at 1.5 , but we make up for that on others at 2.5 or even 3 depending on the item and what our cost was and what the overall market for items similar to ours are.
I’m in the process of getting all my state and federal ID numbers, in particular so that I can open an account with Darice. I am a paper crafter and I’m wondering if their prices are worth it. I can’t look up their pricing myself to gauge. Do you know about how much a single color pack of their Core’dinations paper is? A little off topic, I know, but you seem like you have a good working relationship with Darice.
Hi Sarah! That’s SO awesome! Congrats on taking that step. 🙂 I’m not sure how much that is but I would suggest emailing them and asking. They’ve been great with customer service for us. If you don’t hear back from them let me know and I’ll reach out. -Nicole
THIS!!!! This could not have come at a better time for me…even preparing for a one off craft event has been an especially time consuming challenge. Thanks for your insight!
I’m trying to start a Candy Business . I bought $134.00 worth of different Molds, $100.00 in products for the Candy. I make my own wrappers , the paper cost $10.00, plus ink to print. I have Candy boxes which some will have 8 to 10 pcs. And some with up to 16. The boxes of course are miniatures how do I charge for the product can you help.