The Right Way to Price a Handmade Product (Step-by-Step Formula)

Pricing handmade items is a subject that puts panic into many handmade business owners. They’ve heard their prices are too low, go looking for a pricing formula, plug their numbers in, and then freak out when they realize what their prices should be.

What you should be pricing your products at depends on so many variables, that you really can’t follow one basic formula to a T.

Multiplying your production hours by 2 can raise your prices unnecessarily high if you make labor-intensive items. Just because it takes you 3 hours to make an item, or you use materials that are expensive, doesn’t mean your overhead costs are just as high and require that big of a markup.

On the other hand, multiply production costs by 2 may not add enough markup to cover all your costs and leave you with a profit.

I’m going to share a different way to look at pricing that allows you to set prices based on what works for your business.


pricing handmade products


How To Price Handmade Items

Handmade items should be priced, first and foremost, to cover the costs associated with making your products and running your business (including your hourly wage). Then, you should add profits to your prices, and then add a markup to allow for wholesale pricing, customer discounts, or to help cover incidentals.

3 steps to price your handmade products are:



Your products’ prices must ensure you’re being paid back for the money you spend on your business each month. Not just your production costs, but all costs and wages.

Materials + Production Wages + Overhead Expenses + Overhead Wages = Costs



Your business must profit in order to stay in business. Profits should always be built into your price and properly calculated; not simply multiplying numbers by two and hoping there’s profit left after costs are covered.

Costs + Profit = Base Price (this price ensures you’re covering all *known costs and earning a profit)

*You won’t know your sales channel costs (e.g. Etsy fees) until you determine your Retail Price and know how many items you’re listing and selling.



Markup allows you to cover unknown overhead costs (e.g. Etsy fees), offer discounts, and it gives your business some extra padding. How much markup you add will depend on your business model, the sales channels you plan to use, whether or not you want to offer free shipping, how well you know your monthly expenses, etc.

Base Price + Markup = Retail Price 


Here’s a quick example of how I might price my scrunchies

>> I purchase my materials wholesale

>> I can make 12 scrunchies per hour & 312 scrunchies in a month (based on my available hours)

>> I am paying myself $15/hour for my wages

  • Step 1 – Cover Costs = $3.50
    • Production costs per scrunchie = $1.70 ($0.45 material costs + $1.25 wages per scrunchie)
    • Overhead costs per scrunchie = $1.80 ($0.55 overhead expenses per scrunchie + $1.25 wages per scrunchie for time spent on overhead tasks)
  • Step 2 – Add Profit = $3.68 (Base Price)
    • $3.68 gives me $0.18 profit (Revenue ($3.68) – Cost ($3.50) = Profit ($0.18)
    • 5% profit margin (Profit ($0.18) divided by Revenue ($3.68) x 100 = Profit Margin (5%)
  • Step 3 – Add Markup = $7.36 (Retail Price)
    • $3.68 x 100% markup = $3.68
    • Base Price ($3.68) + Markup ($3.69) = Retail Price ($7.36)

To learn how to calculate markup for your desired profit margin and markup, read the details under each step below.



Before we get into the details of the 3 pricing steps, let’s take a look at why the traditional pricing formula doesn’t work for many handmade business owners.


  • Materials + Labor = Production Cost
  • Production Cost x 2 = Wholesale Price
  • Wholesale Price x 2 = Retail Price

The traditional pricing formula starts off right, by calculating the production costs for a product.

But then that number is multiplied by 2 in an attempt to cover overhead expenses and add a profit.

This doesn’t work for a few reasons:

1) It’s not based on what your overhead expenses actually are.

2) Just because your production costs are high doesn’t mean your overhead costs will be too (or visa versa).

3) You can’t be sure you’re profiting or calculate how much you’re profiting.


Let’s look at my scrunchie example using the Basic Pricing Formula:

Materials + Labor = Production Cost: $1.70/scrunchie

Production Cost x 2 = Wholesale Price: $3.40/scrunchie

Wholesale Price x 2 = Retail Price: $6.80/scrunchie

When I actually calculate my overhead costs, I determine my total costs per scrunchie (production + overhead) are $3.50. If I were to charge $3.40/scrunchie when selling wholesale, I wouldn’t even cover my costs, let alone make a profit.

I would be losing money when selling my scrunchies wholesale using this basic pricing formula.

Now imagine I make labor intensive items like quilts and it takes me 10 hours to sew a quilt (being paid $15/hour). I buy my materials in bulk and at wholesale prices and spend $100 on materials/quilt.

Materials + Labor = Production Cost: $250/quilt

Production Cost x 2 = Wholesale Price: $500/quilt

Wholesale Price x 2 = Retail Price: $1000/quilt

Let’s say my overhead costs per quilt are $150 (that includes everything; packaging and shipping materials, Etsy fees, trip to the post office, etc.). My total costs are $400 (Production Costs: $250 + Overhead Costs: $150).

Revenue ($1000) – Costs ($400) = Profit ($600)

Profit ($600) divided by Revenue ($1000) x 100 = Profit Margin (60%)

That basic pricing formula gives me a 60% profit margin, which is extremely high.

Great if consumers are willing to pay $1000 for a quilt, but it likely prices me out of the market.

I don’t need that much markup on my quilts. Just because I spend 10 hours sewing a quilt does not mean I need 10 marketing and selling hours to sell one quilt.

Now that we understand why the traditional pricing formula doesn’t work for a lot of businesses, let’s look at an alternative way to price your products.

The Right Way to Price a Handmade Product



There are many ways to categorize costs to properly file taxes, but for the sake of keeping things simple when pricing your products, we’re going to look at your business’s costs as:

A) Production Costs

B) Overhead Costs



Think of production costs as the money you must spend to create a product so it’s ready for market. Those costs may be:

  • Materials
  • Hours to make the item
  • Price tags
  • Packaging/labels

Production costs must be tracked with a little more detail so you know how much to charge for one product vs. another.

For example, if I make jewelry, I can’t simply buy a bunch of jewelry materials and split the cost evenly among earrings, bracelets, and necklaces. That would likely lead to overpriced earrings. Rather, I would add up the costs for my earring materials and divide that number by how many earrings I can make with those materials.

If I spend $50 on earring materials and can make 10 pairs of earrings, each earring would cost me $5 in materials.

You also want to track the time it takes you to make each item and multiply those hours by the hourly wage you want to be paid.

For example, let’s say a pair of earrings take me 15 minutes to make

If I want to pay myself $15 per hour, a pair of earrings would cost $3.75 in production wages.

Materials + Production wages = Production Costs

$5 in material + $3.75 in labor = $8.75 Production Costs


pricing handmade jewelry



For simplicity, think of overhead costs as anything you spend money on for your business, outside of production costs. This includes your wages for marketing, selling, and admin tasks.

List all your *known costs such as:

  • Yearly costs (such as a business license) that can be divided by 12 to find the monthly expense
  • Photography equipment or tools
  • Marketing material (e.g. business cards, flyers, posters)
  • Shipping materials
  • Tools and equipment, repair or maintenance
  • Membership fees (e.g. membership to the fabric store to get wholesale pricing)
  • Wages for time spent:
    • Photographing products
    • Creating listings
    • Answering emails
    • Packaging orders
    • Driving to the post office

*You can’t know your Etsy fees at this point because those depend your your final price, how many listings you create, and how much you sell. The same applies to craft show fees (you don’t know which craft shows you’ll be accepted to or how much they’ll cost). So these fees will be covered when we add markup.

You can get a general idea of your overhead wages (even though you haven’t worked them yet):

Consider how many hours you have to work on your business in a month (e.g. 52 work hours per month).

Every working hour cannot be spent making products.

For every hour you spend making products, you need to time market and sell them. A good place to start is allotting 1/2 your hours in a month to production and the other half to marketing/selling/admin tasks. As you track your hours you can find your right ratio.

If I have 52 hours to work on my business each month, 26 hours would be spent on production (and those wages are already factored into production costs) and 26 hours would be spent on overhead tasks (and I must calculate those wages).

With that calculation, you can also figure out how many products you can make in a month. 

If I have 26 hours to work on production and I can make 2 products in a hour, I can make 52 products in a month.

Let’s say I spend $50/month on overhead expenses and $390 on overhead wages (26 hours x $15/hour = $390).

My total overhead costs are $440/month ($50 + $390).

I know I can make, on average, 52 products per month.

$440 divided by 52 = 8.46

I would add $8.46 to my production costs to get my total costs.


Total Costs

Production costs (per item) + Overhead costs (per item) = Total Costs

For example:

$8.75 (production cost per item) + $8.46 (overhead cost per item) = $17.21

Of course, there may be expenses you don’t think of, ones that pop up, and there are also your sales channel fees. The markup you add in the last step will cover those.

Determine your Production Costs per item and your Overhead Costs per item and add them together to get your Costs (per item). 

Now we want to add profit.



The first aspect of success when it comes to a business is profits. If you don’t have profits, or a plan to start profiting in the near future, your business cannot survive.

Profits may be used for different things, but you’ll likely use profits to grow your business or pay yourself more than an hourly wage.

Without profits, your business isn’t growing.

You’re simply spending money and then getting that money back. And, you end up being an employee of your business; getting paid for the hours you work and nothing more.

The reason I add profit at this point is because you want to ensure you’re profiting when selling wholesale. And Costs + Profit is often an item’s Wholesale Price.


What are profits?

Profit is the money that’s left once you deduct your costs. Not just the costs of the product, but ANYTHING you spend money on to run your business; that includes your wages.

You can get more detailed than this (gross profit vs. net profit) but we’ll stick with this basic definition for simplicity.


What are profit margins?

Profit margin is expressing your profits in a percentage. You determine your business’s profit margins by dividing your profits by revenue, then multiplying by 100 to get the percent.

For example, if I charge $100 for a product and $90 of that sale pays for expenses, I have $10 in profit.

10 (profit) divided by 100 (revenue) = 0.1 x 100 = 10%

My products have a 10% profit margin.

We’ll use a profit margin to calculate how much money to add to your base price.


What is a good profit margin for handmade products?

Profit margins vary depending on the industry, but a good range to fit within is 5% – 20%.

You may want higher or lower profit margins depending on your business model and how much money you want to invest back into your business for growth. Profit margins may also vary from product to product, and you may increase or lower them as your business evolves.

>> 5% profit margin is considered low

>> 10% profit margin is considered average

>> 20% profit margin is considered high



You can set your profit margins however you see fit; base them on the goals you have for your business.

If you’re focused on growth, you may aim for the higher end of that range (e.g. 20% – 25% profit margins) so you can invest more money back into your business each month.

If you’re a volume-based business (i.e. you sell lots of units), you may aim at the low end of the profit margin scale. Your profit margins per product may be low (e.g. 5%) but if you can sell 100 units per month, your profits overall will be high.


To work profit margins into your prices, follow these steps:

  1. Determine what you would like your profit margins to be (e.g. 5%, 10%, 20%, or another percent)
  2. Turn that percent into decimal form, by moving the decimal two points to the left (e.g. 5% -> 0.05, 10% -> 0.1, 20% -> 0.20)
  3. Subtract that number from 1 (e.g. 1 – 0.05 = 0.95, 1 – 0.1 = 0.9)
  4. Divide your cost per product (production costs + overhead costs) by that number.
  5. The number you’re left with is your price with profits built in

For example, let’s say I can make 10 earrings per month and my costs per earring are $17.21. I may want 20% profit margins since I’m selling a lower volume of earrings each month.

    1. 20%
    2. 20% -> 0.2
    3. 1 – 0.2 = 0.8
    4. $17.21 divided by 0.8 = $21.51
    5. Profits per item = $4.30 (20% profit margin)

Profit ($4.30) divided by Revenue ($21.51) multiplied by 100 = 20% Profit Margin

Total profit per month = $43 ($4.30 profit per item x 10 sales)


Now let’s say I can pump out 50 earrings each month (and I have a plan to sell the majority each month) so I want to set a lower profit margin at 5%.

    1. 5%
    2. 5% -> 0.05
    3. 1 – 0.05 = 0.95
    4. $17.21 divided by 0.95 = $18.12
    5. Profits per item = $0.91 (5% profit margin)

Profit ($0.91) divided by Revenue ($18.12) multiplied by 100 = 5% Profit Margin

Total profit per month = $45.50 ($0.91 profit per item x 50 sales)

My profits per pair of earrings are much lower (20% profit margin $4.30 vs 5% profit margin $0.91), however, because I’m able to sell more units in a month at a 5% profit margin, my overall profits are higher. 


Decide on a profit margin and follow the formula to get your Base Price (Cost + Profits = Base Price).



In this pricing strategy, I define/use “markup” a little differently than the traditional pricing formula that uses a standard markup (Productions Costs x 2) to get Wholesale Price and then another standard markup (Wholesale price x 2) to get Retail Price.


How much to markup handmade items?

How much you mark up your prices will depend on your business, the types of discounts you want to be able to offer, the sales channels you sell through and their fees (e.g. Etsy, craft shows, retailers, consignment shops, etc.), and how much padding you’d like for unexpected expenses.

Most handmade products should have a 100% markup so they have the potential to sell wholesale to retailers.

However, as mentioned, some business models/products aren’t a fit for selling wholesale (e.g. marking a quilt up by 100% is likely to price it higher than most customers are willing to pay, so wholesale may not ever be a fit). If you never plan to sell wholesale to retailers, you may set a lower markup percentage.

Marking up prices by 60% – 100% is typically a good range to be in for a handmade business.

*However, testing should be involved when choosing your markup. Test your price with the desired markup by running it through an Etsy fee calculator or estimating craft show fees etc. and ensure you’re covering all fees and being left with a profit. 


quilt price

Markup in my formula is going to cover your sales channel fees (e.g. Etsy fees, craft show fees, transaction fees, etc.) and allow you to offer discounts (e.g. wholesale discount for retailers (50%) or run sales in your Etsy shop), or offer perks like free shipping to your customers.

Base Price plus your Markup will create your Retail Price. Retail Price is what the consumer pays, whether they’re buying your products on Etsy, at a craft show, or through a retailer.

How to add markup into your prices

  1. Determine your markup percentage.
  2. Multiply your Base Price by that percent.
  3. Add that number to your Base Price.
  4. Your total is your Retail Price.

For example, let’s say I’ve decided on a Base Price of $18.12 for my earrings (5% profit margin). I plan to sell through retailers so I need to be able to offer a 50% discount and must mark up my price by 100%.

    1. 100% markup
    2. $18.12 (Base Price of earrings) x 100% = $18.12
    3. 18.12 + 18.12 = 36.24
    4. Retail Price = $36.24

The retail price $36.24 allows me to offer a 50% discount and still cover all my costs and be left with my desired profit.

Let’s say I realize that selling wholesale is going to raise my price too high. I could go back and find a way to lower my costs, or I may decide to choose a different business model; selling directly to consumers. I still need markup to cover my fees when selling direct to consumers, and I may want to run the occasional sale without losing profits. I decide on a 60% markup.

    1. 60%
    2. $18.12 (Base Price) x 60% = $10.87
    3. 18.12 + 10.87 = $28.99
    4. Retail Price = $28.99

The retail price $28.99 allows me to sell my earrings through Etsy and earn a healthy profit after Etsy fees are deducted.

If you want to be able to offer “free shipping”, you may add a bigger markup (e.g. 150% – 200% markup).

Calculate your numbers with a few different markup percentages and then use those prices when calculating different sales channel fees (e.g. Etsy fees, craft show fees), as explain under “Test & Adjust”.


Why do I need so much markup?

Here are a few reasons you want to carefully consider your markup:


When you sell wholesale to retailers, they expect to purchase your products for (typically) 50% off the retail price. That 50% discount then allows them to mark your prices back up to the Retail Price, and that markup helps cover their overhead costs and give them a profit.

If you have a product that is well suited for selling wholesale and you hope to have your products carried in retail stores, you’ll want to add at least a 100% markup to your wholesale prices (multiply wholesale prices by 2).

Consignment is a similar situation but often, shops that sell handmade items on consignment will only take 30% – 40% of the sale. You can learn more about the difference between wholesale and consignment here. 



If you plan to sell wholesale, marking your prices up by 100% will allow you to offer discounts when selling directly to your customers, so you don’t need to add more markup on top of your wholesale markup.

However, if you don’t plan to sell your product wholesale, you should still mark your prices up so you can run sales once and a while or offer promo codes to your VIP customers.



You may even use your markup to absorb some or all of shipping costs into your prices so you can lower shipping fees or even offer free shipping, without cutting into your profits.



If you offer things such as a money-back guarantee or free repairs, you need a markup on your products to help ensure you’re not losing money when a customer decides to cash in on that offer.

The customer isn’t paying you any more money when you fix an item for free and you may be taking a loss if they return a product you can’t resell. But that little extra money you get from each order, on top of covering your costs and making a profit, helps cover those hours or losses (on returns) that only pop up once and a while.

Of course, this only works if the majority of your customers are happy with their products. If 9 out of 10 customers want a refund or need a repair, your markup would have to be extremely high to cover those losses/hours.



Your markups can also add a little extra cushioning so you have extra money if you need to take time off work or have a one-time business expense pop up.

For example, if you use an expensive piece of equipment to make your products, and that equipment breaks one month, you can’t all of a sudden raise your prices to cover the cost of repair or replacement.

Markup can help you put a little extra money away each month to help you cover unexpected or occasional costs without having to dip into your profits or go into the red (loss/debt).


Test & Adjust

Before you take your number and run with it, plug it into a few different equations using the sales channel fees you’re likely to encounter.

If you plan to sell on Etsy, use an Etsy fee calculator to plug your retail price and costs in and see how much Etsy will charge you in listing and transaction fees.

If you plan to sell at local craft shows, gather some basic numbers such as how much the event organizer charges for a table, how many hours you’re going to have to work (on top of your allotted hours for the month…which are already factored into your costs), extra expenses you may incur (e.g. parking, food, mileage or gas), and transaction fees you’ll pay (for using a point of sale credit card reader like Square). Estimate how many items you think you’ll be able to sell per hour to get your revenue, then deduct all your costs and wages (production & overhead plus extra expenses and wages associated with the craft show) to ensure you’re likely to profit.

If you find that selling your item on Etsy and offering free shipping isn’t leaving you with enough profit, go back and test your prices with a higher markup or profit margin.

It’s important to set your prices correctly from the start so you’re not losing money (or losing sales because your items are overpriced). But it is okay to adjust your prices as you grow your business or as you get to know your business better.

If you’re 6 months into running your business and you realize you’re spending way more hours on it than you allotted, or you forgot a major expense, it’s okay to raise your prices to cover those wages/expenses.


What To Do When your Prices are Too High

If you’re finding, even with this pricing formula, your prices are higher than people are willing to pay, you have a few options.



Your business’s costs are the starting point of your prices, so if they’re high, your prices are going to start high. There are several ways to lower your costs such as speeding up production, removing product features that are time/cost consuming but that your customer doesn’t place importance on/isn’t willing to pay extra for, buying materials in bulk or at wholesale prices, etc.

You can find more ideas to lower your costs here.



Why are consumers willing to pay 10x the price of a t-shirt when they’re shopping at Gucci vs. Old Navy? Quality is obviously part of that factor, but another big factor is Gucci’s branding.

Through several factors, Gucci has increased the perceived value consumers place on their products. They believe their products are better and worth more money.

If you want to increase the perceived value of your products, so customers are willing to pay more money for them, you can work on your branding.

It’s also important to communicate why your prices are higher. Shoppers won’t know, unless they’re told, if you use a material that is better quality than your competitors.



Who you target has a big impact on how much you can charge.

If I make jewelry and I’m targeting a consumer who may wear my pieces when they go out for dinner, I can’t charge as much as I could if I target brides.

Brides will be wearing my jewelry on their big day, which makes the jewelry more important to them and makes them willing to spend more to get that perfect piece.

Once you find a profitable target market, you also must offer them the right product and experience.

For example, if I’m going to target brides, my jewelry must be bridal jewelry. And if I’m going to target brides willing to pay high-end prices, I must use high-end materials and make sure my business screams “luxury” every step of the way.

HOW TO FIND A GOLDMINE OF CUSTOMERS will help with this step.



Many people selling on Etsy aren’t running businesses. They’re trying to sell the crafts they make or test the waters to see if what they make will sell, and they’re basing their prices on what other Etsy sellers are charging. Not to mention, Etsy is saturated with business selling mass produced items (which allows them to set prices much lower than handmade items).

On Etsy, it can become a bit of an infinite loop with sellers trying to undercut each other and, in the end, no one is profiting because they’re just trying to get the sale (not build a sustainable business).

When people shop on Etsy, they see your competitor’s prices right next to yours. When given two similar options, most shoppers will go for the cheaper one, especially if there are no discerning features.

If your prices are much higher than your competitor’s prices on Etsy, it may be beneficial for you to start building your own website or selling through other sales channels.

A website will allow you to customize it to perfectly suit your brand (Etsy only allows so much customization). It also removes the competition when someone is looking at your products; they’re only seeing your products and prices, not hundreds of other Etsy sellers.



Some products aren’t made for selling wholesale and that’s okay. If you focus on building your business and selling directly to consumers, you don’t have to worry about factoring in that wholesale markup. As mentioned, you do still want some markup, but it doesn’t have to be as big.



Although you love what you make, it may not create the best business opportunity. Usually, there is some way to simply alter your product or business model, but if you’re unwilling to do that, you may not be able to run a profitable business.

For example, if I make bejeweled quilts that take me 100 hours to create, but no one is searching for “bejeweled quilts”, there isn’t a target market willing to pay thousands of dollars for my quilts, no matter how great my branding is.

Some crafts have the ability to be more profitable than others. You can check out CRAFT BUSINESSES THAT MAKE THE MOST MONEY and CRAFT BUSINESSES THAT MAKE THE LEAST MONEY for more on those.

You must also know what people are searching for before you start creating and building a business around what you want to make. If you want your business to make money, it has to be about the consumer.

This article will help you determine keywords people are searching, which can help you create products you know are in demand (even if you don’t sell on Etsy).



I hope you’ve found this article on how to price your handmade items helpful 🙂



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  1. Elizabeth says:

    Yes! I get sooo frustrated with that simplistic formula and trying to explain to anyone why it’s not a solid, confident way to price your handmade items. I’ve seen way too many people that use it and are then very discouraged when they find themselves struggling financially, or plain out not making sales.
    Thanks so much for putting this wise, logical, reasonable information out here for handmade makers!!!!

    1. Made Urban says:

      Thank you so much for reading!! I always felt the basic x2 formula wasn’t quite right but wasn’t sure how to explain the “right” way in a simple to follow formula. This way isn’t as simple as the “x2” method but I think it makes so much more sense for a wide variety of business and products. Glad it does for you too!

  2. Petra Slay says:

    Love how you broke this down, it makes so much sense. I will definitely try to implement these strategies

    1. Made Urban says:

      I’m so happy to hear it helps! Let me know how it goes as you apply them to your business. Always good to see it applied to different types of businesses and products and make sure it works in a variety of scenarios 🙂

  3. This is one of your best articles yet! Fellow vendors in my co-op often tell me my items are priced too low and that I’m “worth more” than what I sell my products for. But I’ve been struggling to find a way to decide my prices that makes sense. This is extremely helpful! Thank you SO MUCH!

    1. Made Urban says:

      Thank you so much Bri!! Keep me posted on how it goes once you dive in and get some new prices for your work 🙂

      1. thank you I will try this ,and see the difference, very helpful

  4. Mollie Anderson says:

    Hey Bri,

    Thank you for this article! I do have a couple of questions:

    I make candles, and I don’t math well, so I’m having trouble comprehending all of this.

    – What if you don’t know how many hours you will be spending on Etsy posts, social media, photography, etc.?

    – In regards to how many hours spent, is it per month?

    – Could I maybe contact you personally and you could help me figure this out? I know, sounds ridiculous but this stuff is really hard for me to figure out.


  5. Made Urban says:

    Hi Mollie,

    I’ll try my best to offer some advice here…

    How many hours you’ll work is a bit of a guessing game until you have more of a routine with your business. I find it helps to start by basing your work hours on how much time you have available.

    For example, if you work a full time job and have kids, you may know, realistically, you can only work on your business for an hour or two after the kids are in bed. So you may guesstimate you’ll have 12 hours per week to work on your business.

    Then consider that most craft businesses need about half their work hours for creating products and half for responding to emails, creating Etsy listings, packaging orders, planning new products, shopping for materials, etc.

    So now you can guesstimate that you’ll spend about 6 hours per week on tasks outside of production. Then multiply that by 4 to get your monthly hours (24 hours per month).

    That will give you some rough numbers to start with, then you can refine them as you start tracking how many hours you actually work on tasks outside of production.

    When you work backwards like this, it also helps you to realize how many hours are available and how important it is to cut out tasks that aren’t worth your time (i.e. won’t give you a return on investment/lead to a sale).

    I hope that helps!


  6. Mollie Anderson says:

    Thank you so much, Erin! I’ll probably have more questions 🙂

  7. Mollie Anderson says:

    Hey Erin,

    How do you set a budget for your business?

  8. Mollie Anderson says:

    Sorry one more question…

    I upcycle beer/wine/spirit bottles into candles. I try to make 24 each week for inventory.

    However, I also have wholesale clients who give me their bottles from their brewery/distillery to make into candles, and these numbers vary.

    In the “Dividing Overhead Costs Among Different Products” section, you say you must know how many products you’ll make in a month so you can divide overhead costs evenly among each product that is made.

    I guess my question is… when I don’t know exactly how many I am going to make in a month because it fluctuates due to wholesale accounts, should I base this number off the candles I make for inventory?

    Thank you!

    1. Made Urban says:

      Hi Mollie,

      There will be an element of guessing until your business has more of a rhythm. You’ll firm up numbers after each month when you look at profits/expenses. But until then, you can base numbers on the hours you have available to work on your business.

      For example, if you only have 20 hours to work on *production* (not 20 hours total, as there are many other tasks outside of production that require your time), and each candle requires 1 hour to make, you can only make 20 candles in a month, regardless of whether you receive 20 bottles or 100 bottles. Knowing this number (how many products you have time to make in a month) can also help you set a budget/determine how much to buy. If you’re constantly offered 50 bottles to make candles but can only make 20, buying more supplies than you’re able to use each month will eat into your bottom line and reduce profits (unless buying in bulk reduces your cost per unit).

      And at the end of the day, your prices must reflect how much money you need to earn back to cover your costs and make a profit. Whether you make a candle this month but sell it next month doesn’t really matter. When it does sell, it should cover you costs.

      Hope that helps!


  9. The initial calculations add only $20 to the equation.
    The data shows that the hourly rate is $20.
    Each quilt takes 10 hours.
    5 quilts equals 50 hours.
    50 hours x $20 = 1000.
    So the profit margin you configured is not 69%.

    1. It seems as though you didn’t read the entire section. The traditional pricing formula is based on one product (Materials are $20, labor is $200 ($20/hour x 10 hours), not $20 as you’re stating), with $220 being the production costs for 1 product.

      Following those calculations, numbers are then multiplied by 5 (for 5 quilts)(total: $1100 for production costs and $250 in overhead = $1350)

      For 5 quilts, revenue is $4400 and costs are $1350 = $3050 (as shown).

      Profit divided by revenue = 0.69 x 100 = 69% profit margin

      If you’re referring to a different section and there is indeed a mistake in my calculations, please let me know.

  10. Elizabeth says:

    Very helpful article. I really appreciate the way you have broken down each step and given examples. I’ve been told that my bags and purses are both underpriced and overpriced. This approach gives something concrete upon which to base my prices, rather than the x2 method. Thanks so much for putting this out there.

    1. Made Urban says:

      Thanks for reading Elizabeth! I’m so happy it was helpful. Hopefully it helps you with pricing. Just as a side note…I’ve had many people tell me my handbags are overpriced. Some people don’t understand the value of handmade; those are usually the same people telling you your products are overpriced 😉

  11. I needed this! Thank you!!!

    1. Made Urban says:

      No problem 🙂 Thanks for reading!

  12. Thank you for this! My question is about dividing overhead costs. I make crochet and jewelry with many varied items. Should I literally add up all my different crocheted items and jewelry respectively to divide overhead or just take how many of each item I could make a month and then divide? Thanks!

    1. Made Urban says:

      Hi Renee! Have a read over Step 1B, it should answer your question about how to divide your overhead costs 🙂

  13. I have a query about overhead costs…
    You said that overhead costs would include:
    • Photographing product (hours, equipment, editing tools, etc.)
    • Etsy (listing fees, hours spent listing products, cost of running ads, etc.)
    • Printing business cards
    • Time spend answering emails
    • Shipping materials
    • Time spent packaging orders & driving to the post office
    • Tool and equipment repair or maintenance
    What about the purchase of new equipment and also heating, lighting and electricity costs? Should these be included in here too?

    1. Made Urban says:

      Hi Jane,

      You bet! There are different ways people define/categorize costs (which is important when filing taxes), but for the purpose of pricing, you really just need to think of overhead costs as anything you spend money on, outside of production costs (materials and time to make your products). That’s the simplest way I look at it anyways 😉


  14. Hi,
    This was an absolutely great article. Very detailed and informative. Really going to help with my business. Thankyou dear. May God bless you!

    1. Made Urban says:

      Hi Fatema! Thank you so much! I’m so happy you found it helpful 🙂

      1. Barefoot Duchess says:

        Thank you so much for this article! it was insanely helpful. I am so glad I found you. Can’t wait to read your other articles.

    2. excellent article, thank you for putting it all down so clearly with all the calculated examples. maths isn’t my strong point and determining my prices is something I struggle with a lot as that standard 2x formula is scary!! very reassuring to have something different to try from someone who knows. thanks again

  15. Thank you so much for this article! I suck at math and I’m not very Business savvy but this explained everything perfectly and it makes so much sense.

    Do you have any suggestions or tips for calculating production costs when the products are digital? What are some things that should be factored in other than your own wages and your time? Utilities maybe?

    Thank you so much again!

    1. Made Urban says:

      Hi Innie,

      That’s so great to hear! Digital is tougher to calculate because you may spend weeks creating a digital product but you’re able to sell that product over and over again, sometimes for years to come. So pricing/product is not a direct correlation to hours in. Let me look into writing a detailed article on the subject.

      However, yes, definitely explore any expense required to make your digital products. That may include the costs associated with your home office, editing or design software you need a subscription for, and you of course still want to factor in your time to create marketing images, product listings, etc.

      I hope that helps!


      1. It does, thank you! And if you make an article focused on that I’d love to read it!

  16. Great article! So informative and easy to read and follow. I had so many mixed ideas on how to price my handmade products, but you broke down each one with examples which is extremely helpful. Thank you so much!

    1. Hi Stacey! I’m so happy it was helpful 🙂 Thank you fo reading.

  17. I’ve been reading your posts here all day and they are the most informative of any I’ve found so far. I’ve been selling candles, paintings, and drawings for several years, and I’ve found those basic formulas so confusing when selling my paintings and drawings, especially. Someone once told me I should just price things at three times the cost of materials, but that doesn’t make sense when you are talking about a tube of oil paint, which you’ll likely only use less than 1/4 of its contents on a painting. Then I heard that you should price by that formula PLUS what you want to be paid per hour, and one more recent one for paintings was to charge $1 per square inch of canvas or paper or whatever, which seems great if you’re already well known, but a bit high if no one has ever heard of you (of course, if you’re confident, I know that makes a difference, but as someone who only painted sporadically up until the last decade or so, I have never felt that my 16×20 inch landscape paintings could be worth $300 to anyone).

    1. Hi Sandra,

      There are definitely a lot of opinions on how to price products 😉 I find, with anything in life, there is no one-size-fits-all. So I like that this formula allows you to adjust based on your business model and desired profit margins. Good luck pricing your paintings!


  18. Hey Erin, I recently started reading your blog and it’s fantastic, so much helpful info in every single post! I was wondering, as I’m making cards and when creating a price for them, how do I calculate the materials such as stamps or die-cuts that are not a material to be used and replaced? Thank you in advance for the answer!

  19. Thank you so much for posting such valuable information!

  20. Hi! Trying my luck here because I’m not sure how often this blog/post is checked but I’m a student who makes accessories(resin, fabric) for fun. Have been thinking of selling my crafts to 1) clear space(especially because I can’t wear half the crafts I make) 2) cover material costs 3) earn some additional money 4) give my crafts a new owner who would use/treasure them more than I can, but pricing my crafts is extremely daunting and a struggle for me because
    1) I’m not sure how much my crafts are worth/how much people would buy them for and what’s a good way of finding out (in the same tone, I’m not sure how good of an idea testing the waters is. I worry that changing my price afterwards(likely higher) would drive away potential customers)
    2) how much I myself want to earn out of this. To elaborate, I’m not financially struggling, but earning money off selling my crafts which I make for fun is striking two birds with one stone. Besides, I can continue making more, and new designs with the money for materials covered. Nonetheless, the more money I make the better, I just do not know how much is too little, enough or too much. In other words, I want to balance both the money I Have to make, Want to make and the money I Actually can make.
    (Some other related questions I have)
    3) It’s been a very long time since I’ve thought about selling my crafts but haven’t taken action and the more I delay, the more worried I get and the more discouraged I feel because I am wasting time. Is it worth to bite the bullet and sell my items at a price(not fully thought out and might change a lot afterwards) or think it through a bit more before I start selling?
    4) If I am not doing this to sustain myself, should I be considering overhead costs?
    5) I think I’m asking too many questions so are there people/types of people/even books or websites you recommend I consult additionally?

  21. Rion Sasaki says:

    If you have time, could you help me with a bit of the math? I tried to figure it out but my brain decided to twist everything around lol! I did the math for a rough production cost($143.5), but if I only sell one product, how does the math for step 1-B work?

  22. Charmaine Greene says:

    hi. I am really impressed with the information.
    I am overwhelmed with the calculations. Is there an excel table that I can just plug in the figures?
    I will very much appreciate it.

  23. Jessica L Lorance says:

    I’m still struggling with this. any chance you could assist? I make hats. $30 per hat, takes an hour each hat. my overhead is 300.

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