Pricing handmade items can feel awkward when you just want to enjoy the satisfaction of making art, or simply wish to share your art with the world. But in order to build a successful art business, you need to make enough money to cover costs and pay your bills so you can keep creating and doing what you love. This is where a handmade item pricing formula comes in.
It’s time to stop feeling like you’re an impostor making prices up as you go, know your worth, and set prices like the true business owner you are by using a professional pricing model. We’ll break down each step of the formula below so the math makes sense and you can start pricing your pieces easily, efficiently, and in a way that’s satisfactory for both you and your customers.
The Simple Formula for How to Price Handmade Items:
(Supplies + Overhead) x Profit Markup + Labor = Retail Price
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Supplies cost: |
Amount spent on supplies per handmade item |
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Overhead cost: |
Amount of non-supply costs per handmade item |
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Profit markup: |
Multiplier used to ensure a fair profit is made and unforeseen costs are covered |
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Labor cost: |
Hourly rate for creating and packaging the product |
You can also learn more tips and tricks about starting a craft-centric business in our step-by-step guide.
How to Price Handmade Items: A Step-by-Step Formula
Pricing handmade items doesn’t have to be a guessing game. Work through these four steps to build a price that covers creation costs and still leaves room for profit.
Step 1: Determining the Cost of Supplies
When determining how to price handmade items, start by calculating the cost of supplies for each piece.
Calculating your supply costs per handmade item can be done in one of two ways:
- Tracking how much of each supply you use per craft.
For a crocheted hat, you would measure how much yarn is used per hat, and how much that yarn cost per inch. You can measure what’s left on the skein and subtract that from the total yardage of the skein, or unravel a completed hat to measure the amount of yarn used. (Ideally, you only need to do this once per item if you use the same process each time.)
- Adding together the cost of all materials used, and dividing that by the number of products created.
Using the simple crocheted hat example, you would find out how many hats can be made per skein of yarn, then divide the cost of the skein by the number of hats made.
- Tracking how much of each supply you use per craft.
Handmade items often vary slightly between each piece, so don’t worry too much about this number being super precise. When in doubt, round up to whole numbers, and be sure to include every direct material cost used to create the product. This includes some commonly forgotten material costs like shipping supplies and packaging (especially important if you sell crafts online).
Direct Material Costs Can Include:
- Raw materials (wire, beads, yarn, fabric, etc.)
- Packaging (stickers, tissue paper, shopping bags, etc.)
- Product labels (clothing tags, business cards, pricing stickers, etc. )
- Shipping labels (printer paper, shipping fee, printer ink, etc.)
- Shipping supplies (boxes, bubble wrap, tape, etc.)
Step 2: Add Overhead Costs
Overhead costs include anything you spend money on in your business that isn’t a direct material cost. With the influx of online marketing and new ways to sell art online, you’re probably paying for more start-up costs than you realize.
Common Overhead Costs Include:
- Website domain fees
- Etsy or marketplace fees
- Studio rent
- Utilities
- Tools and equipment
- Software
- Marketing
- Transaction fees
- Liability insurance
How to Spread Overhead Across Products
Spread your overhead costs across each item you make.
Add-up your average monthly overhead costs, then divide that total by the number of items you expect to sell that month. For bigger one-time purchases like equipment or tools, spread the cost across a full year of sales instead.
This might take some trial and error to find the right number for your formula, but that’s okay! Unlike determining supply costs, you can round down for this number since you’ll be adding a profit multiplier next to cover unforeseen expenses.
Step 3: Choose a Profit Markup & Multiply
Using a profit markup is the difference between barely covering costs and actually making money selling your handmade products. This isn’t just about paying yourself for your time (more on that in a minute), but about covering unforeseen costs, and earning enough to reinvest in yourself or the business.
Some people prefer to calculate a profit percentage for each product they offer, but let’s not pretend we crafters delight at the idea of more math, shall we? Using a profit multiplier is a simpler approach that leaves you room to play when comparing your final retail pricing with the market standards.
You’ll add your supply and overhead costs for the item together, and then multiply that number by your chosen profit markup. Here’s a practical range of profit multipliers you can use in the (supplies + overhead) x profit markup + labor = Retail Price formula.
| Type of Handmade Item | Multiplier |
|---|---|
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Simple / fast / small items |
2.0
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Standard time handmade items |
2.5 |
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Complex / slow / premium items |
3.0 |
So why is there a range of multipliers, and not just one fixed rate?
Having a range helps ensure you’re being paid fairly for your creative effort. When an item takes more creative effort, you’ll want to price it as a “premium” or “luxury” item so the price matches the perceived value. Since you’ll have fewer of these items to sell, increasing the profit multiplier makes it clear these high-ticket items are more valuable.
But to be clear, you still need to pay yourself for your labor. Factoring in the profit markup before labor costs keeps high-effort items from skyrocketing in price and exceeding the market value.
Step 4: Pay Yourself for Your Time
This is the part artists often struggle with the most, but it’s essential to pay yourself fairly for every handmade item created. Don’t undervalue your time. It won’t drastically increase your prices since we already added your profit margin before adding the cost of labor.
How to Calculate Labor Costs:
- Track how long one item takes to create and package from start to finish
- Assign yourself a reasonable hourly rate (at least minimum wage)
- Multiply the time spent by your hourly rate
Why a Labor Rate Is Not Optional
While it can feel odd to pay yourself an hourly rate for your labor, not doing so is a disservice to you and your business. Cutting the labor cost out of the equation can be tempting to keep prices low, but not including labor costs leads to underpricing items — especially the ones that take multiple hours of hard work to make, like a hand-knit sweater or a stained glass suncatcher.
Yes, factoring labor time will raise the cost of certain handmade items, but those items should cost more for the amount of work put into them. In fact, 70.8% of consumers surveyed said they are willing to pay more for high quality, original handmade products.
Plus, as a creative entrepreneur, your time is your most valuable resource. Setting a labor rate and tracking your time spent making different products will help you see the full picture of what products take the majority of your time vs. what sells the best.
Worked Examples of Pricing Handmade Items
Example 1: Simple / Fast / Small Item (Multiplier = 2.0)
Product: Beaded Stretch Bracelet
| Cost Component | Amount |
|---|---|
|
Supplies (beads, elastic cord) |
$3.00
|
|
Overhead (packaging, transaction fees) |
$1.00 |
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Labor (15 minutes @ $20/hr) |
$5.00 |
Calculation:
- Supplies + overhead = $3.00 + $1.00 = $4.00
- Apply markup: $4.00 × 2.0 = $8.00
- Add labor: $8.00 + $5.00 = $13.00
Retail Price = $13.00
Example 2: Standard Handmade Item (Multiplier = 2.5)
Product: Crochet Beanie
| Cost Component | Amount |
|---|---|
|
Supplies (yarn, branded tag) |
$6.00
|
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Overhead (packaging, transaction fees) |
$2.00 |
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Labor (1 hour @ $20/hr) |
$20.00
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Calculation:
- Supplies + overhead = $6.00 + $2.00 = $8.00
- Apply markup: $8.00 × 2.5 = $20.00
- Add labor: $20.00 + $20.00 = $40.00
Retail Price = $40.00
Example 3: Complex / Slow / Premium Item (Multiplier = 3.0)
Product: Hand-Tooled Leather Journal Cover
| Cost Component | Amount |
|---|---|
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Supplies (premium leather, thread, hardware, handmade paper) |
$22.00
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Overhead (packaging, transaction fees) |
$3.00 |
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Labor (2.5 hours @ $20/hr) |
$50.00 |
Calculation:
- Supplies + overhead = $22.00 + $3.00 = $25.00
- Apply markup: $25.00 × 3.0 = $75.00
- Add labor: $75.00 + $50.00 = $125.00
Retail Price = $125.00
Common Handmade Item Pricing Mistakes
- Pricing handmade items by what “feels right” without factoring in your actual costs
- Undercutting competitor prices without lowering your costs too
- Not paying yourself a labor rate, or making the labor rate less than minimum wage
- Lowering your quality standards only for the sake of lowering the cost
- Failing to revisit pricing as costs change or you become more efficient with your labor time
How to Check If Your Final Retail Price Makes Sense
Compare your price to the market average
After using this formula to figure out how to price your handmade product, sanity-check that number with the market. Keep up with what handmade items are trending and compare your price to competitor items of similar make and quality to see if you can reasonably compete with their prices.
What to do if your price feels too high
When pricing handmade items to sell, 54% of creatives price items between $25-$50. If competitors offer similar items for less, it’s easy to assume we should lower our prices to compete, but simply lowering the price without considering the true cost of making the item isn’t smart nor sustainable. Instead, focus on reducing what you spend to make the item.
Recommended Ways to Lower Costs:
FAQs About How to Price Handmade Items
How Do I Price Handmade Items?
To price handmade items, use a pricing formula that factors in your supplies, overhead, profit margin, and labor costs. This ensures your final price includes all the costs of production.
How Do I Price Handmade Items for Wholesale?
Use the formula (supplies + overhead) x profit markup + labor = wholesale price. Your retail price will then equal 2x your wholesale price. Just remember not all handmade items are suitable for wholesale, especially items that take a lot of time or expensive materials to create.
How Often Should I Reprice Handmade Items?
You should update your prices any time your supply, overhead, or labor costs change. This will ensure you are covering your actual production costs, and your price is as low as it can reasonably be to better compete in the handmade market.
How Much Profit Should You Make on a Handmade Item?
Handmade items should have a profit margin between 50-80% to cover supply, overhead, and labor costs. This is typically lower than mass-produced items, which have a profit margin of 10-20% due to the scale at which they are sold.
How Do I Package My Handmade Items?
Keep supply costs low with minimal packaging if selling handcrafted items in-person like at a market. A paper or plastic bag to carry the item in, and a business card in that bag is all you really need.
If you’re shipping handmade items from online sales, pack the item in a box with bubble wrap. If the item is extra fragile, place the first box in a bigger box filled with bubble wrap or packing peanuts to provide more cushion.
Sarah Arman | Copywriter
Sarah Arman is a licensed insurance agent in the state of Ohio and a copywriter for ACT. Best known in the small business space as a Brand Voice Specialist, she loves helping creative entrepreneurs follow their dreams. Writing has always played a large role in Sarah’s life and livelihood. She holds a Bachelor's Degree in Journalism from Ohio University, and previously worked as a Creative Copywriter for BarkBox — where she learned the art of a perfect pup pun, and named countless dog toys. Outside of work, Sarah enjoys reading, gardening, fiber-art crafting, cuddling with her dog, and dabbling in interior design projects. Read Sarah’s full bio.
Sarah Arman is a licensed insurance agent in the state of Ohio and a copywriter for ACT. Best known in the small business space as a Brand Voice Specialist, she loves helping creative entrepreneurs follow their dreams. Writing has always played a large role in Sarah’s life and livelihood. She holds a Bachelor's Degree in Journalism from Ohio University, and previously worked as a Creative Copywriter for BarkBox — where she learned the art of a perfect pup pun, and named countless dog toys. Outside of work, Sarah enjoys reading, gardening, fiber-art crafting, cuddling with her dog, and dabbling in interior design projects. Read Sarah’s full bio.
