How to Price Handmade Items

You’ve poured your heart and soul into creating beautiful handmade items, but when it comes to pricing them, you’re stuck. Sound familiar? You’re not alone. As a fellow crafter, I’ve been there, staring at my creations, wondering how to put a price tag on something that feels priceless.

Here’s the thing: underpricing your handmade items isn’t just leaving money on the table- it’s undermining the value of your skills and time. But overpricing? That could leave you with a pile of unsold inventory and a deflated spirit. It’s a delicate balance, and getting it wrong can mean the difference between a thriving business and a costly hobby.

But don’t panic! I’ve been right where you are, staring at my handmade creations and wondering how to price them fairly. In this guide, we’ll dive into the nuts and bolts of pricing your handmade goods. Whether you’re just starting out or looking to level up your existing craft business, you’re in the right place.

Also See: What Sells at Craft Fairs?

Calculating Your True Costs

Let’s start with the basics. Before we can even think about setting a price, we need to know exactly what goes into making our handmade products. And I mean exactly. First up, materials. This isn’t just about the main components you use. Don’t forget those “invisible” costs like packaging, labels, or even the thank you notes you include. Every penny counts!

Raw materials come first. This isn’t just about the fancy yarn or the shiny beads. Also consider about those sneaky extras:

• Packaging materials
• Printed labels
• Thank you notes
• The ribbon you use to tie it all together
• Credit card fees
• Business cards

Next up is your time. It’s precious, so don’t sell yourself short! Figure out how much tip you spend creating your products. A few of these include:

• Designing your product
• Creating each piece
• Answering customer emails
• Packaging orders for shipping

Then, there are overhead costs – these are the indirect expenses associated with running your handmade business. Unlike direct costs such as materials and labor, overhead costs are not tied to a specific product but are necessary for your overall operations.

Common overhead costs for handmade businesses include:

• A portion of your home utilities (electricity, heating) for your workspace
• Internet costs for online selling
• Craft show booth fees
• Depreciation of tools and equipment
• Software subscriptions for bookkeeping or design
• Marketing expenses
• Business insurance

To calculate your overhead cost per item:

1. Sum up all your monthly overhead costs
2. Estimate your average monthly sales
3. Divide total monthly overhead by the number of items produced

This gives you a per-item overhead cost to factor into your pricing. Especially starting out, this number is going to be next to impossible to figure out, but the point is to estimate and factor them in so you are able to know the true costs of running your business.

Also See: Is a Craft Business Still Profitable?

Setting Competitive Prices for Your Handmade Items

Now that we’ve calculated our costs, let’s dive into pricing strategy.

First, research what similar handmade items are selling for. You can’t compete with mass-produced items on price alone, so don’t limit yourself to big marketplaces like Amazon or Temu. While their prices are worth noting, you shouldn’t be directly competing with mass-produced items. Instead, focus on:

• Other handmade marketplaces (like Etsy)
• Local craft fairs
• Boutique shops

Also See: Etsy 101

These are your true competitors, facing similar costs and challenges.

Different handmade items often require different pricing approaches:

Jewelry:

• Often allows for higher markups due to perceived value
• Consider the cost and rarity of materials used
• Factor in the complexity of your designs

Home decor:

• Pricing can be more flexible due to the uniqueness
• Consider size, complexity, and current interior design trends
• Think about the perceived value in your target market

Clothing and accessories:

• Account for sizing and fit issues (e.g., cost of offering multiple sizes)
• Factor in seasonal demand (e.g., higher prices for winter coats in fall)
• Consider the cost of high-quality, durable materials

Art prints:

• Limited editions can command higher prices
• Price originals significantly higher than prints
• Factor in the cost of high-quality printing and paper for reproductions

Food items:

• Research local food safety regulations and factor in compliance costs
• Consider perishability and how it affects your production schedule
• Factor in specialized packaging and storage costs

The Pricing Formula

A common pricing formula in the handmade world is:

(Materials + Labor + Overhead) x 2 = Wholesale price Wholesale price x 2 = Retail price

However, this formula isn’t one-size-fits-all. Here’s why:

• It might result in prices too high for your market
• It doesn’t account for the perceived value of your items
• It may not work for all types of handmade goods

While formulas give us a starting point, let’s look at some practical tools to help you price your handmade items more accurately.

Craft Pricing Calculator: Many websites offer free craft pricing calculators. Let’s walk through an example using a basic online calculator:

1. Input your material costs: $10
2. Enter your labor time: 2 hours
3. Set your hourly rate: $15
4. Add any additional costs (overhead): $5
5. The calculator might suggest a retail price of $60

This gives you a baseline to work from, considering your specific costs and time investment.

Etsy Fee Calculator: If you’re selling on Etsy, their fees can significantly impact your profits. Here’s how to use an Etsy pricing calculator:

• Enter your item price: $50
• Input shipping cost: $5

The calculator will show you:

• Etsy’s fees (listing, transaction, payment processing)
• Your net profit after fees

This helps you understand how platform fees affect your bottom line and adjust your pricing accordingly.

Profit Margin Calculator: To ensure you’re making enough profit, try a profit margin calculator:

• Enter your product cost: $20
• Input your selling price: $40
• The calculator will show your profit margin percentage

I typically aim for a profit margin of at least 50% for most handmade items to account for unexpected costs and provide room for sales or discounts.

By using these tools, you can get a clearer picture of your pricing structure and make informed decisions about your handmade business. Remember, these tools provide guidelines, not hard rules. Always consider your unique situation and market when setting final prices.

Something to keep in mind is that not every product will be profitable. The challenge is finding the balance between what customers will pay and what you need to charge to make a profit. This exercise is also helpful as you can determine if a product is going to cost too much to make so you can focus your time elsewhere.

Smart Strategies for Shipping and Platform Fees

Let’s talk about something that online sellers need to pay close attention to, which is shipping and platform fees.

Starting with shipping, it’s tempting to just guess at shipping costs or use flat-rate shipping for everything. It’s easy to underestimate shipping, so take the time to weigh your items and calculate accurate shipping costs. And don’t forget to factor in the cost of your packaging!

Free shipping is a huge incentive to get customers to buy more, so look at offering free shipping over a certain order amount. Customers love free shipping, and you can build the cost into your product prices. It’s a win-win!

Next, let’s look at platform fees. Whether you’re selling on Etsy, Amazon Handmade, or your own website, there are always fees involved. Make sure you understand exactly what these fees are and factor them into your pricing. Different platforms might also require different pricing strategies. What works on Etsy might not work at a local craft fair. Be flexible and willing to adjust your prices based on where you’re selling.

Pricing for Profit and Sustainability

As your skills improve and you gain experience, your prices should reflect your growing expertise. Many crafters hesitate to increase their prices, fearing they’ll lose customers. However, starting with higher prices and offering introductory discounts can be an effective strategy. This approach allows you to gauge market response and adjust accordingly. It’s generally easier to lower prices than to raise them later without customer pushback.

Understanding Your Customer Base: A necessary principle in pricing handmade items is recognizing that not everyone is your target customer. You’ll inevitably encounter individuals who complain about your prices being “too expensive.” It’s important to understand that these people likely aren’t your ideal customers. Your true customer base appreciates the value of handmade items and is willing to pay for quality and uniqueness. Focus your energy on attracting and retaining these customers rather than trying to please everyone.

The Power of Reviews: Reviews play an important role in the handmade marketplace. They build trust with potential customers and can significantly influence purchasing decisions. Don’t hesitate to ask satisfied customers for reviews. Consider implementing a system where you offer a small incentive, such as a discount on a future purchase, in exchange for honest feedback. This can help build a robust collection of reviews, boosting your credibility and attracting more customers.

Balancing Passion and Profitability: Running a handmade business often starts as a hobby, but transitioning to a sustainable business requires a shift in mindset. While it’s important to love what you create, it’s equally important to ensure your products are commercially viable. Regularly assess your product line, production processes, and pricing strategies. Be open to pivoting or evolving your offerings based on market feedback and financial performance. This balance between creativity and business acumen is often what separates successful handmade businesses from those that struggle to thrive.

Also See: How to Get Started Selling at Craft Fairs

Wrapping It Up

Pricing your handmade creations blends creativity with business sense. We’ve explored the importance of understanding your true costs, from materials to overhead, as the foundation of your pricing strategy. But your unique designs, quality craftsmanship, and brand story add value beyond basic expenses. Finding the right price point for your jewelry or artisanal treats means balancing your worth with market appeal. Your ideal customers – those who value handmade quality – are willing to invest in uniqueness. Your task is to connect with them and showcase why your creations merit their price.

By mastering pricing, you’re building a sustainable business that honors your craft and satisfies customers. Analyze those costs, craft your narrative, and set those prices. Your ideal customers are ready to discover and cherish your handmade treasures.