How to price handmade items

Price = (cost per item + fixed fees per sale) ÷ (1 − target margin − percentage fees).

Cost per item is everything one item costs you to make and send out: materials, your time, a share of overhead and packaging. The fees are what the place you sell takes from each sale. This guide goes through each part, then works one example from start to finish.

Step 1: materials per item

Count only the amount one item uses, not the price of the whole pack. If a $24.00 piece of leather makes 10 wallets, the leather in one wallet costs $2.40. Do the same for thread, findings, fabric, wax or whatever goes into the piece. If you lose some material to offcuts or mistakes, divide by the share you can actually use: a pack you can only use 80% of costs 25% more per item than the label suggests.

Step 2: your time

Time yourself making a batch, divide by the number of items, and multiply by the hourly rate you want to pay yourself. Labor per item = minutes per item ÷ 60 × hourly rate. Include cutting, finishing, photographing and packing if you do them for every item. If you leave your time out, the "profit" you see is really your wage, and nothing is left for the business.

Step 3: overhead and packaging

Overhead is what you pay whether or not you make anything this month: tools, software, a share of studio space, website costs. Spread it over the items you make: overhead per item = monthly overhead ÷ items made per month. Packaging (box, tissue, label, thank-you card) is a per-item cost, so add it directly.

Step 4: fees and margin

If the place you sell takes a percentage of the sale plus a fixed amount per order, as Etsy does, you cannot simply add the fees to your cost. The percentage is taken from the price, so you divide by what is left after it, which is what the formula at the top does. Margin is the share of the price you keep as profit after every cost and fee, on top of the wage you already paid yourself in Step 2. Which margin to aim for is your decision; there is no single right number.

Worked example (fictional numbers)

A maker sells a leather card wallet. These numbers are an example, not a suggested price:

Materials: $4.80 per wallet.
Time: 30 minutes at $20 an hour = $10.00.
Overhead: $90 a month spread over 60 wallets = $1.50.
Packaging: $0.70.

Cost per wallet = $4.80 + $10.00 + $1.50 + $0.70 = $17.00.

The fees are the US Etsy rates used in our Etsy fee calculator: 6.5% transaction plus 3% processing is 9.5% of the price, and the $0.20 listing fee plus $0.25 processing is $0.45 per sale. The target margin is 30%.

Price = ($17.00 + $0.45) ÷ (1 − 0.30 − 0.095) = $17.45 ÷ 0.605 = $28.84.

Check it: fees at $28.84 are $28.84 × 9.5% + $0.45 = $3.19. Profit is $28.84 − $17.00 − $3.19 = $8.65, which is 30.0% of the price. If you round up to $29.50, the Etsy fee calculator shows fees of $3.26, profit of $9.24 and a 31.3% margin.

This example has no shipping charge. If you charge shipping, Etsy also takes its percentage of that, so check a full order in the Etsy fee calculator.

Common mistakes

Pricing from pack prices. Use the amount one item uses.
Leaving out your time. Pay yourself inside the cost, then add profit.
Adding fees on top of cost. Fees come out of the price, so divide as in the formula.
Doubling cost and calling it 50%. Doubling $17.00 gives $34.00, but after $3.68 of fees at the rates above the margin is 39.2%, not 50%.
Never re-checking. Re-run the numbers when material prices or fee rates change.

Run your own numbers in the handmade pricing calculator: enter materials, minutes, hourly rate, overhead, packaging, margin and fees, and it does the division for you.