How to Price Your Handmade Products: A Complete Guide

Pricing handmade items or digital products related to them (such as templates and patterns) can feel overwhelming for crafters. Price too low, and you'll burn out working for pennies. Price too high, and sales might slow to a trickle. It can be a journey to find the right balance.

Many crafters undercharge because they are afraid of rejection or do not take into account everything they should. It is a good sign that you are reading this blog post and not setting your prices based on feelings. Indeed, pricing should be a thoughtful process that is a reflection of the true value of what you have to offer. You're selling your expertise, your creativity, and the hours you spent perfecting your craft, not to mention all the other tasks you have to do to maintain your business.

In this blog post, I'll walk you through a process for pricing your handmade products that will ensure both fair compensation for your skills and effort and appealing prices for your customers. To keep the main point from getting lost in the chatter, I will try to keep things neat and simple without extra storytelling.

Before diving into the calculations, let's be clear about why pricing matters:

Sustainability: Proper pricing ensures your craft business can thrive long-term
Value perception: Your price signals the quality and value of your work
Profitability: Without profit, your passion project remains just a hobby
Self-worth: Charging appropriately values your time, skill, and creativity

Step-by-Step Guide to Pricing Your Handmade Products

Step 1: Calculate Your Material Costs

This step may seem obvious, and you've probably already considered it, but let's break it down anyway. Start by tracking every material that goes into your product:

List all materials used in your item
Calculate the exact amount used of each material
Determine the cost of materials per item
Include packaging materials (tags, boxes, tissue paper)
Add shipping supplies if included in your price

For digital products, your material costs may include:

Premium fonts, graphics, or templates purchased
Stock photos or illustrations
Private label-products

Example:

Emma makes wooden key chains and buys her materials wholesale.

The total cost of raw materials is high, but when she calculates the cost of a product, she divides that cost per unit. For example, if the wood she buys costs $900, and she can make 1500 pieces (she already knows that they will sell well), the total cost is only $0.60 for one product.

Materials for one keychain cost:

Basic materials : wood and metal rings ($0.71)
Stickers ($0.02)
Packaging ($0.57)
Thank you card ($0.35)
Total materials: $1.64

Keep a spreadsheet of all your material costs and update it regularly as prices change. A list of the materials you use and their prices will help you efficiently calculate your prices for different products.

Step 2: Calculate Your Labor Costs

Your time is valuable! Here's how to price it:

Track exactly how long it takes to make one item
Decide on your hourly wage (research industry standards or consider minimum wage as a starting point - don't sell your time for less than that!). You can also assign different values for tasks.
Multiply hours worked by your hourly rate

Include all production time — preparation, creation, finishing touches (photographing!), and packaging.

Time spent on your digital product might include:

Initial research and planning
Creating the actual content or design
Editing and revisions
Formatting for different platforms/devices
Creating previews/samples for marketing
Setting up delivery systems

Digital products often have front-loaded labor — you might spend 40 hours creating a product that sells hundreds of times with minimal additional effort. Your first sale might barely cover costs, but each subsequent sale has virtually no additional production cost.

Example:

Design, engraving, drilling, assembly, packaging and customer service are all included in Emma's labor cost for a keychain. She makes key chains with laser engraving, which is efficient in time. She decides that her time costs $25 for creative work, and $15 for other work. She spends 13 minutes for creative work / keychain, and 6 minutes for other work / keychain.

$25/60 × 13 min = $5.42 creative labor
$15/60 × 6 min = $1.50 other work (such as packaging)
Total labor: $1.64

Step 3: Calculate Additional Costs

Overhead includes all business costs not directly tied to a specific product:

List all your business expenses (monthly or annually)
Calculate how much overhead to allocate per product
Add this amount to each item

Overhead might include:

Studio/workspace rent
Utilities
Equipment maintenance
Website fees
Marketing costs (regular)
Business insurance
Professional development

Digital-specific overhead includes:

Cloud storage costs
Software subscriptions
Website maintenance
Digital security measures
Online advertising (regular)

Think about spreading these costs over the number of sales you expect to make, not just the number of products you make each month.

Example: Emma's websites cost $348/year, which is $29/month. She divides $29 by 100 because she sells 100 items in a month. Her laser engraver cost $1500 and she expects it to work for at least 36 months, so she divides 1500 by 36 and then by 100 (since she sells 100 items per month). So, additional costs for one keychain might be:

Website ($0.29)
Software subscriptions ($0.29)
Regular marketing costs ($1.50)
Laser engraver ($0.42)
Other fees and shipping ($3.40)
Total additional costs: ($5.90)

After you have calculated the additional costs, it is an important moment to evaluate the overall viability of your product. If your price is climbing too high after adding overhead costs and you can't reduce expenses further, it may be a sign to reconsider your product strategy. Being willing to shift your focus when the numbers don't work is a sign of business wisdom, not failure.

Step 4: Add Profits

Now that you've calculated your base costs (materials + labor + overhead), it's time to add profits. This is the money that goes beyond covering your expenses — it's what allows your business to stay and grow. That is why this step is critical to your business. You can approach profit-setting in three different ways:

By profit margin: Determine a percentage of your costs to add as profit.
- Example: Emmas total costs are $14.45 and she wants a 20% profit margin:
- $14.45 × 0.20 = $3.62 profit
- Price with profit: $14.45 + $3.62 = $18.07
- Profit margin for handmade products could be 8-25%, depending on how much products are sold regularly (lower margins for higher volume).
By profit amount: Set a specific money amount you want to earn on each item.
- Example: Emma wants $4 profit per item:
- Price with profit: $14.45 + $4 = $18.45
- This approach is effective for products that are always made in the same way.
By sale price (retail price): Start with your desired retail price and work backward.
- Example: Market research shows that similar keychains sell for $19.95:
  - This is the retail price, which already includes markup (To understand the markups, you must see the next step)
  - Emma uses a 120% markup, which is (120-100) × $19.95 ÷ 120= $3.33
  - The profit would then be $19.95-$14.45-$3.33 = $2.17
  - The wholesale price would be $19.95-$3.33 = $16.63
- This approach helps you assess whether the market price is viable for your business and how much pricing flexibility you have. Note that the usual markup in stores tends to be double the wholesale price, so the markup percentage standard would be 200%.

Choose the approach that makes the most sense for your business model and product line. You might use different methods for different product categories.

Now, you have your base price, the price that includes profit. This is your wholesale price if you are considering selling in stores. More specifically, this is the price you will charge for your products when you sell them to the stores - they will sell them at the retail price.

Step 5: Add Markup

Markup covers additional costs associated with direct sales (such as Etsy listing fees and transaction costs) and provides room for promotions or discounts without cutting into your profits. Your specific markup percentage will vary based on several factors: your unique business structure, which platforms you sell through, whether shipping costs are built into your price, etc.

For independent sellers, consider these markup factors:

Calculate a 1.2× to 2× markup on your cost-plus-profit price from Step 4
Example: Keychain price after adding profit is $18.07:
- With a 1.2× markup: $18.07 × 1.2 = $22.15
- With a 2× markup: $18.07 × 2 = $36.91
This markup accounts for:
- Transaction fees from online platforms
- Customer service efforts (usual)
- Marketing expenses (campaigns)
- Seasonal promotions and sales

As an independent seller, you're handling all aspects of retail — from marketing to customer service — which justifies this markup. This approach ensures you have flexibility in your pricing strategy while maintaining profitability.

Step 6: Research and Adjust

Your calculations give you a starting point, but market research helps refine it:

Research what similar handmade products sell for
Consider your target market's purchasing power
Evaluate your brand positioning (luxury, mid-range, accessible)
Test your prices in the market and gather feedback

Be willing to adjust based on demand

You can always raise prices gradually as your skills improve and demand increases.

Make Pricing Easy with a Calculator

Creative people tend to dislike math and may procrastinate on calculations. This is why I've created a comprehensive Pricing Calculator Spreadsheet that does the heavy lifting for you! This time-saving tool automatically calculates your prices once you input your materials, labor hours, hourly rate, additional costs, profits and markups.

The spreadsheet allows you to save your commonly used materials with their costs. In addition, it allows you to include additional (overhead) costs, and experiment with different profit margins to see how they affect your final price. Physical and digital products have different tabs in the table. A great feature of this spreadsheet is the Break-Even Analysis tab, which helps you understand the sales volume required to reach your break-even point, in other words, how many units you need to sell to cover your monthly costs and become profitable.

If you need to evaluate your product strategy, this tool will save you a lot of time. Use this budget-friendly spreadsheet to get your starting numbers for testing your prices. Get the Pricing Calculator from the link below and take the guesswork out of pricing your handmade treasures.

Pricing Calculator Spreadsheet Template

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One more thing before you go. After calculating all the costs, the prices may seem high compared to many products these days (but that's what you have to get if you want to make a living from crafting!). In order to actually get good prices for your handmade products, you have to acknowledge a few things.

How to Charge Higher Prices for Your Handmade Products

Commanding premium prices for your handmade goods isn't just about raising numbers— it's about valuing your skills, your creativity, and your time. Here's how to position your products at higher price points:

Elevate your brand story: Customers pay more when they connect emotionally with your journey. Document your process, share your inspiration, and craft a compelling narrative around your work. Show the human behind the product.
Enhance your presentation: Premium products deserve premium packaging. Invest in high-quality product photography, professional branding, elegant packaging, and thoughtful unboxing experiences. The perceived value begins long before customers use your product. Express why this product costs moolah!
Build exclusivity: Limited editions, custom-made pieces, and personalization justify higher prices. When something cannot be mass-produced or easily replicated, its value increases naturally. Be intentional about discounts: If you're constantly giving them, your customers won't pay full price for your products.
Focus on craftsmanship details: Highlight the intricate techniques, time-intensive processes, and specialized skills that make your products exceptional. Educate customers about what distinguishes your work from cheaper alternatives.
Target the right audience: Not everyone will pay premium prices. Identify and market directly to customers who value quality, uniqueness, and craftsmanship over price. Sell where these customers shop.
Collect and showcase social proof: Testimonials, reviews, and features in publications validate your higher prices. When others vouch for your quality, new customers feel more confident paying premium rates.

Remember: There are customers at every price point. By positioning yourself properly, you'll attract those who value what makes your handmade products special — and are willing to pay accordingly.

Final Thoughts

Pricing handmade products correctly is both an art and a science. By following this step-by-step process, you'll create prices that respect your craftsmanship while appealing to your target market.

Remember that as your skills develop and your brand grows stronger, you can — and should — revisit your pricing strategy. Your expertise is valuable, and your prices should reflect that. Sometimes the cost of your materials goes up. You'll need to change your prices in that case, too. Whether you like it or not, calculations are a big part of the sustainability of your business, and you need to do them regularly to be successful.