Materials are only the start
Many makers set a price by adding up materials and then adding a little for effort. That usually undercounts. A price that looks fine on paper can quietly lose money once all the other costs are included.
This article lists those costs and shows how to put them together. It is general information: it cannot tell you what buyers will pay, and no formula guarantees a profit. Rules on tax and business costs vary by place.
The costs people forget
Your time. This is the largest cost for many handmade products and the one most often left at zero. It includes making the item, but also design, sourcing materials, setup and cleanup, photographing, listing, answering messages, packing and posting.
Waste and failures. Offcuts, spoiled batches, test pieces and items that do not pass your quality check are real material costs. If one in ten pieces is scrapped, the nine good ones must carry the cost of all ten.
Consumables. Glue, sandpaper, blades, thread, solder, batteries for tools, finish and cleaning supplies are used in small amounts, so they are easy to overlook.
Tools and equipment. Tools wear out and need replacing. Machines may need maintenance. A way to account for this is to estimate how many items a tool will help you produce in its lifetime, then assign a small share to each.
Workspace. Rent, utilities, storage and insurance for a studio, or a fair share of costs at home or in a shared workshop.
Selling fees. Marketplace listing fees, transaction fees, payment-processing charges and stall fees at markets reduce what you actually keep from each sale.
Packaging and shipping. Boxes, filler, labels and any postage you absorb. Shipping handmade goods often adds more than people expect.
Photography and marketing. Props, backgrounds, advertising, business cards, a website and domain name.
Returns and replacements. Some items will be damaged, lost or returned, and a small allowance for this is realistic.
Taxes and registrations. Where applicable, taxes on income, sales taxes or VAT, and the cost of permits or licenses. Ask a qualified professional about what applies to you.
Learning and development. Courses, test materials and the experiments that lead to new products.
A hypothetical worked example
The numbers below are invented to show the method, not to suggest what any product should cost.
Suppose a small item takes 2 hours of your time in total, from making to packing. You decide your time is worth 12 per hour for this exercise.
| Item | Amount |
|---|---|
| Materials | 6.00 |
| Consumables and waste allowance | 1.50 |
| Time (2 hours at 12) | 24.00 |
| Packaging | 1.50 |
| Tool and workspace share | 2.00 |
| Total cost | 35.00 |
Check: 6.00 + 1.50 + 24.00 + 1.50 + 2.00 = 35.00.
If you sell through a platform that takes fees of 10% of the sale price, then your price must cover the 35.00 after the fees are taken. Selling at 35.00 would leave you with 31.50, a loss of 3.50. To keep 35.00 after a 10% fee, you need a price of 35.00 divided by 0.90, which is about 38.89. Round up to 39.00 or choose a price point that suits the market, and note that this still leaves no margin for growth, unexpected costs or slow periods.
Real fees differ from platform to platform, and some are fixed amounts instead of percentages, so use the actual terms where you sell.
Check your price against the market
A cost-based price is a starting point, not a verdict. Look at what comparable items sell for, think about what makes yours different and consider the perceived value. If your cost-based price is well above what buyers seem willing to pay, you have options:
- Make the item faster or with less waste, perhaps by drawing on small batch production methods
- Use less expensive materials where quality is not harmed
- Simplify the design
- Aim at buyers who value what you do, with a clear description and good photographs
- Drop the product
What is usually unwise is to quietly accept that your time is worth nothing. That path tends toward exhaustion, which is why pricing connects with the topic of maker burnout.
Wholesale and discounts
If you plan to sell to shops, which typically buy at a reduced price, work out the numbers first. The cost to you does not shrink when the price does. Likewise, regular discounts and sales reduce what you keep, so check that a discounted price still covers your costs.
Keep your numbers current
Material prices, fees and your own speed change. Review costs every few months, and use real records of hours and spending, not memory. Simple cost tracking makes this far easier and keeps your price honest.
Pricing is partly arithmetic and partly judgment. The arithmetic ensures you know what you are giving up with each sale, and the judgment is yours.