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Posted: Mon 12th Aug 2024
7 min read
Selling handmade or homemade items is a great way to turn your passion into a business. But knowing how to price handmade goods correctly is often one of the biggest challenges new sellers face.
Set your prices too low and your business won't be sustainable. Go too high and you risk scaring away potential buyers.
This short guide takes you through exactly how to price handmade craft items, including a reliable pricing formula, tips for Etsy sellers and strategies to help your business thrive.
As Joanne Dewberry notes in her book Crafting a Successful Small Business, handmade sellers often compete with hobbyists who don't follow the same rules.
Platforms like Etsy, Amazon and eBay are full of sellers pricing their creations far below market value simply because they're not aiming to run a profitable business.
Joanne writes:
"This can make it harder for those who play by the rules and, more importantly, know their product's value.
"Do not be lured into lowering your prices – remember you are crafting a successful small business."
There are many ways for business owners to price products, but handmade goods require a formula that accounts for your time, materials, overheads and platform fees.
Here's a simple and effective craft pricing formula:
(Base production cost x Mark-up) + Labour + Overheads + Seller fees = Final product price
Let's break it down.
This is how much it costs you to make a single item.
Include everything! For example, you might have used fabric, thread, buttons, labels, swing tags and/or string. Don't leave out packaging and postage materials.
Figure out how much of each material you've used to make one item. Some materials are easy to calculate (such as buttons), while you may need to estimate others like glue or thread.
Use the last price you paid or an average if the price fluctuates. Don't forget to include shipping costs or delivery fees when calculating the cost of materials.
Multiply the unit cost by the quantity used for each item, and sum all totals to get your base production cost.
Example:
Say you've used:
four buttons, each with a unit price of £0.021
fabric, each with a unit price of £3
one label, with a unit price of £0.10
your total base production cost would be £3.184.
Mark-up is the multiplier you use to account for profit. Sarah Turner, founder of Little Beau Sheep, explains:
"Once you've mapped out your overall cost, roughly you need to double it to obtain your wholesale price and then double it again to reach your retail price."
This isn't a hard rule – adjust based on your goals and the profit margin you're looking to hit. If you're not wholesaling and having to deal with wholesale pricing, a smaller mark-up may suffice.
Don't undervalue your time. Use this basic formula:
Manufacturing time (hours) x Hourly rate = Labour cost
For example, if it takes three hours to make an item and you pay yourself £10 an hour, your labour cost is £30.
Overheads include things like:
rent for your studio or workshop (if you have one)
electricity and gas
internet
software subscriptions
Estimate your monthly business expenses and divide by the number of items you produce each month to get a per-item overhead cost.
If you sell on platforms like Etsy, consider their specific fees:
Listing fee: £0.15 per item
Transaction fee: 6.5% of the sale price
Payment processing fee: 4% + £0.20
Offsite ads fee: 15%
Add these into your pricing formula to make sure you're covering your costs.
Selling handmade items on Etsy is incredibly popular, but it's also competitive. When deciding how to price handmade items on Etsy:
use the full pricing formula above
research what similar items are priced at
make sure you're including Etsy fees
offer perceived value through packaging, customisation and branding
Remember: People go to Etsy looking for handmade, personal, quality products. Don't compete only on price.
Ask yourself:
how much are competitors charging for a similar product?
how does their quality compare to mine?
are they using premium or sustainable materials?
do they charge for shipping or build it into the selling price?
Your handmade crafts are unique – don't undervalue them just to match prices.
If you want to stand out while maintaining strong prices:
include a handwritten note with each order
package your products beautifully or gift-ready
offer personalisation options (like custom messages or colours)
use eco-friendly raw materials
reward repeat customers with small gifts or discounts
These enhancements build loyalty and justify premium pricing.
Pricing is not a one-time task. Test different price points, observe customer behaviour and adjust.
Little Beau Sheep's Sarah says:
"I was guilty of undercharging at first. But if you want to turn your passion into a proper business, you have to get your prices right."
Sarah suggests reviewing prices monthly at first, then yearly. Etsy makes this easy because you can test without high upfront costs.
Learning how to price crafts and homemade goods is essential if your handmade business is going to see success in the long term.
Use the craft pricing formula as a foundation, add your unique value and don't be afraid to experiment.
With the right price, you can turn your creative passion into a profitable business.
