How to Price Handmade Items for Profit

Why Pricing Right Matters

Price too high? You won’t make sales. Price too low? Customers may think your item isn’t worth much. It's all about the perceived value of the item; the customer’s belief that what they get is worth more than what they give. Many handmade sellers underprice their products, often out of fear or imposter syndrome. Contrary to what you may think pricing too low can actually hurt sales as people may think that the item is low quality or too good to be true. As a handmade seller you're not selling items mass produced in a factory. Each piece has care and attention to detail and as such the price should reflect that. You're not trying to compete with factory goods. You’re offering something authentic, creative, and meaningful. The right customers will value that but only if your price reflects it.

Simple Handmade Pricing Formula: Materials + Labor + Overhead + Profit = Your Price

Some sellers just multiply material costs by 3 or 4. This may be quick, but it can lead to inaccurate pricing. Instead, use this accurate, transparent method:

1. Materials – Everything that physically goes into the product.
2. Labor – How much time you spent × your hourly wage.
3. Overhead – Packaging, utilities, transport, craft fair fees, website fees.
4. Profit – Your markup. This is what grows your business.

Even if you're just starting out, this method helps you break even, grow sustainably, and avoid losing money on every sale. It also can help you understand where your costs are and how to spend more where it matters and save where it doesn't.

Step‑by‑Step Handmade Pricing Breakdown

So how does this work. First calculate all material costs. I don't know how to do that you might say. It's actually not too hard thankfully.

1. Calculate Material Costs

Most supplies come in bulk. Just divide the total cost by the number of units.

Example: $25 for a pack of 50 beads = $0.50 per bead.

If you use 5 beads: $0.50 × 5 = $2.50.

2. Add Labor

How much is your time worth? Start at minimum wage but ideally aim higher.

Example: You choose $25/hour. It takes 45 minutes (0.75 hr) to make an item.

Labor = $25 × 0.75 = $18.75

3. Estimate Overhead

• Packaging (bags, boxes, ribbon)
• Shipping supplies
• Website or marketplace fees
• Electricity, fuel, rent
• Craft fair mileage, booth fees

Divide annual costs by the number of items you plan to sell.

4. Add Profit

Your base cost = Materials + Labor + Overhead.

You'll want to add some markup, so you have some profit margin.

Our pricing calculator can handle all of this easily for you it's completely free to use and you can find it here Yarnnu Pricing Calculator.

Example Calculation with Real Numbers

Material 1 5 used @ $0.50 = $2.50

Material 2 20 used @ $0.15 = $3.00

Materials $5.50

Labor $25/hour × 0.75 hr = $18.75

Overhead Estimate = $2.00

Base Cost $5.50 + $18.75 + $2.00 = $26.25

Markup 30% profit = $7.88

Final Price $34.13

How to choose your profit margin Your profit margin can depend on a few factors such as your business goal and how competitive your niche is. If you're looking to grow, then you'll want a higher margin. If you sell a bunch of items each month, you'd probably want to do a lower margin as you make up for it in volume. If you sell unique items that are in demand and don't have many competitors, you can have a higher margin as supply is much lower than the demand. You should have at least some margin starting at 5%. This gives you some profit to help you grow. Once you start getting sales you can experiment with your pricing to help find what your idea price is that gives you enough profit while still selling your items.

Price adjusters: packaging, shipping, platform fees

Depending on where you sell, you'll probably have marketplace or website fees as well as packaging costs. You can add these into your overall item cost to help recoup some of the cost.

Your costs don’t end with creation. Include:

• Packaging materials
• Shipping labels or delivery charges
• Marketplace commissions
• Website fees

Add these to your item’s cost to protect your profits. Depending on where you sell you don't need to include shipping in the item price as it may make it seem too expensive, but you should charge for shipping even if it is separately.

Wrap-Up: Pricing Smart = Profiting Sustainably

You're not guessing on what the item costs. You're calculating so you know exactly what you need to sell it for and how much you'll make. Pricing isn't about what people will pay it's about knowing your worth and building a business that lasts.

Need help? Try our free handmade product pricing calculator here: Yarnnu Pricing Calculator.